Club Méditerranée SA

25, rué Vivienne
Place de la Bourse
75002 Paris
France
(1) 42-61-85-00
Fax: (1) 40-20-09-61

Public Company
Incorporated: 1957
Employees: 2,000 (permanent parent-company only); 24,600 (total group employees during high season)
Sales: FFr 7.84 billion (US$1.6 billion)
Stock Exchanges: Paris Brussels Luxembourg New York

Since the organization’s early days as a vacation village concept pioneer, Club Méditerranée has grown into the world’s largest creator and operator of holiday resorts, with more than 87,000 beds in 139 vacation villages scattered throughout 35 countries. The Club has also pursued a consistent diversification strategy into other sectors of the tourism industry. In addition to the flagship vacation villages, Club Méditerranée manages upscale hotels under the Les Villas trade name; operates the Club Med 1 cruise ship; runs tours at more than 70 locations worldwide; and lets vacation apartments through the 45-percent-owned Maeva Group.

Club Méditerranée was the brainchild of a Belgian diamond cutter named Gérard Blitz, who in 1950 brought the 2,300 charter members of the club together in Alcudia, a village on the Spanish Balearic island of Majorca. Blitz conceived of the vacation as a stimulating escape from the daily grind of life in postwar Europe. Accommodations were basic: Blitz’s old friend Gilbert Trigano provided U.S. Army surplus tents to accommodate the first guests. Food was simple and visitors were asked to help out with cooking and cleaning. Nevertheless, the emphasis on all-inclusive egalitarian fun and a lively community spirit made the first summer a notable success. Club Méditerranée grew rapidly over the years as locations and amenities became more exotic, but the company’s core philosophy never strayed far from the original Alcudia model.

As Blitz had foreseen, the relatively low price and high entertainment value of the vacation village concept quickly caught fire. In response to increased demand, a new site was developed in Italy. In 1954 Gilbert Trigano left his family business and joined Club Méditerranée in a permanent capacity as managing director. Trigano’s vision and drive were relentless; he is credited with most of the strategic decision-making in the company to date. Trigano’s contribution to Club Méditerranée’s success culminated in an appointment as chairman and chief executive officer in 1963. In spite of occasional rumors in the press that he was grooming a successor, Trigano was still overseeing operations as of 1992.

The year that Trigano joined the Club, Polynesian-style huts superseded tent accommodations at the company’s newest location in Greece—the era of the permanent village getaway had arrived. Two years later, in 1956, the company’s first ski resort opened in Leysin, Switzerland, enabling the enterprise to cater to a year-round clientele. Buoyed by continuing success, Club Méditerranée was incorporated in 1957, although shares did not start trading on the Paris Stock Exchange for nine years.

As Trigano and Blitz became more ambitious, so did their capital requirements. Unable to finance further expansion out of Club revenues, they turned to the financial markets for help. As a result the Rothschild Group, under Edmond de Rothschild, became the entity’s largest single shareholder in 1961, and remained so until late 1988, when the Caisse des Dépôts group increased its holdings to 10 percent. Rothschild also had a controlling interest in a number of international hotel properties, a situation that the Club was later to exploit.

In 1965, with 14 summer villages and 11 winter resorts on the books, Trigano was ready to take the familiar formula out to sea. In order to keep costs and prices as low as possible, Trigano leased the Soviet ship Ivan-Franko, and in the course of the 1966 season, took over 2000 guests for a cruise. In 1967 the French Government agreed to subsidize two otherwise uncompetitive French shipping companies and Club Méditerranée dropped the Soviets in favor of the domestic concerns. Unfortunately the French ships that he ultimately leased had substantial cargo business, which they did not interrupt while Club Méditerranée passengers were on board. Unaccommodating crews, used to a less cosseted clientele, contributed to an occupancy rate of less than 50 percent during the cruise season. Prospects looked even worse after the Arab-Israeli Six Day War in June, which rendered an already lukewarm public even more unpredictable. Trigano decided to suspend cruise operations temporarily, admitting to one of the first setbacks in an otherwise stellar program of expansion. He was to refloat the idea in 1990, with the successful launching of the world’s largest sailing ship, the company’s own luxury “floating village,” christened the Club Med 1.

In 1968 Club Méditerranée attacked the U.S. market with the opening of a village in Guadeloupe in the French Antilles and the signing of a preferential agreement with American Express. The first U.S. office had opened in New York City the previous November and quickly attracted 10,000 members willing to pay an initiation fee of $1 and annual membership of $5 for the privilege of taking all-inclusive vacations at scenic locations. Nicknamed Club Med by its English-speaking clients, the company began scouting for a hotel site for the first lodging on U.S. soil. Eventually Bear Valley in northern California was found to fit the bill. Club Med would not build a full-scale village in the United States, however, until 1980, when Copper Mountain in Colorado opened for business.

In the 1970s a series of mergers and acquisitions propelled Club Méditerranée to a position as one of the biggest leisure operations in France. In 1970 the company absorbed a rival travel club, the financially embarrassed Club Européen du Tourisme (C.E.T.). Several banks and insurance groups became major stockholders in Club Med and added their financial backing to the asset-rich company in 1972. The next year an office opened in Japan, and although sales in the first months barely covered administrative costs and office rent, Trigano had astutely gained a foothold in the undeveloped Southeast Asian market, which by the 1980s would be one of the few dynamic sectors in a generally depressed industry. Acquisitions in the late 1970s included a 45 percent option in the Italian travel specialist Valtur, and the buyout of Clubhótel, the largest purveyor of timesharing properties in France.

During the same period, the unique Club culture that had been developing over almost two decades received finishing touches. By now, guests, called GMs—“Gentils Membres,” or kind members—were looked after by GOs—“Gentils Or-ganisateurs,” or kind organizers. The GOs, usually in their mid- to late-twenties, were the lifeblood of each village. They attended to every aspect of members’ comfort, from cooking their food and cleaning their rooms to teaching them how to play tennis. In the evening GOs would play games and perform sketches to encourage even the most reticent guests to participate. The prevailing atmosphere was one of supervised abandon; GMs were constantly reminded that they had escaped from civilization. Random room assignments were handled by the company, although couples could be accommodated together if necessary. The pricing structure was simple, based solely on the number of beds in a room. In every other respect the service was identical and even tipping was discouraged. The meal of choice was a sumptuous buffet; the alcohol flowed freely; and liaisons, though numerous, were rarely dangerous. The Club experience was all-inclusive except for bar service, which was paid for using beads instead of cash. Such sybaritic touches seemed somewhat at odds with the Club’s down-to-earth beginnings, but Trigano declared in a 1980 Le Monde interview that his company’s strength remained an ability to “offer the city dweller an old fashioned village experience ... neither too grand, nor too small.”

One decade later, the Club Med cliché of sun-drenched swinging singles was no longer quite so accurate; the fun-loving baby boomers of the seventies became the cost-conscious parents of the eighties. Earnings growth at Club Med in the mid-1980s slowed significantly to less than 5 percent annually.

A new conservatism was allied with a general upmarket trend. In response, Club Méditerranée began to target different age groups in its advertising and promotional materials. In order to attract families with young children, the company introduced the concept of the Mini Club—a village within a village where children of all ages could swim, finger-paint, and play under constant supervision while their parents enjoyed time alone at the beach. Parts of some sites were dedicated to seniors; others to special interest groups such as Alcoholics Anonymous. Facilities were constantly upgraded and conference capabilities were enhanced as the Club sought more corporate business. Doors that had previously remained unlocked during a guest’s stay were soon equipped with magnetic-stripe card readers, which also served as credit cards. Sites that had once housed a single public telephone now boasted mini computers in every room.

Gilbert Trigano was congratulated for his ability to stay ahead of the competition by anticipating new trends and responding to them immediately. Club Méditerranée’s image was now so strong that smaller countries in lesser developed parts of the world were openly competing to obtain new villages. Building a new village entailed short-term work for the local construction industry and in many cases, long-term opportunities for service workers, would-be GOs, and the host country’s national airline.

With the 1984 introduction of Club Med, Inc. in New York, worldwide operations were split into two main groups. The new company took over businesses in North America, Central America, Asia, and the Pacific and Indian Oceans. Although Trigano was still chairman, Club Med, Inc. enjoyed a modicum of autonomy in the English-speaking world. In 1987 the Club announced the opening of Sandpiper, a luxury resort in Florida, which set new standards for the vacation village concept. That same year the first full-fledged Club village opened in Japan. The winter resort, located in the northern city of Sapporo, was completed in partnership with the Japanese real estate and retail giant Seibu Saison, which had first approached Club Méditerranée in 1984.

Club Méditerranée extended its worldwide agreement with American Express in 1990, a relationship that was consolidated by the financial service company’s purchase of a 1.6 percent stake in the Club in March of 1991. Under the terms of the agreement, Club Med would honor American Express cards at all its facilities in exchange for preferential booking treatment at American Express travel outlets. The financial holding company’s decision to purchase a small stake in Club Med maintained the pattern established by other influential corporate friends of Trigano, who viewed stock purchase as a demonstration of commitment to Club Méditerranée. In February of 1991, the Aquarius Group became a wholly owned subsidiary, significantly enhancing the Club’s distribution capability in France.

This pattern of rapid expansion into new markets with new partners came to an end abruptly in 1991, when Club Méditerranée posted an end-of-year loss of FF 17.33 million (US$3.64 million)—its first deficit as a public company. However, the loss was misleading insofar as company operations had technically been profitable that year. The deficit was the result of Trigano’s decision to voluntarily write off the risk on recent diversification into the air transportation business and the costly restructuring of Aquarius.

Several factors had contributed to the reversal of fortune, not the least of which was the Gulf Crisis of August 1990, which had developed into a full-scale war by January of the following year. Hot on its heels came civil unrest in newly independent Yugoslavia. In the wake of the political upheaval, bookings dropped off sharply as skittish tourists elected to stay at home. To make matters worse, the recession delayed construction on some of Club Med’s most ambitious projects, most notably in Mexico, where millions of dollars in advance bookings had to be refunded to customers. Unfortunately Club Méditerranée had recently diversified into the air transportation business with the acquisition of a 50 percent stake in the Minerve airline and an indirect stake in a second airline, Air Liberté. Since the early days in Europe, Club Méditerranée members had been transported to vacation sites by chartered aircraft. The lack of control that the company exercised over these subcontracted operations had at times led to scheduling problems and delays. For a number of years, therefore, Trigano had been considering backward integration into the transportation business. Unfortunately his timing could not have been worse. In 1991 the airline industry suffered its worst season in many years; Club Méditerranée was forced to cut losses by sharply reducing its stake in the airlines. In his message to shareholders in the 1990-1991 Annual Report, Gilbert Trigano admitted that he had just come through the worst year in the company’s history, but refused to be daunted by the loss. Rather, he praised the “obstinacy and flexibility, the determination and open-mindedness” that he felt would enable Club Méditerranée to weather the storm. He pointed to the success of the luxury sailboat Club Med 1, which had been cruising the Mediterranean and Caribbean since February of 1990, and outlined plans to launch her sister ship, the Pacific-going Club Med 2, late in 1992.

Trigano’s optimism may well have been justified. Club Med, comprised of an international collection of upscale properties and state-of-the-art computerized support, was governed by clearly defined strategic goals. The setbacks of the early 1990s only proved how effectively Club Méditerranée could perform in a crisis. Above all the company consistently demonstrated a willingness to adapt to the information age and members’ changing demands. Club Med’s success was illustrated by the fact that nearly 47 percent of customers returned for more, a sign that although much-imitated, the Club Med experience remained unique.

Principal Subsidiaries

Club Méditerranée GmbH (Austria); Club Méditerranée Reise GmbH (Austria); Club Méditerranée SA Belgique; Grand Hotel Parisién; Hoteltour; Trident Conseils; C.M. Croisiéres et Tourisme; Société Immobiliére de Villages de Vacances; Société Calédonienne des Villages de Vacances; Société Polynesienne des Villages de Vacances; Société des Villages Hotels de l’Océan Indien; Club Méditerranée Deutschland; Club Méditerranée Helias (Greece); SA. de Coordination Hoteliére et Touristique (Greece); Club Méditerranée Ireland; Kerry Village Ltd. (Ireland); Club Méditerranée Israel Ltd; Gestione Espansione Turística Otranto Srl. (Italy); Société Immobiliére de la Mer (Morocco); Club Méditerranée Holland BV; Sociedade Hoteleira Da Balaia (Portugal); Société de Gestión Hoteliére et Touristique du Sénégal; Club Méditerranée SA Espagne; Hoteles y Campamentos SA (Spain); Club Méditerranée Scandanavia AB; Club Méditerranée Suisse; Nouvelle Société Victoria (Switzerland); Immobilien AG Dieschen (Switzerland); Akdeniz Turistik Tesisler AS (Turkey); Club Méditerranée UK Ltd; Club Méditerranée Services Europe Ltd (UK); Club Med Argentina Srl; Medsul (Brazil); Club Med, Inc (Grand Cayman Island); Club Méditerranée Bahamas Ltd; Village Hotel of Bermuda Ltd; Club Med Holding NV (Dutch Antilles); Société d’Investissement Touristique des Iles SA (French Antilles); Caribbean Trident Holding, Ltd (Grand Cayman Island); Club Méditerranée Haiti SA; Operadora de Aldeas (Dominican Republic); Holiday Villages (St Lucia) Ltd; Club Med Sales, Inc. (USA); Club Méditerranée of Colorado, Inc. (USA); Village Hotel of Sandpiper, Inc. (USA); Club Med Management Services, Inc. (USA); Village Properties of Sandpiper, Inc. (USA); Club Med Investments, Ltd (USA); Club Méditerranée Australia (Pty.) Ltd; Holiday Villages (Hong Kong) Ltd; Club Méditerranée Management Asia; Club Méditerranée (Club Med) Hong Kong Ltd; Club Méditerranée Association Japan Co. Ltd.; Club Méditerranée KK (Japan); Holiday Villages of Malaysia Sdn. Bhd.; Holiday Villages Management Services (Mauritius) Ltd; Club Méditerranée NZ Ltd (New Zealand); Club Méditerranée Services (Singapore) Pte Ltd; Vacances Siam (Club Med) Ltd (Thailand).