Bold strategic move 6: Asian expansion

Relaxed: One of the newer Banyan Tree properties, Chongqing Beibei

The timing is right for Singapore entrepreneur Ho Kwon Ping as he expands his resort and residential property empire into China.

Ho Kwon Ping is concerned about being left behind.

The joint owner of the Singapore-based Banyan Tree Hotels & Resorts sees one of the biggest risks facing his luxury brand, famed for its Asian-style private villas and tropical‑themed spas, is other businesses nabbing the niche opportunities before he does and winning the race to become the first global player in his market sector.

Understanding Ho’s philosophy makes it easier to decipher why the hotel group is rapidly expanding into China, a fragmented market with more than 80,000 property developers and a government keen to cool its hot property sector.

The business intends to roll out Banyan Tree or its more accessible Angsana brand in up to 17 projects in China between now and 2017.

The listed company already has 12 Banyan Tree spas and resorts and another four Angsana in China.

It also plans to build an upmarket residential community in a suburban area near Chengdu in central China.

Banyan Tree chief executive Abid Butt openly admits the shift into China’s hotel and resort market will take time to pay off.

“The gestation period [will be] fairly long,” Butt says. “China is an oversupplied and under-demand market at this point because China is growing extremely fast. Even in the primary markets like Shanghai, Beijing, Chengdu … the room supply side of things has exploded.”

Butt says China is an investment in the future. “For the projects that we are managing on behalf of other developers, they understand that. When we are developing our own resorts … we also understand that it will take a bit of time before China really starts to kick in.”

Ho Kwon Ping and wife Claire Chiang.

Ho Kwon Ping and wife Claire Chiang.

While China’s economy may be slowing, it is still growing at 7 to 8 per cent each year, Butt points out.

“China is exploding and part of it is being there at the right time, in the right place. Of course, we are very, very selective as to where we will end up … so that we can make sure that our brand’s core values can be delivered.”

With the rest of the world almost coming to a halt when the global financial crisis hit, China has presented one of the few opportunities for expansion.

Banyan Tree has recently inched into Mexico and India – however, Butt says the lion’s share of growth is happening in China.

“Had it not been for the financial crisis, we would have had hotels all around the world,” he says.

“But a lot of the projects, particularly in the northern hemisphere, were put on hold because funding dried up overnight. Having said that, some of the liquidity in the market is coming back. Some of these projects are being resurrected.”

Ho Kwon Ping’s focus on brand was born out of necessity, as his very first hotel was built on an abandoned Thai tin mine in 1994 that lacked water frontage.

Ho realised he had to woo customers, and he did so by building a swimming pool for every villa and offering a spa experience with a more traditional Asian presentation.

Customers responded with their wallets – after all, who needs a beachfront when you have a private swimming area at your back door and can be pampered without leaving the building?

An earlier experience in business had taught the former business journalist about the importance of branding. His family ran a manufacturing business, and Ho branched out with a sneaker factory in Thailand.


Chief executive Abid Butt

Chief executive Abid Butt

Within a year competitors from Indonesia were undercutting him on price, forcing him to shut up shop. It drove home the difficulties of competing on price alone.

Banyan Tree Holdings was listed on the Singapore Exchange in 2006, the same year that the business launched offshoot Banyan Tree Residences, selling villas, townhouses and apartments to investors in Banyan Tree resorts.

Banyan Tree’s recent push into China has been funded through the Banyan Tree China Hospitality Fund, which rallied investors through a series of seminars throughout China and closed in 2011 after raising capital commitments of RMB1.07 billion.

Banyan Tree’s confidence in China is driven by the belief that much of the country is yet to be developed. “I don’t think in the near future there is an issue for hotels, nor for our brand,” Butt says.

This article is from the October 2013 issue of INTHEBLACK magazine.

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