This week's guest column is by Martin Roll, Business & brand strategist. Martin Roll is a world-renowned thought-leader and advisor. By focusing on building and managing successful businesses through iconic brands, Martin Roll helps his global clients enhance financial value and create sustainable competitive advantage. He holds an MBA from INSEAD. He is the author of the global bestseller Asian Brand Strategy, and a weekly business columnist with Forbes and several other global media. Martin Roll is currently writing two new global management books. The first will look at the important interface between branding, leadership and strategy, and the role of the CEO. The second will discuss the role and position of the Chief Marketing Officer in management, which is set to change dramatically in the future. In this column, Martin discusses how a local brand grew to challenge established global brands in the hospitality industry in Asia.
From an early start in 1992, Banyan Tree Hotels & Resorts has grown into one of Asia’s most successful hospitality brands with numerous international awards and accolades from publications like the prestigious Condé Nast Traveler and others. Banyan Tree is one of the youngest chains of up-market and privately-held luxury boutique hotels and resorts. By successfully blending its environmental concern with the unique Asian traditions and heritage and the concept of individual luxury villas offering an intimate experience, Banyan Tree has emerged as one of the leaders in the hospitality industry.
Branding has been part of the strategy from the early start, and was born out of a necessity to differentiate a traditional overseas Chinese family business. Banyan Tree wanted to escape being overrun by cheaper competitors from Indonesia and China on the one hand, and to take the focus away from tough pricing on the other.
These have been the typical challenges for many Asian businesses trying to compete in the new environment and building competitive advantages. It proved to be a successful way of breaking away from an Asian commodity business and changed the focus onto higher value-added revenues.
Banyan Tree is founded by Singapore-based Ho Kwon Ping, who named the brand name after a place in Hong Kong where he and his wife spent idyllic days when he was a reporter and editor for an Asian magazine. In 1994, the couple opened the first Banyan Tree resort in Phuket, Thailand.
Given the inevitable turmoil of the volatile hospitality industry, Ho Kwon Ping was convinced from the beginning that a strong focus on branding would give Banyan Tree a sustainable competitive advantage. This was proved right as Banyan Tree withstood the repeated crises of 1997/98, the events of September 11 and the Iraq War. During the SARS outbreak in Asia in 2003, the company still emerged profitable by achieving average occupancy rates of 65-67%.
The company has based its brand on the two main beliefs of the organization. Banyan Tree resorts would become a “romantic escape for couples” and Banyan Tree would be an environmentally sensitive and a socially responsible organization.
Branding has started right from the locations of the Banyan Tree resorts and has been consistent through the designs, the facilities offered, and the ambience created in each of the resorts.
The resorts offer a unique experience for the visitors by providing them a luxury holiday complete with self-indulging and pampering experiences like the Banyan Tree Spas which offer traditional treatments and fresh ingredients. The company operates a training academy in Phuket where all spa therapists must go through the compulsory 400 hours of training, which is above the industry standard.
Concern for the nature and environment surrounding the resorts has been a trademark of Banyan Tree. Many environmentalists appreciate their efforts to nurture and protect the surroundings of their resorts. True to its belief that environmentally sustainable and socially responsible tourism is compatible with making profits, Banyan Tree has established the Green Imperative Fund to extend financial assistance to environment conservation and community projects.
Banyan Tree initially resorted to advertising to build awareness in the market, but the advertising budget was soon cut to save costs. In fact, the overall marketing budget of Banyan Tree has been 7% of the total revenue, with 60% allocated for trade and 40% allocated for consumer promotions. The entire brand communications strategy has been based on third party endorsements, word-of-mouth and public relations.
Editorial coverage combined with word-of-mouth recommendations from customers and co-branding activities with strategic partners have since the launch of the company served as the major channels for brand communications. The media coverage has helped build the brand’s international awareness and credibility.
The strong belief in branding by Banyan Tree’s corporate management has started to pay off, and the Banyan Tree brand equity has enabled new revenue streams for the organization. It has enabled Banyan Tree to come out with a brand extension in the form of Angsana Resorts (launched in 2000), targeted towards young families and at different price points – typically 20-30% lower than Banyan Tree resorts themselves. It also operates stand-alone Angsana Spas.
The latest line extension has been Colours of Angsana, a sister chain of resorts under the Angsana brand, which opened in 2003. The hotels are launched in more remote areas of the world including UNESCO’s World Heritage sites.
These measures not only allow Banyan Tree to increase its awareness in new markets and gain international momentum, but also create a strong platform for a portfolio of sub-brands that can be a source of long-term revenue generation.
The future strategy of the Banyan Tree Company is described as “to string a necklace of resorts around the world. It’s not about being everywhere, but having a presence in chosen places. It is not about quantity but building quality jewels that form a chain”.
The future challenges
Distinctively Asian versus developing a global image: With plans of expanding beyond Asia, Banyan Tree faces the typical dilemma of any Asian brand to find a balance between being distinctively Asian and developing a more globally-oriented image.
Consequences of brand extensions: This is a challenge which goes to the very foundation of the company - management of the brand and allocation of resources. Though Angsana has a lower price point and is targeted primarily towards family guests, these resorts still have much of the typical Banyan Tree feel. The challenge is to balance two distinct brands and differentiate them without diluting the leading brand Banyan Tree.Keep innovating and avoid copycats: The market is crowded with many entrants running similar branded resorts in the upper-end. Particularly in Asia Pacific, where Banyan Tree has its stronghold and traditional base, new entrants are facing only small barriers-of-entry other than huge capital requirements and availability of good locations.