Interviews

“Sterling plans to expand to 40 properties in 18 months”

We are now focusing on offering immersive experiences to our members, says Ramesh Ramanathan

India’s hospitality sector is increasingly beginning to show differentiation, the signs of a maturing market. Amongst the not-so-new, but lately getting popular segments is the timeshare market. While it may still be rather less known in India, it is picking up pace. With multiple players and an expanding footprint, the profile of the Indian customer is getting younger too, explains Ramesh Ramanathan, Managing Director, in an email interview to Suman Tarafdar. Excerpts

What is the current footprint (number of hotels and rooms)?
Sterling currently operates 31 resorts across 29 destinations. It has a total of over 2300 rooms.

What are the near and medium-term plans for the company’s future? What are the expansion plans in terms of properties? How does Sterling see the potential in the Indian market?
There is immense potential in the Indian market. The domestic tourism industry is currently at Rs. 6,284 billion and is expected to grow to Rs. 13,306 billion by 2026. Today, India ranks as the 12th largest travel industry in terms of size, but is expected to reach 4th place in the coming decades. (Source: WTTC India 2016).

The government has been focusing on Travel and Tourism as a key sector and there is a lot of investment going behind building infrastructure and embracing technology to develop the same. Today, travel is a lifestyle statement and according to some studies, as many as 44 percent of travelers have increased their travel spends in 2016.

Sterling Holidays is one of India’s leading experiential holiday lifestyle companies today. That is, we want to go beyond accommodation and on-holiday services to providing differentiated holiday experiences to our guests. We are now focusing on offering immersive experiences to our members and guests at all our locations that allow you to discover the destinations in new ways.

Anaikatti by the Siruvani is a freshly added destination Sterling’s expanding footprint

For instance, a holiday in Ooty is no longer just about going boating in the lake or visiting the botanical gardens, we at Sterling offer you novel experiences – like tasting the regional delicacies of the Nilgiris or maybe even learning a bit of the local Badaga tribal dance!

We have recently tied up with a professional clowning company that teaches our employees and our guests clowning. They train you to find your own personality as a clown. We have also tied up with TI Cycles to facilitate cycle tours around our resorts. It is elements like these that will help guests in creating memories.

We plan to expand from 27 properties to about 40 over the next year and a half. Bandhavgarh, Bhimtal, Bindsar, Coorg, Hatgad (Saputara), Kanha, Kumbhalgarh, Mahabaleswar, Mount Abu, Panchgani, Port Blair, Srinagar and Wayanad are some of the destinations under consideration.

In addition, in the near to medium term, Sterling will expand overseas in destinations sought after by Indian tourists, such as South East Asia and Sri Lanka.

Who is the typical Sterling customer?
Our customer profile is getting younger. Today 60% of our customers are below 40 years of age. While we have a lot of families holidaying at our resorts, we cater to multiple customer segments – ranging from couples to informal groups of friends and families to reunions to formal groups from corporates.

Who is the Indian holiday goer changing?
Secondly, the Indian holiday goer is changing. The 2016 holiday report showed an increasing segmentation of travelers into specific categories like solo travelers, immersive travel, slow travel, all women tours, among others. Some of these categories would be unthinkable a decade ago.

Holidaying is becoming an integral part of the Indian lifestyle, with people holidaying for different reasons. Sterling has to keep abreast of all the changes, and constantly evolve with the changing consumer.

How many members are there currently? What has been the growth rate in the past five years? Has the proportion of timeshare and non-timeshare guests been changing over time?
Sterling Holidays active membership base has gone up by almost 90% in the last 5 years from 55,000 to an expanded base of 85,000 members. The membership base is growing healthily at an average annual rate of 10-15%.

What is the share of the OTAs in sales?
Contribution from OTAs is increasing, however we have a well balanced channel portfolio of OTAs, offline travel agents, directresort & corporate channel / business.

What is the average cost per key for a hotel/ resort, and what is the average ARR (or range according to property)?
The Average Room Revenue is extremely dynamic and varies according to some principal factors which dominate travel industry. Seasonality is one of the determinants of the footfalls and therefore ARR. Some destinations like hill stations are very sought after during the summers while some others are in demand during the winters.

Children’s holidays, long weekends and festive seasons are favorite times for vacationing and are hence high demand. Depending upon region, some properties face a much higher demand from the mass traveler while others cater to a more niche audience, and therefore fewer travelers.

Different properties have different ARRs depending upon the season and demand. Average Room Revenue is growing and there is no impact of the deep discounting that occurs because of the ecommerce drive sector.

Compared to its chief competitor, Club Mahindra, Sterling is perceived as more affordable. Is that deliberate, and would you want to change the perception?
Our business model is very different from Club Mahindra’s – we follow a hybrid business model inviting both vacation ownership members as well as FIT guests to holiday at our resorts, so the comparison might not be right. Today, all of our properties are upgraded to best in class standards with state of art facilities, amenities and service standards and the pricing is hence competitive.

How has the acquisition by Thomas Cook impacted Sterling? Where is the capex being utilised?
Sterling Holidays was acquired by Thomas Cook (India) Limited (TCIL), which is a part of Fairfax Financial Holdings Limited, a $38.2 billion global investment and insurance holding company, headquartered in Toronto, Canada.

The acquisition has put Sterling in a select group of companies and has helped strengthen brand credibility. The capex has been primarily used for the refurbishment of resorts. Today, the renovation is almost complete and all the properties boast of state of the art facilities and best in class standards.

Are all the properties owned? Will there be managed properties as well?
Sterling has 27 properties,and follows a mixed model of owned and leased properties. 10 of the properties are owned.

How is the timeshare market doing in India? What is the current size of the sector?
There are around 80 vacation ownership companies in India today and the total number of resorts is around 180. Put together, the industry represents an overall capacity of around 9,000 units including hotel units. The market is doing well and growing healthily at 20-25%.

Sterling is growing its presence in north India, and already has three properties in Himachal Pradesh, including this one at Kufri 

What is the growth potential for the sector in India?
Travel and tourism in general is growing exponentially, in India and therefore all segments within the industry present a huge opportunity. Vacation ownership segment is growing and the customer profile is getting younger. As a vacation ownership company, we need products which give complete flexibility to the buyer to appeal to this younger target group.

Are there any significant differences in the way it operates in India compared to other markets?
One of the key differences is that some Western markets are more evolved, the timeshare concept is well established, and the need to educate the customer doesn’t really exist.

What are the main challenges and opportunities in the timeshare sector? How does it keep its identity in a rapidly changing hospitality landscape, from digitization to room aggregators and impact of social media etc.?
Some of the main challenges are the need to orient the present product towards the younger consumer. We also need to keep in mind that products need to offer complete flexibility to the buyer (usage once or in multiple times).

There is also a need to simplify the product and buying process – the industry might move to the online platform for both purchases and reservations. Room aggregators and digitized platforms are expanding the market, but operate on a completely different model – there is very low differentiation between different players and they are only competing on price.

How is technology important for Sterling’s growth path?
Yes. Technology is changing the travel industry for all players. E-commerce & online aggregators have mushroomed to provide tailored services to very specific customer segments. At the same time, they can simultaneously reach a much wider audience. However, there is very low differentiation between the various service providers, which emphasizes the need to establish distinct brand positioning.

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