Mahindra War Room Design to Disrupt

MAHINDRA WAR ROOM 2019

CLUB MAHINDRA CASELET
“Great Design is not just a solution. It is the elimination of the problem.”

Chapter 1: Empathize

It was a hot summer day in 1996. A news story in a leading paper reported about
how Indians were losing faith in “timeshare” business operators, who took money
promising a relaxed vacation in a timeshare resort at an attractive price but were
unable to deliver on due to financial or other constraints. The promise of a dream
holiday for thousands of Indian families turned out to be a nightmare, as many
lost their money with no hope of recovery. The topic of the day’s headlines
triggered a spontaneous discussion at the Mahindra Board Meeting held on that
day. “Why can’t Indian families enjoy a holiday experience in our beautiful
country, affordably and safely” asked a Mahindra board member, triggering a
Billion-dollar business in the process.

Chapter 2: Design & Ideate

Indeed, why can’t Indian families enjoy a holiday experience across our vast and
beautiful country, affordably and safely? After all, very few countries around the
world enjoy 3.3 million square kilometers of land area, with a rich geography of
beaches, hills, plains, valleys and plateaus and climates that suit every need.
After all, people around the world have seen the value and taken benefit of
affordable timeshare holidays in even less attractive terrains. The main problem
with the timeshare industry in India then was lack of trust especially given that
this is not a one-time consumption product but a product which you invest in for
decades. People needed to trust a company that provided a timeshare service, to
transform this ill-fated business. Mahindra Group had the credibility and trust that
this business needs with flourishing presence in Automotive, Farm, Agriculture,
Information Technology and Financial Services. Also, Indians are price sensitive
when it came to indulgences, and a timeshare resort would compete with a
myriad of hotels and holiday homes.

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Chapter 3: Prototype & Test

The entire success of the experiment lay in the genius behind getting the resort
design just right. On the one hand, it should not spell ‘5-star luxury’ that tended to
be seen as profligacy, putting off many Indians who grew up in the era of freedom
movement inspired by ‘simple living and high thinking’, particularly in the 90s. At
the same time, the resort should be clean, hygienic, set in scenic locations, and
offer a package that is within the reach of many Indian families.

Within couple of years of the board meeting, the first Club Mahindra resort
opened in Munnar, Kerala with great fanfare. It was a reasonably short time from
problem to solution, but the detail in design created a blueprint of scalable
success for Club Mahindra - an an expansive family-oriented resort in the tea-
growing Munnar, offering a week’s vacation every year to it’s members. The
target segment was middle and upper-middle class Indian families, who usually
sought a memorable family vacation. Instead of standard hotel rooms, Club
Mahindra rooms were designed for families with lots of space. Members could
choose from a studio (2 adults and 1 child), 1 Bedroom Apartment (BR) (Upto 4
Adults) and 2 Bedroom Apartments (Upto 6 Adults) depending on their family size
and holiday needs. Adding value to it was a curated and careful selection of ‘in
resort activities’ like pottery making, towel origami, Coffee with Chef, Aqua
Zumba, Fun cooking and explorations of local attractions of tourism, cuisine, art
& culture. This complimented with great spa treatments that rejuvenated the
body, mind and soul. “Members” of Club Mahindra paid a fixed joining fee that
allowed one week (7 nights and 8 days) of vacation every year for 25 years with
family. The week was available across 12 different configurations of 4 seasons
(Off Peak-Blue, Moderate-White, Peak-Red and Super Peak-Purple).

In effect, the design effort that went into the offering in the mid-1990s was a
disruption in the family holiday space then. The physical space at the resort, the
experiences that would engage all generations of a family, the ‘timeshare
product’ itself ensured that families enjoyed an inflation-free holiday.

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Chapter 4: Scale Profitably

The concept met with instant success, with the first resort, breaking even in
record time. The concept was proven, and now it was a matter of scaling. More
resorts opened, each with their unique characteristics and design elements at
picturesque locations in Sikkim, Corbett, Pondicherry, Goa, Naldhera, Binsar,
Naukuchiatal, Manali, Kumbalgarh, Kanatal, Coorg, Kandaghat and Ashtamudi in
India, apart from Dubai, Bangkok, Malaysia, Sri Lanka and Singapore. The
portfolio created what was possibly the most diverse array of holiday options for
an Indian family. Over the years Club Mahindra almost perfected the art of
building resorts at unexplored places, creating destinations out of locations such
as Munnar, Madikeri, Kumbhalgarh, Binsar etc. This also ensured a low cost of
land- acquisition, an aspect of the business design itself.

In 2014, Club Mahindra’s holding company Mahindra Holidays & Resorts India
Limited (MHRIL) acquired Finland based ‘Holiday Club Resorts Oy’ (HCR). HCR
was then a leading Vacation Ownership Company in Europe with 33 resorts, 25
of which are in Finland, 2 in Sweden and 6 in Spain, with 60,000 member
families, making the combined entity the largest Vacation Ownership player in the
world outside of USA. Furthermore, MHRIL also acquired a minority stake in
Bangalore based XOXOday focused on aggregating in-city experiences.

Today, Club Mahindra is India’s #1 Vacation Ownership brand, and the World’s
#1 Vacation Ownership brand outside of North America, offering 3600 apartments
and cottages, benefiting 240,000+ members across 61 resort properties.
Strategic partnerships also ensure members can choose from over 110 partner
hotels and resorts in India, USA and Europe for a nominal access fee, as well as
RCI’s network of over 4200 resorts globally. Club Mahindra has also created an
experience eco-system to engage it’s members year round while they are not
holidaying at the resort spanning cruise holidays, gourmet dining and curated
vacations.

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Chapter 5: Design to Disrupt

Over the last 23 years, Club Mahindra’s business has evolved from a single
resort and grown to become the largest vacation ownership company in the world
outside of North America. In the process, Club Mahindra has established a
unique resort business model, that steers clear of the two big problems that
usually are faced by most hospitality companies: Debt & Occupancy. Club
Mahindra enjoyed 83% occupancy rate last year, with about US$ 24 Million in
profits, growing at a CAGR of 19% over the last 5 years and no debt in it’s books!
But where is the next big growth for the company going to come from?

Growing the membership base organically is the conventional approach.

Experience shows that it takes a long gestation to grow this way. Building new
resorts or even leasing good properties and then communicating the value of
them in the market to build the membership base takes considerable time.

Growing product options is another alternative. Two years ago, Mahindra created
a 10-year ownership option for members over 50 years, called Bliss. Recently
Club Mahindra launched a 3-year holiday product for young members branded
GoZest. While these products offered incremental revenues, they are obviously
not designed to be disruptive for exponential growth.

Growing inorganically is another alternative. But Vacation Ownership companies

rarely go on sale, as the business is considered resilient even during
recessionary times such as during the 2008-09 economic crisis. This is the
reason why Club Mahindra acquired Holiday Resorts Oy of Finland, as soon as
the opportunity arose. The quest for new growth avenues in hospitality led Club
Mahindra to acquire minority stake in XOXOday. While this move helped open
doors to in-city experiences, it did not quench Club Mahindra’s thirst for a big-
ticket disruption in hospitality.

To create real disruption, Club Mahindra should go back to its genesis and
reimagine from the roots. The current Club Mahindra business model, as we now

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know, was born out of the newspaper report in 1996. The consumer then was
looking for credible players with good value proposition as timeshare partners.
Club Mahindra fit the bill perfectly and went on to dominate the category in the
process. That business model has remained stable all the way. But it is 2019
today, we now have booking.com, AirBnB and Oyo, leveraging technology,
increasing discoverability and rapidly organizing the unorganized supply. Instead
of scamming timeshare owners, the newspapers are screaming of how
companies without a dollar of hospitality asset are causing big disruptions,
changing consumer behavior and the landscape of hospitality. The upwardly
mobile consumers of today are not the same as those in 1995.

If that same visionary and responsive Mahindra board which could build a highly
profitable Club Mahindra out of one productive discussion were to meet today, in
the backdrop of these newspaper headlines, what would they do? And how
would the design of the new Club Mahindra emerge? The inspiration need not be
limited to hospitality business alone - it can even include some iconic consumer
facing entities such as Netflix, Uber or Amazon.

What do the customers of today seek in vacations/ leisure/ travel? What

problems do they face in the process? In 1995, the burgeoning Indian Middle
Class was just about to experience a big boost in income, owing to the
liberalization of Indian economy. They had money to spend, and sought a
reliable, trustworthy, good, family friendly vacation experience. Who is the
equivalent of that customer in today’s India and what do they want with respect to
travel, experiences, accommodation etc. that other travel businesses do not yet
offer? Is there anything like that at all, and if so, how is that to be designed to
disrupt?

Design a disruptive strategy for a new Club Mahindra idea born in 2019,
which is highly attractive to the vacation seeking consumer of today. Build
a business model for this new business idea that includes the projected
financials.

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