One of the high growth segments in Indian travel and hospitality industry, the vacation ownership segment also happens to be a recession-proof sector. With the number of timeshare resorts in the country growing by over 50 per cent in the last six years, according to the All India Resort Development Association (AIRDA), it is a sunrise sector within the tourism industry and a great driver of domestic tourism. While 3,50,000 families subscribe to timeshare products in India, the estimated market size exceeds 3.5 million.
Growing at a CAGR of 18 to 20 per cent in the last five years, this growth is expected to accelerate in the future. “We hope with the projected growth rates the timeshare industry will provide up to 20 per cent of the hospitality accommodation inventory in the country in next 20 years. This market will be further expanded by an increased range of vacation ownership products,” states B S Rathor, chairman, AIRDA. To accelerate growth in the industry, AIRDA looks at government support in terms of incentivising timeshare resort projects in the exotic regional destinations to promote economic activity, generate new jobs and create wealth in these areas – hitherto not explored. Other issues are development of tourism infrastructure, last mile connectivity, communication, security arrangements, trained and accredited tourist guides, taxi operators, etc, to attract tourists.
|“The industry will provide up to 20 per cent of hospitality accommodation.”|
B S Rathor
A recent survey by AIRDA to study the impact of economic value addition of the vacation ownership industry in India presented many important findings – while the economic impact is Rs 700,000 million, the industry has created 1.7 million jobs. “The overall economic impact works out to 0.9 per cent of the country’s GDP. The future contribution of the timeshare is expected to be much higher, with more impetus to the timeshare industry by the government,” says Rathor, pointing out that the timeshare industry needs to be nurtured by proactive and enabling government policies. For instance, the approved guidelines for classification of hotels state that hotels, in project or operational stage, will not be allowed timeshare inventory. “This has become an obstruction in the way of investments in hotel projects which envisage having timeshare inventory. AIRDA is working on the issue with the ministry of tourism and hotel associations and hope the matter will be resolved,” adds Rathor. A significant development in recent years has been the notification by MoT of the approved guidelines for the classification of timeshare resorts in India. Only AIRDA affiliated resorts are eligible for the classification process.
|“Vacation ownership is a mature business.”|
MD, RCI India
The large population of aspiring holiday-makers offers an untapped potential to the timeshare industry. The fact that the penetration of vacation ownership is very low among the 100 million upper middle class in India makes this segment a very attractive proposition for resort owners and developers. World leader in vacation ownership, RCI currently has a portfolio of 110 resorts in India. Pali Badwal, MD, RCI India says, “Vacation ownership is a mature business and in our global experience we have seen that there are two key factors that drive long-term growth. One, developer relationship and two, market development. The key is driving customer value.” He believes that in the current scenario, when the economy is going slow, vacation ownership can be an excellent business option for resort owners and a great investment from the customer’s perspective.
Need for governance and regulation being critical factors for the industry, RCI is working closely with AIRDA and other partners in maintaining a regulatory body for better governance and management in the sector. “This along with self regulation, as many of our resort owners already practice, will help us shape the future of the industry as a whole. Everyone benefits as a consequence. We have experience of growing the category in countries with similar characteristics to India like Latin America, South East Asia, among others. This global experience and best practices we hope would help us and our partners overcome challenges as it may be,” says Badwal.
The last few years have seen significant evolution in the timeshare sector in India – this ranges from enhanced experiences that new age global travellers seek to setting up of timeshare resorts in undiscovered locations which have not been on popular tourist map. “Current and future growth will be in unchartered territories and undiscovered locations with great tourist potential – where timeshare activity will contribute to local commerce, employment and economic activity,” states Rathor, adding that there is visible changes in the delivery models of timeshare experiences – it is no longer just the location, but value adds around the holiday such as golf, trekking, river rafting, jungle safaris and new-adventure sport.
|Economic impact of timeshare in India|
|1.7 Million Jobs created||0.9% of the country’s GDP||As per American Resort Development Association (ARDA) statistics the timeshare industry supported US$ 69 B of economic output to the US economy in 2009, 465,800 jobs, over US$ 22 in salaries, wages and a substantial amount of tax revenues.|
Another significant trend is the concept of mixed-use of timeshare resorts with hotels and vice-versa. Rathor feels that the timeshare landscape in India will see radical changes with the advent of the global brands who would like to participate in India’s growth in the coming decade. Almost all major global hotel chains – Marriott, Starwood, Hyatt, Holiday Inn, and others have timeshare in their inventory.
|“The emphasis is on delivering quality experiences.”|
CMD, Concept Hospitality
The vacation ownership industry in India is in its second avatar and is delivering quality products at market-friendly pricing, avers Param Kannampilly, CMD, Concept Hospitality. “The emphasis is on delivering quality experiences rather than rapid expansion and fund raising,” says Kannampilly. He foresees an increasing number of independent resorts with inventory above 50 rooms allocating at least 25 per cent of their inventory to timeshare. “This approach essentially guarantees good yielding, year-round business. We have used this model with excellent results in our earlier projects and are considering it at our upcoming Jodhpur resort project,” he says, adding that the Indian timeshare industry will grow and reputed hotel industry players will enter it because it is an alternate means of financing of the industry. Concept Hospitality has built the Lotus Suites in Goa and the VITS hotel in Mumbai using the timeshare model.
According to a recent research report, the most popular length of holiday stay amongst Indian travellers was seven days indicating that Indians do in fact take their vacation time seriously. Badwal points out that whilst long holidays seemed to win favour amongst the majority, even shorter breaks such as four and three days were equally popular amongst Indian travellers implying that people were tending to break away from the ‘one annual break’ habit and would rather look forward to taking several breaks in a year of a shorter duration. This is a positive development for the vacation ownership industry.
|“We have been uniquely responsible for creating the place.”|
MD & CEO, Mahindra Holidays
Taking into consideration the developing needs of the young urban traveller, timeshare companies formulated their strategy for future growth/ expansion. Club Mahindra that currently has 2500 rooms, plans to add a thousand more to the inventory by March 2014. “We are in an expansion mode and we are looking to grow within India. We are currently looking at eastern India, Uttarakhand, Himachal Pradesh,and Kerala. Although we have six locations in Kerala, we could do with more,” says Rajiv Sawhney, MD and CEO, Mahindra Holidays. The company is also looking at expanding in Goa where it already has 350 rooms across two properties. A resort is being built in Kanha, Madhya Pradesh and Virajpet in Coorg. There is also a project underway in Naldehra in Shimla. “Last year we expanded to Bangkok and Dubai because of low cost carriers covering neighbouring countries and making them economically closer. Since Sri Lanka is equally close and is easy for families to visit, we are looking at expanding there also. Based on the experiences with Bangkok, we will look at something else in Thailand. However, it is not on our active radar for now,” mentions Sawhney. He does not forget to add that it was Mahindra Holidays that put places on the tourist map like Kumbhalgarh in Rajasthan, Munnar in Kerala, Coorg in Karnataka, which did not exist as tourist destinations before Club Mahindra went there. “So we have been uniquely responsible for creating the place and the experience we offer,” he asserts.
|“Our occupancy levels are not affected by economic cycles.”|
MD, Sterling Holiday Resorts (India)
Sterling Holiday Resorts (India) the oldest timeshare operator in the country, currently has an inventory of 1512 rooms with plans to add another three-four resorts in the near future. “Since our core business is vacation ownership, our occupancy levels are not affected by economic cycles and we are actually seeing year-on-year growth,” states Ramesh Ramanathan, managing director, Sterling Holiday Resorts (India). He acknowledges that the evolution of the product is in line with changing consumer holidaying patterns and aspirations. “The Indian consumer of today is more discerning and seeks to explore a wider range of destinations and new holiday experiences. There is also an apparent shift from annual vacations to multiple short breaks with family and friends. This implies that a vacation ownership company has to be in a position to deliver memorable holidays in full-service resorts located in a wide array of destinations. In this connection, it is important to note here that Sterling enjoys a huge competitive advantage in terms of its 19 resorts in India’s scenic holiday destinations, large inventory and 15 additional sites it already has, which will enable it to grow rapidly along with the industry,” adds Ramanathan.
|“The differential starts with our ownership of picturesque properties.”|
COO, Magic Holidays
A recent entrant, Magic Holidays has a target of acquiring one property a month in India and one in every quarter internationally. The company has 38 properties worldwide including places like Kaziranga, Corbett, Chail, Bhimtal, Bageshwar and in international locations like Auckland, Thailand, New York and North Carolina. Apart from this there are eleven upcoming properties. “For us at Panoramic, the differential starts with our ownership of picturesque properties in India, and strategically, across the world. I’m also talking about aspirational markets such as the US, on the one hand, and locations such as New Zealand, known for its beauty and charm,” says Hitesh Kshatriya, COO, Magic Holidays. The company is looking at buying properties in Coorg, Durgapur, Goa, Jaipur, Kumarakom, Mangaon, Munnar, Neral, Panvel, Pune, Tadoba, and Tehri. Internationally they are looking at Phuket in Thailand for the coming quarter.
|“Ownership of the resort is very important for uniform experience.”|
CEO, Citrus Check Inns
Another young company, Citrus Check Inns, has adopted the strategy of building its inventory first and then enlarge its membership base. The company has eight existing hotels with another signed recently. “We have committed money upfront, ownership of the resort is very important for a uniform experience. The sales and membership has been up by 35 per cent over last year. Our target is the average 40-year-old who needs to go for a holiday every year with his family,” says Gaurav Pallial, CEO, Citrus Check Inns. The current inventory of Citrus Check Inns is 500 plus keys that can sustain 150,000 members. “If you look at the biggest players like Club Mahindra they have 92 per cent occupancy, while hotels have 62 per cent occupancy. There is a captive audience,” points out Pallial.
One of the key challenges for the industry is developing the right manpower. With a focus on creating employable human resources for the timeshare sector Citrus Check Inns has tied up with a hospitality education institution. AIRDA has also worked closely with IHMs to introduce a Timeshare module in the IHM syllabus so that more job opportunities would be available.
(With inputs from Steena Joy and Rituparna Chatterjee)