Club Med has become synonymous with family holidays at exotic destinations around the world. The 65-year-old company is now adapting to a new emerging affluent traveler by offering premium all-inclusive holidays that combine fun-filled activities for the family with refined comfort. By Shoeb Kagda
No company in the world puts as much energy and thought into having fun as Club Méditerranée SA, or just simply Club Med. Founded 65 years ago, the Paris-based company is now a global enterprise devoted to creating happiness by offering all inclusive holidays at its ‘villages.’ as its resorts are called.
The first company to pioneer the concept of an all-inclusive holiday where all meals, an open bar, sports activities, child-care services and accommodations are included in the price, Club Med today operates 68 resorts in 28 destinations across the world. It also runs a cruise ship, Club Med 2, sailing between the Mediterranean and the Caribbean.
The company earned $1.68 billion in revenue in 2015, according to its annual report. After having suffered some difficult years in the late 1990s with declining customers, the company undertook a dramatic change in its strategy by offering upscale and premium villages to meet the demands and needs of a new market – affluent travellers from emerging economies such as China, India and - increasingly - Indonesia.
“Fifteen years ago, we realized that we needed to change our approach,” said Xavier Desaulles, Club Med’s chief executive officer for East and South Asia & Pacific at the recent unveiling of the newly renovated village in Nusa Dua, Bali. “We opened the first five all-inclusive exclusive luxury villagers in Mauritius, Switzerland and China.”
In 2007, the company opened its first 5T (five trident) village, La Plantation d’Albion on the island of Mauritius, followed by its first village in China in 2010. That was also the year Chinese group Fosun International acquired a stake in the company.
That was a fateful year in the history of Club Med as the injection of new funds allowed it to go on an aggressive expansion plan in China where it now operates four properties. But even as it expanded, the company closed or sold off properties that were no longer deemed to be part of its up-scale strategy.
Fosun’s takeover - it now owns 92.8% of Club Med - valued the company at just over $1 billion.
Fighting off competitors
The strategy to go up-market seems to have paid off for Club Med as the company is now on a more secure financial footing than it was in 2000. New properties in China and the acquisition by Fosun injected new energy into the company as it seeks to see off competitors who have adapted its all-inclusive model.
“When you are successful, people imitate you,” said Henri Giscard d’Estaing,” Club Med’s chairman and chief operating officer since 2003. “And when you are successful, you become lazy.”
“Fifteen years ago we were challenged by others who tried to do the same,” he added. “Our positioning was a bit blurred as we were not upscale nor middle scale.”
The company was also buffeted by changing trends in the travel industry. Bipolarization, digitalization and the rise of affluent travelers from emerging economies had disrupted the travel industry and established players such as Club Med.
“These days, you either have to be the best or the cheapest,” noted Giscard D’Estaing. “That was the challenge we had 15 years ago and we decided that for Club Med, we had no choice but to be the best.”
As a result, the company underwent a massive change, investing $1 billion in upgrading its villages, including its two in Indonesia. “We also focused on families and active couples where Club Med offers a unique experience.”
The company also took a huge bet on the Chinese market, opening a number of resorts in the Middle Kingdom since 2003. “I was convinced that China would become the largest tourism market in the world and that the Club Med formula would fit the Chinese market,” said Giscard d’Estaing.
He was proved right as the company now draws some 200,000 Chinese guests each year. One defining change came in 2007 when the Chinese government allowed its citizens to travel individually rather than only in groups.
“We were growing and the market was shifting so I decided we needed a Chinese partner,” he noted, explaining the decision to partner with Fosun International.
Creating memories for Indonesians
It was not by chance that Giscard d’Estaing was in Bali in early September to personally inspect the renovations undertaken at its property in Nusa Dua. One of the first international hospitality companies to open in Nusa Dua, Club Med sits on a breathtaking 14-hectare piece of land that opens to the Indian Ocean.
The 30-year-old Club Med Bali has 393 rooms, including the newly developed deluxe rooms that come with terraces. The company has spent nearly $14 million adding a Zen pool, a gourmet lounge - The Deck - and a family zone where children from as young as four months to 17 years can play under supervision.
As its economy grows, Indonesia is becoming an important tourism market for global players such as Club Med. According to a travel survey by GFK, Indonesians now travel 30% more frequently compared to six years ago, with a sharp increase of 8.2% for trips per household between 2015 and 2016; 40% of premium travelers from Surabaya and Jakarta take leisure trips at least two to three times a year, spending an average of $3,800 each time.
This is a market Club Med is eyeing, not just for its onshore properties but for its other locations as well. “We are convinced that Indonesia has remarkable potential and that affluent families will enjoy the experience Club Med has to offer,” said Giscard d’Estaing.
In recognition of this potential, Club Med has opened an office in Jakarta and is planning to open its third village in Lombok by 2019.
With the diversity of its offerings – from ski resorts in the French Alps to the crystal blue waters of the Maldives – Indonesians looking for adventure, unique experience and memories are likely to be attracted to what Club Med has to offer.