Employee problems at the Club Mahindra

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).

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%.

The net revenue for Club Mahindra on a consolidated basis for the year ended March 2019 stood at Rs 2,239 crore ($306.4 million), down from Rs 2,317 crore ($317 million ) in the previous year. It’s profit after tax (PAT) more than halved to Rs 60.4 crore ($8.3 million) from Rs 132.4 crore ($18 million) in the same time period.

The irony is that at a time when it’s crucial for Club Mahindra to hang on to its patrons, it’s struggling to serve rooms.

A stitch in time?

Ankur Chawla lost all faith in the Club in May 2018, when he tried to book its Varca property in Goa for his dad’s birthday. On Club Mahindra’s platform, there was a waitlist, while the same rooms were available on OTA Agoda with breakfast. Despite being a member with 17 days of accumulated room nights, Chawla had to shell out Rs 35,000 ($478) for three nights. In a Facebook post , Chawla says this isn’t the only time he’s had trouble booking.

The unavailability of rooms is far from Club Mahindra’s only problem though.

A senior executive with a VC fund, who has been a member for five years, says the quality of rooms and resorts is inconsistent. What is consistent is that they’re cut off from cities, which ends up being undesirable when the resort’s quality is poor.

Some members have also alleged that the company oversells to a particular category leading to overcrowding, with other categories missing out. Members and analysts who have tracked the company since its initial days say that the company went overboard with selling, intensifying its problems between 2007 and 2015. Agents, at the time, were pushing ‘red’ memberships aggressively—this promised travel plans even during the peak season, barring new year’s. But with several people signing up, the company couldn’t offer rooms at popular locations.

Additionally, to jack up numbers prior to its initial public offering (IPO) in 2009, the company offered memberships that came with free LED TVs and other goodies.

While all these sign-ups were happening, this fund manager says, the inventory addition did not keep pace making customers frustrated whenever they tried booking a property.

The Ken reached out to Club Mahindra, but the company refused to participate in the story.

Club Mahindra’s woes reflect in its stock, price which has barely moved since listing. In fact, it has dropped to Rs 222.90 ($3) from its listing price of Rs 324.90 ($4.5).