Club Med Case

Club Med: Going Upscale

Current Situation

Club Mediterranee (Club Med) the all-inclusive resort with over 100 villas in 40 countries has been facing a reduction in the ability to increase sales and gain new customers. The changing and increasingly competitive landscape, poor leveraging of government relationships and ecological disasters are a few of the external factors hindering Club Med’s growth. These external factors combined with an inability to set a competitive pricing strategy, as well as a lack of a cohesive and attractive corporate image, are limiting the resorts profitability. Profits are being limited for two main reasons: the first is a drop in revenue and the second is an increase in expenses.

The all-inclusive resort is now facing competition from other all-inclusive resorts, customized packaged pricing, cruise ships and traditional resorts. One reason expenses have increased is because the company chose to enter into joint ventures with host governments as they expanded into new markets.

The company expanded in areas with political instability. In leveraging joint venture relationships with unstable, corrupt and dangerous host countries, Club Med opened itself up to risk. When the host government was unable to invest funding in the resorts due to weakness in current economic state, the company found itself having to invest additional funding that it had not anticipated.

To maintain its luxurious product concept, there is a need for constant remodeling of the villas. This calls for lofty remodeling expenses.

In addition, the company expanded in areas such as the Caribbean and Southeast Asia which are some of the world’s most beautiful areas. The risk of these expansion territories is that these areas are also the most ecologically susceptible to disasters. As the hurricanes and tsunamis sweep through these areas, Club Med will have to invest in rebuilding the resort villages. By trying to increase its world...