hat made the club offering successful in the 1970s--inexpensive, all-inclusive package holidays for the wet-T-shirt crowd. In response to this change, Club Med only tinkered with its basic no-frills formula. For example, it carved out baby and mini clubs in some villages, but it was slow to recognize that older, wealthier vacationers were far less charmed by the unlocked doors, amateur-night entertainment, and rooms without telephones than are the club's younger clientele. According to Serge Trigano, director general of France's Club Mediterranee S.A., in the 1970s, people accepted the fact that there was no air conditioning--it was Club Med--so people relaxed and appreciated the ambiance and budget prices. That formula worked for 20 years, but Trigano believes it no longer is valid.
In 1983, Club Med Inc., a 73 percent-owned subsidiary of France's Club Mediterranee, was generating good earnings gains and a 20 percent return on equity from seemed to be a sure-fire formula: the sale of fantasy moments to beautiful young people in exotic villages stretching from Polynesia to the Caribbean (Phalon, 1988, p. 56). However, by 1987, Club Med's net dropped from $1.27 to $1.19 a share on a sales gain of 9.8 percent. Return on equity was only 9.7 percent. In 1988, its sales were up 10 percent but the net was down 25 percent to $1.10 a
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