Ski holidays top destination for those looking for luxury : Rachael Harding
What does it really take for a global family-focussed luxury holiday club to be back on its feet and running after all its resorts were compelled to shut down in March 2020? Rachael Harding, CEO, ESAP, shares how Club Med pivoted
Rachael Harding, chief executive officer (CEO) of East and South Asia & Pacific (ESAP)
After the Covid-induced lockdown stopped travel worldwide severely impacting the hospitality business, Club Med, an all-inclusive holiday club, took some tough decisions to pivot business strategies to get back to profitability with a tight leash on costs and expenses. That paid off gradually and steadily.
“At the end of 2022, we were back to pre-pandemic business volumes and more profitability than 2019 because of our shift in strategy. Now, in the first half of 2023, we have had a record first quarter mainly driven by our mountain business. We had quite an aggressive pipeline in terms of development. We opened five new resorts during this time. We didn’t take effort off that,” says Rachael Harding, chief executive officer (CEO) of East and South Asia & Pacific (ESAP). She leads the stewardship of Asia-Pacific markets (excluding mainland China).
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Club Med was founded in 1950 by Gérard Blitz, who invented the all-inclusive holiday club concept, adding in activities especially for children with the creation of the Mini Club in 1967. Club Med operates over 60 resorts, of which 95 percent are rated Premium & Exclusive Collection that offers a selection of the brand's most exclusive resorts, villas, chalets, and yachts characterised by premium accommodations, exceptional hospitality and personalised services, exclusively beautiful locations, refined dining concepts and lounges, transformational experiences, and unique architecture and design elements.
Fosun Tourism Group, a Hong Kong-listed tourism entity that runs resorts assets including Club Med and the Atlantis luxury resort in China's tropical Hainan Island, has a market value of about $652 million, according to Reuters.
Edited excerpts from an interview:
Q. Where is India in your roadmap now?
It is just a really exciting time to be here. I think the market is ready for it.
We started in 1950 as all-inclusive resort. Truly all-inclusive means a lot of things to a lot of different people. We offer food, beverage and a combination of all activities and in particular, childcare and kids' clubs. So 70 percent of our business is family. We provide a premium platform for families to be able to have a carefree holiday.
Why all of this is becoming popular in this market, is value. They are paying for value worth diverse range of activities, good food and a great experience for people around the world. This is what I am seeing with the change in Indian travellers. They are much more sophisticated and wanting more immersive experiences in their travel, which is not too different from what we are seeing from most other regions.
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Q. I am curious, you still do not have any Club Med in India even when India is a bright spot on the global tourism map.
We would love to have one in India. Let me agree with you. First of all, India is incredible and that aligns to one of our very core values. It's very multicultural and diverse. It's different in terms of landscape, climate, which also gives a wide range of food. Of course, this is why India is such a popular holiday destination.
For us in a resort, we pride ourselves on beautiful, pristine destinations, and pioneering locations that have a generally big land, to be able to work our activities within. If I was going to look for a property here in India, I guess it would be somewhere like Goa. We are not a hotel, but we are a leisure, family, resort business.
We have got to find the right piece of land.
Q. What do you look for in a property?
We look for a property that is going to be able to activate the all-inclusive concept in a beautiful location or a pioneering location. It needs to be near the international airport. It needs to have a solid base domestic business as well as international. India is perfect for that. Domestic tourism within India is huge. Multiculturalism is another one of our key values, whether it be our team or the people who fill our resort. So I think India is a good place with the potential enough for people to be able to come and to be useful in that distinction. But we don't have anything on the radar at the moment.
Q. When you spot a location, do you build it from scratch or acquire?
Both. We have resorts that we do from scratch because we found the perfect location for it. We have also resorts that we took over. We spend a lot of time making it a Club Med.
We lease, we manage or we own some of them.
Q. How does Asia contribute to the business?
We have 67 properties worldwide. In Asia, we have 12 properties in Southeast Asia-Pacific like Indonesia (Bali and Bintan). We have five resorts in Japan, two in Maldives, Phuket in Thailand and Malaysia. In China, we have quite a few. We have three ski resorts in China. We have actually another completely different model in China, called Club Med Joyview, which is more or less near to the city centre. We have an aggressive pipeline internationally but we are looking actively in Asia. We are opening a second property in Malaysia next year. We have a strong pipeline for Indonesia and Thailand. We are also looking at India and Vietnam.
Q. What is the kind of revenue contribution by all geographies?
Asia Pacific region contributes to about 20 percent of our current business volume, but that in the next two years will go to one-third of the total. Then it will be one-third in Europe, and a third out of the Americas (North and South). Our biggest market is France, because we are a French company and it is where we have most of our resorts. We have incredible penetration rate, and a lot of opportunities in terms of capacity in the area. North America is also a very big market, because we have destinations in the Caribbean, a ski resort in Quebec, and Mexico. In South America we have three resorts. If I call them new markets considering Thailand, Indonesia, India, India is 32 percent of that weight. From 2018 to 2019 pre-Covid we saw a huge increase in volume with people from India travelling to Maldives and other Indian Ocean destinations. Now we are seeing a complete shift, only half our business is going to that area, and the rest are going to mountain destinations with skiing.
Q. Have you seen a shift in travelling trends?
It's a tremendous change in the trends. We work with travel partners here who amplify our brand. We have worked really hard at trying to diversify them to not just selling one destination, which, clearly for the Indian market, has been Maldives, especially for honeymoons.
We worked really hard at training our partners and making sure that they are selling new destinations and experiences as well. I think skiing in general, just through influencers, has become quite popular. I think Indians are happy to spend more and go for longer, and be a little bit more creative and sophisticated in their holidays now. Mountain holidays are trending, especially for families. If parents haven't grown up skiing, they want their kids to do so. We offer skiing lessons, where to hire from, what to eat.
Q. Aren’t skiing holidays cyclical in nature, only a few months of the year, snow is appropriate for that sport?
There are a couple of things to answer there. First of all, let's call it the mountain holiday. Because half of our ski resorts are mountain resorts, and open in the summer as well. In summer, it's a summer mountain experience, so tourists use the mountains for hiking, horse-back riding, biking and other such activities. We have circus, tennis, golf and yoga. Especially from big cities, people visit these mountain resorts just to be able to have that wide open space and fresh air.
Skiing in Japan resorts starts from November to May, which is quite long. Depending on where the resort is, it could be a shorter or longer skiing season. Skiing is 30 percent of our capacity in terms of our resorts. We have around 20 ski resorts but [they are] half of our business volume.
We have a specialised pristine collection of resorts for value experiences in Hokkaido (Japan), France, Mediterranean and Caribbean. Almost 70 percent of our business is family holidays and 30 percent couples, what we call active couples, and friends.
Q. Have you seen a spike in your luxury travels post Covid as you are positioned as a premium luxury collection of resorts?
We have recognised, 15 years ago, that the premium market, where we are currently in, is the most resilient and buoyant market unaffected by global events. We made a conscious effort 15 years ago, led by our president, to shift our model to the upscale. So we had 120-odd resorts, we closed 50-60 of them, and then started our strategy to either renovate or build upscale. As our capacity contributes much more to our overall growth, it's definitely the way that we are going to continue to move. There are more resilient markets, but also we have resorts that are located in those destinations that people are looking up to. So there isn’t really a lot of competition in terms of upmarket dedicated family resorts.
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Q. What kind of business losses did you incur because of the lockdown?
True, hospitality was the hardest hit industry. There was a point when in March 2020, for the first time in our history, Club Med closed every resort. The secret to Club Med’s success and profitability is the fact that we have a glocal approach. When you are a family business, if you only rely on one market, you will be out of business quickly because when the families travel, they travel during some holidays. What happens to the rest of the year? So we have this local approach to our business where we have markets all over the world, but it is a very local focus in terms of product information. Whilst Asia was shut down, America and Europe were traveling pretty quickly. Maldives opened quickly, people from particularly Russia, Europe, India were travelling to Maldives.
The silver lining to Covid was in areas where we had resorts domestically, like in Japan, Singapore, Malaysia, we filled our resorts with locals who wouldn't necessarily travel. As we had people/guests in these resorts, we could target future sales of other global destinations. The benefit of Covid was we were seeing more eyeballs on our product by default because these people couldn't travel anywhere else. Now, would I have loved a destination in Australia? Yes, because those people couldn't travel anywhere else. But we did very well because our domestic resorts had record numbers from local domestic markets, and we had other parts of the world that were still able to travel to our resorts, even though we couldn't get to them.
Q. Did this shift in strategy hit business during Covid?
The years 2020-2021 were very tough years. We had to make some really hard calls in our business, in terms of closing our resorts initially, like I mentioned, and gradually opening our resorts. We only opened Japan in 2022, just getting the tail end of the ski season. We didn't open Bali till half of 2022.
At the end of 2022, we were back to pre-pandemic business volumes and more profitability than 2019 because of our shift in strategy. Now, in the first half of 2023, we have had a record first quarter mainly driven by our mountain business. We had quite an aggressive pipeline in terms of development. We opened five new resorts during this time. We didn't take effort off that. We have plenty of capacity to fill.
Q. What are the tough decisions you took after 2020?
We had to close all our resorts one after another in 2020. We had to take some pretty big decisions in terms of our costs. We tried to protect our people as much as we could, but like any business we had to try and find some efficiency in the way we did business. So that was devastating, but like I said, we opened up pretty quickly.
