Club Mediterranee Takes A Break

The hottest rumour that broke this winters travel season was that the $3 billion Club Mediterranee of France, the worlds largest resort company, was packing its bags and leaving India.

Certainly by December, Club Med seemed to give cause to believe the buzz. The companys Singapore headquarters directed it to close bookings until further notice. Then, Club Med posters were stripped from its eleventh floor office at Gopal Das Bhavan in New Delhis Connaught Place and its furniture, airconditioners, computers, teleprinters and other office items sold.

By January, the five-man Indian outfit had downed the shutters of its only office in the country, rented at Rs 2 lakh a month to promote Club Meds southeast Asian village resorts. Since then, Club Med India has moved to 80, Sunder Nagar, residence of Jimmie NG, general manager of Club Med India, and converted itself into a SOHO (small office-home office).

 

But Samir Sindhwani, chief accountant and acting GM in the absence of NG who is away in Kuala Lumpur, is keen to allay the gossip. We are in a transition phase, he insists. Club Med is not ending operations in India. Our lease at Gopal Das Bhavan expired, which is why we moved here, he explains. We are shifting to a new office very soon.

There could, of course, be a simple explanation for this shift. Club Med India could be on a cost-cutting drive because its French parent is in poor shape, reporting a net loss of $216.7 million for the year ended October 1997.

Sindhwani however hints that something big is afoot. Including, he says, special projects with ITC and the Tata group, an expanded network through Thomas Cook and charters to Club Med destinations.

Many companies have approached our Paris head office for plans that I cant reveal right now. Now, our office is clearing up lots of legal work, he says. We have already applied to the RBI for a renewal of our lease in India which expires in March 1998.

There appear to be other uncertainties in Club Meds India operations. For one, it is yet to renew its one-year General Sales Agreement contract with Thomas Cook, signed in January 1997. It is in the pipeline and is on 200 per cent, says Sindhwani. Ajay Balli, head of Leisure Holidays in Thomas Cook, Mumbai, which gets a 10 per cent commission on the dollar value of each Club Med holiday sold, confirms: The tie-up is not changing.

For another, despite spending over Rs 5.5 crore on promotions and advertising, Club Med India has been hard put to expand its business. In 1995, its inaugural year, it sent 1,000 visitors. In 1996, the number doubled but the 3,000 passengers in 1997 fell 1,000 short of the target set by the companys Singapore office. (Club Med India is the reservation hub for Dubai, Pakistan, Sri Lanka and Bangladesh, but India accounts for 92 per cent of its business.)

What ails Club Med India? It cannot be accused of overestimating the market because leisure holiday companies are aware that they operate in a niche. The answer seems to lie in the basic concept, which Indian holiday makers are still to understand.

Sindhwani admits: One of the problems is that since we have to accept payments in dollars, a traveller has to face the hassle of going to a money changer. And Indians dont plan trips ahead but want to take the first flight the next morning. The Club Med concept of holiday is still new, he says.

This is also clear from the low rate of repeat purchases for holidays just 10 per cent compared with 80 to 90 per cent overseas. There are still so many options entering the market that people want to explore all options before retrying one, says an executive in a leading travel house in Mumbai.

Besides, Club Med has not really been able to expand its distribution network. Apart from Thomas Cook, it was in touch with only about 40 travel agencies which could not familiarise themselves with the Club Med concept fast enough to sell it to clients.

Sources say another reason things have been tough is that Club Med got its positioning wrong. The company, started by Serge Trigano 46 years ago and owning 110 resorts and employing about 20,000 people worldwide, largely targets the middle income segment in Europe. But in India, it was launched as a premium product. So it had little appeal to those with money to burn and wanting more exclusive options.

Sindhwani is keen to emphasise that corporate India has patronised Club Med despite this. Club Meds list of corporate holidaymakers includes the Kirloskars, the Bharat Rams, Seagrams, Pepsi, Coke and Maruti.

Club Med Indias sojourn has been shaky on other fronts as well. Since its entry, it has had three general managers. The first was Raman Narula who was recruited to garner a wider foothold in the domestic travel market. He left to run his own travel agency. After him came Stephen Michie, a New Zealander who started his career in the company as a diving instructor but resigned in September 1997 after 20 years to head the Hard Rock Cafe in Singapore. Jimmie NG, Club Meds director, sales in Malaysia, then took additional charge in India.

Club Med does not have any properties in India which means it has almost no fixed running costs for the Indian outfit. But it is reportedly scouting for properties in Kerala, Goa and Lakshadweep.

Plans like this fit oddly with the disarray in NGs living room-cum-office. Half-unpacked cartons line the room and Club Med brochures lie strewn all over. In one corner, an attendant sits transfixed in front of the TV watching videos of Club Med holidayers. If its plans materialise, Club Med India may just need this break.