Club Med?!?!

Definetely

CLUB MEDCLUB MED

GROUP 13 – Section BGROUP 13 – Section B

Andrea Tellarini Vassilis KykrilisAndrea Tellarini Vassilis Kykrilis

Gabrielle Ng Masato ShiraiGabrielle Ng Masato Shirai

Matthias KuhnMatthias Kuhn

HistoryHistory

FounderFounder

MissionMission

1st Village – “Alcudia” in the Balearic Islands off the coast of Spain (1950)

Dream TeamDream Team:

Gerard Blitz

To provide a sanctuary for those looking for escape from the stresses and demands of “modern” life. The ultimate goal was to create a utopia. Early enthusiasts likened the experience to a “Robinson Crusoe” adventure.

Maiden Maiden projectproject:

Gerard Blitz (inspiration) & Gilbert Trigano (engine)

HistoryHistory

1963 - Trigano became CEO

1968 - Expansion into North America (Fort Royale in Guadeloupe)

Club Med flourished, in sync with philosophy of the times

• Jumbo jets increased global tourism• Expansion into Africa, Americas, Caribbean, Asia and South

Pacific• “Sea, sex and sun” image established

1970s

HistoryHistory

1980s to 1990s

• Peter Dickson’s “Theory of Competitive

Rationality”

• Entry of serious competitors: Jack Tar Village,

SuperClubs Organization, Sandals

• Smarter consumers: more selective, less attracted

by appearances, more concerned with value,

authenticity, comfort and individuality

• New management under Philippe Bourguignon to

revitalize Club Med’s flagging image

ActivitiesActivities

• All-inclusive resorts

• 140 resort villages in over 35 countries

• Having natural beauty

• Providing many activities

• Separated from urban civilization

• Operating cruises besides resorts

Core BusinessCore Business- Resorts -- Resorts -

OtherOtherbusinessesbusinesses

• Tour operating (Jet tours)

• Sport facilities (Gym)

• Licensed products

• Med world

About 80% of the revenue About 20%About 20%

In essence, they are selling relaxing time…

Industry Analysis Industry Analysis Market VolumeMarket Volume

1980 2000 2020

200

400

600

800

1000

1200

Mill

ion

280m in ‘80

700m in ‘00

1500m in ‘20(Long-term Projection)

September 11

in 2001

Iraq war, Terrorism to tourists and SARS

in 2002/2003

Steady growth in the long-term

Deep depression in the short-term

Industry Analysis Industry Analysis -Depression--Depression-

• Demand decreased• Reduced capacity and cut jobs• Restructured routes and destinations

Air

• Demand decreased• Providing lower rates and special offers

Hotel

• Nearby destinations• Shorter stays• Pursuing the lowest prices

Customer demand and

behaviors

• Short-haul destinations• Shorter stays

TechnicalQuality

ServiceQuality

TimingQuality

ReputationQuality

RelationshipQuality

Price

Ben

efit

s

Val

ueIndustry AnalysisIndustry Analysis

- customer trends -- customer trends -

Short-term customerShort-term customertrends by recent disasterstrends by recent disasters

Long-term customerLong-term customertrends as commoditiestrends as commodities

Necessity of flexibility

• Shortened time from reservation until leaving

• Customized holidays• Holidays as an experience

• Traditional channels still keeping strengths

• Image of safety

-

• Convenient Orders on the developed web

Same as left

Same as left• Lower prices

• Difficulty of enclosing customers

• Differentiated brands

BARRIERS TO ENTRYMEDIUMMEDIUM

Some partners are required but service is

simple.SUPPLIERSMEDIUMMEDIUM

The number of Both Suppliers and travel

agents is many.

SUBSTITUTE PRODUCTS

MEDIUM/HIGHMEDIUM/HIGH Amusement parks,

games and hobbies are substitute, but well

differentiated.

CUSTOMERSVery HIGHVery HIGH

Customers have a lot of choices and

switching cost is low.

RIVALRYHIGHHIGH

Many players with relatively low differentiation

Industry forcesIndustry forces

The degree of competition is HIGH in total.

FinancialsFinancials

36%

23%13%

8%

16%4%

France Rest of Europe

Americas Asia

J et tours Other businesses

Revenues by issuing zone and by business

Other businesses: Club Med World, Club Med Gym

• Resorts (Core business): 79.6%

• Europe: most profitable

• Impact of world insecurity

• Remaining lack of focus

• Heavy past investments

FACTS ISSUES

OP. MARGIN SALESm Euro GROWTH

VILLAGESEurope 26 Europe -4.10%Asia -5 Asia -17.60%Americas -21 Americas 9.80%Sub total 0

JET TOURS 1OTHERS -7TOTAL -6

Key FiguresKey Figures

Revenues by issuing zone and by business

Other businesses: Club Med World, Club Med Gym

Losses are entirely attributable to « Other businesses »

-0.37%-0.17%2.52%

5.45%4.81%

-

1,000

2,000

3,000

1999 2000 2001 2002 2003

Rev

enu

es E

ur

mio

-2.00%

0.00%

2.00%

4.00%

6.00%

8.00%

Op

. m

arg

in

RevenuesOp. income

CompetitionCompetition

► Club Med offers unique focused productsClub Med offers unique focused products► Yet Club Med competes agains more mainstream Yet Club Med competes agains more mainstream

competitors (Hotels and T.O.)competitors (Hotels and T.O.)► Competitors offering the same product as Club Med Competitors offering the same product as Club Med

are FEW but...are FEW but...► Local players are important because GM travel Local players are important because GM travel

within their own geographic zone (Asia 99%)within their own geographic zone (Asia 99%)

CompetitorsCompetitors

In spite of its very unique signature concept, Club Med competes against other players

(global and local)

Jack Tar Village SuperClubsSandals

Diverse activities

GO – GM concept

Upper class

Global

yes

No

no

no

yes

go

yes

no

yes

no

yes

no

All inclusive Yes yes yes

Club Med

yes

yes

yes

yes

yes

Village no no no yes

Nb resorts 5 12 11 140

yes yes no yes

Hotels, Carribea

n,US market

Closest

competitor,

US marke

t

For couple

s

For couple

s

Fam. and couples

Strategic IssuesStrategic Issues

All-inclusive All-inclusive priceprice

Many were included in the price

but not used by vacationers

CompetitorsCompetitors

This allowed competitors to offer lower prices and take away potential vacationers from Club Med

It was not as widely accepted as it had been in the past

ActivitiesActivities

They offered the same activities but did not include them in the initial price

International ExpansionInternational Expansion

Club Med found it difficult to maintain beautiful resorts in countries that suffered from economic and ecological

disaster

Effects in one area where Club Med is based often indirectly affect other Club Med resorts as well

Club Med revenues from successful resorts had often been used to compensate losses of other resorts

During 90’s Club Med faced hard financial time due to rundown properties, reputation for mediocre food and

amenities

Old Fashion messageOld Fashion message

During 90’s Club Med faced hard financial time due to

INCONSISTENT MESSAGE FILTERED THROUGH ADV AGENCY IN DIFFERENT INCONSISTENT MESSAGE FILTERED THROUGH ADV AGENCY IN DIFFERENT COUNTRIESCOUNTRIES

Club Med concept had become Club Med concept had become outdated outdated

RUNDOWN RUNDOWN PROPERTIESPROPERTIES

BACKLASH AGAINST BACKLASH AGAINST THE SEXUAL THE SEXUAL REVOLUTIONREVOLUTION

REPUTATION FOR REPUTATION FOR MEDIOCRE FOOD AND MEDIOCRE FOOD AND AMENITIESAMENITIES

Global EnvironmentGlobal Environment

Since 2001 Club Med has experienced an exceptional global environment hostile to tourism (September 11th attack, new

consumer concern such as safety and well being)

ECONOMIC ECONOMIC RECESSIONRECESSION

New reservation habitsNew reservation habits

(internet expansion, on-line booking, last minute bookings)

Changing faceChanging face

RenovationRenovation

Financial result Financial result less sensitive to less sensitive to the business the business cyclecycle

Ensure growth by Ensure growth by winning market winning market share share

Key innovation Key innovation for the futurefor the future

Technical updates

New Village Design

Flexibility of Rooms

Eliminating loss making activities, optimizing the offer, optimizing the

operating profitability

Expanding indirect distribution channel, using the product to leverage the brand

Total all inclusive holiday

Renovation ProgramRenovation Program

TECHNICAL TECHNICAL UPDATESUPDATES

Club Med launched one of the fastest, most intensive renovation programs in recent hotel industry history

• Rethink its original moniker as “an antidote to civilization.”

• Club Med should still be an escape from civilization — but one that has phones in the rooms and, in the 3- and 4-Trident villages, televisions in the rooms.

NEW DESIGN - REVAMPING THE VILLAGENEW DESIGN - REVAMPING THE VILLAGE

• Experience of a village filled with small, local restaurants

• More aesthetic attention was paid to the bar

• Reassessed the traffic flow of the villages

Renovation ProgramRenovation Program

FLEXIBILITY OF ROOMSFLEXIBILITY OF ROOMS

• Better materials

• Clear and bright colors played against white to achieve a more ethnic and a happier look

• Two beds that could be attached to form one king-sized bed

• Enclosing a balcony

• Rooms could be enlarged included creation of a small “children’s room” attached to the adult guestroom.

Renovation ProgramRenovation Program

New look, consistent all over the villages

Maintained the perception of an escape from the city style,

keeping a simple look but with good quality materials

Club Med did not depart from the easy, accessible resort

aesthetic that set it apart from the “marble and gilding”

sort of resorts

Financial results less sensitive to Financial results less sensitive to business cyclebusiness cycle

Club Med deployed some strategic priorities to focus on Club Med deployed some strategic priorities to focus on profitable activities and to optimize the offer and profitable activities and to optimize the offer and

operating profitability. operating profitability.

• Club Med Montreal was closed in April 2003

• 6 Club Med Gym were sold in 2003

• 11 Club Med Gym will be closed during 2004

• Concentration of customer preference

• 4 - Trident village

• Up-grading 3-Trident Village

Reducing fixed costs by:

• Cutting non-village workforce

• Outsourcing task with no added value

• Managing contacts (i.e. Coral Beach)

Eliminate loss making activities Eliminate loss making activities

Optimize the offerOptimize the offer Optimizing operating profitabilityOptimizing operating profitability

Ensure growth by ensuring market shareEnsure growth by ensuring market share

EXPAND INDIRECT EXPAND INDIRECT DISTRIBUTIONDISTRIBUTION

• Update on new sales outlets

• Sales people training

• Agency Sales focus

Attract ConsumersAttract Consumers

A BRAND

Create New NeedsCreate New Needs

PRODUCT INNOVATION

Leverage Customer Leverage Customer RelationshipRelationship

SERVICES

Sell SuccesfullySell Succesfully

MARKETING SUPPORT

USE THE PRODUCT TO USE THE PRODUCT TO LEVERAGE THE BRANDLEVERAGE THE BRAND

Use the product to leverage the brandUse the product to leverage the brand

WORLWIDE BRANDWORLWIDE BRAND

• 97% in France

• 87% in Belgium

• 93% in US

HIGH SPENDING IN ADVHIGH SPENDING IN ADV

3 NEW CONCEPTS3 NEW CONCEPTS

• Spa village in Phuket

• “FreeStyle” in Europe

• “Riad” in Marrakech

BOOKING BONUSBOOKING BONUS

• Advantages for early bookers

• Makes prices more flexible outside the high season

BEFORE, DURING AND AFTER BEFORE, DURING AND AFTER PROGRAMPROGRAM

• Continuous customer support

• Club Med Trip Planning

CLUBMED AND AMEX / FINAREX CLUBMED AND AMEX / FINAREX CARDCARD

• Payment Card

• Loyalty Program

• Easy payment terms

• 1,200 Club Med sales people worlwide to support distribution

• Pioneer in Trade Marketing

• Ongoing training for travel agents

• A highly effective booking system

QUESTIONS?