Club Med Gets Real

In June 1989, I stayed at the Club Med Sonora Bay on Mexico’s West Coast. The accommodations were sparse — two beds, a place to stow my belongings, a basic bathroom. No TV, no phone, no clock radio. I asked for a wake-up call, and someone knocked on my lockless door at the appointed time. I wore bar beads, which I bought in order to exchange for drinks.

Times have changed, and so has Club Med.

Today, guestroom doors have locks. Rooms are air-conditioned and include CDs, clock radios, TVs, phones, coffeemakers, irons and ironing boards. The rooms, while simple in design, are no longer sparse. There are no bar beads and no tipping.

“We’ve determined that this is the ‘get real’ decade,” said John Vanderslice, president and CEO of Club Med Americas, based in Coral Gables, Fla.

The Paris-based parent company, which introduced the all-inclusive concept in 1950, had a rude awakening when competitors such as Sandals and SuperClubs arrived on the scene in the 1970s, offering luxury resorts with a full complement of in-room amenities, charging one price that includes everything except spa services, off-property excursions and incidentals.

However, Club Med villages remained pseudo-all-inclusive until three years ago.

“We weren’t really all-inclusive, and we weren’t really EP; we were in the murky middle,” said Paula Hayes, Club Med’s senior vice president of sales, U.S. and Mexico.

Over the last three years, Club Med invested $350 million in its more than 100 villages in 40 countries worldwide, including $150 million in its 12 villages in the Americas. Every property underwent extensive renovations, and some were expanded. All properties in the Americas received the new in-room amenities, and villages in other parts of the world are adding them according to the demands of their markets, Vanderslice said.

Some villages were completely retooled. For example, Club Med Punta Cana in the Dominican Republic was converted into an all-suite property by combining rooms and adding a building.

Every village in the Americas now has massage palapas, offering treatments for an extra charge. In addition, the company has partnered with Crunch to offer its fitness program and with the Association of Tennis Professionals for its tennis program.

And earlier this year, Club Med launched its “Total All-Inclusive” program, putting its villages on the same playing field as other all-inclusives.

Those improvements were years in the making, according to Vanderslice, but “9/11 gave us the opportunity to accelerate.”

The changes happened so fast that they took some guests by surprise. One man, upon finding a CD player in his room at the Club Med Sandpiper-Florida, assumed it was left by a previous guest and tried to return it to the front desk.

While virtually all travel companies went into a slump after the Sept. 11, 2001, terrorist attacks in the U.S., Club Med took advantage of the slowdown to shutter villages that were underperforming or simply did not have the amenities and features to attract North American clients. Among the villages closed: Sonora Bay, Huatulco and Playa Blanca in Mexico, Moorea in French Polynesia and Eleuthera in the Bahamas.

“We were able to use that capital [from the closed villages] to make improvements to existing villages,” Hayes said. “The post-9/11 period was our time to regroup, hunker down and look at the best way for survival. And we decided the best way to do that was to tighten up, look at the villages with the best potential for growth and bring them up to an even higher standard for the North American market.”

The company also decided that going totally all-inclusive was vital. “I felt it was critical,” Hayes said. “It made the selling process very difficult. We really were the odd duck. Now we’re at least even if not superior to our competitors.”

The investment is paying off: Post 9/11, Club Med’s villages in the Americas were losing money, Vanderslice said. In winter 2002-03, they made a $2 million profit. And in winter 2003-04, their profit quintupled to $10 million. (Club Med operates by season, with winter running November through April and summer running May through October.) In addition, the average occupancy rate jumped from 66.3 percent in winter 2002-03 to 70.1 percent in winter 2003-04, according to the company’s annual report.

Travel agents are finding it easier to sell Club Med since the upgrades.

“In the past, Club Med villages were considered to be distinctly different from other all-inclusives because they weren’t really all-inclusive,” said Sharleen Wollach, manager of product development and training at San Diego Travel Group. “We now have a better opportunity to sell Club Med because we’re comparing apples to apples.”

Another $75 million is earmarked for the Americas, according to Vanderslice. Among the developments: Buccaneer’s Creek in Martinique — the village that put Club Med on the map for the U.S market — will be demolished and rebuilt. The new village is scheduled to open in November 2005.

Areas of future expansion include the Caribbean and Mexico. In particular, the company wants to open a village on the Riviera Maya or on the West Coast, and is working with Fonatur, Mexico’s National Tourism Development Trust Fund, to develop another property. A third village in Mexico would be a cost-efficient way to expand since a company infrastructure already exists.

“We would have more synergy there, whether it be in advertising, promotions, charter flights, buying goods and staffing, since we do move our GOs [gracious organizers] from village to village,” Hayes said.

Achieving that growth took significant rebranding — something Vanderslice, who comes from a packaged goods background, knows well.

“People are looking for value more than anything else — not a label, and not price only,” he said. Vanderslice implemented a new branding strategy based on three expectations — value, location/accommodation and activity — after surveying nearly 1,000 travel agents and consumers, who placed activity at Club Med villages in the “acceptable” range and location/accommodation on the low end of “acceptable.” That led to an overall value rating below the “acceptable” level, he said.

The good news was that only the accommodations, not the locations, needed upgrading. All villages sit on at least 50 acres in “superb” locations, he said. The Cancun property, for example, sits on 77 acres next to the second largest coral reef in the world, with water on three sides.

The improvements also changed peoples’ perception of the villages. “Twenty years ago, people thought of Club Med as sun, sex and sea,” Hayes said. Today, there’s a clearer mix of villages targeting different demographics. Most are family-friendly; and some (not all) offer children’s programs. Two — Cancun and Turkoise (Turks & Caicos) — require guests to be at least 18 years old.

“The differences between their villages are more defined as far as the clientele they’re going after — family, single, romantic,” said Eric Maryanov, president of All-Travel.com in Los Angeles. “People want different life experiences at different points in time but still want the Club Med experience.”

Added San Diego Travel Group’s Wollach, whose 30 agents are all Club Med Specialists: “You’re getting a new clientele — every demographic. Multi-generational trips have become very popular.”

One thing hasn’t changed: the gracious organizers, who plan activities, teach sports skills, tend bar, prepare food and entertain, among other duties. They’re Club Med’s secret weapon for attracting and retaining customers.

“GOs are hired for their technical skills [in tennis, windsurfing and other activities], as well as for conviviality,” Vanderslice said, adding that all Club Med employees, including himself, are GOs. “It’s part of the Club Med community. You don’t just go in and pull your shift. You live in the village.”

That may be why, although Club Med was losing business until recently, it has consistently enjoyed a 70-percent-plus repeat factor among its loyal GMs, which stands for gracious members — Club Med’s term for its guests who, in essence, become club “members.”

The real challenge, then, has been to lure new customers. And that’s where travel agents come in. “Three years ago, [the hotel industry] was walking away from travel agents,” Vanderslice said. “We went the opposite way. We still offer 10 percent commission and can go as high as 17 percent.”

Club Med did try to increase direct sales several years ago, before Hayes joined the company. “To say the least, it was a failure,” she said. “The right thing was to embrace the trade. We can touch consumers one-by-one but if we touch one travel agent, they can touch 20 people in one day. We knew we could get our message out more quickly and efficiently by using this terrific distribution system.”

In addition, the company doubled the size of its sales force to 16, with positive results, especially from the Western U.S. In the past two years, revenue and customer base have grown at a higher rate from travel agents in the West than from those in the East, according to Hayes.

Club Med now has two sales reps in Los Angeles and two in San Francisco; it also added a rep in Texas and one in Phoenix.

To help agents offer service and knowledge, Club Med offers a specialist program and has gotten up to speed with electronic marketing tools such as e-postcards, available on its travel agent Web site, www.clubmedta.com. It also is offering more agent seminars at conferences.

Club Med is “more travel agent friendly than they used to be years ago,” commented Dan Ilves, vice president of sales and marketing at TravelStore in Los Angeles. “They used to say they were, but they did so much direct marketing it was hard to work with them. Now, it’s easier to get projects out the door that will generate sales.”

In fact, the company’s sales figures are up 29 percent in the Americas over a year ago, compared with 8 to 12 percent for hotels industry-wide, according to Vanderslice, who gives much of the credit to travel agents.

The company recently received another shot in the arm, when Accor Hotels, which owns Sofitel, Novotel, Red Roof Inns and Motel 6 brands, announced it will acquire a 28.9 percent equity interest in Club Med. The transaction, which is subject to regulatory approvals, would make Accor the core shareholder of Club Med.

“We were looking to have people on the board who were closer to the industry,” Vanderslice said of the deal. “Accor believes in our strategy and that the turnaround is on the right track.”