How many times have you been waylaid at a fuel filing station by a Club Mahindra executive thrusting a personal data form through a rolled-down window, in lieu of entering you into a bumper draw?
Three days later, you discover you have won the draw but can collect the “award” only after attending a 30-minute presentation at a nearby Club Mahindra office. Never fallen for the bait? Well, you would be in the minority.
You’d be surprised to learn how many do fall for the holiday maker’s offer, going by a record 80% occupancy at Club Mahindra’s timeshare properties for three consecutive years (2006-08). When traditional hotel bookings have been going for a nose-dive, the timeshare business is booming—the growth in 2008 was 25%, against the last five-year average of 18%, according to Group Resort Condominiums International (RCI), the exchange company that provides affiliation to timeshare operators in India and abroad.
A major gainer in this game, you guessed right, is Club Mahindra, thanks to a slew of innovative marketing strategies adopted by the company besides aggressive in-your-face advertising.
“Our income grew 56.32% last year and during the festive month of December 2008, we had an occupancy of 89% against 85% in December 2007,” enthuses Ramesh Ramanathan, managing director, Mahindra Holidays and Resorts India. A lead player in the category, Club Mahindra claims a membership base of 80,000, with a compound annual growth rate (in membership) of over 37%, accounting for 67% of the total RCI business in India for the past three years. Heady on the growth, Ramanathan says, “We have 23 more resorts in the pipeline, and plan to double our inventory to 1,500 rooms this year.”
The AIRDA (All India Resort Development Corporation) projects that the Rs 125-crore timeshare business in India that has been growing at 15% CAGR (compound annual growth rate) since 1998 is poised for robust growth even during a period of slump, given consumer need to cut their holiday budgets.
An indication of this is transaction bookings of 28%-plus from January to November 2008 according to a Group RCI-Cushman and Wakefield Hospitality report, The Spectrum of Leisure Real Estate Products in India, tabled last month. RCI estimates that the demand for timeshare products is likely to grow at approximately 16% per annum from 2006 to 2015, facilitated by supply of 12% holiday units per annum. The average unit sales are projected to grow at 3% per annum.
Radhika Shastry, managing director of Group RCI’s operations in the subcontinent, estimates that they transacted nearly Rs 500 crore in business (including revenue for food and beverage sales) last year at the 72 RCI-affiliated resorts run by 40-odd timeshare operators, who, between them, command a membership base of 98,000.
The reason for this spike is not difficult to guess. Over time, not only has the timeshare business proven more budget-friendly for a family of let’s assume four, there is also more variety and flexibility in the offer. For instance, you can club your vacation week to the next year, bring bigger groups of people to your property for a proportionate reduction in stay, choose from a variety of products (studio, one or two bedroom units) at any location (hill, beach or jungle resorts in India or abroad) for a small exchange fee to the RCI Group, and even move between two or more timeshare operators, which is another trend catching up with Indians with whom holidaying is gradually developing into a habit.
“Lately, we have noted growing interest in related products, as well, such as fractional ownerships, private residences and condo hotels,” informs Shastry. And why not? Given that all stakeholders—developers, operators and consumers—stand to gain from the growth in the category. For developers, experts estimate, it’s possible to break-even on a sale of 65% to 85% inventory, varying of course with the project cost. This could be less for players like Club Mahindra who favour mixed use of the property, under which the unsold timeshare inventory is pooled back into the general hotel category for maximum returns.
Arguing that the timeshare business was a product of the downturn, when it was first developed to sell condos at intervals, Ramanathan says, “The ‘mixed use’ approach allows us greater flexibility in the business.”
In contrast, Concept Hospitality, promoter of Vits, Mumbai (erstwhile Lotus Suits), a division of the Kamath Group, allocates a fixed inventory (20 out of 183 rooms) to their timeshare business, after which they purposefully stop sales.
“The inventory for this year is sold, so we are not promoting this category anymore as we have good response from the general hotel category also,” says Param Kannampilly, director, Kamat Hotels (India), and CMD of Concept Hospitality, whose two properties in Mumbai and Goa fall in the business category and have not been severely hurt by the slowdown.
Operators are drawn to the business for its low maintenance (average Rs 7,000 to Rs 10,000, per holiday unit, per annum) that is anyway charged to the customer, while for the consumer the obvious gains are—flexible payment (he can pay full fee upfront or in installments during the first few years) and swap it for any resort affiliated with RCI for an exchange fee (Rs 5,250 to Rs 8,550) depending upon the property location (domestic or international) and rating.
“Roughly, a family of four will run up Rs 20,650 (including taxes, food and beverages and annual maintenance) during a week’s stay at a timeshare property compared to Rs 42,000, plus taxes at Manali Resort; Rs 84,000 plus taxes at Fort Chawa, Jodhpur; Rs 1,05,000 plus taxes; Rs 1,77,800 at Anfi Palace, Switzerland, Rs 2,45,000 at Sheraton Vistana, Florida; and Rs 78,750 at Golden Shores, Australia, which are incidentally, all RCI-affiliated properties,” says Shastry, who has worked out the tedious economics of the business.
Again, although it may appear a little daunting to sell a notional product like a holiday through a colourful, printed brochure, Shastry says that with the right focus, its possible to turn this into an easy sell “emotional” purchase product. (See accompanying sidebar on marketing strategies).
For the record, across the world, the timeshare industry comprises of over 5,425 resorts with 6.7 million active members availing 10.7 million timeshare weeks in 200 countries. In India, the industry is still nascent, comprising of 4,640 timeshare units and 1,46,450 members availing 2,41,330 timeshare weeks. Popular destinations, as always are Goa, Kerala and Rajasthan, although offbeat resorts at Coorg and Munnar are also finding takers in recent years. On the flip side, most timeshare products in India are still positioned at the mid-market to first-class categories. “There is a paucity of five-star to luxury suits in the same league as Disney or Hilton Vacation Club, which could be an opportunity for branded hospitality players,” says Shastry. Weak and inconsistent tour flow, high marketing costs, old-fashioned sales tactics leading to inconsistent results, ineffective property management and bad product design can sometime lead to off-schedule cancellations, non-payment of dues or defaults, all of which are highly avoidable.
“In due course, AIRDA would develop enough teeth to regulate the industry, introduce more transparent practices and prevent misuse,” hopes Kannampilly of Concept Hospitality. Till then, the best returns are reported from Mumbai, Pune, Ahmedabad and Surat, followed by the National Capital Region, Lucknow, Punjab, Jaipur etc. The west and the east account for 23% of the business. South and east trail at 29% and 6% respectively.