State of Business June 2009.

2009 is proving to be an interesting year! Our sales for the winter season were more or less in line with previous years, but profitability has been hit, with steeply rising rents and an increasing head office overhead.

Summer sales have been slow. Two months ago forward summer bookings were down by 20% compared to last year. This prompted an urgent re-appraisal of costs, and it is with great pride that I have seen all of our staff rising to the challenge.

We have asked all of our people to buckle-down, and it is our goal to come out of this recession having made no redundancies. That would be a great testament to the commitment of our people, and ours to them.

In parallel we have had to re-visit the rental agreements that we have with the owners of many the apartments we manage. We appreciate the understanding shown by many owners, but it is with frustration that we have seen others refuse to accept the economic reality. Unfortunately, leases that cannot be renegotiated will have to be terminated, which will hurt owners.

Likewise we salute those suppliers, from the local baker to the national companies, who have revised their tariffs in this difficult market. We won’t forget their effort – just as we forget those who haven’t helped.

We are clawing back the summer business. We are now confident that we will end the summer with respectable occupation levels, but at what price? The story in our sector is of a clientele comfortable booking on the internet and making their purchase very late. It makes sales visibility difficult. Late discounting has become the norm.

Meanwhile, the recession has taken its toll on our competitors. Since 2008 a dozen actors in our market have gone bust. Even the industry leaders are feeling the heat. Pierre et Vacances recently announce a profit-warning to its shareholders. Other big firms will fail. Here at Madame Vacances we know very well the identity of the next one that will fall.

And Madame Vacances? Of the remaining French operators of Residence de Tourism, Madame Vacances is one of the strongest. We have the treasury to survive a few tough seasons of sales - though we’re not planning to use those funds recklessly. We also have a far more experienced manage team than most, drawn exclusively from the Tourism and Service sector. Most importantly, we work harder than our competitors. We stay open when they are closed. We work until we have found solutions. Others walk away from their responsibilities.

Where next? The euro has been at an all time high recently, making France a very expensive place to visit. Subsequently, the proportion of visitors to France from the euro area, as opposed to further afield, is at the highest level in a generation. As for the French economy, it is unlikely to come-out of recession until next year, with unemployment rising until well into 2011. Consumer spending is in retreat. Those companies heavily reliant on a domestic market may find the going tough over the next 3 years.

However, the Euro should weaken, and, coupled with the strengthening of sterling, the UK market should take-up the slack from 2010.

Onwards and upwards. The next few yew years present great risk and opportunity in our sector. Madame Vacances is shaping-up to be one of the winners at the end of it.