It has found that consumers’ preferences have changed. Vacationers are not willing to spend large amounts of money for vacations that include many activities they are not using as much as the had in the past. Its competitors have been able to customized travel package for each customer at prices that customers feel more comfortable with. Club Med’s disadvantages: o Cub Med has been scattered all over the world 0 Currency devaluation o Political boycotts Background and History Club med was founded by Gerald Blitz in 1950.
In 1 954, he changed this association into a business with the aid of Gilbert Trigano who sought to establish this organization. By 1 985, Club Med was transferred into a public traded company on the Paris stock exchange. Today, it encompasses over 80 villages and has 2 cruise ships. The reason for success o Its living area is much simpler than the typical hotel chain and rooms sparsely decorated (no phones, TV, writing paper … etc. ) o It measures its capacity by the number of beds, not the number of rooms o Its image are as a place to go when customer want to escape.
In 2004, after years of trying to make higher profits, it altered its plan hoping o make a comeback, which aimed at giving consumers a differentiated product that was more upscale and luxurious, especially in the Americas Industry Structure until 1986, it had a very strong position in the allinclusive resort market. Its level of bargaining power with buyers, suppliers and labor was high. During that time period a customer paid 50% to 100% less than other resorts. The airlines were willing to give Club Med significant discount in exchange of mass booking. At the end of 2003, it launched a website, www. lubmed. com in keeping with the advance in information technology. The internet accounted for about 20% of its sales at that time. Travel agents could check availability, airfare and book online. In 2004, it developed a specialist program for travel agents. Under the program, it certified 12,000 agents and apparently the certification has enabled travel agents to increase bookings significantly. Competition In 1986, Club Med began facing competition. This company was no longer the only all-inclusive resort competitors adopted Club Med’s style.
However, the big difference between the Club Med and other competitors was that it maintained to exclude the rice of drinks. After agents complained, Club Med reverted to an all Most of the inclusive deal and launched “Total” All-inclusive package in most of its villages. Competitors o Jack Tar Village, the Jamaica-based company, positioned the resorts as more glamorous and modern than those of Club Med. It’s claim to fame in relation to Club Med is its open bar policy o Super Club Organization, reputations for being most uninhibited and sexually oriented resorts.
Super Club also included drinking in their inclusive price. The other difference from Club Med was the vacation’s packaging and distribution. For instance, Club Med bundled the ground transportation with the rest of their packages while air transportation was to be distributed directly to consumers or travel agents. Super Club, bundled ground transportation packages to be sold through large tour wholesalers, who in turn groups these packages to be sold to the travel agencies. o The offering They don’t include all the activities in the initial prices Of the vacation.
For example, consumers have to pay more if they want to do jet skiing and pa rasailing. o These offering plans allow them to lower the price and take away potential lients from Club Med o Club Med also suffered from the economic, ecological and political constraints that prevent the firm from using the individual pricing method, which could lead to customize packages for vacationers. The service Concept The original mission statement includes the idea that the companys goal is to take a group of strangers away from their everyday lives and bring them together in relaxing and fun atmospheres in different parts of the world.
The companys strategy for assuring that guests come back is carried out by having their guests join a club as members by paying an initial fee as well as nnual dues, with the membership, they receive newsletters, catalogs featuring their resorts, and discounts on future stays. This makes people feel like being a part of this organization and create the strong brand loyalty The average Club Med vacationer revisits four times after their first visit at one of its resorts. All Club Med resorts setup regarding to which part of the world they are in.
Each resort has about 40 acres to suit all the plan activities: windsurfing, sailing, basketball, volleyball, tennis and so on. Club Med organized everything in a manner that encourages social interaction between guests. The rooms are built around core facilities such as the pool. Meals are done buffet style and the tables seat six to eight people so guests can sit and meet with many different people at every meal. All activities and meals are included in the prepaid before the vacation begins. The only exceptions are bar drinks and items purchase in the small shops, those items are put on the tab and will be cleared when checked out.
This idea make customers don’t worry about the financial decision and the real world. Problems Until 1 996, Club Med was predicted to have strong sales growth due to successful market penetration in other countries. However, Club Med didn’t have as great of an increases in sales as it had anticipated due to economic and ecological disasters in countries where Club Med resorts are located. This makes it difficult for Club Med to keep its beautiful resorts in countries hat suffer from such disasters. Contracts o If Club Med is allowed to enter the country, the firm will increase tourism in that area.
In turn, the government will provide financial aid to help pay for the costs of maintaining the new resort facilities. Examples o In Mexico, the government agreed to maintain Club Med’s facilities if the orporation would increase Mexico’s tourism level. However, unexpected occurrences, such as depreciation in country’s currency, limited the amount of capital the Mexican government could help. Even though Club Med are very profitable in Mexico but due to the weak currency, it costs Club Med a lot to maintain the resorts. Also, at that time, it became known that France had been conducting nuclear tests in the South Pacific. This caused Club Med to receive fewer booking than expected in its Tahiti-based resorts. o Another significant event was the September 1 1; attacks in the U. S. that aused a considerable reduction in travel the world over. Hurricanes in the Caribbean in 2004 also caused some serious damage to Club Med’s resorts in that region o Moreover, the Tsunami disaster in Southeast Asia devoured most of its coastline and Club Med’s properties in Malaysia, Phuket, and the Maldives. With a low income in those resorts that got effected from disaster, the company compensates for such losses by using the profit fro other resorts that have not suffered from similar disaster. These problems prevent Club Med from reducing prices by implementing a customized travel package like ts competitors. What Lies Ahead? In 1 998, Philippe Bourguignon, who is credited with turning around Euro Disney, was brought in as new chairman to stem the decline. He immediately instigated a $500 million, three-year recue program. He could turn around Club Med by bouncing back its stock from $63. 7 to $84. 17 in only 1 year after the he got the job However, he was resigned in 2002 after a cash problem. Henri Giscard was appointed as a new chairman. He also made a lot of changes within organization. He focused in France, the U. S. , Canada, Belgium, Japan, Italy, Germany and Switzerland. These countries account for 74% Of Club Med’s visitors. Club Med also plan to enter the Chinese market once again after it failed. This time Club Med planned to open the sales office first and resorts later. Club Med intended to follow the similar strategy while entering Korea market.
The United States is Club Med’s No. 1 target. To increase the sale in U. S. , Club Med plans to open 3 new resorts around the LJ. S. ; couple resort in Dominican Republic, family resort in Yucatan Peninsula and family resort in Brazil. IT invested over $350 million from 1 998 to 2004 in advertising to refresh their brand name. Club Med also partner with match. com, an online dating company. In 2004, Club Med executed new upmarket strategy, rebranding itself as upscale and family oriented. It renovated its U. S. location, namely Club Med Columbus Isle, Club Med Buccaneer’s Creek and Club Med Turkoise.
Isle went through $5 million upgrade to include more luxury items, king sized beds, flat screen TV, well-stocked mini fridges. Add to that three new dining options and a poolside with gorgeous music, daybeds and lounges. The company also spent $50 million for renovating Buccaneer Creek and $6 million On the One at Turkoise. In 2005, the company launched its first flagship store in London, known as “The Travel Boutique” Question Given Club Med’s current problem, do you feel the company could have avoided its pricing scheme problems through different expansion plans? I don’t think so. Club Med have been doing well against not only the competitors but also new marketing strategies. We have no choice to avoid the pricing schemes. Therefore, we should be prepared for anything that could happen and the contingency in pricing and currency fluctuations. Why is Club Med unable to offer competitive prices? Because Club Med already had full discounted prices and they have many resorts around the world. Some make profit, some lost due to any crisis that happened. So, in order to maintain all of them, they can’t reduce their prices any more. Given Club Med’s current problems, do you think that “the club” will be able to survive by keeping its current pricing strategy or do you think a new strategy should be implemented? As you can see in the Club Med share price graph, Club Med is bouncing back from the past. Even though it’s not profitable like 2007-2008 but not bad sign comparing to the previous year. Moreover, Club Med just recently opened new resort a few years ago, so I think we’d better wait for a few years to make any further decision. How can Club Med continue to differentiate itself in order to sustain its competitive advantage against its competitors who seem to be imitating its service concept? Since Club Med already had a strong brand name, value and loyalty, using these, they should continue to renovate and remodel their resorts by the latest trends, and they should come up with the impressive ads to the world. Club Med has changed its strategy recently to a more uxury driven one. By the end of 2008, the company hopes to have most of its villas operating as luxurious boutiques.
Spending $50 million a villa to refurbish it, how does that affect costs and eventually profits? In other words, what is the justification for these high expenditures? The current trend is luxurious. The reason why refurbishing a villa costs a lot compared to the common cases was that most of its villages were old fashioned, they should spend more money for refurbishing for being attracted by customers, no one wants to stay in the old resorts that have the old facilities.