MHRILNSEJuly 28, 2023

Mahindra Holidays & Resorts India Limited

11,608words
86turns
8analyst exchanges
3executives
Management on call
Kavinder Singh
MANAGING DIRECTOR AND
Ram Mundra
INTERIM CHIEF FINANCIAL
Dhanraj Mulki
GENERAL COUNSEL &
Key numbers — 40 extracted
62%
level, in quarter one, our occupancy levels at the country level are getting normalized at around 62% after reaching post- pandemic high of 71% in February '23. This is all India level. However, avera
71%
ls at the country level are getting normalized at around 62% after reaching post- pandemic high of 71% in February '23. This is all India level. However, average ADRs at about INR6,800 are still trend
INR6,800
t- pandemic high of 71% in February '23. This is all India level. However, average ADRs at about INR6,800 are still trending significantly above pre-pandemic levels. India's domestic air traffic has grown
15%
trending significantly above pre-pandemic levels. India's domestic air traffic has grown by about 15% on Y-o-Y basis in May, which indicates significant demand for domestic travel, which includes tra
90%
vel as we can see from these indicators. Moving on to our resorts. We have been able to achieve 90%-plus occupancy on an expanded inventory base of about 5,000 rooms, leading to highest ever quarte
INR92 crore
expanded inventory base of about 5,000 rooms, leading to highest ever quarterly resort income of INR92 crores, which is up 10% on a year-on-year basis. This quarter, we have also introduced a new 4- year pro
10%
f about 5,000 rooms, leading to highest ever quarterly resort income of INR92 crores, which is up 10% on a year-on-year basis. This quarter, we have also introduced a new 4- year product targeting mil
23%
4- year product targeting millennials. Our member additions were robust, and they have grown by 23% year-on-year to 4,700-odd members. With this, our cumulative member base stands at 286,000 famili
85%
r-on-year to 4,700-odd members. With this, our cumulative member base stands at 286,000 families, 85% of them are fully paid memberships. Membership sales value, including upgrades, is at about INR17
INR177 crore
, 85% of them are fully paid memberships. Membership sales value, including upgrades, is at about INR177 crores, and this is up by 21% on a year-on-year basis. And continuing the momentum in upgrades aided by
21%
erships. Membership sales value, including upgrades, is at about INR177 crores, and this is up by 21% on a year-on-year basis. And continuing the momentum in upgrades aided by our happy members, we
rs,
by 21% on a year-on-year basis. And continuing the momentum in upgrades aided by our happy members, we achieved the highest ever Q1 upgrades of INR49 crores, which is a growth of 16% on year-on-year
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Guidance — 20 items
Kavinder Singh
opening
“In line with our strategic objective of rapidly expanding our room inventory, we aim to double our inventory base from 5,000 to 10,000 keys by FY '30.”
Kavinder Singh
opening
“This acceleration in inventory addition will be achieved through different routes.”
Kavinder Singh
opening
“And that's another resort, which will be built by us once the agreement is done.”
Kavinder Singh
opening
“It will be a 244 keys resort, and this is at a capex of about INR30 crores.”
Kavinder Singh
opening
“Ganpatipule, we are planning to have a greenfield project, already the ground has been broken, 236 keys at an investment of INR250-odd crores.”
Kavinder Singh
opening
“So as a result of this, all these actions that we have taken are setting us on a path to ensure that the INR800 crores capex, which is underway, will deliver 750 keys plus.”
Kavinder Singh
opening
“And we have also started construction of a greenfield 236 keys project in Ganpatipule.”
Kavinder Singh
opening
“We aim to double it to 40% of the total energy.”
Kavinder Singh
opening
“Let me conclude now, the opportunity by 2030, and this is in public domain that we will have INR3 crores high-income households with income greater than INR27.5 lakhs, which is our target group.”
Kavinder Singh
opening
“Thereby, hopefully, we will be able to realize the huge potential that exists in India.”
Risks & concerns — 4 flagged
Spa Hotel performance has been impacted due to low occupancy in the off-season and lower in-resort spending due to weak consumer sentiment.
— Kavinder Singh
By the way, Q1 is a seasonally weak quarter and the profitability was also impacted due to low occupancies in Finland and Sweden.
— Kavinder Singh
So this kind of -- identifying these kind of people who would want to buy and therefore, improving our conversion rates is one big area of opportunity and also a challenge.
— Kavinder Singh
And that is a challenge, as I said, clearly, the conversion, but that's a big opportunity as well.
— Kavinder Singh
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Q&A — 8 exchanges
Q
My first question was on the company's strategy to open new resorts close by to the existing properties. So do you see any conflict where you are under this model you are planning to sell on a per night basis versus your existing model where you have your 2,85,000 members where they have taken a 4-year or a 15-year or 20-year subscription?
Kavinder Singh
So we don't see really any conflict because, please remember, which we have talked earlier also that right now, whatever I enumerated is to grow the timeshare business, which is the Vacation Ownership business. And I have talked about growing our existing resorts. The numbers that I gave you are to drive the overall inventory, which will help our members to holiday more and spend more. The strategy of having a new brand, which will be closer to the new resort will be to ensure that we get people to experience the new brand experience, which will also, in a way, help us to get more members beca
Q
First question is on the Holiday Club Resorts. So on an annual basis, with your introductory remarks, you mentioned about the cost efficiency measures. So with those measures coming in, how should we look at the profitability metrics of the next 2 to 3 years on an annual basis? That's my first question.
Kavinder Singh
I think that's a very, very valid question. If you notice, in the last year, despite the Russia-Ukraine war, we were able to deliver EUR 5 million EBITDA at a full year level. And that was remarkable given the fact that the inflationary conditions, at least in some parts of the last year were very, very bad, including the energy prices, which have pulled off a bit now. If everything goes all right, our aim would be to definitely beat the number that we have done in the last year. We have already tightened our belt. We know how to manage cost there in that economy now. And as I mentioned, we ar
Q
Sir, we have seen almost 23% growth in member additions, cross-member additions on a Y-o- Y basis. In that backdrop, could you provide some color on member additions outlook for current financial year. I think, sir, in past, you have guided for more than 20,000 member additions.
Kavinder Singh
Yes. So Himanshu, like I mentioned earlier, we remain very consistent with the idea that we have delivered 17,000-odd member additions last year, 17,600 or thereabouts. We are definitely aiming to outgrow that number. You can already see the run rate in the last 2 quarters, it has already accelerated. I would hasten to add that you can yourself very clearly see. And by the way, our aim to add 400, 500 rooms every year and something that we have delivered in a way outlines our mindset of growing member additions faster. And that's why, as I said earlier, we launched two new products. We launche
Q
So the first question is, if you look at the long-term plan, early, we are effectively saying that whatever we have added inventory till date since inception, we are effectively looking at adding over the next probably 6, 7 years. Now my question is, firstly, on the land bank that you have mentioned, do we have enough land bank? Is it sufficient? Or do we require further investment for land bank?
Kavinder Singh
So if you look at the -- our ability to add inventory, what we are looking at now in a way is something like doubling our level of inventory, we already did about 400 rooms in the -- on an average in the last 3 years, right? And if I'm looking at to add another 5,000 in about 7 years, so we are talking about 750, 800-odd rooms. So we have to double our room rate, right? Now as I mentioned, there are four routes that we will take. We will take the greenfield route, which is where the land bank is definitely required. We will take the route of expanding existing resorts. We will also take the ro
Q
My question is regarding the receivables deficit, post-COVID it has come down and we see the standalone core business, India operations. And now with the launch of new short tenure products, how do we see these receivables going ahead for the next 2 to 3 years?
Kavinder Singh
I heard the later part of your question, how do we look at the position of receivables going ahead? I couldn't hear the beginning part of... V te 117 ClubMahindra Yes. So what I was saying was, if we see post-COVID, the receivables have come down significantly. It used to be about INR1,600-odd crores in FY '19, which is now about INR1,160 crores, if I see last year. Got it. So how do we see this going forward with the short tenure products like 4 years, 15 years and many more which you all have introduced. So as a number of days, if I were to calculate on your VO and ASF, as a number of days,
Q
Congratulations on a good member addition growth. So I just have 2 quick questions. Sir, we've given very ambitious target for doubling our room inventory. And we've spoken all about our - - about the macro -- how the micros are favourable in terms of higher ADRs and higher air traffic and all of that. But sir, I wanted to understand more on a micro level, like what is the kind of visibility that we are seeing in terms of our business model? Is it -- that is giving us the confidence to double our room inventory usage, but we are seeing a lot more inquiries post-COVID or -- and considering that
Kavinder Singh
All right. Very good question again, indeed. You're right. I mean, if we double our member base -- sorry, room inventory in a way, you will have to double roughly your member base. So the way to do this would be to look at the big picture, which I already painted where I said that we are very, very optimistic on 3 things. Number one, which I mentioned was that the high income or affluent households will grow to 3 crores households from current 1.6 crores, 1.7 crores by 2030, which means they will have income greater than roughly INR30 lakhs per annum of INR27.5 lakhs per annum. This is a V te
Q
Most of my questions are answered. Just two thing on the AUR side, we have seen INR3.8 lakh AUR, INR4 lakh that's normally -- that's the average we have. So now we are planning to add members aggressively because the room additions will be much higher. So do you see any moderation in the AUR going forward?
Kavinder Singh
I think, again, a very good question, appreciate it. See, AURs will a little bit fluctuate. You may have seen, I think sometimes we are at INR4 lakh, sometimes we are at INR3.8 lakh, sometimes we go to INR4.2 lakh. To be honest, what is the number to really look at, the real number to look at is how much we are adding in the deferred revenue. We are at INR66 crores in this quarter. Last year, we added more than INR200-odd crores in the full year. What is really important is every person who comes in as a member is a person who has thought about his holiday needs has paid for it in advance. You
Q
First of all, as I always say, thank you very much for taking your precious time off to ask us questions, listen to us. And you may have noted that I finished my summary very, very quickly. This time, we were able to accommodate more questions. And we will -- we are very happy to engage with our potential investors, analysts, whoever are on the call or whoever are tracking us. We remain committed to our strategic objectives that I outlined. And we are more than happy to answer any questions or queries that you may have. On that note, I would like to say thank you very much for being here on th
Management
Speaking time
Kavinder Singh
34
Moderator
10
Himanshu Shah
8
Ram Mundra
6
Nirav Savai
6
Forum Makim
5
Senthil Manikandan
4
Ankit Kanodia
4
Lokesh Manik
3
Hrishikesh Bhagat
3
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Opening remarks
Kavinder Singh
Good evening, everyone, and a very warm welcome to our quarter one FY '24 Earnings Call. On the call with me today, we have Mr. Ram Mundra, our Interim CFO; and Mr. Dhanraj Mulki, our Company Secretary. You can find our quarterly results and investor presentation referred to in our remarks today on the stock exchanges and our company website. I hope you all have had a chance to go through the same. Let me begin by giving a big picture, and then I'll come quickly to the performance that -- on quarter one and the opportunity that we see ahead. At an industry level, in quarter one, our occupancy levels at the country level are getting normalized at around 62% after reaching post- pandemic high of 71% in February '23. This is all India level. However, average ADRs at about INR6,800 are still trending significantly above pre-pandemic levels. India's domestic air traffic has grown by about 15% on Y-o-Y basis in May, which indicates significant demand for domestic travel, which includes trave
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