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Global Recession Hits Club Med Profits - 2002-01-16

Officials at France's famous Club Mediterranee, whose resort villages once attracted thousands of vacationers, say the global recession and the September 11 attacks on the United States have taken a toll on their profits. But the drop in Club Med's business is also due to larger changes in the travel industry.

Club Mediterranee's reported last week a net loss of more than $62 million in 2001. The company attributed about $20 million of the loss to the effects of the September 11 attacks.

To save money, Club Med plans to close 23 of its villages - enclosed vacation facilities located on just about every continent in the world. It also cut more than 243 full-time jobs and froze hiring of many seasonal staff.

Club Med spokesman, Thierry Orsini, hopes the cuts will be temporary. "We want to place Club Mediterranee to rebound as soon as the crisis is over," he said. "But it is very difficult for me today and I think for other people to tell you when all the consequences of this crisis will be over."

But many experts doubt that the economic downturn and the September 11 attacks are fully to blame for Club Med's losses last year. They say people are continuing to travel. Moreover, the terrorist attacks took place near the end of Club Med's fiscal year, in October.

In fact, much of the club's losses can be attributed to the millions of dollars it has spent to revamp its image as more than just a vacation spot for singles.

Alain Dupeyras, head of tourism for the Organization for Economic Cooperation and Development in Paris, says tourist companies are trying to capture other, specialized markets - like tourists interested in the environment or families.

"What we can say is the tourist [market] is globally much more complex than it used to be," he said. "And probably, I think that Club Med has changed at lot, but probably it was still seen as [a club for] sea, sex, and sun, which was the initial idea of the creator of this club, and now many things have changed."

Club Med's new image may be catching on. Despite its losses in 2001, its overall sales increased by five percent.