Mahindra War Room 2017 Hospitality Caselet

MAHINDRA HOSPITALITY BUSINESS CASELET

FROM VACATION OWERNSHIP TO VACATION ECOSYSTEM

The Club Mahindra business was born out of a newspaper report published in 1996,
explaining how fly-by-night operators were deceiving customers in the so called time-
share Industry, dominated by unscrupulous resort companies. The report was
discussed in the Mahindra Board meeting that was coincidentally held on the same
summer day. Mahindras leaders felt strongly about how Indian families, needed
aordable, good quality holiday experiences provided by companies with strong values
and ethics. Mahindras opportunity to make a dierence and ace the future was
obvious, which led Mahindra to foray into the business. This was a conscious foray of
the Mahindra Group leveraging the principle of "transferability" to infuse into the
business a sense of trust and care for delighting the customer. Mahindra Holidays &
Resorts India Limited (MHRIL) was incorporated in 1996, and the brand Club
Mahindra was thus born.

BUSINESS BACKGROUND

Club Mahindra opened its first resort in Munnar - a beautiful destination in Kerala, the
same year. Encouraged by the response from consumers, Mahindra Holidays went on
to open 50 resorts during their journey of 20 years and 218,000 families have enrolled
since then. Club Mahindra along this journey has gone to unexplored destinations and
created an array of marquee resorts across destinations, like Kandaghat, Naukuchiatal,
Thekkady, Sasan Gir, Kumbhalgarh, Kanatal, Coorg, and Ashtamudi in India. The
company also has international presence in several locations thereby becoming Indias
#1 Vacation Ownership Company, a SuperBrand and has been voted as Indias
Favorite Resort Chain this year by Holiday IQ based on review/ ratings of its 2million+
members.

Club Mahindra resorts are dierent from the conventional luxury hotels or resorts.
Consumer Research shows that the average middle & upper class Indian consumer
feels slightly out of place in a sti and formal environment of luxury hotels/resorts and
experiences not so warm attitude of hotel sta. Indians when traveling with family
(children) for instance, like to see their kids play, which a typical luxury hotel may not
allow. Also the stay & food costs tend to be unaordable for longer vacations. Fun

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activities for entire family including children, from learning new skills, adventure
activities to experiencing arts & culture along with wellness oerings for adults (spa,
ayurvedic treatments etc) are available only at Club Mahindra resorts, oering a
complete holidaying experience for the entire family.

Club Mahindra Members enjoy 7 nights & 8 days of vacation every year for 25 years, at
any of the Club Mahindra resorts for a fixed upfront membership fee. They also get
access to exchange their vacations with 4000+ RCI aliated resorts around the world
for a small additional fee. The week is available across 12 dierent configurations of 4
seasons and 3 accommodation types. Club Mahindra ventured into Thailand, Dubai,
Malaysia and Austria to provide international experiences to its members in line with
the emerging trend of growing international travel amongst Indian families. MHRIL has
also acquired controlling stake of 91% equity in Finland based Holiday Club Resorts
Oy, making the combined entity the largest Vacation Ownership player outside of the
United States of America. Holiday Club Resorts is a leading vacation ownership
company in Europe with 31 resorts (23 of which are in Finland, 2 in Sweden and 6 in
Spain), and a membership base of 55,000 families.

LIVE BUSINESS CHALLENGE: FROM VACATION OWNERSHIP TO VACATION

ECOSYSTEM

Travel & Tourism is one of Indias biggest Industries, contributing to about 9.6% of
Indias GDP. Valued at USD 210 Billion, the sector is set to rise by ~7% in 2017. Over
the last 15 years, the sector has attracted over USD 10 Billion in Foreign Direct
Investment, supporting over 25 million jobs - about 6% of the total employment of
India. With the popularity of India growing as a holiday destination, a reformed e-visa
policy and Indias rising international profile is expected to have more inbound tourism.
Domestic tourism contributes to 83% of Indian travel and tourism market and 1.43
billion domestic trips were taken by Indians last year. The outbound Indians as
segment is growing even more aggressively, numbers moving from 15 million in 2015
to 25 million (expected) in 2025. Club Mahindra is poised strongly to leverage this
strong disruption on the horizon. It has built a potential of positive asymmetry in its
business model by building a large customer base and holidaying options across the
globe.

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The advent of smart phones and unleashing of the Mobile Digital Era since 2008 has
proved to be a black swan event in the travel, tourism and hospitality businesses
around the world. A new paradigm of aggregators and shared economy has emerged
in the travel ecosystem today. With the entry of peer to peer accommodation
marketplaces such as Airbnb, aggregators of hotel rooms such as OyoRooms, online
travel agents such as Goibibo and experience providers such as Thrillophilia have
substantially changed the way travelers plan their holidays. How can Club Mahindra
Leverage the upside created by the increase in travel intentions due to these shifts
while managing the downside due to these newer avenues for experiences globally?
Interestingly, Club Mahindra is also a shared economy concept, much before the
Shared Economy became widespread. Club Mahindra members enjoy the flexibility
of holidaying in ever expanding range of resorts in India and abroad over a 25 year
membership period.

Way back in 1996 when Club Mahindra was formed, this composite environment never
existed - the challenge back then was to overcome the dominance of fly-by-night
operators and travel agencies who shortchanged customers. The entire ecosystem of
travel and stay has gone through a complete change. Powered by a mobile app and a
smart phone, customers now have the world at their fingertips. The number of oerings
are increasing exponentially and price discovery is instant whereby bookings can be
done immediately. What is this doing to Club Mahindras future customers? What will
change in the usage, attitudes and behaviours of consumers triggered by the digital
ecosystem specific to the travel and accommodation business and what are the
opportunities & threats for Club Mahindras existing business model? The digital
ecosystem is profoundly shaping everyday behaviors of customers. For instance, the
need to print is declining and are printers going to become redundant like fax machines
and photographic films in the future? Will these trends shape the behaviors that will
dissuade customers to commit to a club membership? How should Club Mahindra
remain relevant in the future? Or how can Club Mahindra embrace this eco-system to
create a distinct advantage for itself? Can Club Mahindra leverage the membership
base to create a positive asymmetry for itself in this business?

The challenge now is to evolve the traditional ecosystem into the post digital era, to
ace the future. The situation is akin to the 1980s era of Apple & Microsoft. Apples
platform was exclusive, not pervasive and was seen to be rigid but high in quality.
This is much like the 25-year committed holiday business model of Club Mahindra,

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which is an interesting and successful model, but requires upfront commitment which
may be perceived as rigid but delivers high quality vacation experiences for the
family. While Intel and Microsoft focused on computing power to win the market,
Apple focused on creating the entire ecosystem. Apple created an ecosystem of
devices, software, cloud solutions & apps which became globally aspirational and
dicult to exit. Club Mahindra finds this inspiring and a possible way to ace the future.

In 2016, Club Mahindra made some significant moves in this direction that produced
interesting results:

1. Evolving unique immersive experiences: Members were oered an opportunity to

holiday in a tent by the sea, stay in houseboats in Kashmir in lieu of holidaying at
the resorts. The response was very positive, as is evident by occupancy rates.
More concepts were developed in 2017 and have worked well Members were
oered holidays at Rann Ustav in Kutch, with activities like Camel Cart Excursions,
Para Motoring, Meditation and Yoga etc.

2. Having realised the need to constantly improve on the customer experience so that
its customers do not fall to the notion of treadmill eect where members are not
constantly energized by the holiday experiences. In resort experiences for the entire
family have undergone a major transformation and new experiences which include
food festivals, edutainment for kids (fun and learning), new adventure activities, arts
and local culture , comedy nights, backwater cruise dining experiences have
helped increase member engagement at resorts.

3. Acquisition of XoXoday, an aggregator of curated in-city experiences: XoXodays

capability is to bring curated, personalized and bundled experiences. Acquiring
stake in XoXoday has added this capability to Club Mahindra and since then they
have integrated some of these experiences on their website for its members. This
was a conscious move hinging on positive asymmetry where it helped to leverage
the power of a digital ecosystem to bring to the consumers delight on a dierent
paradigm.

4. Strategic tie-up with Marriott, where Club Mahindra members can get up to 30%
discount on the published online rate, around the world. This was a conscious

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move hinging on positive asymmetry where it helped to leverage the power of a

digital ecosystem to bring to the consumers delight on a dierent paradigm.

5. The new Club Mahindra Mobile App - less than a year old, the app has seen
150,000 + downloads and now accounts for 25% of all resort bookings. The app is
designed to engage the members through all the three stages of holidaying: a)
Anticipation phase b) At Club Mahindra Resorts c) Holiday memories. The app has
transformed member experience from search to booking to payments, sharing
feedback and pictures.

6. To promote engagement beyond the 7 nights & 8 days of holidays, Club Mahindra
created Heart to Heart program - events for member families in their city of
residence by creating resort like atmosphere. Members enjoy a fun filled evening
with their families and also get a chance to resolve their queries. In 2016, over 7000
families participated, and referred 10,000 new customers in these forums.

The goal now is to string these together into a comprehensive ecosystem. For
example, can the success of the Heart to Heart concept be evolved into a community
portal where members share they travel experiences within Club Mahindra and beyond,
and create an aspiration for potential members to be part of this community? Chef
Channels, Photography Clubs, Travelogueswhat are the possibilities? Similarly, can
the app start giving secret deals through API plug-ins, not just in Club Mahindra but in
partner hotels and resorts as well? Can there be a Club Privilege card - a benefit
program that can get you secret deals at Partner Hotels - what are the possibilities and
how to monetize them? What are the upsides and downsides of such approaches?

Given this background, evolve a Vacation Ecosystem for Mahindra that is:

a. Aspirational & Compelling

b. Oers special privileges, benefits & experiences

c. Accentuates Need to Belong over the membership period of 25 years

d. Delivers the promise that the longer a member stays in the eco-system, the more
he/she would benefit

e. Creates a desire to bring in their friends & relatives and enrich this ecosystem.

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Develop a 2020 ecosystem strategy, wherein the Club in Club Mahindra comes
alive and helps Club Mahindra capture enhanced lifetime value of its current and
growing network of 218,000 members.

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