Evening Standard, London
Dec. 17--Shares in Club M‚diterran‚e, the French holiday company synonymous with sun, sea, sand and uninhibited
behaviour, have rallied after the chairman of German holiday group Preussag said he was interested in some sort
of collaboration.
While the thought of battles over beach towels on deckchairs might deter the British from booking, the remarks
of Preussag's Michael Frenzel have drawn attention to the recovery at Club Med achieved by former Euro Disney boss
Philippe Bourguignon, and the prospects for further consolidation of the European holiday business.
The latest talk about a possible German-French tie-up arises from uncertainty over the future of Havas Voyages,
France's largest travel agent.
American Express, the leading shareholder in Havas, which with annual holiday sales of some UKpound 600 million
is one of France's biggest booking agents, has apparently signalled its desire to find a partner capable of turning
Havas into a Europe-wide business.
Preussag is one possible partner. So too is Club Med which, while increasingly attracting punters from all over
the world, still sells 30 percent of its holidays through Havas under an exclusive arrangement.
A three-way tie-up might be better still. For Club Med is still some way from the financial muscle-flexing peak
of commercial health. However, it is starting to show the benefits of Bourguignon's "Re-New" programme.
Hired in February 1997 to revive a company with its roots in the post-war holiday camp boom that had lost its way
in the Nineties, Bourguignon gave himself three years to get the group back on track.
Recognising the need to re-spond to the demands of clients who have become more individualistic and demanding,
he has forced the group upmarket, ditching the shabbiest resorts and refurbishing others, to enhance the quality
of holidays on offer. He has also introduced off-season discounts to provide better value for money and improve
occupancy.
Holidaymakers who used to pay for their purchases with beads from a string worn around their necks now pay cash
to a group that seeks to combine the traditional enthusiasm of its holiday organisers with a hard-headed commercial
approach.
A sales push in North America, where the company is weak, has also been combined with the development of some city-centre
destinations in response to the trend for shorter, more vigorous breaks.
The rising number of holidaymakers, now exceeding 1.5 million a year, has helped occupancy rates, which topped
72.3 percent in 1998 and 73.1 percent in the first half of 1999. Net income is rising too -- to Ffr165 million
(UKpound 16.5 million) in the first half, on revenues of Ffr3.98 billion, against income of Ffr132 million in the
first half of 1998. For the year 2000, Club Med is targeting operating income of Ffr700 million to Ffr750 million,
against Ffr386 million in 1998.
By mopping up tour operator Jet Tours in June, Bourguignon has made Club Med France's biggest holiday company,
with a 20 percent market share, ahead of Nouvelles FrontiŠres.
And as one might expect from a Disney prot‚g‚, marketing has come to the fore. Not content with selling us holidays,
Bourguignon wants to sell us the clothes we wear while we are at home as well as away.
Last month, in a move designed to develop the brand and promote the company's holidays, Club Med unveiled a sportswear
deal with French hypermarkets chain Carrefour. Next summer, the store chain will start selling a range of men's
wear, women's wear and children's clothing sporting the Club Med brand. Under the three-year agreement, further
licences for use of the Club Med name could be granted for use on luggage and swimsuits.
Similar deals have already been struck with L'Oreal's Gemey subsidiary to produce Club Med suncream and Loubsol
for sunglasses, while a Belgian group will offer Club Med watches.
And now the marketing supremo is busy revamping the company's travel shops too. As a relief from the panorama posters
and bewildering brochures, Bourguignon's decorators have de- vised motifs of giant starfish and aquarium windows
which will be installed in Club Med's 35 shops at a cost of UKpound 100,000 a throw.
This marketing flair, combined with the fact that Club Med achieves 70 percent of its sales through its own stores
-- Jet Tours has a further 80 franchised outlets of its own -- or by telephone, does lend credence to Bourguignon's
assertion that "Havas Voyages needs us more than we need them".
The reality, however, is that Club Med's market capitalisation, at euro 1.51 billion (UKpound 949 million), remains
a very digestible sum for many international rivals. And its shares, up 47.9 percent this year to euro 112, have
only modestly outperformed the CAC-40 index of leading French companies. They may well have further to run. A recovery
play, underpinned by consolidation prospects, is just the kind of investment market speculators love.
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(c) 1999, Evening Standard, London.