Organizational Transformation Challenges
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CLUB MED

CLUB MED, best known as the first to introduce the famous “all-inclusive” concept in its holiday villages, appears to be one of the successful transformational organizations during the last 2 decades.

Back to 1950s when Club Med was founded, its all-inclusive approach received competitive advantage due to customer preferences and lack of competitors. What made this concept become attractive was that customers could entirely enjoy their holidays with food, drink, outside activities in fun atmosphere without being worried about extra payment or using credit cards. Club Med’s strong position in the market still remained until the end of 1980s.

Drivers for restructuring campaign

Quickly in 1990s, Club Med faced competition from a growing group of rivals who adapted the Club Med village concept targeting the more family-oriented spirit favored by consumers, especially tour operators (Nouvelles Frontières, Marmara, Thomas Cook etc.). Those fierce competitors were selling the same concept of all-inclusive holidays but with lower price. Simultaneously, Europe area crisis and European slow growth rate could lead to a significant decrease in European tourists and had a significant effect on travel agents and tour operators.

Responding to these external influences, Philippe Bourguignon – CEO of Club Med in 1998, saw the tough situation as a chance for the company to find solutions to stay competitive. He decided to renovate the hotel and villa chain; upgrade, refurbish the group’s aging villages, even close down if necessary.

However, factors had been building toward Club Mediterranée's reversal of fortune still occurred at the end of 2001 when terrorist attacks in the United States cast a pall across the global tourism industry. Club Med once again posted a loss of nearly $64 million in 2002.

Thinking differently, Henri Giscard d’Estaing – CEO of Club Med in 2002, found out that Club Med could benefit from its excellent reputation. He then made a major shift to differentiate the strategy by repositioning Club Med’s services to high-end position (4 and 5 trident), focusing on value rather than volume approach. As analysis of customer’s insight, he was quite confident with the new strategy as Club Med would deal with less-price sensitive, affluent clientele - “during economic crisis, the top-op-the-range clientele continues to go on holiday and still afford it”. Besides that, the favorable impact of technology development, digital marketing in particular, also brings Club Med more opportunities to approach high-end family audience instead of mass market.

As a result, Club Med ‘s revenue reached 1,494 € millions  in 2008, an increase of 9% compared to 2006. In the same period, the number of customers rose by 2.5% while the number of 4 and 5 trident customers met an increase about 42%.

Looking at Club Med’s turn around process through contingent approach helps us have deep analysis about the contexts led to their success. Until now, they haven’t give up innovating their services and finding new opportunities all over the world (Asia, America, Africa,…). Hope that they may keep their spirit and value in top-of-the-range hospitality market.

nguyenthutrang's insight:

CLUB MED, best known as the first to introduce the famous “all-inclusive” concept in its holiday villages, appears to be one of the successful transformational organizations during the last 2 decades. 

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