University of Arkansas System
Type of paper: Thesis/Dissertation Chapter
Analysis Of Club Meds
Club Mediterranee was created in 1950 under the law of 1901, through the initiative of a former member of the Belgian water polo team, Gerald Blitz. The idea came to him following a visit to his sister in 1949 at the Olympic Village of Calvi, in Corsica. It was formed along a quite singular concept, that of offering “all inclusive “holidays. Sixty years later, Club Med annually welcomes over 1.7 million guests from all over the world, to around 90CM villages in seaside and mountain locations. To cater its guests, also called GM’s (“Gentils members” or gracious members). Each holiday village has its own structure that is exclusive to club med: the structure is composed of the following
The Gentils Organisateurs (GO’s) or gracious organizers.
A staff category, including entertainers, group leaders, but also others.
Job functions including heads of maintenance, swimming instructors, cooks, human resource directors and many others
The gracious employees (GE) who include the waiters and gardeners and usually come from the country hosting the club.
Both gracious organizers and gracious employees may be seasonal workers or permanently employed depending on the length of the time that the club has been open.
Pillars behind the club’s performance
The club has a unique type of staff organization, which is part of the unchangeable pillar of the club.
It has exceptional quality of its locations, which distinguishes it from its competitors making the club to be more successful.
The club has also managed to find and secure the most beautiful and well-preserved sites in the world, thus contributing to an added competitive advantage.
The club ranks its villages in five categories (tridents) according to their locations, their infrastructures and the services offered. Their establishment of the villages ranges from simple huts to a 5-trident establishment. The villages with huts and those currently classified up to three tridents are scheduled to gradually disappear, making a way for additional up-market villages, more in keeping with the club’s new strategy.
The first Club Med village was a temporary tent located in the Alcudia in the Balearic Islands. To help him launch his first session, he sought assistance from his friends who he had managed during the pre-war sports. On the club’s first season, they operated on a leased plot near Palma. The tents and the basic cooking necessities were bought in an American army surplus store in Germany. Blitz idea was to involve guests in the successful running of the village. This concept facilitated meeting people and abolishing financial and class barriers for the duration of the holiday through a multitude of activities, sports and excursions. This eventually led for Blitz contacting the Trigano et Fils for additional materials, tents and camping equipment. This eventually led to him meeting Gilbert Trigano his elder brother, a few years later they joined forces and in 1963, he actually became the chairperson and the managing director. (Zaleznik, 1997).
In 1952, club med also built its first village with huts in Greece. The construction of a number of further hut villages followed, then more robust constructions in bricks and mortar, more similar to hotels. The first club was built in Agadir under the encouragement of King Hassan II. In 1960, the club almost went bankrupt under the management of the burner. It was saved by Edmond de Rothschild, who came to own 35% shares. In 1966, for the first time, the club was listed on the Paris Stock Exchange. At the beginning of the seventies, the club’s finances were still wanting and Gilbert Trigano, the manager at the time had to seek a considerable injection of new capital. This was when nine new shareholders, including Gianni Agnelli gained a majority of the company’s capital. His participation led to the opening of the first village in Italy. He remained in possession of 23.9% of the capital up to until 2004. A major innovation was introduced afterwards with the first ‘Mini Club Med” a special children’s club catering to all ages, from babies to teenagers. This formed a strong pillar of the enterprise and that is even today, an important criterion for comparing with the competitors. The club later launched a public promotional campaign, which led to the opening of a new club in Brazil in 1979 preceded by the USA during the following year. Four years later the club opened premises in Wall Street, where its shares were listed.
In 1980’s the club launched its first sailing ship the “Club Med I”, and two years later, they launched “Club Med II”. They also acquired an airline afterwards. Due to these acquisitions, the club started experiencing crisis due to a drop in guest numbers and also its debts increased which three years later, Gilbert Trigano decided to hand over the leadership to his son, Serge. The leadership by Serge ended with huge losses up to 113 million euros in 1996 and 150 million euros in 1977. He was replaced by Phillipe Bourguignon whose ambition was to transform a company of holiday villages to a company of services. There followed the launch of a new promotional campaign that also marked a key date in the history of Club Med (Spring, 2002).
In the 20th century, there began renovation of the villages and more competitive price positioning. A number of innovations emerged with the creation of Med World, a venue for concerts and evening entertainment, where the guests could meet up before or after their holidays. In 2001, Oyyo Club concept was created and it aimed at a younger population (18-25 years). In the same year, the Gymnase club was acquired and turned into the Club Med Gym. This year the club was debuted on the internet. The years 2000 resulted in both extreme sailing competitions and participation in hypermarkets through a range of sportswear.
Club’s Current Operations
In 2000, the turnover had grown by 28% compared to the previous years and the operating profits rose to 103 million euros. However the villages were disinfected in the year 2002/2003 leading to a deficit of 6 million euros. This led to the replacement of the manager, Pierre Bourguignon by Henri Giscard d’Estaing. An upheaval occurred later in the shareholding structure. The club sold 28.9% of the share stock to the Accor group, which led to the launch of a new strategy: to make Club Med the leader in up-market, convivial and multi-cultural holidays. This meant that the club would no longer be a mass package holiday organization aiming for high volumes, but rather high-end organization reflecting its exceptional locations. It would continue to be convivial and multicultural. This global strategy is reflected in villages created to be refined in the fact that the villages are now designed by renowned architects and designers, generosity in the attention given to the children with supervision, entertainment and ensured activities for all groups and offering the guests a choice in their preferred means of transport, offering a choice in the wide range of activity options, between sports course spa treatment weeks etc. This strategy led to the abandonment of villages that did not correspond to the new strategy (villages with huts to those with 2 tridents) in order to concentrate on the three and four tridents that offer a return on investment of 9 to 15%. The club sold some of its villages and this enabled it to clear debts and was able to finance the success of the remaining villages. Between 2004 and 2008, over 50 villages were closed down and 20 new ones opened. Today, Club Med manages 80 villages around the world.
Club Med communicated its new strategy by launching a new advertising and communication campaign in 2005, under the signature: “There is still so much world to discover” (Discover new worlds, discover new people), also called the “Faces Campaign”. It was aimed showing in concrete terms that Club Med had evolved and positioned itself towards the top end of the market. In 2007, a new advertising campaign reinforced their upmarket positioning with the signature. This promotional campaign sought to show tangible proof of this up scaling. The second event was the launching of the first 5-trident Club with the opening of a second village in Mauritius. Classification of the villages reached a new standard, demonstrating the determination to aim higher end of the market. 2007-2008: there were challenges like unfavorable environment that included soaring of petrol prices and a financial crisis. The club had also to face a decreasing accommodation capacity due to the new focus on certain villages and reduced opening periods of the 2 and 3-trident villages. It also succeeded in escaping from debts in this year with net profit of 1 million euros after four years of losses. The shareholding base was still fluctuating with the Accor group selling a large percentage of its holdings, remaining with less than 9 % and still it was planning to discontinue its investment.
The company is having difficulty in realizing profits since they increased their tariffs, which eventually led to a rapid loss of customers. Up to the year 2009, the group was still in deficit due to real estate charges connected to the closure of certain villages. The commercial potential of Club Med remains essentially in Asia. The Asian market represents a large share of the 60 million potential customers worldwide. The transformation of the club into a global specialist in all – inclusive, up-market and multicultural holidays is real as the chairperson, Henri Giscard d’Estaing is confident in the strategies that he applied. The club is now offering the most accessible, up-market holiday. Asia was responsible for the club’s turnover in 2006-2007, whereby it was estimated that 26 million out of the 60 million potential customers are Asians. Despite the unfavorable environmental context in Asia, i.e. The tsunami of 2004, an outbreak of avian flu and terrorist attacks, the customers in this region continue increasing.The developers of the internet; greater customer loyalty and a lengthening of the average duration of stays have boosted the levels of growth in Asia.
The club also has extended to china and in 2006, they opened a new agency in Canton, thus consolidating its commercial development strategy with the Chinese, as they were the population that was spending an increasing amount of time and money on holidays. Although the club is investigating all opportunities for development, including extending to other countries like the Philippines and Indonesia, the management is also counting on the Asians travelling outside of their home zone. Although the Asian continent has as many cultures as it has countries, it seems to share the same attitudes concerning holidays. Studies carried out has shown that behavior is very similar across the continent, in particular with regard to Club Meds population. To achieve the Asian market targets, the club involves two aspects:
The first is the duration of the holidays: Asians do not have many days’ holidays and they therefore spend only four or five days in the club on average. This holiday consumption necessarily influences the club’s occupation rates.
Another aspect is the lifestyle adopted by the Asians. They appreciate all activities including archery, kayaking, aqua gym etc. They are always happiest indoors with the air conditioning. They thus adore Club Med as it offers all these activities and adds the karaoke. Studies have been done to investigate on the ways to attract customers worldwide and preserve the current ones with the primary family target implied to goods and services. These are:
The offer must be refined in the right locations, high quality villages, a dedicated team, and a high cuisine as well. Studies also show the importance of the all-inclusive formula with the need to suit the whole family, and a flexibility of services to match the inclinations of all. Rooms’ should be extremely comfortable and with modern communication facilities. CITATION Chr97 l 1033 (Clayton, 1997)
Club Med is not faced with direct competition in terms positioning. In Asia, for example, the competition is situated essentially on the traditional luxury market. However, sometimes the competition is local. For example, although in Bintan, Club Meds major competitor is Banyan Tree. In order to satisfy customer demand and potential customers while at the same time affirming its new strategy, Club Med has orchestrated its actions around innovation, renovation and service.
Club Med has invested over 50 million euros in the renovation of its villages in the Asia-pacific area, where it has ten villages after having closed down five that no longer met the standards of top-end establishments. Apart from the village and room aspect, the activities and the organization have also been reconsidered according to customer expectations. The children’s supervised entertainment and activities, one of the pillars of Club Med has been systematically reconsidered and more widely deployed. Other infrastructures for catering to children have been set in place or renovated. A baby Club Med has been opened in Bali together with a password for teenagers and the renovation of the Petit Club Med and Mini Club Med. Apart from the children’s supervised activities and entertainment, the upscaling of service is particularly demanding in Asia, where regional standards are higher than the rest of the world. The club has used local advertising, communications systems to market their operations. Making the transition from a volume culture to a valuable culture is not without repercussions on the employees’ attitudes. This is the reason why Club Meds human resources have been closely linked to its strategy, which is reflected in the Club’s drive to attract and keep talented employees. Leading to several, initiatives being implemented in terms of recruitment, training and career management.
GM Feedback, a major indicator of strategic success is the level of satisfaction shows that the criterion “Intention to return” is particularly high in Asia overall, which is encouraging for future years. This intention is because of the excellent marks given by customers to the criteria of child supervision/ entertainment, the general atmosphere and the GO teams. In order to measure the impact of the changes, The Research Pacific Group carried out a study. Although criticism persists, it tends to focus on three dimensions: the price, now considered too high: the comfort of the rooms, that could be still improved, and the lack of freedom. (Franco, 1972) The study essentially highlights is the enthusiasm of potential customers for Club Med, in that the mentality that Club Med is a rather old-fashioned type of resort, but rather as the ideal holiday venue for the family, where a multitude of activities and discover a special atmosphere. Another study endeavored to measure the perception of Club Med via an internet buzz, Club Med is ranked third among the island’s resorts, in the Indonesian islands of Bintan. This position was won thanks to the service, children’s services, the GO team and the variety of activities offered. This position clearly shows that Club Med has joined the upper crust with its luxury hotels, and is confirmed by another example in Bali where Club Med has been ranked fifth. This satisfactory ranking was made possible thanks to service in a broad sense, which includes cleanliness, the GO team and the activities offered.
Recent figures published show that turnover has increased 1.9%, in spite of a context of economic crisis affecting all operators in the sector. Business is growing in all zones; while the capacity, as scheduled, has been decreased by 3.1%. Asia recorded 5.2 % (highest growth), Although Club Med benefits globally from the region’s economic dynamism, and it is nevertheless slowed down by up scaling operations that have been accompanied by an 11% average increase in price. The new strategy is attracting new customers, from the point of view of quality; the “family” strategy engaged by Club Med is working since recruitment is made essentially on this target, with 63% of the Asian clientele structure made up of families (Hart, 1990).
Issues And Recommendations In Club Med
Throughout the past sixty years, Club Med has never really had a chance to profit from a break and the relaxation it succeeds in offering its own guests. The geopolitical climate has often caused difficulties, like the Gulf War of 1990-1991 or the terrorist attack of Bali in 2002, but it also evident that the company has created its own problems. The consistency and coherence of the current strategy are the first for close to 15years and there has been criticism and more obstacles than in any other company (E, 1985). Club Med has an aura of great brand, out of the ordinary, enthusing the public and at the same time receiving all sorts of more or less negative comments. The fame enjoyed by Club Med since its beginning has never weakened and both the customers and the non –customers all over the world have heard about the Club Med and are capable of saying a few words about it. Evidently, this has contributed to its international recognition but it has also complicated its task since it has been trying to effect a repositioning; changing mentalities is a longer and more complex task than changing strategy. Three principle challenges seem to stand out for the future of Club Med: environmental, political and organizational.
The first challenge is environmental. The whole history of Club Med has been intimately linked to natural disasters, pandemics and financial crises. For example, in Asia the region has suffered from Tsunami, an outbreak of avian flu and terrorist attacks. This is the law of tourism, but it has affected Club Made even more now than in the past, since it’s owns the majority of its villages and its overheads weigh heavily on its balance sheet. This challenge is particularly taken into account in the new strategy where the type of clientele targeted is, for example less sensitive to the financial hazards. Moreover, all new constructions are realized taking into account the possible risks of a Tsunami or an earthquake in areas at risk (WILEY, 1983).
Another challenge is political in two senses. The first is connected to the environmental aspect. The challenge of political decisions in the countries where Club Med is active is considerable. The prevailing laws, local requirements and legal obligations to make the taking of risks inevitable in emerging countries, risks that will necessarily have an impact on the financial results. At the same time, by not taking these risks, the Club may be exposing itself to overtaking by the competition that could undermine its historic position as the pioneer. (Hart, 1990) The second sense of the political challenge lies in its singular position in France. Since the club’s activities have been in the headlines, with the opening of villages to movements of capital in its shareholding structure, the worlds of business, politics and the media have been taking an inordinate interest, more so than they would have done for any other company of this size. Club MED has often taken advantage of this position, which has frequently enabled it to build villages in areas where building permits are difficult to obtain, but at the same time every strategy, it advances is commented, analyzed, dissected and criticized before the new village has been opened.
The Club Med also face the organizational challenge, which gives rise to a number of problematic issues. The first is that of resources and ambitions. Club Med is striving to become the world leader of “all- inclusive” top end, convivial and multicultural holidays. The product it is developing today seems to fit this strategy, but the question remains whether the club has sufficient resources to realize its ambitions, and whether it has the resources to undertake a planetary strategy with the financial capacity of a large SME. Given its large size, it’s also questionable whether the club is capable of succeeding on the three great markets of Europe, Asia-pacific and America. No holiday village operator could succeed and its competitors are often regional operators. With this, there arises a significant question of whether the club will have to give way to a worldwide operator in the short term to medium term as Accor did. This is hastened by the fact that the club’s capital is fluctuating thus making it an easy prey for tourism experts and others. This last challenge seems to be the most complex to resolve. The problem of service issue in the club’s upscaling operation and the general size of the club is questionable.
There has been many cases of failures in the leadership. CITATION Zal97 l 1033 (Zaleznik, 1997) As in the year during the management by Serge Trigano, the club was operating at losses and this eventually led to its slow growth to the upscaling market. The decisions made by the managers also were wanting as in the case of the increase in the tariffs, which eventually led to a hemorrhage of customers. The club, after the closure of some of its villages, it started operating at losses due to the huge real estate charges involved. The decision taken to launch an airline also affected the club negatively as they recorded a loss of 60 million euros. The strategy adopted in the year 2000, although it managed to bring in a huge turnover, there were attached costs penalizing Club Med and its customers found difficulty in recognizing exactly where the club stood in the club stood in the market. This led to losses in that business year. The disinfection of villages in the year 2002/2003 led to difficulties within the club and they recorded tremendous deficits. During this period, the club also lost the majority of its shareholders. During the year 2007-2008, Club Med had to adjust to an unfavorable environment. Soaring petrol prices followed by a financial crisis. The club also faced a decreasing accommodation capacity due to its decision to focus on certain villages and reduced opening periods for the 2- and 3- trident villages. During this period, the shareholding base continued reducing as their main shareholder; the Accor group sold a large percentage of its holdings and was still planning to continue its divestment.
The club also has another major weakness: its focus is entirely on the Asian market. It is developing strategies and making acute efforts to improve their position in the Asian market. This has minimized their profits. If the club would target, setting up villages in many parts of the world they would be at a better competitive advantage to its competitors. Understanding what Club Med has become through its new strategies is a main challenge. The club explains its concepts and how it operates in Asian markets. This is usually in conflict as these same Asians have prospects of what they would like to see. I.e. Their needs and expectations are not e European the same as those of the European counterparts regarding the fundamental criterion of the quality of service provided.
Effective use of technology, which can be done in terms of two methods, which are Promotion, and online marketing. In regards to promotion, Club Med can offer package deals to the customers in which each package deal comes with its own unique set of activities, perfect location, breath-taking cuisines and culture friendly yet involved. In the case of online marketing since advertisement is only done locally, Cub Med can target the international community since this era we are is digitally driven. Online marketing would draw untapped enthusiasm from tourist seeking thrill and social travelling. Experiencing other cultures would be the main attraction since it has numerous tridents that offer different reception of cultures.
Globalization has made it possible for the introduction of a small representation of culture in different countries such as the presence of china town in the New York. Club Med could benefit from representation of other tridents in the same tridents since its focus is in Asia. Club Med can represent the other tridents in the Asian one enough to create a need of satisfaction. This could help market the other tridents. Club Med can also reduce their tariffs imposed on the customers. This would lead to increased customer turnover and eventually they would register enormous profits. They should also adopt an efficient product mix to attract the number of potential shareholders. The club could also work on improving their infrastructure for catering for all age groups. They could provide better communication appliances in the customer’s rooms to make them comfortable. This would satisfy their customers and thus no chance of losing them to their competitors (E, 1985). Club Med could also channel its efforts to target on a larger market scope rather than coming up with strategies to favour the Asian continent. They should establish various villages in many places in the world. This would ensure that they get a high turnover.
Their forthcoming tridents should be located in environmentally viable locations to minimize the chances of disasters and events like terrorist attacks. They should also have some basic guidelines that every decision made by any director should be first screened, voted in by the majority shareholders, vetted and test for market efficiency. This would reduce the chances of managers making ambiguous decisions and coming up with inappropriate strategies that would lead to huge losses, which strains the recovery. To effectively cater for the Asian community, which lacks holidays, Club Med could come up with a strategy that would introduce festivities, such as Cultural nights, music festivals, amongst others. This would influence the preferences of the Asian community positively in hindsight during holidays. They should also seek to renovate their villages and add to them many ideas of interactive workshops with babies and parents. This would ensure that they are at par with the local competition. (WILEY, 1983)
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