Event Round Up

India is a potential market for timeshare models

Group RCI's Leisure Real Estate Symposium churns an interest for different vacation real estate products with vacation ownership tipped to push India's hospitality development. By Sanjeev Bhar

Group RCI held its annual symposium in the city for the first time for its Asia Pacific region in India from August 23-24, 2007 at The Taj Palace, New Delhi focussing on identifying the various real estate products that would be viable hospitality projects in the future. The two-day event enlightened the participants about vacation ownership in its various forms as a profitable business model. On the occasion, Radhika Shastry, managing director (Indian subcontinent), RCI India said, "Looking at the future, vacation ownership is going to become a strong driving force for resort development, and Indian developers are eager to know about various products that could be lucrative real estate products. The symposium was aimed at delivering understanding of products to potential developers and has achieved that target by generating a keen interest among them." Peter Giamalva, president and managing director, NorthCourse Advisory Services, Group RCI added, "We made a concerted effort in informing people about different vacation ownership products for real estate development. India is seen as a potential country for such developments and awareness is the requisite to start the process." Discussing the development platform, B S Rathor, chairman and principal advisor to All India Resort Development Association (AIRDA) remarked that vacation ownership is growing at a compound annual growth rate of 20 per cent for the last three to four years and has become the reason for resort developments in India. "The market for timeshare models is huge and more importantly, domestic traffic is adopting the lifestyle that supports the timeshare model." Kenneth May, chairman and CEO, Group RCI summed in the most appropriate manner. He said, "We did get a lot of participation for the symposium and created a sense of interest and awareness among the developers, which was not there earlier. The business models discussed during the event are practically suitable for the Asia Pacific region and looking at the hospitality boom in this country, this is certainly going to further the horizons." India is in an embryonic stage of development in innovative product models for vacation ownership real estate developments.

Focus on leisure real estate models

The day one discussion was devoted entirely on the education part for the participators. Taking the centre stage, Giamalva made a presentation on about four models viz. traditional timeshare, condominium hotels, traditional fractional and private residences clubs. He informed, "In total there are nine products in leisure real estate and shared ownership models but India is ready for all of them. The concept gives boost to those developers who may be having the land bank but are not backed with finances. In all scenarios, hotels are not appropriate and hence, time share concepts are becoming relevant." Max Eidelman, director (Americas), NorthCourse Advisory Services made a presentation on Condominium hotels and its opportunities in India and the rest of Asia.

Session 1: Legal implications in the region

Moderator: Peter Giamalva

The first session was on the latest legal issues surrounding the models and legal sanctity or guidelines for entering into the market. Ravi Singhania, Managing Partner, Singhania & Partners said, "At present the rules of these models are governed by the Indian Partnership Act." He discussed the legal statute and individual responsibilities associated with different models. Expanding that point, Edena Low, Vice President, Legal & Government Relations - Asia Pacific, & COO - North East Asia, Group RCI said, "Most Asian nations don't have associations and have club concepts when it comes to mixed ownerships. Therefore, management takes care of the various maintenance or day-to-day issues, unlike associations in developed markets."

The discussion proceeded towards the dynamics of the Indian market and guarantee guidelines associated therein. Singhania remarked, "As of now, the return on investment is in a nascent stage. A guaranteed return on certain products is prohibited and thus, guarantee offered as a concept needs to be structured and demands strong regulatory framework." The panel also discussed on how the whole ownership model of buy-let-use would work in these products and money distribution can be worked out. Queries generated by the discussion were about the non-Indian investment in ownership of property real estate models, licence requirements, ownership and profit gains, second sale, etc.

Session 2: Hospitality in India: The limits of growth or the growth of limits?

Moderator: Sanjay Verma, executive managing director - South Asia, Cushman & Wakefield

India as a land of opportunities was the focus on the second day. Verma, opened the discussion with the remark that India is driven by demand. In such a scenario there will be challenges. Responding to the statement, Vimal Singh, managing director, Golden Tulip Hotels & Resorts said, "Challenges need to be faced and should be seen as opportunities where all kinds of properties will find relevance in future." Sunil Mathur, director of International Development, Indian Ocean & Middle East, Wyndham Hotel Group remarked, "The leisure real estate model is a promising segment. All of us are gathered here because there lays an opportunity and it is a long period market. The approach, though, should be at creating right balance in value proposition, franchise market, offering management contracts, etc."

Rajiv Kaul of Hotel Leela Ventures went on to discuss the plight of the hospitality industry. He said, "The key issues for the hotel industry would be to address land issues, learning to use FSI better, more imaginative ways of using space, etc." He also showed his scepticism towards the growth of budget segment in India. Uttam Dave, head of development, Accor Hotels - India, Nepal, Sri Lanka and Bangladesh said, "There are only a few places in leisure for achieving growth and major developments are moving out of the cities. The land prices are jumping while occupancy is not and this is creating a mismatch." The debate went on to discuss the sustainability of projects especially when land records, time taking procedures, low FSI limit points a question on value proposition of projects, competency to complete project in time. It was suggested that after open sky it is time for open state policy to see infrastructure growth. The discussion also pondered on the present state of manpower crunch and possible solution. The session ended on panelists' demand from government i.e. unlocking of FSI, rationalisation of licence regime and quick redressal of sector's needs for all round development.

Session 3: Asset Optimisation: Getting more out of your real estate investment

Moderator: Li Hao Zhuang, managing director, advisory services - Asia Pacific, NorthCourse Advisory Services

The scope of asset optimisation is a real concern for the hospitality sector. Speaking on the subject, P N Mohan, chairman, Grand Nirwana Holiday Resorts said, "Asset optimisation varies from company to company and services to services, and the scope is not restricted to the metros; it is possible in all opportune segments. I feel the best way to optimise is to have a project at a place and develop it as a destination and not the other way round. Being unique in location is the key." Jumpoon Chavasiri, senior vice president - The Quality Group remarked, "Vacation clubs are coming up as multiple products to capture the entire market and in such a scenario, training and customer needs would play a key role in asset optimisation." Rajeev Reddy, CMD of Country Club, India said, "Appreciation through innovative concepts will work to help the cash flow." He also said that going to segment where marketing is easy and picking projects where location, cost of land, USP of location and project cost works in favour. Chavasiri added, "It is also important to know your partner well when we are talking about assets." Reddy summed, "Strategic alliances and partnerships can't be avoided and therefore, relationship endorsements need to handle financial structure properly giving benefit sharing and transparency the utmost importance."

Session 4: Implementing successful marketing and sales strategies

Moderator: Prakash Wakankar, managing director, Perfetti Van Melle

The sales and marketing presentation in timeshare is of vital importance. Different companies adopt different strategies, so the question arises, which strategy offers greater return over other models. Mark Atwood, director (sales & marketing), Karma & Royal group said, "In-house sales are very dear to my heart and it makes sense. Product refinement is the key and we are the largest in-house operator in Asia with properties in Goa. According to me on-site sales is all about seeing and believing." Whereas, Major Madhukar, managing director of Golden Stables Outsourced Services remarked, "Venue sales operation is going great guns. Indian market is responding well to venue selling. Here, the sales processes require presentation of benefits." He added that India goes for traditional direct marketing option. "In venue selling, we could go for front end, middle order or back end selling," he added.

R Radhakrishna, chief sales officer, Mahindra Holidays & Resorts India opined, "We have resorted to franchise and home sales. Today, venue sales, on-site and off-site sales and channel sales are taking off. In this age, franchisee route is being experimented upon." Brand building is needed to build credibility. It is difficult to sell without a brand - a recognisable name. The panel discussed the issue in length identifying how brand brings people to venue and then credibility of product is established for sale. Madhukar said that a lot banks upon the telemarketing mode on generating leads but now, one has to adhere to rules and regulations of those registered under "do not disturb" facility with telecom operators. Radhakrishna said, "Over 33 per cent of sales is generated through reference and therefore this cannot be neglected." The panel also discussed on manpower issue related to timeshare models and attributed that age old perceptions regarding the industry should be done away with as it is the impediment to sector's growth.

Session 5: Asia's leisure real estate boom: Making your best move now

Moderator: Larry Malarkar, regional director (sales & marketing), India & Nepal, Starwood Asia Pacific Hotels & Resorts

As the symposium moved ahead for the close, the final session of the day took a plunge at identifying with the real estate boom in the last couple of years and its future course. Speaking on the same, Prem Subramaniam, principal, business development of Infrastructure Development Finance Company (IDFC) described how state agency in India operates and has full control on developments. "It is vital today that investors should put assets to full use by spreading them out to different pockets. There are many challenges which should be met like clarity of sale deed, project alienation due to high costs or unviable expectations, etc. Therefore, there is no room for linear approach; integrated approach to development should be seen equally by government and private sector," he elaborated. Rutger Smits, managing director, Cushman & Wakefield Hospitality, Asia Pacific explained on how Egypt developed its tourism. He remarked, "Good strategy would see us achieve holistic tourism perspective. There is a need to involve state government where, boom is supported by government's pursuit for legal and environmental regulations, simplification of various approvals, financing, selling ease, etc. Nathan Andrews, chief development officer, Lavasa Corporation said, "To cash in on the boom, strategic alliances would be crucial. There is a need to have a vision, and a consultancy help for giving it a desired shape and achieve laid out business plans for development." He gave example of Lavasa project (near Pune) being developed as a destination for future. This also raised the issue of factors that delay such large projects due to lack of coordination therein though it was assumed that mixed-use developments will be targets of future provided bureaucratic backing give opportunistic possibilities.

Apart from the various sessions during the two day long event, some individual presentations were made which were as follows:

• Outlook of travel & tourism in India and rest of Asia by Amitabh Kant, principal secretary (industries & commerce), Government of Kerala and former joint secretary, ministry of tourism.
• Relevance of shared ownership leisure products in India and Asia by Arun K Nanda, chairman, Mahindra Holidays & Resort India.
• Innovative luxury product models by John Spence, chairman and owner, Karma & Royal group.
• Case study: Creating a resort and turning it into a destination by Hanley Chew, CEO, Sunway International Vacation Club Berhad.