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Coronavirus: Do resort companies hold the key to future of hospitality industry?

Coronavirus lockdown 4.0: Ramesh Ramanathan, CMD, Sterling Holidays, says that they are only opening up those resorts which are within 4-5 hours drive

twitter-logoAjita Shashidhar | May 13, 2020 | Updated 10:43 IST
Coronavirus: Do resort companies hold the key to future of hospitality industry? 
Lockdown 4.0: What the future hold for hospitality industry

KEY HIGHLIGHTS

  • Mahindra Holidays, Sterling Holidays believe they have an edge in the hospitality industry
  • People will prefer resorts located at drivable distance to avoid air, train travel
  • Customers don't have to pay for their rooms, as it is already paid, says Mahindra Holidays
  • Mahindra Holidays CEO Kavinder Singh says they have deferred revenue of over Rs 5,000 crore
  • Resort majors are investing in safe, hygienic and contactless experiences

As the hospitality industry puts together elaborate SOPs around health and hygiene in order to bounce back post the Coronavirus lockdown, resort and timeshare companies such as Mahindra Holidays and Sterling Holidays believe that they have an edge over the rest of the hospitality industry. "We are a resort company, therefore by definition our properties are spread out, they are not vertical structures. It's a huge strength considering the strict social distancing norms one has to practice in the new normal," points out Kavinder Singh, MD and CEO, Mahindra Holidays & Resorts. Singh also adds that since most of their resorts are drivable it gives them an additional advantage given the stigma around air travel.

Ramesh Ramanathan, CMD, Sterling Holidays, says that they are only opening up those resorts which are within 4-5 hours drive. "For instance, Mount Abu is a 4-5 hour drive for people living in Udaipur or Ahmedabad. Most of our resorts are in drivable distance and people can avoid air or train travel," explains Ramanathan, who says that his team has been calling its 100,000 Sterling members and a lot of them have actually expressed desire for a vacation post the lockdown.

Also read: Coronavirus live updates: Rs 20 lakh crore economic package! FM Sitharaman will address media at 4 pm today

Both Sterling and Mahindra Holidays already have members who have signed up with them for 25-30 years. "We know discretionary consumption will take a hit, but people will visit Club Mahindra as they don't have to pay for their rooms, their rooms are already paid for. When travel restrictions will be removed people will go to places which are drivable," says Singh. He also says that the company's business model enables it to withstand shocks.

"We have more than Rs 5,000 crore of deferred revenue, because when we take a membership we only recognise 4 per cent of the income, 96 per cent is pushed into the future. We have the annual fee which comes from the members, which is a regular source of income. We also have zero debt, as of 31st December 2019, we had Rs 694 crore on our books. So, we have strong balance sheet with deferred revenue of Rs 5,000 crore. While we push income to the future, we take costs upfront," Singh further explains.

Their membership base, points out Ramanathan, not just gives them steady revenue, but it is the member's trust in them, which according to him will bring them back to their resorts. "To begin with, we will not open up all our rooms. We will ramp up depending on the demand."

Also read: Coronavirus impact: Hyatt Hotels to lay off 1,300 employees globally as pandemic cripples travel

The resort majors are obviously investing in offering safe, hygienic and contactless experiences. From online check-ins to pre-planned meal combos, in order to reduce as far as possible the congregation of guests at their restaurants and using hospital standard sanitisers, they are doing their bit to win the trust of their patrons. "Earlier, the requirement was a clean bed and bathroom, the expectation is now moving towards clinical hygiene. We will demonstrate to our guests our hygiene standards. They need to see the efforts we are putting in," says Ramanathan.

So will these additional investments lead to holidays becoming expensive. "Costs won't go up significantly. Investment you make in technology helps your productivity. You will be able to increase the productivity of your staff," says Singh of Mahindra Holidays.

Singh says that while their regular timeshare membership is a 25-year programme, they also have a three-year programme targeted at the millennial. They also have a 10-year programme, Bliss, which is targeted at people above 55-years, and given the income constraints that the new normal is likely to pose, Singh of Mahindra Holidays expects more takers for their shorter duration holiday membership offers.

Also read: Coronavirus: International tourism may decline up to 80%, says UNWTO

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