9:00AM New York—Club Mediterranee posts €9 million net loss in the six months to April on increased spending however, issues a positive outlook on the future.

The largest European resort operator Club Med swings to a loss in the first half of the year as it spends to reposition the resort for the luxury market. The resort operator books most of the profit from the real estate sales is likely to sell luxury units in Asia at a profit.

Revenue in the first half rises on strong sales in Asia

The French resort operator Club Mediterranee reported first half revenue climbed 12.6% to €944 million from €839 million a year earlier but profit fell on higher capital expenditure and seasonal rental payments. In the six months to April the Europe’s biggest resort operator said on constant currency basis revenue gained 11.2%.

Club Med said its villages unit reported revenue growth of 11% and online sales provided 12% of group business volume.

Winter occupancy levels gained 1.4 points from a year ago to 71.5%. The company said as of June 7, summer 2008 bookings were up 8% from the prior year and winter 2009 bookings were at 18.3% of total winter sales in the current year.

Revenue per available bed (RevPAB), which is a key indicator of Cub Med’s operations, rose 8% to €105 from €97 the year before.

Business was up sharply in Southeast Asia, rising 51% in China, 35% in Hong Kong, 27% in Malaysia and 14% in Taiwan.

Club Med swings to a loss

For the six months, Club Med posted a net loss of €9 million compared with a profit of €2 million reported in the corresponding period in 2007 when tax gains helped to lift earnings.

The company, which grew its reputation in the 1970’s by offering French holiday makers “sun, sea and sex” at resort villages said earnings dropped due to higher expenditure on property renovations.

Company chief executive and chairman, Henri Giscard d’Estaing, said “the bottom line reflected the impact of completing the move upmarket, the seasonality of real-estate costs and the small number of asset management transactions during the period.”

Operating income from leisure rose 61% to €30 million compared with €18.6 million in the year ago period, which was in line with market estimates. Consolidated operating income rose to €8 million from €6 million last year.

Village earnings before interest, taxes, depreciation and rentals at €148 million, was 21% up from €122 million the year before.

Real estate sales will offset weak operating results

Club Med is refurbishing 80 resorts, and building new ones, as part of efforts to grow margins and occupancy rate.

This week, Club Med said it would sell its Jet Tours unit to Thomas Cook for €70 million and sell 80 percent of its Club Med Gym to 21 Centrale Partners. The sale will bring in €100 million and help strengthen the groups’ cash position which stands at €330 million. Part of this money will be used in the renovations.

Club Med has already sold 16 of its villas in Mauritius for €22 million, and targets to build 12 new ones by 2010. The disposals are expected to reduce debt level by almost 50%. April end, company debt stood at €350 million, marginally down from €365 million a year earlier.

During the first half, net new customers increased by 20,000, and especially in high-end market customers. Luxury customers reported a net gain of 36,000 in the 4 and 5 Trident villages (equivalent of hotel star ratings) during the winter season and 84,000 in the last two years.

Villages in Indonesia, Tunisia, Japan, Australia, Dominican Republic, Portugal and France will be renovated.