The Accidental Tourist

Philippe Bourguignon emerges from the kitchen of the lavish apartment just off Champs-Elysees, and apologises. After a 26-year career in the leisure industry, the chairman of Club Mediterranee has lost none of his commitment to the customer. I am his guest in Paris, and he is running late. Mr Bourguignon greets me as an old friend and checks on my comfort before retreating to the kitchen where he has sought seclusion for the day with the other three members of the executive committee orchestrating Club Med's recovery.

Club Med is the best-known holiday company in the world. It is ranked as one of the top 60 global brands (there are only two from France), and has an average recognition rating of 86 per cent around the world. But three years ago it was on its knees, haemorrhaging cash with an annual loss in excess of FF1bn (pounds 100m). The "sun, sand and sex" Club Med formula had fallen behind the times.

Mr Bourguignon was the man selected in February 1997 to breathe life back into a business that had put destinations such as Majorca, Cancun and Agadir on the holiday map. Nowadays, the company apartment serves as the focal point for Club Med's creative team.

Given Mr Bourguignon's reputation for firm management and his distaste for excess, the place seems a little off- message. The building is hidden from view by oak-panelled gates, which open to reveal an expansive and ornate courtyard. The reception room has a baby grand piano. The pictures, photographs books and objets d'art seem a little extravagant for a company so recently staring financial ruin in the face. Before the question is asked, Mr Bourguignon explains the apartment is rented. This was once the Parisian retreat for a European princess, and now it is a haven for artists, writers, photographers, playwrights and journalists who are encouraged to pop in to enjoy and encourage the spirit of creativity central to Mr Bourguignon's management philosophy and a key part of Club Med's revival.

Indeed it is this creative centre that provides a colourful illustration of how 51-year-old Mr Bourguignon is engineering a transformation of Club Med, which embodies an old but in this case apposite French cliche, plus ca change, plus c'est la meme chose.

The challenge here is to refocus Club Med's appeal without alienating a loyal customer base of more than 1.5 million holidaymakers: to be the same but better. So these days the creative centre is where the shows are devised and produced. These shows - an integral part of the nightly entertainment at Club Med's holiday villages - used to be created at each place. They were fun but inconsistent and sometimes amateurish. Today they are polished and professional, offering from kids' fashion shows to Asterix and the Gaul. So successful is the central creative team that Club Med may make it a business stream in its own right, offering shows to mainstream impresarios. "It is expensive and we need to spread our expenditure over a broader base," says Mr Bourguignon.

With the show producers at the apartment are the guardians of what is known as the forum concept, part of a subtle move to add a more cerebral dimension to Club Med's long-established reputation for fun and frolics. So, in Cancun, revellers in the late Mexican spring found themselves rubbing shoulders with poets and authors gathered for a literary forum. Anyone wishing to take a break from techno dancing and "half-pipe" skate- boarding sessions was welcome to join the likes of Susan Minot and Jay McInerney in a debate on the globalisation of literature. Club Med also organised a photographic forum that delivered a collection of photographs from Gerard Rondeau, Luc Delahaye, Willy Ronis and Richard Dumas, among others.

Mr Bourguignon's Bohemian tendencies and creative energy are often masked by the common perception that he is an excellent manager whose exposure to American business practices is behind his success. He was plucked from the higher echelons of Accor, the French hotels group, by the Walt Disney organisation in 1988. After 10 years in the US leading Accor's drive into the North American and Pacific regions, his credentials as an international rather than solely French executive were already in place.

At Disney he was groomed by the top man, Michael Eisner, to take the helm at Euro Disney, the master company behind the ill-starred theme park in Paris. There Mr Bourguignon attracted the attention of a wider audience when he won plaudits for transforming Disneyland Paris from an embarrassing blot on the Disney horizon into a bustling Continental success.

Mr Eisner's gratitude knew no bounds. It was made clear to Mr Bourguignon that he could virtually pick his job within the Disney empire. Unfortunately Mr Bourguignon did not want one, not because he was disenchanted with Disney but because his family was uneasy about returning to Los Angeles. It was time, he felt, to put his family first. "I knew I had to leave, but maybe in two or three years," he says. "If you had pressed me about what I would do I may have said TV but I did not know. I had not finished thinking about it when Club Med passed by."

When the invitation was made for Mr Bourguignon to weave his magic again at the flagging leisure company he did not hesitate. The turnaround was not the main attraction. "People say I am fascinated by recoveries but I am not, " he says. "I hate it when people tell me it is what I like doing. The thing is if a company is not broken they will not ask me to fix it. For me it is just a chance to get into a position where I can run the business for the longer term." How close Club Med came to the financial precipice is a moot point. The company is recovering, and accounts moved back into the black in Mr Bourguignon's first full year at the helm.

The recovery plan put forward by the previous management in 1997 had been rejected. That had not only prompted the search for a new chairman but also marked the beginning of the end for the founding Trigano family's association with the company. Fifty years ago Gilbert Trigano and his friend Gerard Blitz were bemoaning the lack of simple and accessible holiday options to help people escape the austerity of post-war France.

Mr Trigano had fought in the Resistance before becoming a journalist on the Communist paper L'Humanite. They founded Club Mediterranee as a non-profit association, with Mr Trigano supplying the military-surplus tents for the accommodation in their first village in Alcudia on Majorca. It was less a commercial venture than an exercise in social engineering, with the village representing an all-inclusive, no-frills vision of Utopia. With tents for shelter and beads for money, communal showers, latrines and dining and a commitment to provide an antidote to civilisation, the die was cast for a formula that was to spawn Club Med's guiding principle of "happiness is our business".

So successful was the Club Med concept that in 1957 the "not for profit " roots were abandoned in favour of a joint stock structure. The culture of the commune persisted in the villages but as the philosophy drew nearer to the boardroom it crept closer to capitalism. By 1966 the company had a full listing on the Paris Bourse, allowing access to capital markets to fund its continued expansion in Europe. At the same time, Gilbert Trigano became chairman and chief executive. In 1968 Club Med tapped the American market for the first time, sowing the seeds from which would grow today's global brand.

In other companies in other countries, a stock market listing might have imposed a management discipline that would have allowed it to capitalise on its early visionary success. But benign shareholders allowed Mr Trigano to run the company almost as a personal fiefdom. Club Med failed to see the need to maintain its competitive edge. In true dynastic style, Gilbert Trigano passed the reins of the business to his son Serge. Whether Serge could not spot the strategic blunders and expensive acquisitions, or whether the presence of his father as honorary president was too intimidating, is not clear. But Club Med entered the Nineties on a collision course with financial disaster.

"Everyone was traumatised," says Mr Bourguignon. "The company had become arrogant with success. It started losing sight of reality." What Mr Bourguignon calls the "infernal spiral" started in 1992 with an air crash in Senegal that killed 30 Club Med holidaymakers, then a spate of armed robberies at resorts, followed by political unrest in key destinations and the 1993 global recession, hurtling the company towards that precipice.

"The company had never made huge profits," he says. "But when it started making losses it decided to raise prices. But when you raise prices you lose clients, so you cut costs. The quality and level of service falls so more clients are lost. So you raise prices even more. The guests are dissatisfied, the staff is dissatisfied so you lose more clients and you lose market share."

The Nineties had brought not only financial problems but a more demanding shareholder base. The indulgence of the Sixties had been replaced by the imperative for a reasonable rate of return. At the heart of the investor unrest was the shareholding held on behalf of Italy's influential industrial family, the Agnellis, which had taken a sizeable stake in 1984 when it swapped unwanted hotels and resorts in Italy for shares in Club Med. After shareholders turned down the recovery plan Mr Bourguignon was installed, in February 1997, with the Agnelli family blessing.

What he found was exciting and frustrating. "On the positive side I inherited a strong brand with huge awareness and a huge international presence. But the image was anything between blurred and ambivalent. There was a strong culture which was extremely guest-oriented but there were operational inefficiencies and the physical assets had been run down."

The strength of the brand impressed Mr Bourguignon most and it is the rebuilding of the brand that is at the heart of his recovery strategy. When he talks about the strategy the prefix "re-" crops up a lot.

The four strategic axes are based on restore (the brand), regain (competitiveness), refocus (the marketing and distribution) and renew (the business). "We want to make the brand breathe again and we want it associated with regeneration," says Mr Bourguignon. "We want people to renew, to rejuvenate and recharge. We want Club Med to be the place where people rediscover their mind and their body, where they re-acquaint themselves with family and friends."

In the days when a Club Med holiday was associated with a "nudge, nudge; wink, wink; know what I mean, squire" mentality it was the custom for people to build the perfect body before they want on parade in the villages. Today, Club Med positions its villages as the place where you discover that perhaps you do need some repairs to the bodywork. That does not make the villages any less energetic or entertaining. The pre-lunch sports and round-the-pool communal sundance are still on offer for those who wish to parade their pectorals, but for those who want a little more seclusion there are plenty of private pastimes. Club Med has always had sports. In the days when tennis, golf and skiing were elitist and expensive hobbies, they were on offer to the masses in the village. "We introduced more Europeans to these sports than any other organisation," Mr Bourguignon says proudly. "Today our clients expect tennis courts but they are not particularly coming here to play."

The company is introducing a new range of activities. The Flying Trapeze, BMX bikes climbing walls, in-line skates and half-pipe are all designed to appeal to a new generation of holidaymakers. That generation is often family-oriented, which is why most of the villages have dedicated teams to look after children. For those who prefer old-style "Club Med come to bed" holidays there are still adults-only resorts.

This restoration of the product is supported by a pounds 200m refurbishment programme at its villages and a more competitive pricing policy. Slowly but surely the company is heading not just for financial security but for profitable growth. An Internet department will be created next month, licensing of the Club Med brand in areas including sunglasses, sportswear, suntan lotion and watches has started and an urban leisure concept will be launched in Paris next year.

"Club Med is a brand associated with more than just a vacation," says Mr Bourguignon. "It is synonymous with free time and socialising. If you see it as a brand for rejuvenation, rejuvenation does not stop as the holiday ends. We have enormous brand awareness but we are only a pounds 1bn turnover business. Where awareness is high and sales low there are fantastic opportunities."

In June, Club Mediterranee announced the acquisition of Jet Tours, the French tour operator. The deal brings Club Mediterranee's share of the French holiday market to 20 per cent, and gives it critical mass and access to significant cost-savings and synergies. "We are not big in each market so we have to create critical mass. We will make acquisitions, take strategic stakes and forge alliances in all our key markets. We made the acquisition in France and we need to do the same in other countries." The company has a 40 per cent stake in an Italian tour operator. The UK, Germany and US are being reviewed. More deals are expected.

The Triganos quit Club Med soon after Mr Bourguignon assumed the leadership. They said the spirit and soul had gone. Club Med may now be positioned as a brand rather than an experience, but the company wants to revolutionise the leisure industry in the new millennium just as it did 50 years ago. "We have a global concept with global clients, " Mr Bourguignon says. "No other company is as developed internationally as we are and nobody is looking at leisure time in a global way.

"We are. Starting next year, you will be hearing a lot more about us."