Banyan Tree To Double Global Assets By 2010

Source : The Business Times, October 4, 2007

It plans to move into Latin America, the Caribbean, Middle East, Mediterranean

BANYAN Tree, a leading manager and developer of premium resorts, hotels, spas and galleries, is on an aggressive expansion push to more than double its global portfolio by 2010.

Banyan Tree Mauritius: The project is scheduled to be completed in 2010. This Banyan Tree branded residences project is architecturally designed by Fosters & Partners of the UK with the resort villas designed in collaboration with Architrave Design & Planning, Banyan Tree's in-house design division

Banyan Tree executive chairman Ho Kwon Ping said it is moving into new markets in Latin America, the Caribbean, the Mediterranean and the Middle East, in addition to stepping up its presence in South-east Asia, the Indian Ocean and North-east Asia (China and Korea).

The group's investments will involve new projects as well as organic growth as it continues to improve and add capacity to existing properties, he said in an interview on the sidelines of celebrations to mark its 20th year in Phuket.

On Phuket island, where the flagship Banyan Tree resort is located, plans are afoot for a new project adjacent to the existing 600-acre Laguna Phuket which houses six properties that are built on land which has been rehabilitated from a polluted abandoned tin mine.

Banyan Tree subsidiary, Laguna Resorts and Hotels, has just concluded a joint-venture agreement with a prominent local Phuket businessman Kanit Yongsakul to develop the 7 million sq ft plot for housing, retail and commercial uses (including office space), plus a hotel.

To be called Laguna Lake, the project is expected to reach the peak of development in three to four years.

The potential revenue contributions from this development could be S$400 million to be realised over a medium-term period, the company said.

The residential portion of the development will offer upscale condominium units, bungalows and townhouses.

Mr Ho: 'It's being where we need to be to remain among the best of the best'

Mr Ho also revealed that within Laguna Phuket, the group plans to add a seventh hotel. This one will be under its Angsana brand. Room rates will be the second highest after the flagship Banyan Tree Phuket.

Construction of the 150-room property will start next year and is scheduled to be completed in 2009. It will cost 1.5-2 billion baht (S$70-93.4 million).

The group's first hotel to open in Laguna Phuket in 1987 was the Dusit Laguna. This was followed by the other five properties, Laguna Beach Resort, Sheraton Grande Laguna Phuket and The Allamanda (all suites), Banyan Tree Phuket and the Laguna Holiday Club (time-share units).

Laguna Phuket has become the reference point for the group's projects elsewhere, such as Laguna Vietnam whose construction will start early next year near Hue in central Vietnam. Mr Ho hopes this project will replicate the success of Laguna Phuket.

On Banyan Tree's global expansion plans, Mr Ho said: 'We want to have strong growth in the next one to three years. Given the strong pipeline of projects that we have - over 40 new hotels (compared with our current existing portfolio of 22) and at least 55 spa projects, we are confident of our growth plan.

'The key drivers will come from three core segments - hotel investment income, fee-based income (such as hotel, spa and design management fees) and property sales. Based on existing signed and sealed contracts that we have, we would have about 60 hotels and resorts by 2010. This is bearing in mind that we will continue to work on increasing this figure.'

Banyan Tree adopts a practical approach in its quest to spread its roots. Its strategy is to further expand into low-cost locations close to its key customer markets.

Mr Ho elaborated: 'In some of these so-called 'low-cost' regions, such as China and Mexico (Latin America), we have managed to leverage on the growth in the tourism sectors there to accelerate our growth there. These regions account for over 20 existing projects in development and continue to present more opportunities for growth.'

Mr Ho is a firm believer in nurturing a brand instead of relying on cost competitiveness. He said: 'One prevalent business model in Asia is to use low cost labour - with many companies manufacturing for other people, as opposed to developing their own brand. My view is that this is not a sustainable business model because someday someone cheaper will come along.

'The key to success is to invest in a brand and build it - like what we have done with Banyan Tree. We need to compete on brand, not cost competitiveness, which takes long-term commitment and mindset, and to be close to the market,' he said.

'Banyan Tree is all about creating unforgettable, deeply personal and cherished memories. It is about the romance of travel and connecting people with a 'sense of place' through the design and architecture of our resorts, that promotes the uniqueness of indigenous cultures of the place. As we have our own full-time in-house design capabilities, we are therefore able to graft the 'Banyan Tree' experience onto our real estate offerings from the ground up.'

'Banyan Tree's business model is to be in exotic destinations, and places like China and Latin America offer a plethora of such destinations. One of the reasons for Banyan Tree's success is that we have stayed in our niche. It's like within this 'sandbox', as long as we are the King of the hill, we could be No 1.'

He added: 'In our space, going global is not about having a few hundred hotels and resorts, but a necklace of jewels that span the globe with a representation in every key market. It is not about being everywhere, but being where we need to be to remain among the best of the best.'