Hotel Online  Special Report

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K.P. Ho, Chairman of Asian-based Banyan Tree Hotels
& Resorts, Discusses the Strategy Behind the
Award Winning Brand; 
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"Building Banyan" as Told to HOTEL Asia Pacific 

November 2003

I find it slightly ironic when I flip through case studies by business schools or chapters in management books on Banyan Tree, that it appears we knew what we were doing all along. How far from the truth! Whatever it was that we did right, was done rather more intuitively than with conscious forethought, and certainly without a checklisted, annually updated business plan. 
 

What appears, in retrospect, to have been a straight and consistent journey towards progress was, in reality and upon closer examination, a series of zigzags, U-turns and even walking around in circles. But there was always a vision which served more as a compass than a road map. 

And that vision, stripped of all its other elements and refined to its most simple form, was to create a brand which could give us the proprietary advantages to compete globally. 

From the outset, the objective of our brand-building was to create a sustainable platform upon which to grow - even if 


K.P. Ho
cheaper competitors and copycats stepped into our space. 

This was a fundamental imperative from the start, and originates from my own bitter lessons in our other businesses before embarking on Banyan Tree.

Let me elaborate on this, because I think quite a few other Asian companies face today - especially with the China challenge - the same dilemma we encountered around 10 years ago.

Before starting Banyan Tree, I had spent the previous 15-odd years working in our family business, which pretty much resembled the typical Overseas Chinese mini-conglomerate. 

We were into everything imaginable - primary commodities, trading, food products, consumer electronics, property development, construction - many things in many countries, but nothing dominant in any industry or any country. 

The common thread running through our businesses was that we were, in essence, contract manufacturers, agents or traders - and our common competitive edge was "cost". We had no particular proprietary advantages, whether in technology, design or brand appeal. 

But, from the early '70s up to the late '80s - almost two decades - the Asian Tiger economies were the most efficient, lowest-cost producers of a wide range of products. 

It was good money while Asia boomed and a lot of companies, including our family business, rode that wave. 

But when a sports-shoe factory which we set up in Thailand with Japanese partners closed shop one year after opening because Indonesia had become a cheaper place to produce sports shoes, I intuitively knew that the writing was on the wall, and not just for Thailand, nor even Indonesia. 

Cost advantages

Every country in Asia - Burma, Vietnam, Cambodia and, ultimately, China - were all vying for lowest-cost status. To rely on cost advantages, one would have to run just to stand still. 

As for trading agencies, we represented European, Japanese and Korean consumer electronics brands in several countries, but it was always a Catch-22 relationship with our principals. 

If we did not make our annual budgets, they could appoint another agent. If we did too well, they would take over the business themselves. 

Why people would spend their whole lives promoting brands which they could lose anytime, was beyond me. These were foresights which, luckily, I acted on. Today, many Asian companies are facing the China juggernaut, and realise now that all the cost advantages they possessed earlier have evaporated. 

They did not use the good years to build up a brand or proprietary technology. They scramble now to set up operations in China for their old MNC (multi-national corporation) customers, but realise that local Chinese firms are just as capable of being subcontractors to these MNCs.

So, when I surveyed our corporate landscape 10 years ago, the harsh conclusion was that most of our businesses were not sustainable. We needed a proprietary advantage to counter cost pressures. It could be a patented invention, but I was not technologically inclined. 

So the only alternative was to build a consumer brand which had to be not only sustainable, not only in Asia, but in a globalised marketplace. 

That imperative for survival, rather than vision for success, is the fundamental driving force behind Banyan Tree. 

If we are to survive in a global marketplace - and hospitality is perhaps one of the most global, because high-end tourists can easily choose between say, Portugal or Phuket, Greenland or Greece - we must be able to be among the best of breed, not only in our own backyard but in whatever markets our customers will go to.

I realised this strategy was the only way we could be a price-maker and not a price-taker. Any enterprise, even with innovations, can only set its own price until cheaper competitors emerge. 

In our case, innovative features - such as pool villas and tropical spa pavilions - are no longer a monopoly of Banyan Tree. If imitation is the most sincere form of flattery, we can take solace in being flattered. But, with competitors emerging, the only way we can remain above price wars is to leverage the brand to generate a price premium and customer loyalty. 

Branding makes a tremendous difference in creating competitive advantage. Much of our decision-making regarding a new venture is determined by its impact on our branding. 

For example, it was very much with an eye towards brand extension that Banyan Tree Gallery has created a new venture called The Museum Shop by Banyan Tree.

Completely aside from the revenue potential of the new Museum shops is their ability to further reinforce our brand association with culture and heritage, our brand values of empowering and revitalising local village communities through craftwork, and to enhance what others have loosely called "the Banyan Tree lifestyle".

This Museum Shop venture also illustrates our brand extension strategy. The three core components of Banyan Tree are our hotels, spas and retail galleries. In our initial years, these components were physically co-located, and reinforced each other to deliver the Banyan Tree Experience.

But, as we grew, we wanted the components to stand on their own. That has resulted in our spas setting up shop independently of our hotels - in Guam, Sydney, Hong Kong, Shanghai and elsewhere - and the galleries going off into independent ventures like the Museum Shop. 

As they do so, they not only build new markets of their own, but they are extending the brand in new areas. This allows diversification and growth within a central strategy.

Another element of our growth strategy is to not confuse our brand by over-stretching and diluting its scope. 

So, instead of creating Banyan Tree Inns or Grand Banyan Tree to cover the lower and higher segments of the market, we created the Angsana brand two years ago. Its brand image is more contemporary, trendy and affordable than Banyan Tree, and we have been very pleased with its success.
 

The Angsana brand was created to enable parent company, Banyan Tree Holdings, to diversify its business operations to other areas of hospitality and spa operations and management, Angsana Resorts & Spa is embarking on a rapid expansion plan in the Asia-Pacific region. Angsana Resort & Spa Bintan, Indonesia, was opened in June 2000 followed closely by Angsana Resort & Spa Great Barrier Reef, Australia in August 2000. April 2001 saw the launch of Angsana Oasis Resort & Spa Bangalore, India and in October 2001, Angsana Maldives Ihuru opened its doors. This year saw the Angsana brand broke new grounds with its first Day Spa operation in trendy Double Bay Sydney in Australia, which opened in February 2003, its first City Club operation in Taiwan’s Taichung city. A planned series of new developments under the banner of ‘Colours of Angsana’ in Sri Lanka, China’s Shangri-La and Laos will pave the group’s entry into the soft adventure and cultural tourism market segment.

Key to survival

Let me touch briefly on what I consider to be the key decisions behind our brand success. First, we started with the end objective as the prime cause rather than the consequence of our actions. 

In other words, I believed that building a powerful brand was the prerequisite to, rather than the reward for, success. Indeed, it was the key to our survival as a small company. 

Second, we intuitively knew that a successful brand was not only about specific product or service features, but about evoking emotional responses and recollections from customers. 

Our product and service innovations were completely new when we introduced them, and gave us a few years of competitive advantage. But you cannot patent these things, and every competitor checked into our hotels and spas and took pictures of everything. 

So, even though we still retain a competitive edge through innovative design - we have, by the way, used only in-house capabilities to design all our projects - we know that we cannot be just selling a product feature. 

Instead, through the Banyan Tree Experience - which is a holistic experience starting with design but going far beyond, and which seeks to evoke romance and intimacy - we see ourselves as the facilitators of very memorable and meaningful experiences for our guests. 

If a couple have shared something very precious with each other during their stay at our resorts, we have evoked an emotional response from them towards us which will always remain top of mind, and give us brand loyalty.

The lesson of this for other companies is that focusing on a specific product feature or innovation by itself is not enough to ensure brand success. 

You must ask yourself: what emotions do I want my customer to associate with my brand? 

And then painstakingly shape your product and service features - and, of course, your external advertising and marketing communications - to solicit that emotional response. 

Core values

Third, I knew that a brand was empty if it only had a shiny veneer and no core values which underpinned its existence and motivated its shared community of colleagues and customers. 

The values behind our brand - such as active caring for the physical and human environment, revitalising local communities or creating pride and respect among the 30-odd nationalities who work in our hotels - hopefully give meaning to our colleagues.

They must see Banyan Tree as more than a means of livelihood, or just a luxury hotel chain with expensive room rates, if I want them to start each day with enthusiasm, to treat each other with respect and to handle each guest with true friendliness. 

Efficiency and service means nothing if people do not have their hearts behind their jobs. 

These brand values are not only important for my colleagues, but also our customers. Consumers are increasingly sophisticated and cynical of slick advertising. Many use their consumer purchasing power to express their personal values. 

Of course, not every tourist is a consumer activist, or will check out the environmental credentials of a hotel before making a booking. 

But I have found that our guests are particularly happy when they discover that their patronage has enabled us to build schools, restore devastated coral reefs or ensured the survival of a village craft. 

In fact, since we launched our Green Imperative Fund a year ago, we have already collected more than half a million dollars from our guests to fund our community programmes. 

The lesson from this is that a brand is not only an external image. A vibrant, evolving and growing brand must stand for values which colleagues and customers can identify with and support as part of their own life values. 

Today, Asian companies are at the threshold of a new business paradigm. The cost advantages of the past two decades are no longer assurances of survival. 

To compete in a global marketplace, we have to own our customers through building brand loyalty and brand strength. 

It will not be easy to do this. Though brand-building has become the flavour of the month, one should not think that a snazzy logo, new name and bigger advertising budget will solve our problems. 

Nevertheless, it is encouraging that companies have now embraced brand-building as a strategic imperative in any new venture.  

© Copyright HOTEL Asia Pacific

Contact:

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Hotel Asia Pacific
Steve Shellum
158 Wong Uk Tsuen
Yuen Long
New Territories
Hong Kong
Tel: +852 2882-7352
Fax: +852 2882-2461
http://www.hotelasiapacific.com
steve@hotelasiapacific.com

 
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The Inside Story on How InterContinental Hong Kong Managing Director Jennifer Fox Teamed Up with Michelin Chef Alain Ducasse to Create a/ HOTEL Asia Pacific New Benchmark for Hotel Restaurants in Asia / Steve Shellum, HOTEL Asia Pacific / October 2003
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Chiller Replacement Project; How The Grand Hyatt Singapore Applied a Holistic Commercial View / HOTEL Asia Pacific / October 2003
Assessing Hotel Security; HOTEL Asia Pacific Magazine / Pertlink Re-Issue Hotel Security Checklist / August 2003
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Hotels Stepping Up Security; Learning to Live with the Threat of Terrorism as Part of Conducting Everyday Business / HOTEL Asia Pacific Survey / March 2003
50% of Hoteliers Have Not Increased Investment in Security – More than a Year After the September 11 Attacks / HOTEL Asia Pacific Survey / December 2002
Security: Something No Hotel Can Ignore / Geoff Griswold / Summer 2002
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