OverviewFounded in 1950 by a group of friends,Club Mediterranee often referred to as “The Club” was the ninth largest hotelcompany in the world in the year 1986.
It was led by Gerard Blitz who was awater polo champion and a Belgian diamond cutter. It was founded first as anon-profit organization attracting people on tight budget who loved and enjoyedsports along with a scenic seaside location. In 1954 Gilbert Trigano wasinvited by Blitz to become the managing director. Trigano saw the businesspotential of combing sports with vacation and scenic landscape and started totransform the association into a business. In the year 1985 Club Mediterraneewas a publicly traded company on the Euronext Paris, hosting 820,000vacationers annually and owning 108 resort villages throughput the year. In1972 Club Mediterranee formed a U.S subsidiary as Club Med Inc., which soldvacation packages and managed resort in North America, the Caribbean, SouthAmerica, Asia and the South Pacific.
In 1984 25% of the shares for Club MedInc. were sold on NYSE which became a favorite of many influential Wall Streetanalysts. Club Med’s Competitive Advantages(Strengths)One of the biggest competitive advantagethat Club Med has over its competitors is the way it operates its business incomparison to the other resorts. How they have integrated the idea of “Family”in their culture where the employees and the guests are a big family with opencommunication grounds. The company understands what customer satisfaction meansto then thus offering one of kind experiences unlike any other resort or hotelchains. They offer a rotation of their employees (nomadism) which helps ingenerating different international experiences in different villages. They alsooffer Spartan style rooms which don’t include any electronics which help itsguest to be involved in the social interaction and participating in activitiesoffered by the club. This also helps the guest to live in the moment and notworry about their work and just have an amazing experience.
The company earned 3 million dollars justin interest from the customers prepaid deposits for their vacation. Further thecompany’s culture is to measure the capacity of their occupancy in the numberof beds available in villages instead of rooms. This leads to the increase intheir capacity for their occupancy which further leads to higher contributionmargin for their beds in villages. The company also holds a strong positionwhen it comes to customers, suppliers and employees. According to the companythe customers can only buy the “true formula” of the vacation package from thecompany itself and it would cost them 50% -100% if they tried to reproduce thecompany’s experience through other vacation options. The company offers a fullpackage and a “Float” system where the customer pays everything beforehand andit includes lodging, meals, activities, ground transportation and sports. Thishelps them to operate at a lower cost than its competitors.
There are commercial airlines that soldClub Med highly discounted air transportation which Club Med sold as a part ofthe vacation packages with a substantial profit. The company also created jobsand tourism revenue therefore economically unstable countries in exoticlocation wanted to be a site for Club Med Village. Thus they offered low castfinancing, foreign worker agreements, tax breaks and in some cases, directequity investment. These gave Club Med an upper hand with its suppliers.The company also attracted many young andtalented people than wanted to work with Club Med.
In 19884 they received 35000applications for 2000 work positions available worldwide. The company was alsoable to attain a strong position when it came to negotiating wages for localvillage workers.The company is highly defensible as ClubMed has a unique culture and are able to offer its customers exceptionalexperiences at lower cost which would deter its competitors.
Also the company’scompetitors need a high capital to enter the market and compete with Club Medat the level they are operating now. Looking at their financial performance forthe year ending October 31st 1986 the company is doing really wellwith an income of 19,087,000 dollars before tax and 18,055,000 as their netincome.The company offers an experience unlike noother which leads to word to mouth marketing which is a huge form of marketingfor the company as most of their guest do recommend Club Med because of theexperience they had. 65% of new guests decided to visit Club Med for the solereason that they were recommended to go by their friends and acquaintances.
25%of guests became repeat customers and took an average of four additional ClubMed vacations, with an estimated contribution margin of 60%. Looking at thesatisfaction rate and follow up questionnaire most of the guests had an excellenttime and exceptional service and were happy with their vacation. Areas Club Med Can Improve On (Weaknesses)Club Med depends a lot on Word of Mouthmarketing strategy where their customers recommend Club Med to their friendsand people that they know. This is where they have a risk of losing businessfrom people who have never visited Club Med or have no friends that havevisited Club Med either. The company has a high turnover rate of46% amongst American employees and 26.7% overall. Even though the company islooking for fresh talent the high turnover rate leads to new employees takingtime to adjust with the culture and increases expenditure on employee trainingwhereas an old employee would already know the ways to get their guests social.The company also has fixed employees irrespective of the number of guests.
Thisleads to increase in expenses on wages which can be brought down if theemployees were numbered according to the guests.Club Med offers single bed occupancies foreveryone and does not offer double beds for couples which could drive away abig market of customers as they might think of Club Med as an experience onlycatering the singles. The activities offered by Club Med became predictablewhich might not appeal people who are looking for something different. The companyneeds to adapt according to change in demands amongst customers.Club Med villages are located in variousexotic locations worldwide leading to some villages having better design andfacilities which further lead to physical problems and difficulty in managingsome villages. The company also had problems keeping all of their facilities intop conditions due to joint ventures with the government. Growth OpportunitiesClub Med offers single beds for everyonewho visits their villages. Thus emphasizing more on singles and their demands.
They can adapt according to the demands of the customers and come up withoccupancies including double beds for couples and also occupancies forfamilies. The company can further design activities for families and forcouples to socialize thus sticking true to the company’s culture. This wouldhelp them capture a larger consumer market and attract more diverse crowd totheir villages.The company highly depends on referralprogram for their marketing. They can offer incentives and discounts to theguests who return to club med and also the friends that they refer to who visitClub Med village on the sole basis that their friends recommended it to them.
This will further motivate the guests to come back and to refer the experienceto other people.Activities offered by Club Med becamepredictable which might drive away customers looking for something differentand a different experience. The company should invest in different water sportsand other activities which would keep things different while maintain thequality of service. The company should reduce their turnover rate and traintheir current employees to provide better services and build up a relation withthe guests. This would help them cut costs in recruiting new employees. Thesewould lead to an increase in service quality for the company. The relativecosts that the company would incur would be investing in new sports andactivities.ThreatsOne of the biggest threats that thecompany possess is the lack of adaptability and stick to the old ways of work.
The company can provide an exceptional and a unique experience by adaptingaccording to the needs of the customers. New competitors are a potential threat tothe company too. Both the competitors SuperClubs and Jack Tar villages offerdifferent Unique Selling Propositions for their company which are a potentialthreat to Club Med. While SuperClubs sells their packages through tourwholesalers, Club Med sells its packages through travel agencies and directlyto its customers.
SuperClubs and Jack Tar Villages both include drinks in theirpackages whereas Club Med keeps a tab on drinks. Jack Tar Village also offersattractions like aquarium, casino, duty free shops and the largest swimmingpool in the western hemisphere. This can lead to customers comparing thefacilities and the quality of service provided by all the resorts in the pricethey are asking. Though the competitors have their own USPs , they aren’t a bitthreat to the company because they do not offer the family like experience andcustomer satisfaction that Club Med has to offer.
The major areas of concern for club medare the lack of adaptability to new consumers and their demands, the quality ofservice provided, predictable experiences/activities and the employee turnoverpercentage.ConclusionAfter the analyzation of Club Med’sCompetitive Strengths. Areas of Improvement (Weaknesses), Growth Opportunitiesand Threats the following case is a Decision Case. The company is really goodat making its guests feel like a family and providing an amazing andunforgettable experience to them. The company’s culture and ways of operationare unique which attracts a lot of people and they also have an advantage whenit comes to package deals and providing an experience with much lesser cost.The company also has weaknesses including the lack of adaptability to customerslike couples and families, employee turnover, dependability on Word to Mouthmarketing and maintain top class services across villages.
The growthopportunities that Club Med possess includes adaptability to new customers andtheir demands including families and couple, providing incentives to motivateguest to recommend the experience to their friends and also increasing thequality of service by including different activities/experiences. Threatsaren’t a big deal for Club Med other than lack of adaptability because thecompany has penetrated the market and has created its brand equity amongst itscustomers. RecommendationsClub Med should keep and maintain theirculture and values as these are the company’s USPs which leads to anexceptional experience for its customers and customer satisfaction. Along withthat the company should adapt according to change demand and be more inclusiveof couples and families in their villages, they should focus on ways toincrease the quality of service by creating and introducing new activities andexperiences to keep things different. The company should also decrease theiremployee turnover as this would reduce the cost of new hires and olderemployees are more comfortable with the guests and know how increase andmaintain customer satisfaction.