Investors were surprisingly calm when Fosun Tourism Group (OTCPK:FOSUF) announced just before Christmas that its big-name co-CEO Henri Giscard d’Estaing, son of the late French president Valéry Giscard d’Estaing, was resigning several of his positions on the company’s board.

That may owe partly to the fact that d’Estaing will continue to lead Club Med, a role he has held since 2001, well before Fosun International (OTCPK:FOSUY) bought the resort chain in 2015.

Instead, d’Estaing’s departure from the Fosun Tourism board looks more like a signal of a shift now happening at the parent company, which is trying to broaden its focus beyond the Club Med chain that currently accounts for the lion’s share of its business.

It could also signal the start of a gradual pullback for d’Estaing from the company with his advancing age. He is now 66.

Under Fosun’s ownership, d’Estaing recast Club Med from “a purveyor of packaged hedonism” to an upmarket, multicultural, family-friendly resort chain.

Having found new life for the brand, he will retain his positions as co-CEO of Fosun Tourism and president of Club Med, Fosun Tourism said in its announcement on Dec. 22. But he resigned his roles as executive director and vice chairman of the Fosun Tourism board effective of the announcement’s date.

Fosun Tourism’s stock rose less than 1% the day after the announcement. But it lost about half of its value for all of last year and is down by a similar amount from its pre-pandemic levels, perhaps reflecting concerns about its parent’s financial condition and China’s slowing economy.

Fosun Tourism is a relative minnow in the global resort sector, paling in comparison to global leader Marriot International (MAR), which is also one of the world’s largest hotel operators.

The company also has yet to earn the kind of respect that its global peers command, with a current price-to-sales (P/S) ratio of just 0.40. That’s a fraction of the 2.94 for Marriott, and 4.82 for Hilton Worldwide (HLT).

All three companies are part of a larger group of tourism- and travel-related operators that are bouncing back strongly post-pandemic, riding a wave of “revenge travel” spending.

d’Estaing’s departure from the Fosun Tourism board evoked rumors from 2022 that Fosun might be looking to sell Club Med as the broader Fosun group faced pressure from its heavy debt load.

In November 2022, Bloomberg reported that Fosun was informally seeking to sell Club Med for up to $1.5 billion, after saying a month earlier that it was planning to dispose of up to 80 billion yuan ($11.3 billion) in assets to strengthen its balance sheet.

Fosun went on to raise a more modest sum of nearly $800 million through asset sales in 2022 and early 2023, bringing its debt-to-equity level down from 138.7% at the end of its 2022 financial year to 114% in the first six months of its fiscal year that begins in April.

Fosun denied it planned to sell Club Med, calling it a core asset at the time of the earlier reports. Such a sale looks less likely now as the company’s debt situation has improved. But if not a sale, then why is d’Estaing leaving Fosun Tourism’s board?

Shifting stake

First, let’s look at d’Estaing’s personal ownership of Fosun Tourism, bearing in mind that 84% of the company’s revenue came from Club Med as of June 30 last year.

In the past year, he has sold shares in Fosun International and bought shares in Fosun Tourism. His stake in Fosun Tourism grew from 1.52 million shares at the end of 2022 to 1.85 million shares in the middle of last year.

Over that same period, his holdings of Fosun International fell from 2.58 million shares to 1.75 million.

A compelling reason for d’Estaing to stay at Club Med is the chain’s rocketing success post-Covid. The chain could also find strong potential in Asia, still one of the world’s greatest growth markets thanks to the region’s growing middle class.

Fosun Tourism’s revenue rose 39% during the first six months of 2023 to 8.9 billion yuan year-over-year, as the company swung to the black with a profit of 472 million yuan from a 197 million yuan loss a year earlier.

Broken down by segments, the company’s Club Med revenue rose 34% to 7.5 billion yuan, while the smaller Atlantis Sanya segment, anchored by a mega-resort on South China’s Hainan island, shot up by 85% to 937 million yuan.

Revenue for the company’s new “vacation asset management center” segment rose by 72% to 390 million yuan.

A business update in October showed Atlantis Sanya’s business volume grew 83.2% in the first three quarters of last year to 1.37 billion yuan.

Club Med’s cumulative bookings for the second half of 2023 were up 23% over the second half of 2019, the last period before the pandemic, and were also up 6% compared to the second half of 2022, reflecting the strong post-Covid rebound in travel.

The big majority of Club Med’s 66 resorts are leased or managed, with just 10 directly owned, as the chain relies on an “asset-light” strategy that is increasingly common in the hotel and resort industry to reduce costs.

The chain still gets nearly half its customers from its oldest markets in Europe, the Middle East and Africa. But the number of customers from that region fell 10% in the first half of last year, while the figures for its newer Americas and Asia regions rose by 16% and 10%, respectively.

Xu Xiaolong, co-CEO of Fosun Tourism, said the company is speeding up the sale of properties in asset-heavy projects as part of its asset-light strategy.

“Our money in the future may not be invested in tourism properties, but it will be invested in travel content and travel intellectual properties,” he said in an interview with the South China Morning Post last April.

“We have gone through the coldest winter of the tourism sector in the past two years, and now we will embrace the best of times.”

The company plans to open 17 new resorts in the next three years, giving equal weight to domestic and overseas resort development.

Xu also said that he expects China, currently Club Med’s second-biggest market after France, to become its largest market with over 500,000 customers per year.

The company also has big plans for Southeast Asia, with revenue and profit from that region seen doubling over the next three to five years.

Disclosure: None

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