case eight Banyan Tree Developing a Powerful Service Brand Joven Wierz AND Mi Banyan Tree Hotels and Resorts had become a Teading player in the luxury resorts and spa mar- et in Asia, As part of its growth strategy, Ban- yan Tree had launched new brands and brand extensions that included resorts, spas, retail out- lots, and even museum shops. Now, the company had to contemplate how to manage its brand portfolio and expand its business while preserv- ing the distinctive identity and strong brand im- age of Banyan Tree, its flagship brand. A brand synonymous with private villas, tropical garden spas, and galleries promoting traditional craft, Banyan ‘Tree Hotels and Resorts received its first guest in 1994 in Phuket, Thailand. Since then, it had grown into a leading manager and developer of niche and premium resorts, hotels and spas in Asia Pacific, Despite having minimal advertising, Banyan Tree achieved global expo- sure and a high level of brand awareness through Kon the company’s public relations and global mar- keting programs. Much interest was also gener- ated by the company’s pro-environmental busi- ness practices. With a firm foothold in the luxury resorts market, the company introduced a new and contemporary brand, Angsana, to gain a wider customer base. As the resorts market be- come increasingly crowded with similar competi- tive offerings, Iured by the success of Banyan ‘Tree, the company had to contemplate how to expand its business and preserve its distinctive identity COMPANY BACKGROUND By mid 2004, Banyan Tree Holdings Pte Ltd (BTHL) owned, managed and operated 15 re- sorts and hotels, 35 spas, and 38 retail shops in more than 40 locations in 20 countries. In the first ten years since its establishment in 1994, the company’s flagship brand, Banyan Tree, had ‘This case was written by Jochen Wirtz and Maisy Koh, Corporate Director, Brand Management, at Banyan ‘Tree Hotels and Resorts, and at Angsana Resorts and Spas. The authors gratefully acknowledge the assistance of Jeannette P. T. Ho, Corporate Director, Revenue Management of Banyan Tree Hotels and Resorts, and Sim Siew Lien, in preparing this case. Copyright © 2005 Jochen Wirtz and Maisy Koh. >100 international tourism, hospitality and marketing awards, some of which inchided The “World's Best Spa” (Phuket) from Conde Nast Traveler 1998, “Best Resort Hotel in Asia- Pacific” (Phuket) for three consecutive years from Business Traveller since 2002 “Seychelles’ Best Resort” and “Seychelles’ Best Spa” from World Travel Awards (2003). The Banyan Tree brand had also been compared to intemnation- ally established brands such as Harley Davison and Manchester United. ~ BTHL was founded by Ho Kwon Ping, a travel enthusiast and former journalist. Prior to entering the hotels and resorts business, Ho spent some 15 years managing the family busi- ness, which was into everything imaginable, such as commodities, food products, consumer elec- tronics, and property development, competing mainly on cost, and was not dominant in any par- ticular country or industry. The closing of a fac- tory in Thailand one year after its opening-be- cause it lost out to other low-cost producers in Indonesia-was the last straw for Ho, who then realized that a low-cost strategy was not only dif- ficult to follow but would also lead him nowhere Determined to craft out something proprietary that would allow the company to become a price maker rather than a price taker, Ho decided that building a strong brand was the only way for him to maintain a sustainable competitive advantage The idea of entering the luxury resorts mar- ket was inspired by the gap in the hotel industry that giant chains such as the Hilton and Shangei- Case BanyanTiee E. ) Lacould not fil. There existed a market segment that wanted private and intimate accommoda- tion without the expectation of glitzy chain ho- tels. This was fueled by the sharp price gap be- ‘tween the luxurious Aman Resorts and other resorts in the luxury resorts market, For example, the Amanpuriin Thailand, one of Aman’s resorts, charged a rack rate for its villas ranging from US8650 to over US$7,000 a night, whereas the prices of other luxury resorts, such as the Shangri La Hotel and Phuket Arcadia Beach Resort by Hilton in Thailand were priced below US$350 Noticing the big difference in prices between Aman Resorts and the other resorts in the huxury resorts market, Ho saw potential for offering an innovative niche product that could also bridge the price gap in this market. A seasoned travel- lerhimself, Ho backpacked throughout the world in his youth, His extensive experiences are evi- dent in his nonconforming belief that resorts should provide more than just accommodation. Ho hit upon the idea of building a resort com- prising individual villas, exotic in architectural design and positioned as a romantic and intimate escapade for guests. The rack rates are typically priced between US$500 and US$2,500 for the resort in Phuket, and between US$1,200 and US$4,400 for the resort in the Seychelles Such a value proposition had yet to be adopted by any hotel or resort then, Operations at Banyan Tree began with only one resort in Phuket, situated on former mining land once deemed too severely ravaged to sus- "The complete list of awards won by Banyan Tree can be found on the company's Web site at swwwrbanyantree com. * Prices as of July 2004; obtained from the Web sites of Shangri-La Hotels and Resorts and Hilton Hotels at wewwshangri-la.com and www.hilton.com, respectively. * Prices as of July 2004; obtained from the Web site of Banyan Tree at waw.banyantree.com. Prices of villas at Seychelles originally denominated in euros; converted to USS at the exchange rate of €1=US$1.2» Case8 BanyanTiee tain any form of development by a United Na tions Development Program planning unit, Itwas abold decision, but the compat together with Ho and his brother Ho Kwon Cjan, restored it after extensive rehabilitation works costing a to: tal of US$250 million. So successful was Banyan Tree Phuket when it was finally launched that the company worked quickly to build two other Tesorts, one at Bintan Island in Indonesia and the other at Vabbinfaru Island in the Maldives. ‘The company had never looked back since. Even when the travel industry experienced ameltdown and was pl tember 11 attacks on the World Trade Center in byretrenchments after the Sep. 2001, room rates at Banyan Tree rose steadily, and no employee was retrenched. BRAND ORIGINS Known as Yung Shue Wan in the local dialect, Banyan Tree Bay was a fishing village on Lamma ‘Treatment Pavilion Island in Hong Kong, where Ho and his wife lived for three idyllic years before he joined the family business. Despite the village’s modest and rustic setting, Ho remembered it to be a sanctu. ary of romance and intimacy. The large canopies of the Banyan Tree resembled the shelter af. forded by Asia's tropical rainforests. Ho thus de- cided to name his resort Banyan Tree, and posi tion it as a sanctuary for romance and intimacy THE SERVICE OFFERING Unlike most other resorts then, Banyan Tree re- sorts comprised individual villas that came with a private pool, jacuzzi, or spa treatment ro each designed to offer guests exclusivity and ut. most privacy. For example, a guest could skinny- dip in the private pool within his villa without be- ing seen by other guests, putting him in a world of his own (see Exhibit 1 for a private two-bedroom ool villa with Jacuzzi and spa treatment pavilion), SARE. View from a Pirate Two-Bedroaim Banyan Treé Fool Vila with acu! ard SpaAll Banyan Tree resorts and villas were de- signed around the concept of providing “a sense "to reflect and enhance the culture and heritage of the destination. This was reflected in the architecture, furnishings, landscape, vegeta tion, and the service offers. To create a sense of exotic sensuality and ensure the privacy of its guests, the resorts were designed to blend into the natural landscape of the surrounding envi- ronment and use the natural foliage and boul- ders as a privacy screen (see Exhibit 2 showing Banyan Tree Seychelles). In Banyan Tree Phuket, for example, the bed was a square platform in the middle of the room, made similar to the Thai ‘dang’, overlookinga lotus pond, and illuminated by soft lighting at night—in total contrast to the beds accompanied by strong reading lights that were found in most other hotels and resorts then, Exbiie 2 anvaniteeBeychell ss Case 8 Banyan Tree > ngs of Banyan Tree villas were de- The furn liberately native to convey the exoticism of the destination with its rich local flavor and luxuri. ous feel. The spa pavilions in Seychelles were constructed around the large granite boulders and lush foliage to offer an outdoor spa experi- ence in complete privacy. The resorts’ local fla vor was also reflected in the services offered, some of which were unique to certain sorts Employees were allowed to vary the service de livery proces according to local culture and prac tices, as long as these were consistent with the brand promise of romance and intimacy. Thus, in Phuket, for instance, a couple could enjoy din. ner on a traditional Thai long tail boat accompa. nied by private Thai musicians while cruising instead of dining in a restaurant. Banyan ‘Tree Phuket also offered wedding packages in which nde Wellinto its Natural Environment’» Case 8 Banyantree couples were blessed by Buddhist monks. In the Maldives, wedding ceremonies could be con- ducted underwater among the corals. Guests could also choose to dine in a castaway sandbank with only their private chefs and a billion stars for company. Service standards at Banyan Tree were de- termined in terms of customer satisfaction, rather than typical service standards in the industry. Products and services offered were also con- ceived with the desired customer experience in mind. One such product was the “Intimate Mo- ments” package, specially created for couples. This is presented as a surprise when guests re- turned to find their villas decorated with candles, incense, flowers, satin sheets, a chilled bottle of wine or champagne, and at the outdoor bath with flowers and bath oils. The couple will be pre- sented with a variety of aromatic massage oils to inspire those intimate moments. Another draw of the resorts was the Banyan ‘Tree Spa, found at every Banyan Tree property. The first tropical garden spas in the industry, Banyan Tree Spas offered a variety of aromatic oil massages, and face and body beauty treat- ‘ments using traditional Asian therapies, with a choice of indoors or outdoors treatment. The spa products used were natural, indigenous products, made from local herbs and spices. Non-clinical in concept, Banyan Tree Spas relied mainly on the “human touch” instead of energy-consum- ing high-tech equipment. The spa experience ‘was promoted as a sensorial, intimate experience that would rejuvenate one’s “body, mind, and soul,” and was mainly targeted at couples who could enjoy their treatments together. ‘To reinforce the Banyan Tree brand associa- tion with culture and heritage, and help promote cottage crafts, a retail outlet, known as the Ban- yati Trée Gallery, was set up in each resort. Items sold were made by local artisans, and included traditionally woven handmade fabrics, garments, Jewellery, handicrafts, tribal art, and spa acces- sories, such as incense candles and massage oils, which guests could use at home to replicate the Banyan Tree Spa experience. ‘The result of Banyan Tree’s efforts was “a very exclusive, private holiday feeling,” as de- scribed by one guest. Another guest commented, “It’s a treat for all the special occasions like hon- eymoons and wedding anniversaries, It the ar- chitecture, the sense of place, and the promise of romance.” MARKETING BANYAN TREE In the first two years when Banyan Tree was launched, the company’s marketing communi- cations was managed by an international adver- tising agency: The agency also designed the Ban- yan Tree logo shown in Exhibit 3, and together with the management came up with the market. ing tagline “Sanctuary for the Senses.” Exhibit 3 Banyan Tree Logo | BANYAN TREE HOTELS | AND RESORTS Sanctuary For The Sensesgh furnished luxuriously, Banyan Tree resorts were promoted as providing romantic and intimate “smallish” hotel experiences, rather than luxurious accommodation as touted by most com: petitor Banyan Tree Experiences” was marketed as then. More than merely resort stays, those intimate private moments with loved ones at the Banyan Tree resorts, The resorts saw them- selves as setting the stage for guests to create those unforgettable memories. When Banyan ‘Tree was first launched, ex rt period of time to gain recognition in the indus tensive advertising was carried out for @ ty: Subsequently, the company scaled down on advertising and kept it minimal, mainly in high- Case8 Banyan Tee » nagazines in key markets, The adver: tisements were visual in nature with suecinet copy or showease the awards and accolades won. Ex hibit 4 shows Banyan 1 lighting the award-winning Banyan Tree resorts, Brand awareness for Banyan ee advertisements high: the ee was gen crated largely through public relations and glo- bal marketing programs. For example, relation- ships with travel editors and writers were culti- vated to encourage visits to the resorts. This helped increase editorial coverage on Banyan Tree, which management felt was more effec: tive in conv ‘ng the “Banyan Tree Experience” from an impartial third-party perspective. A Ban yan Tree Web site (www.banyantree.com) was Exhibit’4 Advertisements Showcasing Awards Won by Banyan Tree Reeorts» Case Boryantree also set up to enable online reservations of rooms and spa services, and to provide information on Banyan Tree products and services. The management of marketing activities was centralized at the Singapore headquarters for consistency in brand building. BTHL appointed a few key wholesalers in each targeted market, and worked closely with them to promote sales, Rather than selling through wholesale and retail agents that catered to the general market, BTHL chose to work only with agents specializing in exclusive luxury holidays targeted at wealthy cus- tomers. Global exposure was also achieved through Banyan Tree's membership in the Small Luxury Hotels and Leading Hotels ofthe World. ‘Targeting high-end consumers, they represent various independent exclusive hotels and have sales offices in major cities around the world, BRAND VALUES Banyan Tree embraced such values as the active caring for the natural and human environment and revitalizing local confimiinities, in tum creating pride and respect among siall: The company hoped to build the brand on values that employees and customers could identify with and support as part of their own life values, Thus, the company worked actively to preserve, protect, and promote the natu- raland human environmentsin which Banyan Tree resorts were located. PRESERVING THE ENVIRONMENT Resorts were built from scratch using local ma- terials as far as possible, and at the same time minimizing the impact on the environment. At Banyan ‘Tree Bintan, for example, the 70 villas located in a rainforest were constructed around existing trees, cutting down as few trees as pos- sible, to minimize the impact the resort had on the natural environment. The villas were builk on stilts and platforms to avoid cutting trees and possible soil erosion. At Banyan Tree Maldives Vabbinfaru and Banyan Tree Seychelles, fresh water supply was obtained by the more expen- sive method of desalination, instead of extra ing water from the underground water-table, which risked disrupting the ecological system in the long run, Toiletries, such as shampoo, hair conditioner bath foam, and body lotion provided in the re- sorts were nontoxic and biodegradable, and filled in reusable containers made from celadon or ceramic. Refuse was recycled where possible and treated through an in-house incinerator system otherwise. Waste water was also treated and re- cycled in the irrigation of resort landscapes. Even the detergents and soap used in the resorts were biodegradable. ‘Through the retail arm Banyan Tree Gallery the human environment efforts were evident in the active sourcing of furnishing from indigenous tribes to provide gainful employment. These employment opportunities provided a source of, income for the tribes and, at the same time, pre- served their unique heritage CREATING BRAND OWNERSHIP AMONG EMPLOYEES: Allemployees were trained in the basic elements of five-star service establishments, which in- cluded greeting guests, remembering their first names, and anticipating their needs. In addition, some employees got a taste of the “Banyan Tree ment beliéved that the stay would help employ- ees understand better what guests will experi- ence, and, in return, enhance their delivery of special experiences for the guests. Although management imposed strict rules in the administration of the resorts, employeeswere given room to exercise creativity and sen: sitivity. For example, the housekeeping teams Were not restricted by a standard bed decora. tion. Rather, they were given room for creativity although they had general guidelines for turn: ing the bed to keep in line with the standards of esort. Banyan Tree invested liber a premium ally in staff welfare: employees were taken to and from work in air-conditioned buses, and had ac- cess to various amenities, including good-qual: ity canteens, and medical and child care facili- ties. Staff dormitories had televisions, telephones, refrigerators, and attached bathrooms ‘The company’s generous staff welfare poli ly paid off. Ho said, “The most grati- cies appare fying response is the sense of ownership that our staff began to have. Its not a sense of financial ownership, but they actually care about the prop Case8 Banyan Tree » erty. In our business, service and service stan: the same thing as ina dards do not always w developed country, where standards are mea sured by efficiency and productivity, by people who are already quite well-versed in a service culture. We operate in plac have not seen hotels. People come from villages. that, sometimes, What we need-more than exact standards-is for of ospitality, a sense th them to have a se the guest is an honored person who, by virtue of being there, is able to give a decent livelihood to the people who work. This creates a culture in which everybody is friendly and helpful INVOLVING GUESTS IN ENVIRONMENTAL CONSERVATION {As part of the company’s efforts to encourage en vironmental conservation and help save the en. Exhibit’ Aerial View on,Avgsara Resort ihuru Island, Maldives» Cases BanyanTiee vironment, Banyan Tree organized activities that involved guests’ participation to create more in- terest in environmental preservation. In the Maldives, forinstance, guests were invited to take part in the coral transplantation program (see Exhibit 5 for a picture of the island resort and its surrounding corral reefs). Guests who partici- pated in the program were then encouraged to retum several years later to see the progress of their efforts. Guests could also participate in ma- rine biology sessions that allowed them to learn more about the conservation of marine life, and take part in reef cleaning projeets. The response from guests had been tremendously positive Banyan Tree established The Green Impera- tive Fund to support community-based environ- mental action in the Asia Pacific region, Guests were billed US$1 per room night (of which they could opt out if they wished) and the company matched dollar for dollar: Details of the program were communicated to guests through various ways, such as environmental messages attached to in-villa turndown gifts Guests were often happy to know that their patronage contributed to meaningful causes, such as the building of schools for the local com- ‘munity, restoration of devastated coral reefs, and the survival of local village crafts INVOLVING THE LOCAL COMMUNITY Banyan Tree also tried to involve the local com- munity in all aspects ofits business, even as the resorts were being built. Villas were constructed as far as possible from indigenous materials, most of which were supplied by local traders. Tradi- tional art and handicraft that complemented the villas’ aesthetics were also purchased from local artisans, In addition, the company engaged local craftsmen to produce indigenous art and handi- crafts for sale at the resort’ retail outlets, the Banyan Tree Callery The company believed in building profitable resorts that would also benefit the local environ ment and contribute to the local economies through the creation of employment and vari- ous community projects. Thus, besides provid- ing employment for the local community, the company also brought business to the local farm ers and traders by making it a point to purchase fresh produce from them. Where possible, the company also supported local tourism ventures that would both benefit the wider local commu nity and enhance the visitor's experience. In Phuket, for example, noting that the local hawk- cers tended to peddle food and gift items on the beachfront near Banyan Tree properties, the company constructed a food center with proper facilities for these hawkers, to promote proper hygiene standards and limit pollution from refuse and waste food seraps. Recognizing that the disparity in lifestyles and living standards between guests and the lo- cal community might create a sense of alienation within the local community, a Comrmunity Rela tions Department was set up to develop and inanage community outreach programs. Funding scholarships for needy children, building a school ‘and child care center, hosting lunches and parties for the elderly, and supporting local cultural and religious activities were some of the community outreach programs introduced by the company: GROWING THE BANYAN TREE In 2002, BTHL took over the management of a city hotel in the heart of Bangkok from Westin Hotel Company. The hotel was rebranded as Banyan Tree Bangkok, after extensive renova- tion works were completed to upgrade the hotel's facilities, build new additional spa amenities and a Banyan Tree Gallery. This was the first Banyan Tree hotel to be located in the city area, unlike the other beachfront Banyan Tree properties.As the Banyan Tree brand became estab- lished, the company began expanding its network of spas and retail outlets. Stand-alone Banyan Tree Spas and Banyan Tree Galleries were set up as separate ventures, independent of Banyan Tree hotels and resorts, in various cities such as Shanghai, Sydney, India, and Dubai, operating either in other hotels or as stand-alone outlets, INTRODUCING NEW BRANDS After establishing a foothold in the luxnry resorts market, BTHL introduced the Angsana brand, in response to demand from hotel operators in Asia that were keen to introduce spa services in their hotels. As the positioning of these hotels did not fit that of Banyan Tree, the company decided to launch a new brand, Angsana, a more contemporary and affordable brand than Ban- ryan Tree, to run as stand-alone spa businesses in other hotels ‘The first Angsana Spa was opened in 1999 at Dusit Laguna, one of several hotels at Laguna Phuket, an integrated resort development with shared facilities located at Bang Tao Bay in Thai- land. The Angsana Spa was so well received that the company quickly set up five other such spas in various hotels in Thailand. In 2000, BTHL opened its first Angsana Resort & Spa, complete with an Angsana Gallery, located less than one kilometer away from Banyan Tree Bintan. In 2003, BTHL launched “Colours of Angsana’ to penetrate the soft adventure and cultural tourism market, catering to the more adventurous segment of the market. “Colours of Angsana” was launched as a product line of Angsana, and comprised a collection of individual hotels and resorts, each with their own identity, situated at more offbeat and exotic locations, and priced more affordably than Banyan Tree. These hotels were acquired under management or rev- Cases Banyan Tree ® enue-sharing arrangements, and were “managed by” Angsana. The brand name was chosen, as Ho wanted thern to “remain individuel, each with their own colorand name, like an artist’s palette.” ‘As of 2004, two hotels were launched under the “Colours of Angsana” brand-the Gyalthang Dzong Hotel in Shangri-La, China’s Yunnan province, and the Deer Park in Giritale, Sri Lanka. THE ROAD AHEAD To diversify its geographic spread, Ho planned to venture into locations in South America and Southem Europe, where he hoped to replicate Banyan Tree's success in Asia. However, given the higher costs of doing business in the Ameri- cas and Europe, would the same strategy that had brought fame and success to Banyan Tree in ‘Asia be workable in the rest of the world? Ho's ultimate vision was “to string a necklace of Ban- yan Tree Resorts around the world; not quan- tity, but a number of jewels that form a chain around the world.” A list of Banyan Tree's eur- rent and planned properties is shown in the Ap- pendix at the end of the case Also, while expanding the company’s network of hotels and resorts, spas, and retail outlets, Ho had to be mindful of the brands’ focus and be careful not to dilute the brands. He also had to consider the strategic fit of the company’s port- folio of brands, which comprised Banyan Tree Angsana, and Colours of Angsana. Banyan Tree certainly stood out among its competitors in the resorts industry when it was first launched. Since then, its success attracted various competitors which offered similar prod- tucts and services. Thus, it was imperative that Banyan Tree retained its competitive advantage to prevent losing its distinctive position in the marketFE Case8 Banyan Study Questions 1. Whatare the main factors that conteibuted to Banyan Tree's success? ~~ ? 3 Evaluate Banyan Tree's brand positioning and communications strategies. Can ‘Banyan ‘Tree maintain its ‘unique positioning in an increasingly overcrowded resorts market? & Discuss whether the\brap@l portfolio of Banyan Tree, Angsana and Colours of Angsana, as viell as the product portfolio of besth resorts and city hotels spas, galleries and museum shops fit asa family. What are your recommen to Banyan ‘Tree for ‘managing these brands and products in future?