Mumbai: Twenty-six years ago, Sterling Holiday Resorts India Ltd, pioneered the timeshare concept in India but it wasn’t able to deliver on early promise. In the last few years, it has posted a series of losses —Rs1.06 crore in fiscal 2009, Rs18.13 crore in 2010, Rs32.85 crore in 2011 and Rs41.32 crore in 2012.
On 29 May, the company said it had turned Ebitda (earnings before interest, tax, depreciation and amortization) positive—with earnings of Rs1.34 crore—in the three months ended March, the first quarter it had done so in 15 years. Analysts said this may signal a turnaround even though the hospitality firm made a Rs5.91 crore net loss in the March quarter.
“There is no Midas touch but we are focused on enriching customer experiences, acquisition of new members and resort refurbishments,” said Ramesh Ramanathan, managing director of company. He was earlier managing director of Mahindra Holidays and Resorts India Ltd, India’s largest vacation ownership company, which along with Sterling, dominates India’s timeshare market.
“First, there were efforts to get in touch with our old and lost customers. We had 60,000 customers and we contacted around 55,000. We are trying to contact more, besides acquiring new customers,” Ramanathan said, adding that the company had set up a call centre and outsourced information technology (IT) functions to reduce costs.
Ramanathan also shut some resorts for refurbishing. More will get a makeover, said Siddharth Mehta, chairman, Sterling Resorts.
Sterling has 18 resorts and plans to add 13 new locations in the coming years. “By September, we would be able to add five to six locations,” said Ramanathan, adding that his company “would not tap more funds as the company is capable of generating revenues”.
He added that Sterling has renewed ties with holiday exchange service RCI Llc.
“We are targeting 80% revenue from our timeshare members and rest from normal hotel business,” Ramanathan said.
The turnaround process began when private equity firm Bay Capital Partners Ltd invested $13.8 million (Rs77 crore) in 2009 and R. Subramanian, Sterlings’s chairman and managing director, ceded management control. A year ago, stock market investors Rakesh Jhunjhunwala, Radhakrishna Damani and others invested Rs120 crore in the company.
P.R. Srinivas, an independent hospitality consultant, and most recently with consulting firm Deloitte Touche Tohmatsu India Pvt. Ltd, said Sterling’s operating results are not a flash in the pan.
Srinivas said the timeshare business is a complex one and has gone through a tough phase in all markets including India. Mahindra Holidays was one of the companies that lent credibility to the timeshare business while Sterling lost several customers and its reputation in the mid-1990s, according to Srinivas.
“Ramanathan was in Mahindra Holidays and Sterling Holiday. He understands the business and is doing the right things to keep this momentum sustainable,” said Srinivas.
A leading hotel stock analyst, on condition of anonymity as he is not authorized to speak to media, said the turnaround story may not be sustained if there was an external shock to the economy. “Travel or timeshare is hugely dependent on consumer sentiments and purchasing power. Since travel is a discretionary item, Sterling Holiday has to pull up its socks to maintain this momentum,” he added.
Sterling Holiday dropped 1.32% to close at Rs82 apiece on Thursday on the BSE. The Sensex lost 1.2% to close at 16,677.88 points.