Giscard d’Estaing is currently repositioning Club Med as an ‘upscale, friendly and multicultural’ tour operator. Having spent around EUR 1bn since 2004, this strategic turnaround had revived customers’ satisfaction toward Club Med’s tour experience. Unfortunately, revenue performance is still poor. Estaing is in need of a concrete strategy to increase Club Med’s revenue by 5 times by 2020 from 2010.

The formation of the strategy is driven by Club Med’s 1) Strength – Strong and established brand name in Europe with acceptable balance sheet for funding flexibility , 2) Weakness – Concentration risk in the Eurozone experiencing sluggish economic growth, 3) Opportunity – Diversification into new growth geographies and 4) Threats – Intense competition driven by low barriers to entry. Club features rating: Club features rating:

Club Med’s Major Issue: Repositioning strategy dealt with skepticism from customers resulting in stagnant customer growth Source: TopTenReview, internationally recognized review agency for the newest technology, products and holiday providers Source: TopTenReview, internationally recognized review agency for the newest technology, products and holiday providers Despite an aggressive and costly upscale repositioning, customers’ perception of Club Med is still poorly ranked against international competitors like Marriott, Disney and Hilton.

This could be attributable to Estaing’s emphasis on renovation of existing infrastructure on the back of limited capital. It is clear that Estaing’s strategy lacks a strong commitment on meeting customers’ perception of an upscale tour experience. We see a lack of focus on building prestige and exclusivity to Club Med’s new positioning. Valuable dollars are wasted to renovations with no tangible effect of converting customers to pursue Club Med’s all-exclusive and upscale tour lifestyle.

In conclusion, Club Med must implement a detailed strategy that serves to satisfy its goal of increasing membership and position itself strongly as a recognized upscale tour operator. This would be most beneficial in terms of commanding premium pricing power with increasing membership. Strategic Options In order to arrive at a well-rounded solution to Club Med’s problems, it is imperative to analyze the viability and overall attractiveness of each of the options. Option 1: The implementation of ‘Club Med Timeshare’ is an option which will increase Club Med’s prestige and exclusivity.

Instead of renting your vacations, Club Med’s customers will be able to own them. This would spur high income earners to spend extravagantly for a consistent quality holiday experience. Instead of charging USD 2,000 for a one time all-exclusive holiday, Club Med will be able to secure committed re-visits at an average rate of USD 21,800. Option 2: Capture the growth of all-inclusive and upscale holidays in the fast developing markets (China, Russia and Brazil – “FDM”).

As of December 2009, Europe contributes to about 72% of Club Med’s revenue. Customers from fast developing markets only constituted to 8% of Club Med’s total customers. As the fast developing markets are still under serviced, Club Med is at a favorable position to capture lucrative growth. Option 3: Provide community concierge service. This would recreate Club Med’s brand legend by incarnating its unique community holiday culture. As such a prestigious club image is created which could further increase consumer loyalty.

Recommended strategy justifications Option 1 and 2 will be the best option as Option 1 will offer superior customer segmentation by attracting only the wealthiest customers to purchase Club Med’s Timeshare. On the back of aggressive development plans, Club Med’s infrastructure will have the capacity to handle rapid growth of Timeshares. In comparison to the potential USD 2,000 of 1 off visits the implementation of Timeshare costing at USD 21, 800 will be able to increase revenue by at least 10 times in the next 10 years.

Upscale tourism sector is expected to grow by USD 15bn per year in FDMs in the next 10 years. Club Med’s current market share in FDM is about 4%. With the expansion in numbers of villages, market share could reasonably increase by 1% resulting in about USD 8bn of revenue by 2020. As such an 8 times increase in revenue is achievable. Options grid | Option 1| Option 2| Option 3| Overall Assessment| Recommended. | Recommended. | Not Recommended. | Strategic Fit| Fits with Club Med’s upscale positioning|

Fits with its objective of expansion. Unknown| Financial Attractiveness| Increase revenue by at least 10 times. | Increase revenue by at least 8 times| Unknown| Noteworthy Risks| Degree of execution risk, as scheduling of vacation could be complex. | Inorganic expansion could be capital intensive. | Unknown| ——————————————– [ 1 ]. Annual maintenance fee of USD 660/year for 30 years = 19800, with USD 2000 down payment, totalling up to USD 21, 800 total payment [ 2 ]. Top tourist destinations by 2020 as forecasted by Worldwide Organization of Tourism