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Mahindra Holidays sees increased momentum in consumption trends

Mahindra Holidays sees increased momentum in consumption trends

Mahindra Holidays sees increased momentum in consumption trends
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By Latha Venkatesh   | Sonia Shenoy  Dec 28, 2018 11:33:47 PM IST (Updated)

Mahindra Holidays sees increased momentum in consumption trends.

Mahindra Holidays & Resorts India Ltd (MHRIL), a listed subsidiary of Mahindra & Mahindra Ltd, on Friday said it’s seeing an increased momentum in consumption trends.

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In an exclusive interview to CNBC-TV18, Kavinder Singh, managing director, said member addition in H1 has been at 13 percent.
Rajesh Magow, co-founder and chief executive officer-India, MakeMyTrip, said business is as usual for the company despite concerns raised by hoteliers. He said predatory pricing concern by hoteliers is blown out of proportion.
Edited excerpts:
Q: Tell us how the demand has been, what segments are picking up now, where are people going on holidays and what do you see as the trend for 2019?
Singh: What we have noticed is that the occupancies in our 58 resorts around the country and internationally are reasonably robust. We are seeing the demand picking up particularly in the third and fourth week of December and that is the time the holiday season starts. We are noticing that Rajasthan is a hot favourite as all our resorts in the state are running full. Goa is an all-time favourite. We are also noticing a huge uptick in the north eastern resorts.
Talking about 2019 trends, I think we are at an inflection point. The per capita, $2,000, that is the level that we are reaching at a country level. We believe that this will spur huge amount of consumption particularly holidaying, leisure, food and exploring new destinations. Anyway, our motto is to make moments magical for our members.
We are as you know into selling memberships. Our memberships are showing a robust growth. We are generally seeing momentum in the membership additions. We are finding that people love the idea of having a vacation ownership, membership and then go out and explore the whole world and that is something that we believe in 2019 will continue.
Q: Just add some numbers to it. When you say membership is growing and revenues are growing, what kind of membership growth have you noticed say year-to-date FY19?
Singh: FY19 H1 results are out as you know. We grew by about 13 percent, which is a significant membership additions growth. More importantly, we did not see enough growth coming from Kerala and Coorg resorts as we were hit by floods. However, at an overall level, we were very satisfied with the performance that we delivered in Q2 and Q1. We saw the momentum this year, which has got built up and let us see how Q3 goes. But, we are also looking at Q4 fairly optimistically. Typically, Q4 is a great quarter for companies like us.
Q: Give some numbers to how much are people travelling, how much is it impacting in terms of the number of people taking recourse to your service?
Magow: Let us talk about growth. If you really see the civil aviation market, travelling within India to start with, then I will talk about outbound as well, there has been phenomenal growth, healthy double digit growth, which has actually been going on now for last about three years, which is fantastic. At a higher base, the growth rate has been between 15-20 percent. In fact in November, it grew about 11 percent at a very high base, which is very good.
I guess there were short term headwinds like increase in fuel prices and the depreciating rupee. Overall, civil aviation growth has been very healthy and that obviously it boosted the domestic travel quite a bit.
Talking about outbound, which is by the way on our platform, we have seen that as a very big emerging trend. Just to give you again some numbers for the last three to four years, we have seen outbound travel growing 5x-6x at our platform at a healthy base, phenomenal growth.
In fact during this season also, we saw about 30 percent growth on people travelling and looking to go overseas destinations. There are a lot of famous destinations, but the key destination that Indians like to travel are just within 5-6 hour kind of flying distance. So South East Asia is a hot destination for everyone whether it is Thailand, Malaysia and Singapore. Except the summer period, Dubai is the popular destination for the whole of the year. A lot of supply is there and therefore the prices are quite cheaper as well.
Not only that, even long haul, Europe has been picking up for us as well. For some of the evolved travelers, the growing destinations that we have seen for long haul are actually Russia and some of them are actually now trying to explore Japan, etc. as well. So, huge outbound trend where people are looking to just spend and travel more and experience new destinations.
Q: I wanted to also discuss in detail what is happening with the hotels business; the packages that you guys offer because we understand that there is a lot of predatory pricing going on especially with the online travel aggregators and that is impacting the business of hotels etc. How is the situation panning out and what does it mean for growth for MakeMyTrip?
Magow: I think the issue is blown out of proportion as from our point of view and from our partners’ point of view, it’s pretty much business as usual. I have already given you the numbers and all the partners are working with us. The so-called predatory pricing that has been talked about, at least from our point of view, it always happens in consultation with the partners and there is also flexibility for them to give promotional kind of offers, if they have to on our platform. So it hasn’t really had any impact. From consumer point of view, they love the prices when it comes down. When you go through the cyclical trends in travel industry, the inventory is very perishable. Therefore, we do not deal in products. We deal in services. In fact, on our platform we have given features that you can offload distressed inventory at the price that you wanted to offload and that sometimes gives an impression that the prices are pretty low. But behind the scene, it’s actually done in a more intelligent and in a more scientific sort of way rather than just dropping the prices just generally – that doesn’t happen. Overall from our point of view, the growth has been good, the consumer story is playing out and the long-term outlook looks quite good.
Q: Now, there are new forms of reaching out to holidays. About a decade or two decades ago, Mahindra was the only one that offered such good holiday proposition. But now there is OYO and bed and breakfast is offered even by lesser known entities and aggregators like MakeMyTrip that are offering other kinds of services. There is a digital attack or a digital rival for you. Is that why your revenues are now in single digits or do you think you can overcome this challenge?
Singh: To give you some figures in the last three years, our
compound annual growth rate (CAGR) growth is about 11-11.5 percent. So despite this so-called digital attack, we haven’t seen our growth slowing down – that’s one. Second, we are also seeing that we have been able to not only get members during this 3-4 year period at 11 percent CAGR, but we have also been able to get members who are able to pay upfront down payment. As a result of which our operating cash has piled up and we have Rs 500 crore operating cash right now on our books as compared to 3 years ago, when we just has Rs 15 crore operating cash lying with us.
The key point here is that it's not so much about this digital attack or online travel aggregators. The way we see the business growing is that eventually people are traveling for experiences and what we have done is strengthen our value proportion by creating an ecosystem of experiences. Just to give an idea, our members today have access to not only the resorts that we have through Resort Condominiums International (RCI), they have access to 4,000 resorts around the world and more importantly in each resort, we have dialed up the experiences. We have a concept called ‘host’. The moment you enter into your resort, there is a single point of contact for you to enjoy your entire holiday and just look around in any of these websites that you mentioned, do they ever talk of any experience. They only talk about price and the room that you are going to get.
We are all about experiences and we are about family vacations. We are not about solo travel. We are about family vacations, adventure, food and holiday activities for all ages. We have activities for a 3-year-old child to a 70-year-old lady. So we are trying to become the one stop shop for your experiences and not only that, we launched a new product called Club M Select and it’s about aggregating experiences from around the world. Now, we have some amazing cruise deals going on for our members and like of which you cannot find on the internet on any OTA. So we are doing things to improve our value proposition build on the ecosystem of experiences.
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