City & Country: Cover Story - Seeking a financially strong partner

The new Zen space in Club Med’s Cherating village is anchored by an infinity pool that overlooks the Indian Ocean

IT has been a good 30-odd years, but as part of its global strategy to strip down to the bare essentials and focus on operations, Club Méditerranée — better known as Club Med — is now putting its Cherating resort on the market.

The “village” — Club Med parlance for “resort”, to reflect its holistic offerings — boasts 305 rooms and a range of features. It was opened in 1980, under the auspices of Club Med co-founder Gilbert Trigano and former head of Malaysia’s then Tourism Department Tan Sri Philip Kuok, who picked out the site during a flight over the jungles of Cherating. The two finally settled on a unique double-bay area within the tropics. To add more flair to the project, they decided to build the entire structure out of hardy teak and it still stands today, albeit with numerous upgrades to keep the resort current. At present, 30% of arrivals at Kuantan airport are headed for the resort.

The Cherating village holds a Guinness World Record for longest structure on stilts

The French resort operator is by no means cashing out of Malaysia. In fact, it is seeking a partner to buy the property and join Club Med in a sale-and-leaseback deal.

“It’s the reverse [of cashing out]. It’s to ensure that we can stay in good economic condition, with high occupancy and rates, and take care of our guests for the next 15 years,” its chairman and CEO Henri Giscard d’Estaing tells City & Country during an hour-long interview at Sunway Resort Hotel & Spa.

The Club Med contingent’s next rendezvous was with Sunway Bhd’s founder and chairman Tan Sri Jeffrey Cheah, hence the venue. d’Estaing is tight-lipped on the reason behind this meeting with the property tycoon. However, a sense of urgency pervaded the session before they bounded off to Cheah’s office.

What makes a good partner? “The partners we’ve had are usually real estate companies, but it is not always necessarily so. Our partner must be financially strong. It has to be someone, or a family, or an institution [that the market recognises],” he explains.

Financial strength is certainly a prerequisite for any prospective partner of Club Med, as the operator has drawn up plans to upgrade the 42-acre resort that could easily cost RM80 million. Upgrading work is scheduled from November 2014 to February 2016.

“Our strategy is not to own, but it is not also to [completely] not have assets. But as soon as we have built value and the assets have profitability ... we must have the best resorts and to sell them at the highest price point,” d’Estaing says.

Conversion into four- and five-trident resorts
The upgrades are also in line with Club Med’s plans to convert most of its villages into four- and five-“trident” resorts as part of its shift to a more premium position. Currently, two-thirds of its 80 villages worldwide are in this range, including Cherating.

The renovations entail making the rooms bigger and adding a new “five-trident” luxury space within the resort. The resort had in 2012 unveiled a new Zen space, featuring an infinity pool ensconced by cabanas, a restaurant and a bar.

Its superior room sizes will be enlarged to 30 sq m from 25 sq m. The upgraded rooms will include a 2.5 sq m balcony while the deluxe rooms will be enlarged to 38.5 sq m from 25 sq m, and a 12 sq m terrace will be added to these rooms. The 50 sq m suites will undergo minor renovations.

Club Med has not finalised plans for its new luxury space yet. However, it will be a class above the rest of the “four-trident” resort, which in itself is already considered upscale.

It is about establishing a long-term relationship. We are not here to just make a transaction.” — d’Estaing

“The five-trident space is an exclusive and private area of the suites in the vicinity of a four-trident resort with a dedicated concierge, bar service and a private lounge. There will be either a dedicated pool or a private beach for the luxury space,” explains Jimmie Ng, general manager of Club Med Malaysia, Indonesia, Thailand and India.  

The space will feature suites that are 80 to 100 sq m with a “refined design”, big bathrooms and various amenities, he added.

While Club Med is demanding a “reasonable” price for its most “exceptional” property — a unique beachside teak structure with a 850mm corridor that holds the Guinness World Record for the longest structure on stilts — the group is also ready to rent it out at rates befitting the property’s stature.

“It is about establishing a long-term relationship. We are not here to just make a transaction,” says d’Estaing emphatically.

Lightening its property portfolio also enables Club Med to devote its energies to what it does best .. . “because in real estate, there are better people than us while we think that in marketing and operations, we are the best!” he says.

Citing listing regulations, d’Estaing refuses to disclose the financials of the group’s Cherating village but he shares that the property welcomed more than 30,000 holidaymakers last year. About 70% of the visitors were families while the rest were singles and couples.

Most were first-time visitors. Chinese nationals made up 29% of visitors, followed by Malaysians at 20%. The rest of the guests come from all over the world. “If we talk about Malaysian customers, the number has grown by 26% in the last five years, and this includes visits to other Club Med villages worldwide,” he adds.

Out of Club Med’s 1.3 million guests worldwide last year, more than 100,000 were from China. To mitigate declining arrivals from Europe, the group plans to make China its second-largest market, followed by Brazil and Russia.

“As you know … traditional Chinese travel, 15 years ago, was tours! The only possibility was to go in a group, and tours would mean going to one place a day with strict schedules. Then the government opened up individual travel 10 years ago. What we observed is that [travelling style] is changing for affluent Chinese families. They want to have holidays. The average duration of stay is 3½ days when they are in China, and 4½ days when they stay out of China, which is the same average as our clientele in Southeast Asia,” he explains.

The affluent Chinese have a sense of adventure, be it in terms of activities or their palate, observes d’Estaing.

“In that respect, Club Med’s system fits very well. We have sports, archery, the flying trapeze. Our GOs (gentils organisateurs or genteel organisers) in Cherating tell us that the Chinese guests try everything! I believe it is due to curiosity and wanting to discover new things.

“Secondly, they very much want an international atmosphere, and being with an international crowd  — that is key for them. Our GOs also told me that we have Chinese, French, Mediterranean cuisine and [this includes] good French cheese selected and flown from France and extraordinarily, the chef told me that a significant number of our Chinese guests like the taste, which is very good! And the last thing which is obviously very important for them is ambience, and that is very important to us.”

To cater for this new influx, a significant number of Club Med’s GOs, comprising more than 20 nationalities, speak Chinese. With the younger set, however, English is the lingua franca. “Sometimes the parents don’t speak English but the kids do, so the kids end up translating for the parents! All the kids speak English,” he remarks.

To this end, Club Med plans to open another three villages in China by 2016. Currently, it has two villages there — the family-oriented Guilin village and Yabuli, which is China’s largest ski lodge. Worldwide, it also plans to open four new villages in locations, including Lombok in Indonesia and the Maldives.

‘Exceptional locations’
Club Med’s planned disposal of its Cherating property is by no means a sign that it will scale down its activities here. In fact, the resort operator plans to open two more “villages” in the country.

“Obviously, in the long term, we don’t intend to only have one resort in Malaysia. We believe in this country, this market. So we are looking at the prospects of having another resort in Kota Kinabalu and we will look at opportunities in the west coast of the country, which has the advantage of having a clement climate, which to us is very interesting,” says d’Estaing.

“In order to do that, we want to create partnerships as we do everywhere, when we believe that the country or destination or market is important, with a significant Malaysian investor and player,” he adds.

d’Estaing does not rule out building its next resort in Kota Kinabalu with its Cherating partners, but as it is, the group is already in talks with interested parties. “We have ideas which are getting more and more precise … I am a bit cautious on the timing of development. I would like it to happen this year, but developing involves two parties, so I cannot say!” he says with a guffaw.

While he remains discreet on the potential parties and sites, he does share what an ideal Club Med Kota Kinabalu site would look like.

“We are looking at exceptional locations … no compromise! It has to have an exceptional natural beauty while the size is a minimum of 15ha, average 20ha, which is large, because we are offering a global experience. We need to have a tennis court, [space for] sailing, we need accessibility, we don’t like high-rise buildings,” he says.

This article first appeared in The Edge Malaysia Weekly, on January 27, 2014.

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