Business Model = Almost like an insurance company â Pay now to enjoy future benefits. Customers provide a float which the company can utilise to build new resorts. In exchange customers get to holiday for one week per year in a destination where club Mahindra resorts are present.
Number of owned resorts = 42 + benefits at over 6500 RCI affiliated places
Total number of members = 160,000 growing at about 15% - 20% pa
Total number of rooms = 2500 rooms, inventory growing @ 21% pa
Domestic Strategy = Build Greenfield projects in cities where Indians travel the most
International Strategy = Where low cost carriers will go â Dubai, Malaysia, Thailand
Sources of Income = New memberships (over 55%), ASF (Annual subscription fee, about 15%), Balance from food, travel and other miscellaneous items
Member expenses = 1. Membership â Rs. 2,50,000 per year, 2. ASF (annual subscription fee) = Rs. 10,000 â 20,000 per year,
Target market = Middle class & upper middle class of India which is set to grow substantially over the years
Moat = A strong and trusted brand is required for customers to trust to pay for 25 years in advance. Besides a competitor will require a larger network of holiday destinations than what Mahindra Holidays already provides
What makes it special = It is like a vicious circle, where the bigger the company becomes, stronger its attraction to new members is. Therefore the monopoly can grow on a sustainable basis.
Member addition cyclicality = Taking a vacation is a discretionary expense. In tough times, member additions will decline while in booming times member additions will increase
Risks = 1. Customer satisfaction â There is always going to be a certain percent of unhappy customers with every service provider. And they are likely to be more vocal. The company needs to keep a watch on this aspect 2. Overall market for time share vacations stagnates 3. A big player like say the Tataâs enter with their network of hotels, offering stays on a time share basis
Triggers = 1. As interest rates drop, people will find it cheaper to buy memberships on an EMI basis. 2. As general economy and sentiments improve, discretionary spend increases dramatically 3. More members get more members â referralâs increase 4. Online bookings (over 50% currently) has made the process quicker, more transparent and trustworthy
Valuation = At about Rs. 250, stock is trading below its IPO price 3 years ago. Maybe a stock to keep an eye on given its unique business model