HOTELS Interview: Club Med’s repositioning, expansion plans

In the midst of a decade-long repositioning from midscale to upscale, Club Mediterranée, Paris, is seeking expansion via third-party management deals with a focus on sourcing more clientele from the fast-growing developing countries.

Club Med is disposing of owned and leased midscale assets to reach a goal of having two-thirds of its portfolio in the upscale segment by the end of this year. Meanwhile its Americas sales are being buoyed by increased demand from Brazil. To find out more about how its strategies have evolved and it plans going forward, HOTELS spoke with Gregory Lanter, Club Med’s vice president of global development.

HOTELS: How is the Club Mediterranée brand currently perceived given its repositioning?

Gregory Lanter: Club Med was created in 1950, and invented the concept of the all-inclusive resort, based on gathering people from various countries and background to an exotic location with a friendly and sport-focused ambiance and staff. The all-inclusive formula would at that time already include accommodation, meals, sports and entertainments. Club Med was the first international brand to settle down in Cancun, Mauritius, the Maldives, Punta Cana — an example since then followed by many.

Concurrently, Club Med developed its tour operating activity on every continent, going directly for the client by opening stores selling holidays and enabling its resorts to be maximize peak seasons and revenue per available bed (RevPAB) with various nationalities.

For the last 10 years or so, Club Med has led a €1 billion (US$1.29 billion) investment and repositioning of its brand and portfolio; it went from a midscale offer to an upscale positioning. We’re having great success on TripAdvisor and the financial markets have largely endorsed this strategy.

HOTELS: You have also transitioned your portfolio to an asset light model. What will the typical ownership/management arrangement be going forward?

Lanter: Club Med has turned to asset light about 10 years ago, considering its equity could be better invested in tour operating and managing properties. Aside from a few number of exceptions in the French Alps, mainly where leasing is still an option, Club Med will only open new resorts under third-party management agreements in which we provide 40 to 80 personnel per resort. Our management agreements will only be signed along with exclusive sales and marketing agreements, so we offer our owner the benefit of our distribution system and tour operating.

HOTELS: How is the Club Med portfolio currently performing?

Lanter: There are two very interesting things about Club Med: first its self-reliance concept that enables Club Med resorts to be located in remote locations without guest demand suffering and the distribution network built up by Club Med during the past 60 years of tour operating, which has resulted in direct sales accounting for nearly 60% of our resort turnover worldwide. This boosts our RevPAB above our competitive set. Our worldwide RevPAB was €96 (US$123) in 2011, our worldwide occupancy was 67.9% in 2011. Our EBITDA margin was 8.9% in 2011.

HOTELS: Where does Club Med see the most growth potential?

Lanter: Historically, Club Med sourced most of its clientele in developed countries, to bring them to resorts in developing countries. Over the past 10 years this has change and Club Med is now strongly sourcing guests from the fast-growing developing countries. Club Med opened its first sales office in China in 2003 and in 2009 achieved a market share of 20% of the upscale Chinese clientele in destinations such as Bali, Maldives and Phuket. China is set to become our second-largest customer market, after only France.

We are working on developing resorts in the Maldives, Turkey, Morocco, the Italian and French Alps and in the U.S. for ski resorts.