Club Med Looks To Make China Its Second-Largest Market On Heels Of Fosun Investment

    Amid frenzied investment in tourism infrastructure, we've begun to see some established international tourism companies look to expand into mainland China in the hopes of tapping the country's growing number of domestic tourists both at the lower and high-end price points.
    Jing DailyAuthor
      Published   in Finance

    Chinese Conglomerate Fosun International's 7.1% Stake In Club Med To Fuel Expansion In Booming China Tourism Market#

    While the biggest story in the China tourism market at the moment is the country's growing number of free-spending outbound tourists, several international companies have their sights set on China's more inward-looking tourists. With domestic tourism -- far more affordable for the middle class -- expected to remain strong in the long term, some cities and resort towns have invested heavily in tourism infrastructure in recent years. Amid this investment, we've begun to see some established international tourism companies look to expand into mainland China in the hopes of tapping the country's huge potential for domestic tourism both at the lower and high-end price points.

    This week, the nearly 60-year-old French tourism specialist Club Mediterranee -- better known as Club Med -- became the latest of these companies, announcing that the Chinese conglomerate Fosun International had acquired a 7.1% stake in Club Med. According to Club Med, Fosun's acquisition will help accelerate the rollout of the Club Med concept in China, and the company is projecting that China could become its second-largest market within only five years. From MarketWatch:

    Club Med has undergone a significant transformation over the past five years, spending 1 billion euros to revamp 70 of its resorts, and closing others in an effort to reposition itself as an exclusively high-end operator. It has also started renting luxury villas and chalets to diversity its revenue stream and is shifting from a strategy of owning all its resorts to simply operating them.

    The success of that enterprise, however, depends on the group's ability to attract a larger share of foreign customers and has put it in more direct competition with the likes of Sandals Resorts and Beachcomber. But while Club Med is very well known in France, it has yet to achieve the same popularity abroad.

    Fosun will appoint a representative to the board. If, later on, its stake rises to 9%, it would appoint a second one, which would need to be approved by shareholders.

    The article goes on to note that Club Med will open its first resort in China at the ski resort town of Yabuli later this year. Yabuli -- which regular Jing Daily readers will remember is working (and investing) hard to become Asia's premier five-star ski resort -- saw the number of Chinese visitors rise 40% last year. With Club Med's presence there later this year, we might see those kinds of numbers become commonplace. That is, if Yabuli can address its customer service issues and ensure its "software" dovetails with its opulent "hardware."

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