Dec. 19, 2004 - TOULOUSE, France -- No matter which resort you visit, Club Mediterrannee always seems to have nabbed the best bit of beach, the nicest corner of the old town or the prime site beside the ski lift.

The image is classy, the customers are chic and service comes with what passes in France for a smile. Yet for years, the Paris-based holiday village operator has been a restructuring challenge defeating even Philippe Bourguignon, the man who managed, temporarily, to make Euro Disney a success.

Last week, Henri Giscard-d'Estaing (the son of former French president Valerie), who runs the group, proclaimed a turning point. For the first time in three years, Club Med made an operating profit.

Shedding low-grade villages and polishing the best lured back more profitable clients, he said. Not only did a record 90 percent of holidaymakers say they planned to return, but Asian and American customers are also falling in love with the all-inclusive package club formula.

But the results for the year to 30 September show a company still struggling. Underlying sales crept ahead 1.2 percent to 1.6 billion euros (1.12 billion pounds, $2.13 billion) and though operating results swung from a 6 million euros loss to a 17 million euros profit, the net loss, after 18 million euros exceptional charges, was still 44 million euros. That is better than 94 million euros for 2003, but the company has not reducing its 390 million euros debt.

Sales to Asian holidaymakers (including 4,000 Chinese) surged 14 percent, allowing the region to make its first profit, of 6 million euros. But revenues in Europe, providing the lion's share of the group's 1.7 million customers, fell 3.3 percent. Last year, the winter generated 19 million euros profit, while the summer provided a 6 million euros loss.

Turning the group back into profit has been a matter of waiting for Asians to get richer, and Americans more adventurous. Club Med is also seeking cost savings from closer integration with Paris-based hotel group Accor, which in June replaced Italy's Agnelli as Club Med's biggest shareholder, with 28.9 percent.

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