Club med is a successful chain of all inclusive, club / hotel style resorts. The company first started by a group of friends in 1950s, as a nonprofit sports association, but by 1985 Club Med is a publicly own company on the Paris stock exchange, Club med had 108 resort villages throughout the world and in 1986 it already became the 9th largest hotel chain in the world. The success of the hotel chain is based on the lack of competition in the market back in the days, as well as the “true formula”. According to the company, the true formula saves customer a lot of money that it would take more than 50 percent extra for the customer to duplicate the experience on their own. ‘
Club Med’s “true formula “involves bundling the group portion of its vacation package with transportation, the volume discount makes the air plane tickets a lot cheaper.
Furthermore, club med also utilizes its passionate and dedicated staff members (GOs) and family spirit with in the organization to deliver a unique experience to all the visitors.
One important fact is that in recent years more companies try to copy what club med is doing or enter the same market.
Strength & Competitive advantage,
With large numbers of visitors, Club med can obtain discount due to their large volume purchases, which results that the bundle of the package is usually a lot cheaper compare to customer going on vacation on their own. In exhibit 7, the industry profit before tax for air transport industry is 2 % and for club med is 11%. This again proves the leverage club med has when bargaining with airlines which give them great benefits regarding pricing and costs.
Lots of hotel resorts are having trouble finding the staff members, not the case for this company, according to the case study there are more than 35000 GO (staff) application for only 2000 positions. The abundance of the applicants gives company pick and choose the right people for the position. Not only with the quantity, the quality of the service is also great. In the case study, a lot of customer praises the energy of the staff members, even under difficult conditions or horrible weather, those GOs always be able to put a smile on the customers’ face.
In Exhibit 5 we see the there are many growth potential and l believe Asia is club med biggest opportunity. The estimated potential for growth for Europe middle east is 75 percent but the estimate potential for Asian countries like Japan, Hongkong and Taiwan are at shocking 1800%-154% percent. Club med’s expansion to Asian will be its biggest opportunity. Asia is not only the most populous continent but also with a booming economy where consumers are looking for a new way of enjoyment and new way of vacation. In Asia, white collars tend to work extreme long hours, the concept of a get-away resort where you can forget about your stressful daily routine and just have fun would suit the Asian market. The culture of the club med would be very attractive to the Asian white collars. If club med is able to capitalize the market, tailor and design their resorts according to the local preferences it would be a huge success.
Threat and Competitions
Jack Tar: a resort company operated in Grand Bahama, Montego and Puerto Playa. The facility of this resort is more advanced compare to club med. Jack Tar has 12 tennis courts, beauty salon, shopping mall, swimming pool, casino and a bar with unlimited drinks and cigarettes etc. This resort is known for the its first-class hotel like facility (rooms)as supposed to club med’s simple and spartan room design.
Couple l: located in Ocho Rios, was the first couple only resorts despite a slow start it has gain popularity in the industry.
Hedonism ll: a 280 hotel roos resort in Negril Bay in Jamaica. Although there are other many activities available it is known for its nude beach and sex oriented theme.
Couple 1 and Hedoism is not too big of a threat, because their target consumers and target markets are different. Jack Tar is their biggest threat competition wise, as Jack Tar advertise specifically against club med, criticising its spartan room conditions and stating that club med is not truly inclusive if they make the customers pay for drinks and cigarettes. ‘
The biggest external threat l see so far is the unpredictable political issues. Government a lot of times will provide benefits package including tax breaks and joint venture which helps maintain the facility for club med. However, just as stated in the case study sometimes governments fail to deliver there promise due to unknown circumstances, those circumstances will deeply undermine club med ability to deliver consistent service which is a big threat to the success of the organization.
Staff Member: The constant rotation causing a high turn over rate among staff member, which results high rehiring and retraining costs.
Not truly inclusive when customers need to pay for drinks and cigarettes might results in discontent and inconvenience.
Club med promotes trust and family spirit therefore there are no room keys for the resorts as this might encourage theft and make customer feel uneasy about their belongings.
Spartan room: Unlike other resorts Clubm med’s room are spartan but clean, however it can be frustrating to the customer whom demand privacy and looking for one single room for themselves.
HIGH STAFF TURN-OVER RATE THE MOST CONCERNING ISSUES.
Staff members(GO) and their turnover rate is one of the most important problem to the company. The turnover rate for recruit for first seasons are 46% percent, l believe that this has a lot to do with constant rotation of the staff members. In club med every six months, the staff members would rotate to different villages to form a brand-new team. It still takes a lot of time for the new members to adjust to the new facilities, environment and customers. Lots of the staff members might not be used to the constant change of environment. Furthermore it also stfile the relationship building between employees and customers. Relationship building between the GO and GM are very important, with limitation on the rotation system it allows GO to be more familiar with the village as well as the customer and build that unique bond with them.
This would increase the service quality, reduce turnover rates and therefor even reduce the cost because the firm is able to put more resources on the development of the existing members’ and less on the rehiring and retraining costs.
Political issues: Due the employment opportunities club med brings to the local market a lot of time they would get benefits or subsidy from the local government; Club med must carefully assess the government ability to deliver the promise before entering the region. It is important to have customized back up plan for the different issues each village might face.
New customer: New customer are very valuable, as new customer tend to tell on average ten other people about their experience, 65 percent of the people decide to come to club med based on friend recommendation. According to case study the club estimate this contribution margin at 60 percent
Exhibit 4, the current ratio for the club med is =Current Assets / Current Liabilities= 91079/60154=1.514, it is above 1 and below 3. The ratio is below 3 shows that club med is using and investing its assets effectively. The ratio is above 1 shows us that club med has the capability to pay off its obligation and is in very good financial health.
In exhibit 2 it is not hard to see that Club Med sales revenue and return on sales number are increasing in a stable pace. Shows that almost every year there is improvement, that customers are still coming back.
In exhibit 7 in both lodging and air transport industry club med profit before tax profit exceed the industry average which shows that the way they doing business is working very well.
In exhibit 11 and exhibit 10 the company did an extensive survey on how the customer feel about the various services provided by club med. The season which survey took place was when the weather is terrible and the facility is in the worst condition of the year. However, on average still more than 85 percent of the respondent checked ‘good, very good, excellent’. This survey alone speaks value of the service quality and culture of club med.
The culture of the organization
The culture and the atmosphere of the club is about social interaction it is attractive to customer and can serve as a great competitive advantage. The idea of a family spirit culture which promotes social interaction is amazing to many uptight white collars. The group activities, the room designs of no telephone and pairing roommates, the random seating during lunch and dinner hours. All those activities promote social interactions, bringing people closer together, transform complete strangers to close friends. The concept of this resort is special, most customer come back not for the facility but for the experience this is a big competitive advantage.
The concept of this resort is special, it is like a summer camp for the grownups, providing them with a chance to make new friends and escape from their stressful city life.
Among employee’s club med has a culture of dedication and commitment, that they are committed to serve the GMS and make sure that their stay will be memorable. Club med also promote the family spirit, connecting not only customers but also the staff members, those unique bonds ensure repeat customers and word of mouth reputation.
Overall the club has been a huge success, the theme of social interactions and the culture of employee’s commitment has been the reasons why customers continue to visit club med. Club should not change any key concepts, but continue to take advantage of its reputation, invest in its staff (Go’s) and tailor the resort design according to different local or cultural demands..
We will see a lot more of all-inclusive resorts in the market , it might be easy for competitor to replicate the business model of club med, but they cannot copy 30 years of reputation and customers, loyalty
However, here are some of the small adjustments club med can make:
It is preferable if club med include the drinks and cigarettes in their all-inclusive package so that customer would not have to bring money to the place. Furthermore, Club med can also change it marketing strategy a little bit as most of its promotion is through word of mouth and club med might lose potential customers whom just don’t have any friends whom visited the place before. It is also more ideal if club med can add room keys for members to prevent the ongoing theft problems within the village.