The encyclopedia · Strategy & Leadership · Strategic decision · 1997–2002
Club Med spent five years and €130M trying to stop being a holiday company
CEO Bourguignon diversified into gyms, bars and budget resorts. Two consecutive losses and a resignation later, Club Med was still a holiday company.
Club Méditerranée · 2002-12
What happened
In 1997, Club Med hired Philippe Bourguignon, the former EuroDisney boss, to rescue the ageing resort chain. His diagnosis was that Club Med's holiday-village model was a dead end, and his prescription was to transform it into a broad 'services company.' He bought the French gym chain Gymnase Club, opened Club Med World bar-and-restaurant complexes in Paris and Montreal, and launched Oyyo, a budget resort concept in Tunisia.
The diversification consumed capital while the core business deteriorated. Operating income fell from €58M to €34M in the six months to April 2001, an 82% profit dive that triggered two profit warnings in seven months. After 9/11 collapsed travel demand, Club Med posted a €70M net loss in fiscal 2001 and a further €62M loss in 2001–02. Bourguignon resigned in December 2002.
His successor Henri Giscard d'Estaing closed Club Med World Montreal, shed the peripheral businesses, and refocused on upmarket holiday villages. Club Med returned to profit in 2005 and was eventually acquired by Fosun International for €939M in 2015.
Why it happened
- Bourguignon mistook the brand's ageing image for a dying business model and tried to escape the category rather than fix it.
- Each diversification — gyms, urban bars, budget resorts — moved further from the competence that made Club Med recognizable.
- Expansion spending left the group financially exposed when 9/11 hit travel demand, turning a strategic error into a solvency scare.
- The board gave Bourguignon five years and two consecutive losses before acting, a lag that doubled the bill.
The lesson
When a brand ages, fix the brand — do not abandon the category. Diversification into unrelated businesses burns the capital the core needs to recover.
Aftermath
Giscard d'Estaing's refocus on upmarket villages restored profitability by 2005. Fosun International acquired Club Med for €939M in 2015 after the longest takeover battle in French corporate history.
Sources
- The Guardian — Club Med profits in the shade (2001)
- Le Monde — Le Club Méditerranée ne parvient pas à rénover sa formule (2002)
- Le Devoir — Perte nette de 62 millions d'euros, le président du Club Med démissionne (2002)
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