Members-only hotels group Karma to invest $100 million

Members-only hotels group Karma to invest $100 million

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New Delhi: Karma Group, a members-only hotel enterprise overseeing 45 resorts worldwide including 15 in India, is looking to invest $100 million over the next three to four years, a top company executive said.

The company is working with EY to assess financing options including debt, private equity, and a potential initial public offering (IPO), chairperson and CEO John Spence said in an interview. The funds will be used to develop and acquire new resorts to support its current 10-15% annual revenue growth. Karma Group earns $45 million in membership fees every year.

In the current fiscal year, the company aims to achieve a turnover of $150 million and Ebitda (earnings before interest, tax, depreciation and amortization) of approximately $30 million, of which half is expected to come from India.

Karma Group has about 85,000 members, and about 25,000 of these are Indians. “We are closer to the Soho House membership club model than a hotel company model,” Spence said. The membership comes with points which can be used for seven free nights a year, among others.

“Indian consumers in the 1990s, when we first began operations here, were rapidly changing. They wanted to have quality holidays and package holidays. We wanted to be in the entertainment business and not the lodging or selling rooms business, so we are managing our properties,” he said. It targeted non-resident Indian travellers.

The company began Indian operations with a modest resort in south Goa in the 1990s, before entering Bali (Indonesia) and Australia later. About nine years ago, it went back to Europe. Its 15 resorts in India include the latest two in Manali and Sikkim.

“We have very little debt, unlike other developers. We take the profits and mostly self-fund. We either own the asset or lease it. But we also make money on our business model, we also focus on selling our membership program. In India, the company does sometimes lease the asset on a long-term basis because of the local requirements,” he added.

Now the company is focused on creating more business out of India for Indians and looks to sell its memberships here by providing more properties here and also around the world where Indians would like to go. It is also looking at more models for millennials to try their product – as opposed to its 20-year membership.

“Millennials we believe, want a much shorter, unlike their predecessors, annual membership product and it’s certainly being proven that they want to do the same experiences but don’t want the old school commitment. The annual membership is about $990 a year which also has networking events along with the same privileges that long-term members get,” he added.

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