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Ladies and gentlemen, good day, and welcome to Mahindra Holidays & Resorts India Limited Q3 FY '22 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions, and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks, uncertainties that are difficult to predict. [Operator Instructions] I now hand the conference over to Mr. Kavinder Singh, MD and CEO. Thank you. And over to you, sir.
Good evening, everyone, and a very warm welcome to our quarter 3 FY '22 earnings call. I hope all of you and your families are safe and healthy during these challenging times. On the call with me today, we have Mr. Sujit Vaidya, our Chief Financial Officer. You can also find our quarter 3 results at investor presentation, which we are referring to in our remarks today on the stock exchanges and on our company website. I hope you all have had a chance to go through them.Let me begin by saying that we delivered an extremely strong performance this quarter and surpassing the pre-pandemic levels and when I say pre-pandemic levels, I mean quarter 3 FY '20 with high level of resort occupancies, highest ever resort revenues reported in any quarter that we have done so far, along with a healthy growth in member additions and room inventory. Despite the onset of the third wave of COVID-19 from early December and the global spread of the highly virulent Omicron variant.Before I get into some level of trends that we see on travel, let me just first run through some numbers for you. As far as if you look at the year-on-year performance, we have delivered an EBITDA growth, which is driven by income growth. We have managed our costs in line with the fact that our operations are normalizing. Our EBITDA has grown to about INR 85 crores and this is despite the fact that the lease rent waivers are now almost ending.Now this is a healthy 30% EBITDA margin. If you look at our profit before tax, you may note that it is lower than the quarter 3 of last year. This is due to the fact that there has been an increase in our depreciation and financing costs. by about INR 7 crores because we have added about 580 rooms between December '21 to -- December '20 to December '21. And yet, if you look at our margin, it is 17%, and it's a healthy PBT margin and if you were to compare it with Q3 FY '20, it's up by about 260 basis points.If you look at quarter-on-quarter sequential performance, typically quarter 3 is a seasonally better quarter, which means we typically have higher occupancies. This is a season where people travel. And; however, operational income has grown in this quarter by about 7%, largely driven by resorts. And if you look at our EBITDA number, it's at INR 85 crores, which I mentioned, it's lower by about INR 4 crores and the real way to look at these numbers is that we have had a reduction in one-off gains from the rent waivers and interest on IT refunds which is of the order of INR 11 crores.If you were to normalize this, you will actually see that on a sequential basis, our EBITDA has grown beyond 10%, which is quite healthy and if I were to move on to talk about the 9-month performance, if you really look at the 9-month performance, we have grown our profit before tax by about 5%. Our EBITDA has grown by about 11% and our income grew by about 17%. And the another important point that we would like to make here is that there is a significant reduction in the one-off gains from the rent waivers that we had got last year.However, there has been a balancing act that has been done by the increase in the treasury income. And of course, we got an interest on IT refund. And as a result of which you do see finally a profit before tax movement upwards and even an EBITDA movement upwards on a YTD basis. Now these are very, very strange times, particularly when it comes to our accounting system when we have lower levels of activity, and we have lower member additions, we tend to deliver higher profits.In fact, as we moved in this quarter, we also noticed that we have spent and by design, extra investments we have done on our brand building and as a result of which you may have noticed that the numbers, the other expenses and the sales and marketing expenses you have seen an increase. If I were to talk about the sales and marketing expenses, this is by design. We wanted to boost the brand top of mind measures because we have not invested in the brand for some time. And most importantly, we also were ensuring that our member additions grow in line with the market sentiment.If I were to look at the other expenses which have gone up, they are largely driven by the resort-related expenditure as you know, that resort income moved up by 57%. There is going to be a variable cost which will come into the other expenses. Of course, there has been a minor increase in few other expenses, which are classified in the other expenses. But these are one-off in nature. And I am quite comfortable with the fact that if I were to compare it with the Q3 FY '20, we have improved our PBT margin despite increasing inventory by 260 basis points.I think this should get us out of the numbers at a very, very broad level, and we'll be quite happy to answer the questions as we move forward. But I would like to mention that throughout the pandemic, we have continued to focus on the 3 major drivers of our business growth, accelerating room inventory additions, growing our member base, and driving resort revenue through F&B and superlative experiences at our resorts. Our inventory buildup has continued. We have added 123 rooms this quarter. We are on track to reach 5,500 rooms in about 2 to 3 years.We have plans to augment our inventory in geographies where current member demand is high and in locations where membership penetration is low, but potential is significant [ through ] recreation of new destinations that we are known for. As the Omicron wave hit, we made sure once again that our guests and employee safety was paramount. We have further tightened our COVID-19 protocols and increased vigilance during gathering and celebrations, which happen at resorts.Platinum certification by Bureau Veritas and best-in-class safety and hygiene measures at our resorts have instilled confidence in our members to stay at Club Mahindra resorts, resulting in very high resort occupancies at 80% and the highest ever resort revenues of INR 70 crores. This is an increase of 57% Y-o-Y and 38% quarter-on-quarter. As members felt safe at our resort, they spent more time inside the resort, spending on F&B and various experiences.We are very happy to see that our efforts towards member engagement and introducing new multiple in resort initiatives to increase spends have actually gone through this quarter, which actually gives us the confidence that even in the future, resort revenues will be a major growth driver and will strongly augment our revenue stream. The pace of the member additions has been good. We grew by about 13% Y-o-Y. We added 3,701 new members. Yes, during the December '21 due to the Omicron effect, we had some difficulties in conducting physical meetings with prospects. But yet we ended up delivering member additions, which are in line with our expectations and most importantly, not only we delivered 13% growth in Y-o-Y in count, but if you look at value, our growth is of the order of 30.8% in terms of value of the memberships that we sold, there is a 30% growth on Y-o-Y basis.We have also increased our referral, digital and on-site sales. Our digital and referral sales are at about 58% of our total sales. We have sharpened our efforts during Q3 on our major growth drivers, and we believe that post the third wave, there will be a phenomenal bounce back in domestic leisure travel as pent-up demand plays out. Hence, as we emerge out of the third wave and embark on a growth phase, we have made a conscious effort towards advancing front-ending the investments for the future by prioritizing brand building, marketing initiatives which I talked about and making holidaying a habit amongst Indian families.While this means a modest increase in cost today, however, it prepares us to eventually benefit from the strong demand expected in leisure travel. So in some manner, we are preparing for the immediate future. I must hasten to add that timeshare vacation ownership is the need of the hour. You know that at this point of time, in these inflationary times, even more so as our members pay onetime membership fee and then they do not have to pay for the rooms and this is something that people are now appreciating and they understand the clear benefits of owning a Club Mahindra membership, and that helps them to plan their vacations well, go regular on regular vacations and most importantly, enjoy the spacious properties and rooms and also allowing for multigenerational travel leading to superior family bonding.However, while Omicron caused some disruptions, we believe that there won't be a serious aftermath in the months to come as we have witnessed that a restriction period is always followed by a significant demand jump. Our consumer insights continue to reflect strong pent-up demand with a wait-and-watch approach with holiday plans being deferred rather than canceled. Currently, we believe that this is the way we will play it out and most importantly, we are entering into April, May, June quarter in 2 months' time, and that's always a peak quarter and barring any other way we should see very high occupancies in our resorts into -- as we look into the future.I would like to just mention here that how we have adapted our operations post the first and second waves of COVID-19. In the first wave, it took us some time to come back to a reasonable level of operations. The second wave impacted our operations for a few months, but recovery was faster. I think post the third wave, the recovery will be even faster and our performance will bounce back. In any case, our performance has already bounced back to pre-COVID levels.Domestic destinations at drivable distances will be preferred -- continue to be preferred and travelers would be inclined towards choosing trusted brands like Club Mahindra. Our inventory addition is on track, and we expect to complete this year with 4,500 total room inventory as we close by March end. I would say that we are definitely looking at the FY '23 in a reasonably optimistic manner. I must hasten to add while Holiday Club Resorts has been impacted this quarter by COVID-19-related headwinds, we have seen in the past that in the absence of COVID Holiday Club Resorts has delivered a strong performance due to its strong fundamentals.Our performance not only in Q3, but through the entire pandemic demonstrate the strength and resilience of our business model and exemplifies our execution ability in tough conditions. As far as industry goes, the domestic leisure travel during the quarter remained strong due to festive demand of Diwali, Christmas, and New Year holidays. Domestic passengers traveling by air grew month-on-month from 17.4 million to 20.4 million to 22 million in October, November and December, respectively.Demand for hotel stays during the quarter came primarily from staycations, weddings, drivable [ destiny ] [Audio Gap] left and we are expecting the trend of increase in domestic travel with leisure travel leading the recovery to continue. We are also noticing that as the uncertainty due to the new Omicron variant grew, there were some amount of cancellations and some amount of deferment that people did in their plans. And definitely, the New Year's weekend and the Christmas weekend was affected for the entire industry.However, we and Club Mahindra have not faced much effect as a result of the problems that surfaced in the week 3 and week 4 of December caused by Omicron. If I were to give the current situation, the good news is that the daily COVID cases have started receding from a peak of 3.5 lakhs on 21st January. The cases are already down to 50% as on 3rd February and even [indiscernible] the cases have come down dramatically, and we believe that compared to the first and second wave, the recovery will be quicker this time around and expect traveler confidence to return at a fast pace.I must just highlight a bit about the emerging trends that we see. People are looking at new form vacation ideas, whether it is vocations, vacationing within drivable distances, factions, et cetera, are gaining momentum. Instead of shorter duration, we have noticed longer duration of stays due to travelers combining work and leisure. People appreciate the time spent with family and friends, multi-generational travel has picked up, as I mentioned.There is a rising preference among travelers for end-to-end personalized and bespoke packages, which include immersive experiences such as local cuisines, dining by the side of the swimming pool, by the beach, or under the stars, camping, barbecue, et cetera, to break away from the regular. People seek outdoors now. People are looking for outdoor activities like nature walks, treks, biking, yoga, bird watching, et cetera. Health and wellness is on top of the mind of people.People are looking at rejuvenating vacations to enhance their mental and physical well-being. -- sustainable and responsible travel, which is the -- which is all about focus on environment and conscious travel is now on the rise, and there is an expectation of deployment of energy-efficient resources, which is an expectation that we see from travelers. If I were to once again come to details of our performance the result performance I already talked about. I am happy to share that Bureau Veritas has certified 40 of our managed resorts and 14 of our associated resorts with the highest rating of platinum for COVID safe -- adherence to COVID protocols.All our staffs are double vaccinated, and yet we continue to do random antigen testing on a continuous basis. Our safety program has stood the test of time. If I were to look at our capacity that we have added in terms of room rents, if you were to compare on a year-on-year basis, our room rents have grown by 16%. And despite the increase, the occupancies remained high at 80%, which is what led to the boost in our revenues. And I must say that in certain states, we have also seen occupancies as high as 90% plus.Except Kerala resorts where the occupancies have suffered we have seen movement upwards of occupancies in all resorts during the quarter and even now when I look ahead in February, we are seeing a reasonably big uptick in the occupancies. By the way, January, we closed the month with about 66% occupancy, which is quite an achievement considering the scare that Omicron created and we believe it's largely due to the safe state program that we have and the certification that we have from Bureau Veritas and the confidence that we have inspired amongst our members.If I were to move towards the fact that our member experience is our focus, our F&B revenue from the members per room night has increased, our other revenues have increased on a per occupied room night. We have launched new specialty restaurants like Pan Asia, Barbecue bay, temptation, and Fins, all of these are creating unique culinary experiences at our resorts. We are focusing on food festivals to improve our engagement with our members and also improving the soft beverage or mocktails related portfolio.We have introduced various resort-based experiences, which are centered around Happy Hub, spin wellness treatments, vacations, birthdays and anniversary packages, and also celebrated various festivals at our resorts. We have introduced all-inclusive packages for members and families at a discount which -- which includes the option to prepurchase. There is a huge amount of traction happening as a result of that. I have talked about outdoor experiences already, which are also being picked up by the member.As far as the costs are concerned, we have to increase the food and beverage-related prices to beat the inflationary pressures that we were facing. And as a result of which our F&B cost is very, very competitive as a percentage of our sale price. We have introduced cost-saving initiatives across the areas of energy, management as well as in all areas that impact the resort cost, that has been in focus on cost management without impacting any experience of our members.I must say that broadly if I were to look at now move towards the member additions, our member additions have been robust. I mentioned about the volume and the value growth. Our AUR is also quite healthy at about 3.0 lakhs this quarter, largely driven by the higher sales of 25-year product. Of course, we also increased our prices of our membership from November '21. And of course, there has been some momentum in the corporate sales as well. The reference and digital have contributed to 58%.Our marketing campaign, [Foreign Language] we cover India, you discover India has got a huge amount of traction on the kind of experiences that we have launched. We have a very interesting program called Family Premier League that is doing extremely well, season 2 is on. And this is to attract prospects to look at our product. This is becoming a very, very good intellectual property for us. If I were to look at movement in upgrades, we have seen a huge momentum in upgrades as well.Our member of -- pace of member additions in the month of January has been all right, despite the fact that there has been Omicron-related restrictions. I mean we would have expected it to be slightly better, but January has definitely slightly impacted our member additions. But we expect February and March to be good, and March is always a big month for us as far as member additions go. As far as inventory is concerned, I have already mentioned that we have projects going on in Assonora, Ashtamudi, Kandaghat, and we will be starting a new project in Ganpatipule.We have about INR 600 crores of capital expenditure, which is in play. And as we speak, we have plans to invest INR 1,000 crores to INR 1,200 crores to add about 1,200 to 1,500 [ keys ] over the next 3 to 4 years. We also are going to add new destinations more on that later. We have made significant progress in the sustainability-related measures, but more on that later because we would like to give you time to ask questions. But there's a lot of stuff that's going on, and that's up there on our website, and we will be again updating it on a regular basis.If I were to look at the overall performance and come to the balance sheet part of the performance because I did focus on the P&L, the deferred revenue for the quarter has increased by INR 40 crores, which is the highest since the onset of pandemic to INR 5,052 crores. And as you know that there is a deferred revenue concept in our business where we recognize only a pro-rata revenue in line with the tenure of the product, and the balance goes into the deferred revenue, which fits in our balance sheet.We continue to have 0 debt at a stand-alone level. India Ratings and Research of FITCH Group Company has reformed our credit rating as a long-term issuer at IND A+ stable for fund-based working capital limits, IND A1+ for non-funds based working capital limits. Our cash position has improved to INR 1,108 crores from INR 1,041 crores as on September 21. Our cash position over the last year has grown by INR 260 crores from INR 848 crores on December 20.We have been driving higher down payments, lower EMI tenures for member addition that has, of course, helped in improving our cash situation. Let me move on to Holiday Club Resorts. A rise in Omicron infections and related restrictions have impacted business from November onwards. They have a partial closure of SPA resorts due to the shutdown of the restaurant and the water park operations. Two of the resorts out of 9 are shut down since mid-January, and they are opening as we speak from the first fortnight -- during the first fortnight of February '22 in line with the easing off of the restriction.These measures have impacted occupancies at resorts, especially affecting the Christmas and New Year festivities as well as group events that happens at that time of the year in Finland. However, from February '22 onwards, the COVID-related restrictions are being eased off, and we are very confident with the winter holiday season kicking in, we should see some good numbers coming from Holiday Club Resorts in the month of February and March.If I were to look at the financial performance. Holiday Club revenue grew by about 9%, despite the Omicron wave. Of course, the timeshare and villa sales decreased due to the travel-related restrictions. Revenue from SPA hotels has increased by 58% on a Y-o-Y basis. HCR also received government subsidy of EUR 1.14 million as a part of the COVID-19 lease in quarter 3 FY '22. HCR has managed to contain its operating loss to EUR 1.35 million in Q3, and it is a significant improvement from the loss of EUR 1.57 million in Q3 FY '21.If I were to look at the overall outlook, COVID-related restrictions are being relaxed as we speak. And as I mentioned, from mid-February onwards, we should see good times coming into Holiday Club Resorts ahead. If I were to look at the consolidated performance, the total income grew by 13.5% Y-o-Y and stands at INR 584.4 crores. Even EBITDA at INR 112 crores is up by 11.2% Y-o-Y. EBITDA margin stands at a healthy 19.2%, and PBT has grown by 3x. Even at a 9-month level, the PBT consol has grown by 6x.I think it's -- we are just waiting for the Omicron wave to sort of go away, which is waning. And I think as we look at into the future, when I say future, I mean February onwards, mid-February onwards, we see things improving literally day by day. And I believe that we are set up post the pandemic or post this wave to really take advantage of the situation where both in India and in Finland, domestic travel will be at an all-time high as we move forward into the future, which means we are positioned very well to take advantage of that.We remain focused on family vacations, and that's our core business, and that should grow in time to come. We do expect tailwinds as we keep moving forward. Thank you so much for patient listening. Now we would open for questions. I think we would really as I mentioned always, we learn from you when you ask us questions, we become sharper, and that's the intention to hear from you and see how we can improve situation and things even better from where we are today. Thank you.
[Operator Instructions] The first question is from the line of Nagraj Chandrasekar from Laburnum Capital.
Congrats on a sharp recovery to normal. Just want to understand your -- you've seen pretty good tailwinds because of inflation in room nights and everyone having -- most people having Omicron sort of vaccination on top of the vaccinations we already have. So just you've also seen your AUR go up to INR 3 lakhs close to pre-COVID levels so just wanted to understand what that should mean for membership addition run rates? Are you seeing pull from members yet because you've done a lot of sales and marketing expenses. So are you seeing sort of pull factor from members yet such that you can get to an 18,000, 20,000 member add sort of cadence? And secondly, if the demand as such going by what you're saying is so good, why have you introduced these packages that you're talking about a slight discount for prepurchase on some packages. So why are you doing this sort of discounting to get sales?
All right. So I think you have 2, 3 questions rolled into one, but let me try attempting them in case I don't please feel free to tell me if I missed something. So if I were to look at when I say pre-COVID levels, what I mean is that and you rightly said that are we seeing good times ahead in terms of coming back to pre-COVID levels. We have come pretty close to pre-COVID levels even at member additions level, you can compare it. We are almost knocking at about 3,800 to 4,000 every quarter.In fact, last year, quarter 4 was -- there was no wave, and therefore, we did extremely well. This time, of course, partly January has been impacted. But if I were to really look at our capability to bounce back, you have obviously seen, over the last 18 months, in fact, now 21 months, including December, we have constantly been growing our profits, cash as well as strengthening our balance sheet in terms of the deferred revenue. I'm quite sanguine, optimistic that things will become better than what they are. Yes, talking about the investments that we did and is it leading to a pull? Yes, the way we measure pull is, are we able to sell most of our units through the digital and referral.So today, if you see digital and referral is at about 58%, which is the highest ever. The down payment metric that we track internally, we are at an all-time high in terms of the percentage of people who are giving us 30% down payment and more any time that they sign up because that shows commitment, that shows pull. So for us, higher down payment, higher digital, higher referral, higher upgrades. These are the measures of the pull, and that is why you are seeing both the cash going up as well as, of course, profits, we have a track record, which I will not talk about, it's extremely good.Our margins have been improving more importantly, along with improving profits. So I think post-pandemic, we are going to get into at least a period of 2 to 3 years where people would travel domestically and with slightly higher inflation situation that we are in, in the environment, the timeshare and the vacation ownership proposition becomes even more attractive and you have seen in the leisure destinations, how the prices are being spiked upwards, we have been able to take price increases both in F&B as well as in our membership.Now coming back to the discounts that you talked about. On the prepurchase, the idea is engagement and sometimes as a marketing strategy, we must invest in giving people an incentive to prepurchase because repurchase ensures that people will commit. They will indeed come and spend their time at our new restaurants, new offerings, which is so critical because there are, in some manner, fixed costs at resorts, the more people engage with us even with a slight discount, it's fine because it just gets them into the habit of coming out of their room, bringing their own food and trying to sort of save money, even though they would have saved money on the room, we expect and we believe that the families need a break from the chores of cooking, and that is where a great food experience also is something that we expect members to enjoy and more they engage more the experience, more they are likely to have a positive word-of-mouth and more reference will come. So it's one big cycle that we try to promote by giving some discounts, some freebies, at some point of time tactically.
Understood. Got it. Just on secondly, more bigger picture question on Finland. It looks like -- if there are no further ways, you should see strong numbers there. But at an overall level, it brings down our ROVs, ROCs and there is not much of a benefit in terms of flow from the Indian customer base into Finland or being able to add members in India from having these resorts in Finland. So are we at some point once things normalize with the new team in place, if margins can be brought up there. Will we be looking to sort of monetize this asset? Or is there any such sort of thinking on the horizon right now? So one of the reasons we have gone into Finland and looked at Holiday Club Resorts is one of the most respected timeshare brand in the Scandinavian world and the largest timeshare operator in Europe. As you know that in Europe, timeshare in some countries is not even allowed and this company has been in existence for more than 30 years and they have built a very solid brand and the culture in Finland is of spending quality time with family, going on a regular holiday for their physical and mental well-being. And you know Finland is the happiest country in the world, the #1. And therefore, a lot has to be learned from their ways of living and how they think about the holidaying.Now the good part for us is that we have a very strong member base there. We have about 60,000 members plus there are some corporate members, et cetera. Plus, we have presence in Finland, Sweden and Spain. You must sort of probably, you may sort of also agree with me that it is -- we took over the company by the time we got the new management team, the pandemic was just about coming in. So we have done a very detailed exercise with one of the consulting majors. Maisa, who is the Chief Executive, she is one of the best leaders that we can find in Helsinki area. She has got a new team.They have come out with a very interesting strategy on how to grow this business to multiple levels in terms of earnings as well as obviously, when I say earnings, I mean even profits. So we are quite positive about the business on its own to deliver much, as I said also, it's got extremely strong fundamentals. And having said that, as far as we are concerned, yes, in the post-pandemic era, there is going to be renewed thrust on ensuring that Indians look to Finland, Sweden, and Grand Canaries as a destination. And more important, use that as a pull to create member addition acceleration.So whatever you said is truly being planned as we speak. It is just that the pandemic has been a spoiler. Every time we have tried to do something, we have had these waves coming in. So really speaking, it's just a matter of time where you will see their strategy playing out in their own core business. And as far as we are concerned, our strategy playing out to create a brand pool for us considering the fact that with Finland, we have 100-plus resorts in India and abroad. So that's something to be proud of as a timeshare company.
[Operator Instructions] The next question is from the line of Ankit Kanodia from Smart Sync Services.
So congratulations on showing good numbers, specifically on the resort income. I hope to see that as a secular trend and not just a one-off. My question was related to the cash basically. So of course, any good business, which has a characteristic of showing a lot of cash in the books. But when your cash keeps accruing to a level where, right now, it is around INR 1,100 crores. And please pardon my ignorance and do correct me if I'm wrong, but my rough calculation says that around even if we take INR 1.5 crores to make a room and we take our INR 500 CapEx to be done in the next, say, 3 to 5 years. And even the impact comes to around INR 750 crores. So after that will be left with INR 300 crores to INR 400 crores of cash. And by that time, we'll probably have more cash accruing from the business. So how do we plan to put this cash to use is something which I'm unable to figure out because the cash sitting on the books is not giving you a returns apart from the investment [indiscernible].
Yes. So I think it's an important sort of observation. Yes, we are going to invest up to INR 1,000 crores to INR 1,200 crores in about 3 to 4 years. But even in those 3 to 4 years, there will be more cash that will get generated. So we may bring it down a little bit. It may remain the same or it may go down by a few hundred crores. If we were to execute our CapEx plan the way we are planning it. But having said that, the best use of cash in our business so far is to invest in resorts -- quality resorts and accelerate the growth, the more we add resorts, the more we can add members and more we generate again cash.Now some part of the cash in normal circumstances will get a return to shareholders. It is just that the new accounting standard, which came in, does not allow us to disburse dividends because of the transition issue that you are familiar with probably. And we are working with MCA to see how we can get an exception to this rule. Despite revaluing our land, we are not in a position to improve our net worth to positive. It is still a net worth negative company despite having a phenomenal dividend paying record, despite generating cash, despite having so much of assets on books. So that is one thing that if we were able to resolve we will definitely then obviously, the shareholders will need to get sort of -- we'll have to return some of this cash back to shareholders, rightfully so.But I feel that a large part of the cash will be deployed for growing the business because we are even more confident than what we were prior to the pandemic, that leisure and the business model that we have, the fact that people want trusted players -- branded trusted players to take care of their vacationing needs. We are not about [ mice ]. We are not about weddings. We are not about events. We are about playing vacationing experiences for the families, and that's a very, very sharp positioning, and that should help us to look at areas like tomorrow. If you were to think about it, what prevents us from creating wellness resorts, focused on wellness, of course, for family wellness.But all these things are being thought of as we speak, to see how we can grow our resort footprint, more we grow the resort footprint, more we create the pull. And obviously, that leads to, again, a generation of cash. And hopefully, once the dividend is allowed to pay dividends and then we keep growing the business without taking recourse to any debt whatsoever.
That helped. So I suppose whenever the MCA appears that, we'll probably also think about not only dividend but also buyback because I think the valuation compared to what the cash flow we have and the properties we have is also still pretty attractive, right? But my second question is regarding the debtors, which we have on book. So we have been maintaining that all these [ debtors ] are in a situation where we can do bill discounting through any bank or financial institution. But I think it would be better for our shareholders if we can get some more clarification about granularity on this in terms of how much of this data is VO-related and how much is ASF related? Because these 2 types of datas are completely different. So I think that would be great. It's just a request. If you can do that, that would be great.
All right. So Sujit, would you like to comment. Sujit is our CFO, and he may want to answer this question.
Yes, in terms of the overall, I just wanted to also add to what Kavinder did mention couple of disbursement. As you would clearly visualize the more we can generate also that means that there is no profit, which we will get generated which will add to the retained earnings, and that would help us actually advance irrespective of what the MCA sale, in fact, that itself will advance our capability to declare a dividend. I just wanted to add that. As far as the debtors are concerned, we look at it as a member receivable and one single member receivable. And that's the reason we had not been kind of splitting that into timeshare or ASF Separately, our membership clearly mentioned that people need to pay their dues on time to enjoy the holidays. So that is the core reason and in terms of the recoverability, both of them stand equal. So I think from an operational perspective, the receivable is reviewable.
That really helps. But just a follow-up on that is that as for our channels, we have -- I don't know whether this is true or wrong or false, but we have understood that there are a few members who continue to be a Club Mahindra member, but they are delaying their ASF payments because they are not utilizing their room days. So in having those distinctions between the ASF [indiscernible] because there is higher chances of getting the [indiscernible] compared to ASF because sometimes the ASF may continue for a longer period of time because if the person at no fault of Club Mahindra but if the person is not enjoying the -- is not taking the use of the resort or room days. He or she might not pay the ASF. So that is why that was asked.
No, I fully understand where you're coming from. Just wanted to kind of put the things in perspective. We have more than 262,000 members. And every family has a very different pattern of taking holidays. Some of them, they do not take holidays for a couple of years and then they take it together. We allow for accumulation of their vacation for 3 years. So maybe members take benefit of that. And they do pay in lump sum once they decided to preplan their holidays. So it is the pattern. And that's where in the overall scheme of things, that percentage of members is always [ material ] or significant is what I would say. Definitely, we actually encourage and we put our efforts, our member experienced management team keeps on reaching out to members and help them with their vacation planning so that they are encouraged to go on holidays because that's also good for our business, not just the ASF collections. So that's what we do. But I would also request Kavinder to if he wants to add something to this.
We have the next question from the line of [ Venkatesh Srinivasan ] from BAM Research.
Congratulations on a great set of numbers. And thank you for such an elaborate and insightful opening remarks section. Most of my questions were answered. Just one more. You've generated the highest ever resort income this quarter. And I believe that if this is managed well, it can be a key driver for topline for this company going forward. Hence, I would love to hear your thoughts on this. What kind of trend do you expect on resort income going into the last quarter of this financial year and also into FY '23?
Yes. I think this is a very insightful question because we earlier used to if you look at our income mix earlier -- in the earlier years, obviously, vacation ownership income was dominant and then came, of course, the accounting standard where vacation ownership income became obviously a little lesser dominant. And now resort income is a period income and that with the number of resorts growing, as I was mentioning in my opening remarks that we added 580 rooms between December '20 to December '21. And obviously, when you have that many rooms extra, of course, your costs do go up, but you are also generating a huge revenue opportunity.Leisure is going to be even bigger than what it is today. And there is going to be that much more leeway we will have to add more and more members to our ever-growing base. So if I were to look at the potential of the income, you know if you -- you can do a back of the envelope calculation when you have 4,000 kind of rooms or 4,200 to 4,300 rooms, you're talking about roughly 1 million or 1.2 million-odd room nights roughly, okay? We are talking after occupancy factored in.So you're talking about 100,000 room nights roughly on a monthly basis, right? Give and take, few nights. Let's not worry too much about the exact number. Now that means that there is so much potential on a per room night basis to create opportunities for members to spend. Now when I was making statements like birthday packages, anniversary packages, prepurchase packages, all-inclusive packages, team nights, new restaurants, what is all this adding it up to. It's all adding up to getting members to spend more and more in the resort, spend more time at the resort. A lot of activities for members and their families so that they find that it is better to be inside the resort than actually go outside because really speaking, I mean, it's unfortunate that when you technically go out of resort, you could be eating food sometimes in an unhygienic setup because people do try to save money. And we have been consciously guiding and we do things like we don't add any color or preservatives in our food because that leads to stomach upsets if people are eating for a longer period of time in our resort.Our food, the hygiene, the kitchen, et cetera, we have ISO 22000 certifications. So we are trying to create some [ food ] good quality, a lot of variety, a lot of engagement around food because people do find during leisure time, food as a way to enhance their experience. And of course, there are a lot of outdoor activities. Our investment in Rocksport actually has helped us to create a lot of outdoor experiences, including we are creating adventure theme parks as we speak in some of our resorts. And it's going to be quite sort of a thing for people to engage in these adventure activities in a very safe manner. These are soft adventures. And this will also become a revenue source for us because the fact of the matter is that some of these are quite engaging and people are more than happy to pay for it.So bottom line, whether it is food, whether it is spa, whether it is these spa and wellness, I mean, and also these outdoor activities and Happy Hub related activities, we believe that this can be a significant income stream. Obviously, our aim would be to see that this expands on 2 counts. One, basis number of rooms, which is quite natural. And basis per occupied room can be enhanced on a per occupied room night. We are able to get more and more people to engage because what we have seen is when people engage when they spend, they are happy and they also refer more. This is something that we have found through deep observation of the membership behavior. So it's a win-win.One side, you are creating a great vacation for the family. And the other side, you are getting refer leads, which are actually reducing your lower of cost -- lowering your cost of acquisition even further. And that's what -- that's how the network effects in some -- some manner play out, and this income could be a potentially very big source of income as we keep moving forward.
We have the next question from the line of Pranav Tendulkar from Rare Enterprises.
So actually, congratulations on the great, great quarter on operating level. So what are -- so I have just 3 questions. First is, what is your opinion about what are the 3 value drivers for the business. The value ever in the sense, I'm not talking about in the soft sense, but the valuation wise. Second question is if that map is clear. How are you addressing conflict? Because I understand that there has to be some optimization. So for example, when you say that I have 1 million in a day or something like -- I just calculated it is like 2.8 lakh nights in a quarter. And then if you say that there is a INR 70 crore revenue that you are deriving from that it comes to around INR 2,400 per room per night, which looks a little bit higher for me and maybe utilization is suppressed and that might be one of the factors which is going against the publicity of the firm because, frankly speaking, the resort quality is amazing, but I got this impression that people think that food and other things are expensive. So that is second point. And it will come to a conflict -- somewhere conflict of getting members or getting value from members, so there has to be a clear thinking about that. And third thing I just wanted to ask is what are the pathway to reach, say, 5,000 to 6,000 members addition per month because whatever calculations and model I have built, it looks like that VO income is the largest for the firm. And rest of the things can be actually optimized on but we can't let go of VO income, which is driven by member addition.
Yes. Again, very insightful questions, of course, multiple questions rolled into one, but fair enough, let me try and see how I can address all of them. You know -- if you -- whatever calculations you did, I'm not commenting on that, but I don't think you should be surprised with INR 2,400 per room night kind of a thing because think about it in the leisure situation, a family minimum per room in our case is of the order of about 3 people because we have studio. So when 3 people are having breakfast, lunch and dinner, it's actually nothing INR 2,400. It could be more or it should be more rather, and we should aim to get more because the fact is that people may say that the food is on the higher side in terms of price, but they get a 25% discount being a member. So there is a member discount. And most importantly, if people are not paying for the room and that they have paid for through the membership, they are definitely most likely to spend on food and experiences, which we create. So there is a significant opportunity even today and holiday experiences, which can be further tapped even beyond food.So the point is that if I don't feel engaged in the resort, I'm not likely to spend. If I feel engaged, if I enjoy, I will spend because people seek value. And when they say seek value, that's not equal to lower price. I mean lower price is also value. But equally, people don't mind paying a reasonable sum whatever comes to their mind as reasonable. And we keep, obviously, this is I must tell you, there's a lot of art and science here in terms of pricing, in terms of promotions, and in terms of discounting -- promotions and discounting in a manner that more and more people adopt. So for example, we have this all-inclusive package, which is a very, very intelligently designed package where there is huge value for the member if they were to sign up an all-inclusive package. And the package is a 2-meal package, 3-meal package with a snack in the evening thrown in.So there's a lot of science that goes in and a lot of analytics that goes in to see what kind of people will spend money on what -- and there is a power of analytics with the technology that we have with the way we can look at things, it is very easily possible to predict who is likely to spend how much and on what. And that's the part of technology, which earlier people did not have, and we have been working on it for more than 3 to 4 years. That's a capability that we have been building. So for us, resort income is equal to resort satisfaction, experience satisfaction, better the satisfaction, better the experience and better the referrals and better the acquisition and better the network FX playing out.Coming back to your earlier question of 3 value drivers. We obviously, you are not wrong when you say that member addition will continue to be a value driver because VO income is necessary. See, member addition is not just about VO income. [ Memberization ] sets multiple streams of income, whether it's annual fee as well as resort because resort incomes are also coming from members in a way. So it is important to keep adding to the list of the members. But equally important is to add inventory because that's how you service the requirement very well. And therefore, you do focus on building inventory. So member increase, inventory increase and the third and the most important, in my view, more than the first 2 is the what kind of experience you're driving because if your experience is not good, why would people come anyway? Why would people become members anyway?And that is something that is sometimes intangible. But now we can take this as a surrogate that how much people are spending on a per room night basis or you did a ballpark calculation. I'm not commenting right or wrong, but it's very easy to do these things. And then you say, hey, is this going up? And why is it not going up? If people are happy? Or is there an issue with the pricing? Or are we not being -- are we giving away value? So there's a lot that goes on there to ensure that members are spending money and enjoying. And the other one, which is a driver of value for us is upgrades. Apart from selling new membership can we upgrade? So upgrades are significant in our business. And they also become a part of deferred revenue because it's always most of the income has to go and sit in the deferred revenue.And costs are obviously upfront. So all the costs come in upfront, very little costs get deferred, and that is all visible on the balance sheet, so I'm not giving numbers. But I think the real driver of value once again to summarize is, keep on adding members, good quality members, higher down payment members, make them holiday, not just add members, make them holiday. Then they will pay ASF, they will come regularly, then they will spend money. And then they will talk good about you and therefore get you more referrals.And the second thing is keep on adding inventory, new experiences, not just rooms, create new experiences, more and more innovation the experience people will spend time and energy and money and get engaged. And last, but not the least, is when I'm saying keep on adding experiences, I meant within the resorts. And then a third point, which is a stand-alone point is keep creating new experiences around food and beverage, around holiday experiences in the resort and ensure that people remain engaged. These are the 3 value drivers for us. And all are easily visible and measurable.Member additions, you can measure. You can see whether we are adding resorts in time. You can see whether we are growing our resort incomes by just adding inventory or otherwise also, is there an improvement happening? And more importantly, are we managing costs because another value of it is how do you really manage costs and ensure that while you are chasing growth, you don't overrun in terms of cost. You don't bloat yourself. And that's a very smart thing that we have done. You may have noticed our productivity and structural changes that we did, including variabilizing a lot of our costs has led to a situation where pre-pandemic, we are better off than the pre-pandemic after 2 years with the 260 basis points in PBT improvement despite adding inventory and despite adding -- despite adding 580 rooms, we are still in fact, but if you look at pre-pandemic to now, it's about 700-odd rooms. So it's not even 580. It's actually 700-odd rooms added and still 260 basis points improvement in profit before tax. And that happens how. It happens when everything begins to work together in a very synchronized manner, where the operational excellence, along with financial prudence actually begins to put all this together and brings out this kind of result that you are seeing.
Right. So just 2 points. I totally understand what you're saying. So for example, if I just say that, say, 100 instances of food getting [indiscernible]. So as a family per day has a minimum 3, have data as compared to how many instances are actually getting utilized. because it can always happen that INR 2,400 per room night is coming, but only 50% of things are getting consumed and actual bill is almost INR 4,800 crore, which will be -- so that is one calculation -- that is one calculation that I would like company to just examine, I'm sure that you would have done it, but that is one. And second is, there has to be one nonintrusive way to improve the social media presence. So I understand I visited some of the resorts and employees are quite active to get treated or happy instances get treated. But if you can get in fight. So I have just holdings saying that [indiscernible] bonus points or whatever, whatever. And it could be a very nonintrusive way to improve those social media revenues? Because I totally understand the value actually I visited your [ cozy resort ] and it was amazing experience. So congratulations on that.
No, no, definitely. We take your feedback. As I said in the beginning of my conversation that we learned from interactions with you. And if we are today where we are, it's because of the interactions that we do with you regularly.
We have the next question from the line of Bharat Sheth from Quest Investment Advisors.
Congratulations Kavinder on good set of numbers. Only, I have 2 questions. One is, I mean, taking this income result, how -- what's our experience say during this period? So how much [ shift ], I mean, [ trend wise ] if you can see can give where before, how many people were enjoying all this food and mainly in resort and because of COVID how that has increased and do we think that, again, say, once the things normalize, again, that may come down. So if you can give some insight into that trend.
Let's say, Bharat it is a very, very interesting question that is it a temporary trend or is it a trend of the future. So if it was that there is a COVID-related restriction and people cannot go out and therefore, you are getting a temporary blip, it could be a temporary trend. But in our case, what we are doing and what we are seeing is that we are using the power of digitization, analytics using the knowledge of our chefs to create new experiences. We are investing in outdoor activities and new experiences. So the whole thing is that we are trying to build capability around new experiences, which you have to keep refreshing because what happens is that something that you like today, after some time, you want a variation there. So that challenge in our business is not about whether people will move away from us.The challenge in our business is how relevant, how innovative we can remain on a regular basis on the ground. And that is where we have to spend our energies. Money, people spend when they see value. This is my fundamental view. If you create constant value, people will come and spend money on any activity or any experience that you create. Just to give you an example, there is an electric bike. You can when you go to Goa and some of our resorts, you can actually go on an electric bike and actually go and see the nooks and crannies for about 3 hours. Those -- that activity costs you INR 2,000 for 3 hours.You will be amazed that people continue to spend that kind of money because they believe that it's value because they have not done this experience ever again anywhere. So we have a new pirate team Adventure Park coming up in Pondicherry. People, when they bring their children, they are going to experience it because they will know that they will not get this in the city in Chennai. So the trick here is to keep creating things which can be done in open air environment. Outdoors and outdoors right now. And it will remain weak for some time again. Maybe after some time, again, people will become focused on indoors when pandemic is gone. But by that time, we would have found something more, something more interesting to focus on. So it's a moving target Bharat, and we have to constantly ensure that people remain engaged because nothing you can take for granted in these times when people are constantly shifting their priorities.
And second thing, I mean, earlier, of course, we were looking for inorganic opportunity, and we were getting a lot of interest. So where this whole I mean, apart from adding our own room and leasing regional, I mean, now taking on the lease or buying out our resource or something -- what is our experience?
So we do multiple things. Resorts -- good quality resorts are truly not available. If they were available, then we would have bought them by now and whichever good are there, we buy them. And what we do is we create our own. We expand our own resorts. We take it on lease if there is a good result if the owner doesn't want to sell, and we manage the whole resort. And last but not the least, if the owner wants to sell, they come to us. We anyway have a right of first refusal in any lease resort that we enter into. Now the advantage of having a situation like this case is, that it also challenges us to constantly think of new ways of creation of great quality resorts.So even now, there are a lot of opportunities that we are evaluating for acquisition. But there are always 2 to 3 things that are important in acquisition. There has to be a value for us, obviously, value for the seller. And then second thing is a great location. Third, a resort where there are permissions available for you to expand because some of these resorts are small. You can't buy a 50-room resort or a 60-room resort and make it economical. You should be able to take it up to 150 to 200 room resort. So there are always those considerations around buying a resort.I mean I was evaluating a resort very recently and we realized that there are some fundamental issues with respect to the surroundings of the resort. And we were not very sure whether the resort will be able to deal with the surroundings. So we said, okay, we cannot go ahead with buying it, let's take it on lease to observe, and it's already there as a part of our distinct. If there are, over a period of time, these circumstances can be mitigated because these are decisions you take for a long time. And therefore, you need to constantly evaluate acquisition opportunities, creation opportunities, buying land continuously in areas where you think there will be opportunities coming to create new, let's say, destinations because that's over one of the core things like Kumbhalgarh we created like many other destinations.So for us, we are driven by a destination creation objective, a very reasonable quality of reasonable pricing of the land and then creating a great experience. For example, if you go to Assonora Resort today, I mean this is something that is not even a resort on the beach, but it is running full. So it all happens because you have thought ahead of time and said that, okay, this is the line I want to buy. I know it will take time for me to build on it. But once I create it, it will be a great experience parallelly we are taking on lease. Parallelly, we are taking it on long-term leases, but I mentioned the same thing. So there are multiple strategies and keep evaluating targets. By the way, Kandaghat resort, which we are today expanding is an acquired resort, just for you to know. Thekkady is in acquired resort. So we do acquire. It's just that we need to get the right resort.
And last question. How many rooms are in pipeline that we plan to add in the next 12 months. So how many [indiscernible] which we have, so which can help us to build up a portfolio for the next 5 years.
So at this point of time, when I say, I have INR 1,000 crores to INR 1,200 crores CapEx plan. It includes investment in the land banks that we have in building new resorts or expanding my existing resorts. So there's an opportunity both ways, expand existing resorts, improves -- it actually improves the economy of scale. For example, if you look at Kandaghat resort, it's a 74-room resort. We are putting another 185 rooms. It's going to become a 250-room resort. And that's phenomenal because that gives you phenomenal economies of scale. And it's so well spread out in terms of terrain. It will still be as pristine as it is today. So that is the beauty of expanding in existing locations.There's a new resort that we will start breaking ground very soon in Ganpatipule area. We are going to build 235 rooms, it's going to cost us about INR 250 crores, but that's going to be, again, very convenient for Mumbaikars to go there and stay. And that's why we are going to invest in that, and that's a destination in some manner, we will create. So idea is really build a big now, do not have 50 or 60 room resorts because those are not really going to be economical. Concentrate, build new resorts, buy and keep buying land. Of course, we keep buying land. We have picked up some land very recently in Maharashtra, in MP.We are doing PPP, by the way. We recently won a bid with the Himachal Government. They were wanting -- it's a small resort. It's a very small resort. They wanted to give it to a private player to develop it, and we are going to do that. We are also participating in the bid with MTDC. So we're doing all kinds of things to either take over an existing resort, then build it up or take it on lease or build from ground zero or expand our existing resort.
Ladies and gentlemen, due to time constraints, that was the last question. I would now like to hand the conference over to Mr. Kavinder Singh for closing comments.
So far, I would like to thank all the participants who came to listen to us. We are grateful and honored. We have learned a lot during these interactions. These interactions, as I always maintain, keep us sharp and keep us alert, and we will take all your questions, go through them and see how we can continuously improve our disclosures, continuously ensure and come up to your expectations. But I once again want to say that we are looking at the future with confidence. And on that note, I would like to say keep yourself and your family safe. I think we are near the end of this pandemic. This is what I feel, this is what I hope, and this is what I think all of us are hoping for.
Ladies and gentlemen, on behalf of Mahindra Holidays & Resorts India Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.