PARIS (Reuters) - Laurent Rigault, 53, is a child of Club Mediterranee CMIP.PA. After his first stay with his parents in 1966 he became hooked on the experience - beach shacks, communal showers and all.
More recently he has shunned the resorts, like thousands of other holidaymakers whose decisions to head for alternative destinations has helped plunge the company into the red and left it to be fought over by two rival bidders.
Rigault’s love affair with the pioneer of the all-inclusive holiday lasted until 1991 and a disappointing stay in Smir, Morocco. “The room was old, the paint was peeling and the shower was clogged,” said Rigault, a research executive, who has since turned to rivals for his all-inclusive summer holidays.
Club Med’s customer base has shrunk by half a million in the past decade. The last time it paid a dividend was in 2000.
Two billionaires are now fighting over the company, in a battle pitching Italian tycoon Andrea Bonomi against one of China’s richest men, Guo Guangchang, and his Shanghai-based conglomerate Fosun 0656.HK.
Both hope new investment and a push into new markets will do the trick. They will not be the first to try.
It all began for Club Med in 1950 when Belgian water polo player Gerard Blitz and tent supplier Gilbert Trigano set up a get-away club for people with a taste for outdoor living.
The first resort, on Alcudia Beach on the Balearic island of Mallorca, offered basic accommodation and shared bathrooms. Grainy film from the early days shows dancing holidaymakers and khaki, U.S. army-surplus tents in the background.
Revolutionary for the time, Club Med wrapped transport, accommodation, food, even drink, into all-inclusive packages with customers entertained and pampered by smiling, tanned staff known as “Gentils Organisateurs”.
As early as 1960 the Club’s finances were looking shaky, but membership was still ballooning. Blitz bowed out and thanks to an injection of funds from Trigano’s friend and banker Edmond de Rothschild, along with some more realistic pricing, by the mid-1970s it was expanding into the United States and Japan.
The first real chill in Club Med’s long hot summer was perhaps cast in 1978 by satirical film “Les Bronzes” (The Tanned Ones) and its title song “Sea, Sex and Sun”, which lampooned Club Med as low-brow and sleazy.
Through the 1980s, Club Med struggled to stay competitive.
In 1992 an aircraft chartered by Club Med crashed in Senegal, killing 30 holidaymakers. The incident marked the end of the road for Trigano. His son Gilbert took on the loss-making business, just as the first Gulf war hit the holiday industry.
The younger Trigano failed to turn the Club around and his successor, Philippe Bourguignon, fared no better. Taking over in the stock market crash year of 1997, the ex-CEO of EuroDisney EDLP.PA diversified unsuccessfully into bars and gyms.
The Sept. 11, 2001 terror attacks added to the Club’s woes, by which time cruise companies like Carnival Corp CCL.N with their swimming pools and night clubs had entered the market too.
Holidaymakers’ tastes had also grown more sophisticated.
“The concept of ‘cool’ of the first years with the discovery of a shared holidays experience is outdated. Now people mix less and look for a more personalized service,” said Stephane Botz, head of real estate & hotels at consulting firm KPMG.
As Club Med limped past its 50th birthday, Henri Giscard d‘Estaing, who still heads the company and backs Guangchang’s bid, took the reins. The son of former President Valery Giscard d‘Estaing pushed up-market so upscale villages, tagged 4 and 5 Tridents by the Club, now account for 71 percent of capacity.
Still the business has struggled. Although an economic boom took Club Med shares to a high of 49 euros in mid-2007, they slumped as low as 12 euros by early 2013. Analysts also blame current woes on a heavy dependence on Europe, home to 70 percent of revenue, but where economic growth is stalling.
This is where Guangchang thinks he can make a difference. His investment model aims to choose businesses and brands he can harness to China’s economic growth.
Bonomi bought his 10 percent stake as shareholders balked at Fosun’s offer, and launched his own bid this year. The Italian, who sees himself as a “white knight” for companies in distress, also wants to expand in China.
Fosun on Sept. 12 upped its bid to 22 euros a share, topping the offer Bonomi made through his Global Resorts vehicle and valuing the Club at 839 million euros ($1.1 billion).
Today’s Club Med operates 70 resorts worldwide, ranging from Caribbean beach villages to Alpine ski locations. But it lost 9 million euros in 2013 and closed several resorts. Sales at 1.4 billion euros last year are down from 1.6 billion a decade ago, with customer numbers at 1.2 million, down from 1.7 million.
For 2014, summer bookings fell another 5.4 percent.
Even before the bids, Club Med was trying to grow its way out of trouble. It opened a third China village on Dong‘ao island in a bid to tap a rapidly growing middle class and wants to make China its No. 2 market after France in 2015.
A spokesman on Wednesday flagged up the company’s efforts to improve its fortunes, noting it had spent about 1 billion euros over the last decade to fund its up-market move amid particularly difficult macro-economic conditions.
Guangchang would accelerate Chinese growth and has ambitions in Brazil, Russia and North America, moving further up-market.
Bonomi, who has a record of reviving premium brands such as motorbike maker Ducati, also plans to focus on growth markets.
But the Italian, whose offer is backed by South African hotel developer Sol Kerzner and Brazil’s GP Investments, also wants to invest more aggressively in Latin America and Europe.
Now that Guangchang has outbid him, Bonomi has said he is examining his options. And Club Med shareholders will have to weigh up their choices, based on the terms on offer for a stock which according to Reuters data trades on a 12-month forward ratio of 0.54, in terms of enterprise value to sales, against 1.57 for hotel group Accor ACCP.PA and a peer average of 1.58.
Tour operators TUI TT.L and Thomas Cook TCG.L for instance are on multiples of 0.23 and 0.20 respectively.
One Club Med customer who has already made up his mind is Rigault, whose memories linger of his bad experience in Morocco involving one of the Club’s mid-market or ”3-Trident“ packages. ”In my mind, 3-Tridents for the summer holidays now mean a poor offering, he said. “The magic is gone”.
Editing by Mark John and David Holmes