In contrast to most holiday companies, MHT’s communication is not about a “Club Mahindra” holiday; instead, it promotes the family bonding experience
Ask Anirudha Haldar where the competitions for his business comes form and he won’t talk of other timeshare companies. Instead, he’ll tell you that it is either the “mother in law” or the “Maruti” he is fighting. What Haldar, who heads the marketing team at Mahindra Holidays and Resorts (MHR), means is that people would rather own a car before a subscription to a holiday scheme. And, given the need to spend time with relatives, they are not sure how well they will use a time- share package over 25 years.
But that hasn’t deterred the team at Mahindra Holidays & Resorts from trying. Having convinced 60,000 families to sign up in the 12 years it has been around the company is now aiming higher. “By March 2009, we should have 100,000 members and revenues should grow at an even faster pace,” says Managing Director Ramesh Ramanathan. That leaves MHR just two years to make another 40,000 families believe that its holidays are worth it. And to treble its top line, which was Rs 240 crore at the end of March 2007. Here is how the Chennai-based firm plans to do it.
Customers for all seasons
Two years ago, consulting firm McKinesey & Co helped MHR; identify categories of customers that might have a reason for taking regular holidays. Among these were patriarchs who felt it was part of their role as providers to take the family on a vacation. Then there were people looking for new experiences, families that wanted to bond, and the romantics. These four categories comprise 80 per cent of MHR’s customers today, with the rest coming from the “show-offs” and “rest seeker” segments. The last is a relatively new category of executives and businessmen who want to put their feet up for a few days. Says Arvind Mahajan, executive director at KPMG, “People are working harder and they are conscious of the need for regular breaks’ At the same time, they are looking for a lifestyle experience and time with the family.” MHR’s marketing strategy, then should speak to this crowd perfectly. In sharp contrast to most holiday companies. MHR’s communication has never been about a “Club Mahindra” holiday; instead, it promotes the family bonding experience. “We are not show-casing tourist destinations or our resorts. We are talking to families,” asserts Haldar.
But MHR is also eyeing another customer group that may not be looking for family time on its holidays. These are the young people who live in the metros; aspiring, affluent couples in their late 20s or early 30s. Obviously, MHR needs to talk to this group differently, and it has. It May, it launched a new product. Zest, that caters to this category. Unlike MHR’s regular time-share package- which offers a seven-day break every year for 25 years—Zest offers short getaways over a 10-year period. In the three months since its launch, the format already has 500 members and Ramanathan says MHR hopes that number will increase exponentially to 50-60,000 in five years “because people today are willing to spend on leisure.”
Chalets come cheap
Which is why MHR’s schemes don’t come cheap: seven days a year for 25 years at any of the resorts costs Rs.2.25 lakh on average, depending on the type of accommodation and the season chosen. For instance, an apartment for four adults costs about Rs.3.5 lakh during the peak summer and Diwali holiday seasons, while a smaller studio facility, which accommodates three, would set subscribers back by about Rs 2.4 lakh. Add to this an annual fee of about Rs 7,000, which is adjusted upwards for inflation.
Still, MHR is banking on the fact these rates are lower than those for comparable rooms in other hotels. For instance, if a night in a studio apartment at an MHR resorts priced at Rs 2,441 (present value), a stay at a similar hotel would cost Rs 4,674. What’s more, at Rs 425 for three meals a day, food is extremely affordable while being comparable with a five-star spread.
In a way, that is what is urging MHR ahead in its ambitions: the existence of a large group of potential customers who expect a high level of service and comfort, can afford to pay for it and yet seek value for money. Halder agrees, “We have a good proposition to attract people who would normally opt for the five-star seconded by Abheek Singhi, partner at The Boston Consulting Group. He believes MHR has possibly penetrated barely 3 per cent of the addressable be at least 2 million families today that can afford to buy such holiday packages. MHR has enough headroom to grow.” Compare this with rival Sterling Resorts, which caters to the two and three star hotel-goer. At its peak, Sterling had over 80,000 members. The numbers is down to around 20,000 now.
On the mountain top
In fact, the MHR brand has been able to cash in on an increasingly indulgent upper middle class. If its prices have gone up by close to 50 percent in the past five years, it is both to cover higher costs and also because it has found takers. A 7 per cent hike that it took a couple of months back included 2 per cent brand premium. Says Ramanathan, “Last summer our rack rate for noon-timeshare customers was Rs7, 500 per night for a studio room at the Munnar property. That indicates the kind of brand of premium we can command.”
MHR spends heavily on advertising the brand marketing and sales account for 28-33 per cent of costs, including the sign- on discounts of 4 per cent. Spends on print and TV are equal, at about 30 per cent of advertising costs. “The TV commercial sets the mood for a holiday.” explains Ramanathan, adding that the campaign focuses the MHR brand rather than on any particular destination. KPMG’s Mahajan believes the positioning is correct and that a TV campaign will enhance the brand quality. “MHR is marketing the product aspirational and, at the same time, the message is that this is money well spent,” he says.
Of late, Mahindra Holidays & Resorts has also started selling on the Internet, advertising on sites such as myiris.com and rediff.com, sites likely to be visited by its core customer group. Halder claims that the click-through rates on some of these have been three times the industry average. “Our spends on the net should go up to at least 20 per cent in the near future,” he adds. A fifth of the marketing budget is used for below the line initiatives: events for families in malls or a direct marketing exercise alliance with Standard Chartered Bank for the latter’s customers, for instance.