This article is from Capital magazine
There’s sunshine for Club Med! After eighteen months of air gap, the company with 67 holiday villages, half of which will be open this summer, now in the hands of the Chinese giant Fosun, begins to see the light at the end of the tunnel. After a missed ski season due to reconfinement, the summer season promises to be very successful, assures its president since 2005, Henri Giscard d’Estaing, who is reaping the benefits of a move upmarket, and therefore in price, led to strong pace in recent years.
What is your assessment of the crisis?
Henri Giscard d’Estaing: For tourism, it is the mother of all crises! On September 11, 2001, the tsunami, the Icelandic volcano, the Arab Spring… the sector has certainly experienced many. But they were mostly local and they passed after a year. This is global and it lasts. At the beginning of April 2020, for the first time in seventy years, Club Med had to close all of its villages. The loss of turnover reached more than 900 million euros last year. This year, the white season, or rather the black season, in the mountains cost us 260 million euros in lost revenue. Following government recommendations, we hired seasonal workers for this season. We had to protect our employees, the GOs, and even accommodate some who were blocked by border closures. We took advantage of this period of inactivity to offer them training, in foreign languages in particular.
Your owner, the Chinese giant Fosun, has supported you.
Yes. To cope, we raised a total of 360 million euros: 230 million in loan guaranteed by the State from our banks and 130 million from Fosun. It is a chance to have this solid shareholder. It is also a chance to have been able to benefit from the experience of the reopening in China, the country where we both closed and reopened first, which allowed us to test the sanitary measures and improve our marketing by putting us, for example, in the “live stream”. Influencers came to film themselves live in our new Seychelles club, which made it possible to show it to clients from a distance.
Serious savings also had to be made.
We were able to save 270 million euros last year, in particular by negotiating lower rents (Club Med does not own most of its premises, Editor’s note). This reduced our fixed costs by 40%, a considerable effort that we maintained from January to the end of April 2021.
Are you going to increase your rates to pay off your loans?
It does not seem conceivable to me! Our prices will only evolve in line with our cost inflation and upscaling, as before. Club Med entered the crisis in good health, with a portfolio of villages at 90% in 4 or 5 tridents.
Do you fear a “de-globalization” of tourism?
The kids, the parents… everyone’s been locked up for months. With the ban on traveling more than 10 kilometers from home and curfews – a word almost unused since World War II! So there will remain a trauma, which in my opinion will be similar to that of September 11, 2001. Remember, until the 2000s, we traveled the world without worry, and then we put in place restrictions that lasted. Some measures taken during the Covid will also remain. The concept of health security will remain very important. And the role of operators will be to make families understand that they offer the best protection conditions. That said, when you experience an event of this nature, there is a desire for life, for freedom, which, I think, will create a significant and lasting rebound in travel and vacations. We will undoubtedly go towards longer stays, favoring operators who ensure the best combination of security and freedom. In this respect, the Club Med experience, the free spirit, seems to me to correspond well to the new expectations of customers.
Where are your reservations for the summer?
There were very few bookings between the end of last year and April. People weren’t looking into the future. The marketing actions did not yield any results, and sometimes they could even have shocked the customers! Fortunately, the situation was unblocked in mid-April, even before governments communicated the reopening plans. The desire to change air prevailed over the uncertainty of deconfinement. For French customers, our cumulative reservations are still below normal levels, but they have been catching up sharply since mid-April.
What about foreigners?
The Chinese clientele can no longer attend our clubs located outside China, whereas it was very important for destinations in Southeast Asia in particular, but it has fallen back on domestic tourism, so that our clubs Chinese visitors experienced a 35% increase in attendance last winter compared to 2019. The US market has resumed double-digit growth since February-March, when vaccination accelerated, which has benefited at our resorts in Florida, the Caribbean, and Cancun, Mexico.
Are you going to have to slow down the pace of openings?
It is not on the agenda, even if there may be discrepancies. This year, we have already succeeded in opening two new resorts. La Rosière, in the Alps, which was scheduled for the ski season but could not open until June 19. And our first club in the Seychelles. By the end of the year, we will inaugurate two more. One in Lijiang in Yunnan, on a magnificent site located on the “tea route” at the entrance to the Himalayas, where the Naxi live, a Chinese minority descended from the Huns. The other in Charlevoix, Quebec. This project symbolizes our return to the North American mountain market. The goal is to open 16 new clubs by 2023, almost half of them in China, and renovate 10. It’s achievable. And, for 2024 and beyond, we plan to continue at the same pace.
Will the tourism sector consolidate?
In 2020, $ 1.3 trillion in tourism activity evaporated and 100 to 120 million jobs in the sector were destroyed. So, obviously, some already weakened players such as mass tour operators are in very difficult situations and there will undoubtedly be consolidations. Our parent company, Fosun, has taken over the Thomas Cook brand, which distributes our stays in China and will soon do so in Great Britain.
Are you in favor of the health passport?
The European health passport is a very good initiative and I am delighted! I even wanted to ask all our customers to provide proof of a test or vaccination before coming to Club Med. We are already asking for the test in our clubs in the United States for the safety of our customers and our teams, and this is done without major difficulty.
Tourism is 10% of GDP, 12% of jobs. Are we doing enough to keep international customers coming back?
As for the summer season, the French will stay in their country, which will benefit our clubs in La Palmyre, Charente-Maritime, Opio, Provence, or the Alps. But it will also be necessary to attract Europeans as well as all those vaccinated from all over the world, and, from this point of view, countries like Spain, Portugal and Greece are making more efforts than we are. Even if, when we look at Google searches, France is the second destination watched by Americans after Italy. When it comes to winter sports, the crisis has reshuffled the cards. France was tied for leader with the United States, but the decision not to reopen this year when the Americans were doing so penalized us. They lost about 10% of the activity, but they took over the world leadership, followed by the Swiss. The imperative is to regain our place on the podium next winter, and that is being prepared now!
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