Sterling Holiday Resorts Sets New Benchmark with 24 Consecutive Profitable Quarters
Sterling Holiday Resorts India, a key subsidiary of Thomas Cook India, has firmly established itself as a leading leisure hospitality player in the country. Headquartered in a major city, the company has achieved an impressive milestone of 24 consecutive profitable quarters, showcasing robust financial health and strategic growth. Vikram Lalvani, the Managing Director and CEO, recently shared insights into evolving tourism trends and the company's ambitious expansion plans.
Evolving Travel Behavior and Strategic Responses
Travel behavior has undergone a significant transformation in recent years. Customers are now opting for more frequent but shorter trips, often booking just 48 to 72 hours in advance, a stark contrast to the months-ahead planning seen previously. Demand peaks during holiday seasons, making it crucial to manage occupancy effectively during off-peak days. Sterling is proactively targeting diverse segments to address this, including senior citizens, solo travellers, corporate offsites, weddings, and pet-friendly travellers. Corporate travel and MICE (meetings, incentives, conferences, and exhibitions) have become increasingly vital contributors, especially on weekdays, bolstering revenue streams.
Occupancy Rates and Financial Performance Metrics
In the leisure hospitality sector, an occupancy rate of 65% is considered strong. Sterling currently operates at an annual occupancy of approximately 60–62%, with tier-2 and tier-3 markets offering better stability due to a blend of business and leisure demand. The average room rate (ARR) hovers around ₹6,500–₹7,000, which is deemed healthy, with potential to reach ₹8,500–₹9,000 in certain premium segments. A primary focus for the company is maintaining EBITDA margins above 30%, a target consistently achieved, underscoring operational efficiency.
Diversification Beyond Traditional Leisure Destinations
Sterling has significantly diversified its footprint, moving beyond conventional leisure spots. The portfolio now includes over 14 wildlife resorts and around 15–16 pilgrimage destinations, with new properties recently launched in Ayodhya and Guruvayur. Expansion into tier-2 and tier-3 cities such as Dehradun, Karwar, Madurai, and Bokaro is underway, leveraging mixed demand from leisure and business travellers. This strategic diversification helps mitigate risks associated with regional disruptions, such as those in Himachal Pradesh, Uttarakhand, or Kerala. From about 30 resorts in 27 destinations four years ago, the company has grown to 77 hotels and resorts across more than 60 destinations, with further expansion planned.
Destination Selection Criteria and Market Trends
The selection of new destinations is driven by factors like circuit integration, accessibility, and proximity to key source markets. Drive-to destinations have gained prominence, with approximately 70–75% of business now coming from road travellers, up from around 30% pre-COVID. This shift is fueled by improved highways, increased car ownership, and shorter booking lead times. Sterling focuses on emerging destinations, entering early to help build the local tourism ecosystem through job creation, supply chain development, and curated travel experiences.
Expansion Outlook and Growth Projections
Over the past two years, Sterling has been adding about 15 hotels and resorts annually, with expectations to reach around 70 destinations soon. The total number of resorts could approach 90–100 in the near term, supported by a strong pipeline. The company follows an asset-right strategy, selectively owning strategic assets while partnering for resort development. Emphasis is placed on destinations that integrate well into travel circuits and offer long-term demand potential, avoiding rapid expansion for mere scale.
Financial Highlights and Organizational Culture
Financially, Sterling recently crossed ₹5 billion in consolidated turnover for the first time, with total turnover exceeding ₹6 billion when including managed properties. Growth has been in the double digits, consistently generating net profits. Sterling ONE, the proprietary distribution platform, is a cornerstone of this success. Notably, the company is completely debt-free, with any future debt likely earmarked for expansion rather than working capital.
Organizational culture is highlighted as a major strength, with a focus on respect, openness, and local empowerment. Around 70–80% of employees at each property are hired locally, enhancing community engagement and authenticity. Through the ESG initiative Sankalp, Sterling supports healthcare access in remote areas, such as establishing dialysis facilities in 7 locations across 3 states, reducing travel burdens for patients.
