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Club Med Looks For A Break In The Clouds (Int'l Edition)


International -- European Business: FRANCE

CLUB MED LOOKS FOR A BREAK IN THE CLOUDS (int'l edition)

It wants to woo strapped French consumers with mini-clubs

It takes an executive with the can-do optimism of Mickey Mouse to see tourism opportunities in the fraught French economy. Yet Philippe Bourguignon, the former turnaround genie at Euro Disney and now president of the struggling Club Mediterranee, sees promise in Paris--among other places. Even as the unemployed march and the ruling Socialists prepare to cut the workweek, Bourguignon focuses on the positive. "The French want to work less and less," he says. "But at least they'll have more free time."

They may be short on cash for package trips to Bali. But Bourguignon reckons they'll be able to afford something closer to home. He is crafting a strategy aimed precisely at the new cash-poor leisure class in France, Club Med's home country and source of nearly a third of its $1.4 billion in sales. The idea is to scoop up leisure spending in smaller chunks--single days, or even hours. Bourguignon envisions mini-Club Meds around French cities--and then in the rest of Europe. It's the kind of new thinking the company needs as much as good weather. Battered by the cruise-ship industry and stuck with a dated sun-and-sex image, Club Med has been losing its luster for a decade.

LET'S SNORKEL. Bourguignon's mini-clubs are in effect theme malls--urban versions of the 120 resort villages Club Med operates worldwide. They would feature bistros, cafes, logo merchandise, and fitness areas where customers could rock climb or snorkel under the supervision of "Gentils Organisateurs"--the GOs who staff Club Med villages. Bourguignon even toys with long shots--such as a kids' Club Med in the French capital's elegant Luxembourg Gardens.

The 50-year-old Bourguignon, who made his name as a cost-cutter at Euro Disney, bubbles with such visions. But before pursuing them, he'll have to dig out of the hole Club Med has fallen into. In late January, he announced record losses of $216 million for 1997. Now, he says, the brand needs a global overhaul. Only with a bankable name can the company revive its operations, from a resort in Ria-Bintan, Indonesia, to the planned leisure malls. "Marketing will be more important for us than operations," predicts Bourguignon.

Both require money, and Bourguignon is spending. He has earmarked $560 million, a third funded by new stock and debt, to spiff up villages and to finance an image campaign--including TV spots in the U.S., Club Med's No.3 market after France and Germany. Trouble is, after 10 months on the job, he admits he's still undecided on the message. Says Gilles Raffort, analyst for French broker Societe de Bourse Ferri: "They're still trying to figure out what they can do."

Bourguignon's biggest test may be in the Americas, where the Club Med image is frozen in the '70s--and where Bourguignon is intent on growing. The region is teeming with sharpshooting niche marketers. In the sex-and-sand genre, new players such as Jamaica's Hedonism II have taken wet T-shirt contests and body painting to extremes that would make Club Med's GOs blush. Cruise lines now target groups from jazz lovers to vegetarians--and are sailing away with market share. Says Robert H. Dickinson, president of Carnival Cruise Lines: "We've reengineered from a floating geriatric ward to a great resort at sea. Club Med has been fairly stagnant."

As if such challenges were not enough, Bourguignon is taking a hit from Asia. Last fall, the crashes in Asia helped weaken Club Med's stock, which now trades at $68 a share in Paris, down 20% from last year's high. But Bourguignon insists that Asia's market crashes should lower costs--allowing him to offer cut-rate packages to the Japanese, the club's biggest customers in the region, as well as to Europeans.

Bourguignon says he also plans to acquire cheap real estate in currency-pummeled lands for future Club Med villages. "We have our antennas up for property on sale in Asia," he says. And who knows? Maybe the Japanese, like the French, could use some Club Med malls. These dreams, like the others percolating in Philippe Bourguignon's mind, all hinge on his ability to resuscitate the battered Club Med brand.By Stephen Baker and Mia Trinephi in Paris


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