Episode 1- Series - Conversations with hospitality entrepreneurs & leaders
With increased connectivity, cheaper travel, and higher disposable incomes, travel and tourism had been one of the fastest-growing industries globally. Along with this growth came a proliferation of hotel brands, with the top 5 hotel companies by room count alone boasting a repertoire of almost 100 different brands, making it increasingly difficult to craft a truly distinctive brand. Now, sustaining a brand in these unprecedented times of COVID-19 will be particularly challenging, and will require a great deal of foresight and flexibility to tide through. In a webinar with EHL, Ho Kwon Ping (KP), Founder and Executive Chairman of Banyan Tree Holdings, shared his story of how the Banyan Tree brands were nurtured and how they have navigated these current times.
The hotel sector has long been dominated by the likes of Marriott, Hilton, and InterContinental Hotel Group (IHG) hotels – up until as recently as 2012, most of the world’s largest hotel chains were U.S.-based companies, with none from Asia. But by 2019, 4 of the 10 largest chains were from Asia.
However, the road to prominence for Asian-based brands has not been easy. As KP explained, when he started the brand in 1994, “At that time, when we built hotels in China, everybody would build a Greco-Roman or pseudo-Spanish hotel […] if you wanted to build a luxury hotel, you wanted to have French chandeliers. You wanted to have fancy Western stuff and my goal at that time was to showcase what was beautiful of Asia.”
The Banyan Tree brand was thus born into a market that was drawn to Western influences and at a time much before the current Millennial-driven trend to ‘go local’. But the brand dared to be ‘fiercely Asian’, held with a clear vision and strong understanding of the market. Since then, the Banyan Tree’s brands have carried on this legacy, being based on the idea of a sense of place; of celebrating the beauty and culture of the destination itself.
Carving out a niche in an increasingly competitive hotel brand market is especially challenging for smaller brands, which do not have the luxury of extensive hotel networks, wide loyalty programs or strong international brand recognition like the big brands. Therefore, above and beyond building beautiful hotels and offering top-notch service, these brands must also recognize and do what is viable for survival by looking to operate on a larger scale. “Some of the smaller boutique brands like to be very exclusive. Unfortunately, it’s not a very great business proposition […] so I made the early decision that we have to survive as a business. It has to be a broader platform,” KP explained.
Therefore, following what he coined the ‘AirAsia phenomenon’ developing in Asia – a pursuit for more affordable travel and tourism options amongst the young, together with a rising middle-class across the continent – the company branched out into establishing other brands to form distinctive segments of the Banyan Tree family. This included Cassia, a chic hotel-apartment hybrid brand, as well as Dhawa, a more contemporary, casual brand. This ability to understand the external forces that drive the market’s preferences has allowed the company to remain financially viable and continue to swim among the big fishes of the hotel sector.
“If you want to remain independent in a world where the giants are multiple times bigger than you are, you need to have strategic relationships,” KP added. In traditional hotel real estate, the tendency is for companies to grow by consolidating their business; trying to integrate vertically and wanting to own everything. However, this may mean slower organic growth and high capital requirements, which is likely to be less practical for smaller companies like Banyan Tree.
Instead, Banyan Tree has worked on building an ecosystem of partnerships, most notably with French-based Accor and Chinese-based Vanke. Accor owns a 5% stake in the Banyan Tree company, which has allowed them to retain their identity whilst benefiting from Accor’s business development and distribution networks. By formulating a co-management deal, Banyan Tree has also been able to retain control over the brand management aspects of their hotels, while Accor manages the operations, thereby creating a win-win situation for both companies - “We don’t have to sell them the brand, they don’t have to pay out millions of dollars to buy us over; and we basically co-share management fees,” KP describes. Similarly, the company’s partnership with Vanke, one of the largest property developers in China, has enabled them access to super-prime locations which has meant quicker yet high-quality development in the country.
Therefore, it is particularly important for smaller hotel companies to craft a long-term strategy, such as by keeping up to date with the forces that will shape consumer preferences of the future, as well as building strategic relationships. In this competitive market that favours size, they need to have the vision and ambition – as KP said, “You can’t be regional; you’ve got to go global, and that’s because the market for hotels is a global choice. People today choose to go to Phuket this year and Prague the next year. They go to Bangkok this year and Barcelona the next year [...] we decided from Day 1 that we have to be global.”
Yet, even whilst going global, hotel companies must also balance growth with retaining the brand’s standards and culture. “When you work with other partners like Accor, when you do franchising, then the real risk is brand dilution. [To avoid] brand dilution, you really have to set up a Brand HQ, [which deals with] everything with the aspects of the brand, from collateral design to F&B standards, housekeeping standards and so on,” KP emphasized. The establishment of Banyan Tree’s Brand HQ has thus been crucial in maintaining the brand ethos, allowing the company to expand its footprint without compromising on quality.
This commitment to quality and consistency permeates through other facets of the Banyan Tree company, including its culture. “[At Banyan Tree,] empathy is what drives service culture, not a sense of subservience.” As service cultures differ across countries and cultures, the company has elected to ground their service culture in the universal value of empathy: empathizing with the local community, colleagues and guests. In addition, this emphasis that service is not about subservience also speaks of how Banyan Tree values their employees and respects the work that they do.
The company is reportedly the only hotel chain in China that has declined to work with hotel owners who do not they pay out their service charges to their employees, as they believe in rewarding them their fair share for the work that they have done. KP shared, “The whole idea is this. Your service charge and my service charge are the same – whether you are a general manager or a bellboy – so that makes us equal. And the second point is that when the service charge is high, it must mean that the hotel is doing well and the guests are happy. It builds up the service culture.”
Banyan Tree’s forward-thinking views and strong corporate culture has also helped keep the company going in this current time of crisis. While most hotels have been focusing on survival, furloughing staff, and rolling out health and safety measures, Banyan Tree has gone beyond these order-qualifiers to rethink staffing needs. The company seeks to take this as an opportunity to implement a more variable employment system in the long-term, based on seasonality and occupancy, which is more common in the Western world but not in Asia. Such inflexibility has meant redundant staff and reduced profits during periods of low occupancy, whether due to seasonality or crises like COVID-19, which KP hopes to see change.
“This business – the hotel business – hasn’t actually changed in the last 150 years. Really, it hasn’t,” he said, “But if you look at other industries, one of the key things we all realize is that when people work in teams to get something done, there is a sense of achievement. When there’s a team of people who build a car from A to Z, there’s real evidence that the defect rate is much lower than with the traditional assembly line, where you just mindlessly do the same thing over and over again. Now, in the hotel industry, have we really looked at that? Have we looked at how teams can work together, where you don’t have to be a waiter or a receptionist every day?”
The rise of lifestyle brands may lull one into believing that the hospitality industry has evolved immensely from the bed and breakfast or cookie-cutter-brand era – but while these changes may have re-shaped the external perceptions of hotels, their internal constructs have quite clearly remained. Therefore, while the short-term prospects of hospitality are still uncertain in these times, hoteliers should identify the opportunities amidst this crisis to restructure and possibly reinvent themselves in this downtime.
The Banyan Tree tale has been one of great foresight, ambition and flexibility that has propelled the company not only to the success it has enjoyed to this day, but also prepared it for challenging times such as a global pandemic. In a similar vein, KP concluded the webinar by advising graduates to remain open-minded and flexible; to do things that may be out of your comfort zone, or that you may have otherwise never considered doing. While we cannot determine how this crisis will take its course, we can certainly determine what we make of it.
“Whatever you’ve done in your life, it will always benefit you. Always remember Steve Job’s famous anecdote about how he only attended a short course [on calligraphy] in Reed College […] he never thought it was ever going to help him, but then what he did at Apple was to really focus on fonts and so on, and that was how even something as out-of-context as doing a course in calligraphy came back into his work with Apple.”