Pierre & Vacances SA

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Pierre & Vacances SA

Espace Pont de Flandre
11 rue de Cambrai
75947 Paris Cedex 19
Telephone: (+ 33) 01 58 21 58 21
Fax: (+ 33) 01 58 21 58 22
Web site: www.pierre-vacances.fr

Public Company
1967 as Pierre& Vacances
Employees: 8,238
Sales: EUR 604.9 million ($483.9 million)(2001)
Stock Exchanges: Euronext Paris
Ticker Symbol: 7304
NAIC: 721110 Hotels (Except Casino Hotels) and Motels

Pierre& Vacances SA has joined the top ranks of the European tourism industrythe French company claims the number one European spot in the tourist residence segmentwith nearly 250,000 beds located primarily in France, the Netherlands, Germany, and Belgium. While France accounts for the largest share of the companys business, at 58 percent of revenues in 2001, at the turn of the century Pierre& Vacances has been engaged in aggressive international expansion. The Netherlands, where the companys acquired Gran Dorado in 2000 and Center Pares in 2001, now accounts for 25 percent of revenues, while Germany and Belgium account for 9 and 8 percent of revenues, respectively. Another important acquisition was that of Maeva, the number two French tourist residence company, at the end of 2001. The company is also developing partnerships for expansion into Spain and Italy. Led by founder Gerard Brémond, Pierre& Vacances has based its success on selling rental and vacation services for residences generally developed or acquired by the company but owned in large part by others. Owners of the companys more than 52,000 homes and apartments turn over rental activities to Pierre& Vacance, keeping six to eight weeks of use of the propertyeither the property itself or in exchange with others among the companys networkand receiving a percentage of around 4.5 percent of rental fees per year. The company markets its residences under the Pierre& Vacances, Maeva, Orion, and Center Pares brand names. Pierre& Vacances has been quoted on the Euronext Paris stock exchange since 1999. In its 2000-2001 year, the company posted revenues of EUR 605 million, more than three-quarters of which came from its tourism operations.

New Vacation Village Concept in the 1970s

Gerard Brémond, son and grandson of real estate developers, went into business on his own in the 1960s. A meeting with famed French Olympic ski champion Jean Vuarnet gave Brémond, an avid skier himself, an idea: developing a vacation village dedicated to skiing. Vuarnet and Brémond joined together to build the Avoriaz ski resort in the French Alps, which opened in 1967. A number of features set Avoriaz apart from competing ski resorts. In particular, Avoriaz was developed around a concept of a village. Cars were banned and children had access to their own village area. Brémond also took care to adapt the villages architecture to its surrounding environment. These features were all to be remain hallmarks of Pierre& Vacances later tourist resorts.

Filling the resort, especially off-season, remained something of a problem until Brémond combined that activity with another passion, film (Brémond started a second successful career as a film producer in the 1980s). In 1973, Avoriaz inaugurated its annual film festival dedicated to science fiction films, enabling the site to achieve a certain notoriety in France and elsewhere.

Adopting the name Pierre& Vacances in 1975, the company began adding to its operations, developing other mountain resort villages, then extending development operations to the extensive French coastline. That move caused Pierre& Vacances to become stigmatized as a company that had filled up the French coast with cement, a reputation it found hard to shake in later decades despite its transition from real-estate developer to tourist services group.

That transition began at the end of the 1970s when Brémond hit upon a new idea for his companys tourist residence activity. In 1979, Pierre& Vacances launched what it dubbed its Nouvelle Propriete (New Property) formula. Instead of owning the walls of its resorts, the company now proposed to sell the apartments and bungalows located within its vacation villages, while taking over all rental services for the properties. Owners were able to purchase a vacation property at a reduced price and receive a modest yet guaranteed annual return on the property as a percentage of rental fees over a ten-year period. Owners were also given use of the property for six to eight weeks each year and, later, the possibility to exchange this use with owners of other properties in the Pierre& Vacances network.

The New Property idea enabled Pierre& Vacances to grow without taking on large amounts of debt, and the company stepped up development of its string of vacation villages. It also helped transform the company from a real-estate developer into a tourist services business. The first site to be transformed into a New Property was also the companys first site at Avoriaz.

Through the mid-1980s, Pierre& Vacances continued to grow organically. In 1988, however, the company made two acquisitions, starting with Geer, which owned developments in Cap Esterel, along the Mediterranean; Les Coches, located in the Alps; Port-Bourgenay, on the Atlantic coast in the northwest; and Porty du Crouesty, in the Morbihan region. Following that acquisition, the company acquired Sogerva, which owned a number of properties located along the Atlantic coast. The Sogerva purchase added more than 5,000 beds to Pierre& Vacances growing total.

Acquiring Size in the 1990s

The long economic crisis that affected France and much of Europe at the beginning of the 1990s deeply affected both the tourism and real-estate sectors. Yet Pierre& Vacances policy of non-ownership of its properties helped protect it from the collapse in property values seen during the period, while it continued to boast healthy profit margins on its activities. This period also spelled opportunity for the company as it began to buy up a number of its struggling rivals.

The companys next round of acquisitions began in 1993 with the purchase of Société des Montagnes de lArc, which held a park of more than 4,000 beds in the Arc area. In 1996, Pierre& Vacances added sites at Val-DIsère, lAlpe-dHuez, Fréjus, and He de Ré when it bought up Rocher Soleil. That purchased increased the companys portfolio by more than 2,000 beds. Pierre& Vacance added another 2,000 beds the following year when it acquired Sofap Loisirs, which operated sites at La Tania, Menton, and Cap-dAgde, in 1997. That same year, the company purchased Pont-Royal SA, particularly attractive for Pierre& Vacances as it held construction permits for more than 20,000 square meters in the highly prizedand highly pricedProvence region.

For the majority of its acquisitions, Pierre& Vacances sought companies with profiles similar to its own, that is, companies operating exclusively within the tourist residence sector and preferably focused on tourism services rather than property ownership. The few properties acquired by Pierre& Vacances were quickly sold off again to investors, helping to pay for its acquisitions and leaving the group debt-free.

As the French and European economies once again took off after the mid-1990s, Pierre& Vacances initiated a new resort development program. A number of the companys acquisitions had brought it lower quality properties, as Brémond admitted to the Nouvel Observateur, commenting: Its often those acquisitions that gave us a reputation as a cement-layer. For its new developments, however, Pierre& Vacances aimed higher, building sites of three- and even four-star quality. The company also was quick to recognize the demand for a new flexibility in resort-style vacations. Customers now sought quick vacationsoften for less than a week or simply for a weekendand the freedom to choose their own activities during their stay. The Pierre& Vacances model was easily adapted to these new trends, helping the company increase its booking percentages.

In 1998, the company launched a new type of resort, a so-called eco-village located in the Picardy region. The company also opened two resort sites, in Martinique and Guadeloupe, marking its first moves outside of France. That year, the company adopted a new holding structure, grouping all of its subsidiaries under the name Pierre& Vacances SA. In June of the following year, the company went public with a listing on the Paris stock exchange.

European Leader for the 21st Century

By the late 1990s, Pierre& Vacances had already begun a more aggressive expansion phase. In March 1999, the company acquired French resorts rival Orion from owners Whitehall et Westmont Hospitality. The purchase, which cost the company more than EUR 50 million, gave it control of a park of 24 resort properties for a total of 7,200 beds. The company also entered an agreement with Italys Beni Stabili to set up a joint-venture to acquire resort properties in Italy, which were then to be managed by Pierre et Vacances.

Key Dates:

Gerard Brémond and Jean Vuarnet open a ski resort village at Avoriaz.
Brémond launches a science fiction film festival at Avoriaz as a public relations move.
The company adopts the name and brand Pierre et Vacances.
Pierre& Vacances acquires Geer and Sogerva.
The company begins a wave of acquisitions.
Subsidiaries of the company are restructured under the holding company Pierre& Vacances SA.
Pierre& Vacances goes public on Paris exchange.
The company enters into a partnership agreement with Beni Stabili to acquire properties in Italy.
Pierre& Vacances acquires Italys Valtur for EUR 30 million.

In April 2000, Pierre& Vacances acquired Gran Dorado, one of the leaders in the Benelux markets and in Germany in vacation home rentals, with a portfolio of nearly 3,500 homes and apartments located in six sites in the Netherlands and Germany. The addition of Gran Dorado added more than EUR 135 million to Pierre& Vacances annual revenues, which had topped EUR 342 million in 1999. The Gran Dorado acquisition cost Pierre& Vacances EUR 100 million.

The companys next expansion move came in March 2001 when, in a joint-venture with Deutsche Bank, Pierre& Vacances acquired control of Center Pares Europe. That company, which posted sales of EUR 354 million in 2000, had its origins in the late 1960s, when it began developing resort parks featuring full-comfort bungalows constructed with enclosed swimming pools and set in wooded locations. By the time of its acquisition, Center Pares had grown into a network of 10 villages, with over 6,600 bungalows and more than 34,000 beds, primarily in the Netherlands but also in France, Belgium, and Germany (as well as sites in the United Kingdom not included in the acquisition). The joint-venture cost more than EUR 600 million. Pierre& Vacances took over management of Center Pares, while placing the entirety of its Gran Dorado property portfolio into the joint-venture in order to meet Deutsche Banks financial contribution, which covered the cost of the acquisition itself. The company then announced its plans to upgrade and rename the Gran Dorado sites, subsuming them under the Center Pares brand.

Pierre& Vacances continued its expansion drive through 2001 as it sought to solidify its position as the European leader in the tourist resort sector. In July 2001, the company acquired the ski resort operations of Groupe Washington at the Valmoral resort, which included three hotels as well as 900 residential apartments. That acquisition also gave the company a ski lift operation, which it sold off later that year in a move that helped pay off part of the acquisition costs.

Meanwhile, the company was preparing a new and still larger acquisition. In September 2001, Pierre& Vacances announced that it had reached agreement to acquire Maeva SA, the number two resort operator in France. Created in 1967 under the name Clubhotel, that company had started out as a time-share operator before being acquired by Club Méditerranée in 1978. Club Med placed Clubhotel under its brand Maeva, created in 1976, then added new acquisition Utoring, a company specializing in resorts management. Maeva continued to grow over the next two decades, building up a park of more than 20,000 vacation homes and apartments with more than 86,000 beds.

The addition of Maeva made Pierre& Vacances the undisputed leader in the French market and allowed it to claim leadership across Europe in the residential resorts sector. The company was also able to evade the sharp drop in business suffered by most of the tourism industry following the World Trade Center attack in September 2001: travelers were now choosing to remain closer to home, and Pierre& Vacances, which saw the majority of clientele coming from within driving distance, benefited from this trend.

At the beginning of 2002, the company paused to digest its recent acquisitions as it restructured its portfolio around four primary brandsPierre& Vacances, Orion, Center Parks, and Maeva. The company also began a revitalization program, particularly of the Maeva properties, which had an average age of some 20 years. In 2002, the company planned to spend some EUR 130 million fixing up those properties.

Meanwhile, Pierre& Vacances set its sites on the southern European market. In Spain, the company entered a partnership with financier George Soros to develop or acquire resort properties in the near future. Meanwhile, in Italy, the companys partnership with Beni Stabili at last came to fruition when the company announced its agreement to acquire Italys Valtur, paying EUR 30 million for management control of nearly 1,300 apartments. With more than 50 percent of the company remaining firmly under founder Brémonds control, Pierre& Vacances prepared to go head to head with the tourism worlds giants, including Accor, Thomas Cook, and TUI. At the same time, the company admitted a possible future interest in linking up with fellow French resort company Club Med.

Principal Subsidiaries

Group Maeva SA; Pont Royal SA; Pierre& Vacances Tourisme SA; Pierre& Vacances Conseil Immobilier SA; Pierre& Vacances Services SNC; Pierre& Vacances FI SNC; Orion Vacances SA; Pierre& Vacances International SA; Pierre& Vacances Transactions SARL; Pierre& Vacances In-vestissement.

Principal Competitors

Accor SA; Preussag AG; Thomas Cook International; Club Méditerranée SA; Boca Resorts, Inc; Inventive Leisure plc; Sandals Resorts International.

Further Reading

Dupuy, Helena, De limmobilier au tourisme, un virage reussi, La Tribune, April 15, 2002.

Hachache, Nora, Pierre& Vacances a toujours le vent en poupe, Le Moniteur, January 18, 2002, p. 136.

Michel, Caroline, Pierre et Vacances, le nouveau roi des loisirs, Capital, October 2001, p. 53.

Tatu, Natacha, La revanche du monsieur gris, Nouvel Observateur, February 2002.

M.L. Cohen