When Ramesh Ramanathan rejoined Starling Holiday Resorts last year as managing director, the task was cut out for him. The company was weighed down by huge debts, which meant it was not able to refurbish its resorts. The competition was relentless. Sterling Holiday Resorts was beginning to look like an also-run in a market it had created way back in the early nineties. A year on, Ramanathan is a happy man — his plans to refurbish the brand has started paying off. In this interview to Saumya Prakash, Ramanathan talks about the problems plaguing the industry and the way forward for Sterling. Excerpts.
You’ve certainly been in the time-share industry long enough to see a lot of change. At its core, has the timeshare product changed much since the industry began?
I have been in this industry for a long time now (since 1991) and have seen many changes — the industry, the product and the consumer, all three have changed. When I started in 1991, the industry really had no presence to speak of. There were only a couple of entrepreneurs who started offering the time-share product (now called vacation ownership), which was very new to India, and they faced a tough time. One of these entrepreneurs was the founder of Sterling. Being a pioneer, Sterling had to invest a great deal in educating the market about the timeshare concept while simultaneously investing in infrastructure and human resource skills to deliver on the promises made to the customers.
From those early days, the vacation ownership industry has changed a great deal as it went through a learning curve and began to understand customers’ needs better. The industry began with offering customers property timeshares. From that point, the product evolved to time and location specific timeshares. Today, the product is far more customer friendly as it is points-based, enabling total flexibility in the choice of the accommodation, the season and the location. The array of choices is not restricted to India but encompasses international destinations as well since customers can exchange their vacation ownership points with other owners the world over through exchange platforms such as Resort Condominium International.
What is the biggest misconception about timeshares out there?
I would like to answer that in two ways. Misconceptions can arise when you know something in a limited way. The problem with the vacation ownership industry is that many people don’t know or understand the concept. So rather than misconception I would say, a lot of people are not aware of the concept. But among the people who do know about it — which is a small segment in itself — the perception is that it is expensive. This misconception arises because they look only at the upfront payment. When they focus only on that, their thinking is that they would be better off putting the money into a bank and withdraw some whenever they want to go on a holiday. This is always a possibility provided there is no inflation in hotel tariffs. And proved your children don’t grow up! Let me explain.
When you are a vacation ownership plan owner, you have the flexibility of opting for larger accommodation to suit the needs of a growing family. So, for instance, you can plan ahead and opt to buy a vacation ownership plan that allows you to holiday for a week in a two-bedroom apartment. The beauty is that you can use your points to holiday in a smaller-sized apartment when your kids are younger — say, a studio or a one-bedroom apartment, and then when your children become teenagers and require their own space, use the two-bedroom option.
That way you can stretch your points initially for more number of holidays and yet, when you need larger-sized accommodation, you have it without having to pay for the extra room. That’s why we talk about inflation-proof holidays. With a hotel, you really can’t do that as you would need to book more number of rooms to achieve the same purpose and that too, at current tariffs. So the misconception arises because of a lack of awareness of the total picture. This will get resolved over time as the industry grows, penetrates a larger portion of the market.
Have you seen the needs of your average customer change over the years? Have you had to alter your strategy to beef up customer service in light of the state of the economy?
Let me answer this by addressing different facets of the changes in customer lifestyles and the needs and the consequent impact on our product and service offerings. First, the average customer has changed a great deal over time with liberalisation and the integration of India with the global economy. The explosion of media, and particularly the penetration of the internet, has also played a crucial role in this change. People are far now more aware. The customer of today does his/ her research before a purchase decision. So they know what they want and what choices are available.
Second, there is a great deal of change in their lifestyles, leading to changes in holiday habits. Earlier, people used to go for one annual holiday. Now they go for two to three holidays in a year. That has led to companies in the travel and leisure holidays space tailoring products differently. Earlier, most leisure resorts and hotels would be constructed in hill stations, some four or five hours drive from the nearest main town. But now thanks to changing consumer needs, leisure holiday companies are looking for locations at places that are at a drivable distance of two to three hours. Then there is the fact that Indian families today are far more outgoing and are keen on experiencing new places, cultures and varied holiday experiences.
Take the growing interest in adventure and wildlife holidays. Luckily, today, we have better roads and better connectivity, making places that were once considered remote, more accessible. Earlier we had people visiting Munnar on an annual vacation. Now we have tourists from all over the country coming to Munnar, thanks to regular flights and good roads.
These factors have meant changes in our product strategy. In fact, this is reflected in our choice of new destinations. We opened up Thekkady, Goa and Karwar last year. Karwar is not on the list of popular tourist destinations. But it has great potential as a beach destination, especially since it is just an hour and a half drive away from Goa and given the beauty of the place. The third change is in terms of personal requirements while on holiday. Initially, the vacation ownership product started as a self-catering concept. A kitchen facility was an absolute necessity. I know people who used to take their cook along during their vacation. Today all that has changed. People are now willing to experiment and try out a variety of food. Of course, there are still customers who have particular diet needs. To cater to such customers, we at Sterling are training our chefs to cater to, say, a Jain diet.
All in all, in big and small ways, the industry has seen and is still seeing significant changes. Let me give you another example. A key revenue items in a hotel, even in a holiday location, was the telephone. Today, it is close to zero as everybody has a mobile phone and is connected to the internet via smartphones or data cards. This seemingly small illustration is, in fact, reflective, of just how much the holiday landscape has changed. Indeed, if you compare the Indian family of 1985 and 2012, you will notice tremendous changes.
However, there is one factor that has been constant over the years and that is basic family values. Indians still want to go for a holiday with their families and are still value-driven. In fact, it is family values that determine the value proposition of a holiday. Interestingly, vacation ownership trumps all other holiday options in this respect for the simple reason that unlike hotels, vacation ownership companies design their products and services bearing in mind the needs of the entire family.
Sterling had been through a lot of turmoil in the past. Was it financial in nature, or was it a strategic failure? How did it affect the brand image?
I wouldn’t like to address issues of the past. However, since you have raised the issue, let me just say that yes, Sterling did go through a 12-13-year hiatus for a combination of reasons. Part of it could be related to management decisions. At one stage Sterling went in for a property-buying spree and ventured into new areas. An example of that is the Greater Noida project. Way back in 1994, Sterling bought land at Greater Noida to set up two golf courses. I think too much of money was invested in such expensive pieces of land/properties.
The ensuing financial trouble did hurt the brand a little. But in the seven odd months that I have been at the helm, I have realised that throughout the period of turmoil Sterling maintained its services to its members. It is because of that commitment that we still have 60,000 members. We have lost some members certainly, but there have been virtually no customer complaints about the services we offer. Today, our customers are seeing visible efforts to upgrade our resorts and are happy to see their faith vindicated and their investment in vacation ownership paying off. All this is reflected in the brand as it stands today. The brand has taken a hit but not a major hit.
How do you visualise the comeback for Sterling? Do you think refurbishing/ renovating existing properties will make a big difference?
The first thing you look at when you are aiming for market leadership is the product. And in our case the product is the resort. The second thing is to build credibility, and for that we have to refurbish the resorts. We have temporarily shut down two of our resorts — in Munnar and Kodaikanal — this January and are refurbishing them. Both these will be ready to open this April in time for the summer holiday season. Mind you, this is much more than just a makeover. When I say refurbishing, I do not mean a cosmetic job but completely changing the resort and bringing it to contemporary best-in-class standards. As I mentioned earlier, the customers have changed and so they expect a wide array of services. Whether it is in terms of facilities like the main kitchen and restaurants or add-ons like lighting within the resort, we have professional architects to completely change the look and feel of the resorts.
How is Sterling going about a makeover in terms of branding and marketing? What will be the tools?
I don’t think we should be talking about branding now. I want to develop the intrinsic value of the brand which is why we are refurbishing our resorts and investing in human resources, team building and technology.
You will notice we have not made any major changes in the brand. We did not want to put money into marketing but in building the intrinsic values of the brand and then move into positioning it. We think we will be in a position to probably move ahead with marketing and branding in the second half of coming fiscal.
Has the economic slowdown affected your prospects in any way?
The penetration of this industry is very low and there is a huge market waiting to be tapped. If there is a slowdown, people may stop going abroad and stop buying luxury goods, but they will go for domestic holidays. We are not dependent on many external factors that can affect our business. So, I don’t think there will be a problem with the slowdown, at least for some more years.
What are your overseas expansion plan?
Nothing immediately, but perhaps two years from now we will be looking into this. We want to offer a few variations of the product here and then look at nearby markets like Thailand or Malaysia, basically overseas destinations that are a few hours away by flight.
