Jayant Nainawat hangs up the moment he hears “Club Mahindra”. Must be a pesky agent calling for membership renewal, he assumes.

On a second call, after realising it’s no agent, he sighs. The Mumbai-based 35-year-old GST Inspector had bought a membership to the vacationers’ club in 2014. Following a memorable complimentary trip to the hill station Kandaghat in Himachal Pradesh, offered by an agent.

However, Nainawat’s romance with the vacationers’ club ended there. Rooms were never available.

“I stopped paying the EMIs and maintenance charge after a point, because I was not able to use it. I had paid around Rs 80,000 ($1,095) and all that money has gone to waste”, laments Nainawat, wishing he’d used the money to make an investment.

A one-time down payment membership fee offers a seven-day free stay at any Club Mahindra property each year for 25 years. There are four membership categories, based on the season—purple, red, white, and blue. While a basic ‘blue’ studio membership starts at Rs 3.5 lakh ($4,793), a high-end ‘purple’ two-bedroom membership can cross Rs 10 lakh ($13,700). Above this, members pay annual maintenance charges of around Rs 15,000 ($205).

Economics at a unit level

Say, Club Mahindra sells membership for Rs 4 lakh to a customer for one unit. There are 52 weeks in a year, so the room will be used 52 times in a year. 4 lakh x 52 = Rs 2.08 crore. Even if you keep 1/3rd as marketing and commission spend, there's still enough money on the table for putting up one room

That’s a huge commitment (and price tag) for today’s plan-fast-book-easy traveller. Club Mahindra is not just struggling to keep its existing customers happy, but it’s also competing with a new generation of vacationers. And they’re not lining up to commit.

No surprise then that Club Mahindra’s membership growth has slowed of late. While it grew by 9.7% in the year ended March 2017, it went down to 8% the next year. Net member addition grew roughly 4% to 243,574 members in the year ended March 2019. Its current member base stands at 254,988 members.

It doesn’t help the 90’s company that there are pocket-friendly, easy-to-reach alternatives now. Travel and hospitality has been completely upended by tech in the past seven to eight years. Online travel aggregators (OTAs) and budget hotel aggregators like OYO have thrown in a multiplicity of options for the Indian traveller, from hostels and budget stays to alternate accommodation. According to a Google and Bain report, 40% of the total $50 billion spent on transport and accommodation today in India happens online.

It also doesn’t help that the government has changed accounting standards since the Club’s heydays. The revised regulatory norms, brought about in the year ended March 2018, mean that Club Mahindra can count only 4% of the initial down payment as revenue, as opposed to 60%.

AUTHOR

Vandana

Vandana is based in Delhi. She covers vertically focussed startups in consumer internet space and also writes on travel tech and smartphones for The Ken. She has spent 13 years in journalism covering a wide range of subjects- equity markets, mutual funds to education and skilling, working at organisations such as Business Standard, CNBC TV18 and The Week in the past.

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