Club Med suffering as reservations slip by a third
Friday September 05 2008
Club Mediterranee, Europe's largest resort company, had its biggest fall in almost six months in Paris trading after growth in summer reservations slid by a third and a "lull" worsened in its main European market.
Club Med dropped 5.7pc, its biggest drop since March 17. Summer bookings were up 5.7pc as of August 30, the Paris- based company said yesterday, a decline of 3pc from June 7.
Growth declined 40pc in Europe and plunged by three-quarters in Asia.
Consumer spending in Europe, where Club Med gets almost 80pc of sales, is waning as economies slow, companies cut jobs and inflation erodes household budgets.
The resort owner is making a final push to refurbish and improve all of its 80 outlets by the end of this year in an effort to lure wealthier clients and bolster profitability.
"Summer reservations confirmed a sharp deterioration in Europe and Asia, which is disappointing," said Guillaume Rascoussier, an analyst at Oddo and Cie in Paris with a "reduce" recommendation on the shares. "The context is challenging at a time when the group needs to grow its client base, he said."
European bookings climbed 5.4pc as of August 30, below the 9pc advance as of June 7. Growth in Asian bookings slid to 0.7pc from 2.8pc.
Excluding transportation revenue, which has been boosted by higher fuel prices, growth in total bookings dropped to 4.1pc from 7.4pc.
Club Med fell €1.78 to €29.37. The stock has dropped 32pc in 2008 after five years of gains. Sales rose 6.8pc to €362m in the third quarter through August from €339m a year earlier after foreign luxury resorts reopened, the company said. Excluding currency movements, revenue gained 9.4pc.
"The lull following the early booking phase is continuing and deepening, especially for long-haul destinations, and leading, as anticipated, to an increase in last-minute sales'' in Europe, said Club Med, which opened its first resort in the Balearic Islands in 1950.
Third-quarter sales rose 9pc to €283m in Europe and gained 12pc to €41m in Asia. Revenue rose 11pc to €36m in the Americas, helped by the reopening of Ixtapa Pacific Village in Mexico.
Bookings for winter holidays are "encouraging", according to Club Med.
The company also said it completed the disposal of an 80pc holding in health-club owner Club Med Gym and the sale of its Jet Tours unit in July. (© Bloomberg)
- Ladka Bauerova
