Section G2, Team (5)

S I N G A P O R E M A N A G E M E N T U N I V E R S I T Y ( S M U )


MGMT 102 STRATEGY
BANYAN TREE HOLDINGS LTD
Birgitte SKAAR <G1310711X>
Nicholas SEE-TOH Yi Feng <S9023413G>
Nicholas Sean TAN Chien Loong <S8941215C>
Nick SIM Jing Jie <S8944630I>
NG Guang Jie <S9031194H>
TAY Li Er <S9228351H>
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TABLE OF CONTENT
EXECUTIVE SUMMARY """""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" #
1. COMPANY BACKGROUND AND HISTORY """"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" #
2. EXTERNAL ENVIRONMENT """"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" #
2.1. GENERAL ENVIRONMENT ............................................................................................................. 1
2.2. PORTERS FIVE ANALYSIS (HOTEL INDUSTRY) ............................................................................ 3
2.3. FUTURE TRENDS ........................................................................................................................... 4
2.4. COMPETITOR ANALYSIS ............................................................................................................... 5
3. INTERNAL ENVIRONMENT """""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" $
3.1. BANYAN TREES CORE COMPETENCIES ....................................................................................... 5
3.2. BANYAN TREES VALUE CHAIN ANALYSIS ................................................................................. 8
4. BUSINESS-LEVEL STRATEGY """""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" %
4.1. DESCRIPTION ................................................................................................................................ 9
4.2. ASSESSMENT ............................................................................................................................... 10
4.3. BUSINESS-LEVEL COOPERATIVE STRATEGY .............................................................................. 10
4.4. RECOMMENDATIONS .................................................................................................................. 11
5. CORPORATE-LEVEL STRATEGY """""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" #&
5.1. DESCRIPTION .............................................................................................................................. 12
5.2. ASSESSMENTS ............................................................................................................................. 14
5.3. CORPORATE-LEVEL COOPERATIVE STRATEGY .......................................................................... 14
5.4. RECOMMENDATIONS .................................................................................................................. 15
6. INTERNATIONAL-LEVEL STRATEGY """"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" #$
6.1. DESCRIPTION .............................................................................................................................. 15
6.2. INTERNATIONAL COOPERATIVE STRATEGY ............................................................................... 16
6.3. INTERNATIONAL ACQUISITIONS ................................................................................................. 16
6.4. ASSESSMENTS ............................................................................................................................. 18
6.5. RECOMMENDATIONS .................................................................................................................. 18
7. COPORATE GOVERNANCE """"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" #%
8. CONCLUSION """""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" &'
9. APPENDICES """"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" &#
9.1. APPENDICES FOR INTERNAL ENVIRONMENT ................................................................ 21
9.2. APPENDICES FOR CORPORATE GOVERNANCE .............................................................. 22
10. REFERENCES LIST """""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" (#
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EXECUTIVE SUMMARY
Established in 1994, Banyan Tree Holdings was founded by avid traveller and journalist, Mr.
Ho Kwon Ping and his wife. Its primary business involves developing and managing luxury
villas and resorts in the Asia Pacific region. Essentially, the Banyan Tree brand is
synonymous with a sanctuary of senses and eco-friendliness.

In general, the hotel industry is an unfavorable industry, characterized by high barriers to
entry, high rivalry amongst existing players and high bargaining power of buyers. Despite the
unattractiveness of the industry, Banyan Tree is able to leverage on its core competencies and
emerge as one of the leading high-end resort provider in Asia Pacific.

Through a focused differentiated strategy for its business-level strategy, Banyan Tree targets
the affluent travellers (mainly couples) by providing high-end villas and resorts. For its
corporate-level strategy, Banyan Tree employs a related constrained diversification strategy.
The company offers a complementary set of product offerings, which includes spa, dining,
golf, and galleries facilities. Banyan Tree also engages in the construction and leasing of
hotels, resorts and apartments. Lastly, the company engages in consultancy and fee-based
management for other hotels in the industry. By diversifying into different businesses,
Banyan Tree is able to leverage on its expertise in the industry to create value.

In a bid to increase its market size, Banyan Tree actively pursues an international strategy.
The company now operates in more than 28 countries worldwide, where 18 are in Asia
Pacific. Through a global strategy, Banyan Tree can easily replicate its concept and product
offerings worldwide by adapting to the local environment with little need for local
responsiveness.

Over the years, Banyan Trees main mode of expansion has been through greenfield ventures.
Despite the high cost and risk involved, greenfield ventures allow the company to have the
largest control and profits in comparison to other modes. The company also engages in joint
ventures and acquisitions but on a less regular basis.

Based on the findings, our group believes that Banyan Trees overall strategies have been
largely successful. However, the key challenges for the company moving forward are
preventing brand dilution, leveraging on its core competencies and expanding beyond As
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1. COMPANY BACKGROUND AND HISTORY
Banyan Tree Holdings (Banyan Tree) was founded by Mr. Ho Kwon Ping, and was named
after Banyan Tree Bay in Hong Kongs Lamma Island, where he and his wife spent idyllic
days while he was a reporter for an Asian magazine. Headquartered in Singapore, Banyan has
developed into a leading hospitality brand in the Asia Pacific, with further expansion plans
for the future. The company started in 1994 with a single resort in Phuket, eventually
growing into a global multi-business operator in 28 different countries today. The group
currently owns and manages 30 hotels and resorts, over 60 spas, 80 retail galleries and two
golf courses with a total of over 8000 employees.

Banyan Trees businesses gained momentum in 2012, recording revenues of S$338.4 million
in the fiscal year ended December 2012 - an increase of 2.7% over 2011. Net profit increased
by 856% to S$14.9 million, on the back of higher revenue and gain on a bargain purchase.
Banyan Tree remains cautiously optimistic of better results in the coming year.

Banyan Tree operates in the following three business segments:
Hotel Investments: Ownership and management of resorts and hotels is Banyans primary
business (55.5% of 2012 revenue). Banyan Tree owns two brands: Banyan Tree and Angsana,
and owns equity interests in 17 hotels, comprising over 1800 keys.

Property Sales: Property Sales (12.6% of 2012 revenue) comprises hotel residences sales
(sale of hotel villas or suites uses for leasing schemes), Laguna property sales (standalone
vacation homes in Laguna Phuket) and development project/site sales.

Fee-based: The fee-based segment (31.9% of 2012 revenue) is a catchall term, which
comprises the management and operation of third-party hotels, resorts, clubs, funds, spas and
galleries for a fee. Banyan Tree offers a range of consulting services extending to tourism
management, hotel management, architectural and design consulting. Revenue is also
generated through managing golf courses and renting of retail outlets and offices.
2. EXTERNAL ENVIRONMENT
2.1. General Environment
Demographic Segment: Banyan Trees target market is primarily made up of couples in
their mid-30s and 40s, who possess high discretionary income and strong purchasing power.
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This is attributed to Banyan Trees price point, where an average customer spends
approximately US$2500 for a four-night stay at Banyan Tree. Traditionally, Banyans
customer base is made up of European and American tourists. However, intra-Asian tourism
is on the rise and Banyan Tree is poised to benefit from the growth in Asian wealth.
According to a recent study by Capgemini and RBC Wealth Management, millionaire wealth
in Asia may top that of North America and Europe by 2014.

Economic Segment: The monetary easing policies pursued by developed economies since
the 2008 subprime crisis have contributed to improvement in market conditions and the rise
in market confidence worldwide. However, luxury hotels such as Banyan Tree continue to
face headwinds from an emerging market slowdown and a political impasse in the United
States. Nevertheless, while tourism from the Western world has since diminished, it has been
made up for by increased tourism from Asia, in particular China.

Political/Legal: Banyan Tree competes in an international market, where political stability
and legal framework varies from country to country. Banyan Tree currently competes mainly
in emerging market Asia, where there might be political instability and unfavorable rules and
regulations against foreigners. However, these countries often look to tourism as a source of
economic growth, which aids in negating this liability of foreigners.

Technological: The prevalence of the Internet has created online distribution channels for the
hotel industry. There are now websites where consumers can make reservations for hotels. At
the same time, the internet has inadvertently led to a more informed consumer base due to the
availability of extensive online information on hotels or alternative lodging available.

Sociocultural: With the modern traveller becoming increasingly sophisticated, hotels and
travel agencies have begun offering differentiated experiences to cater to unique tastes. There
is also a rise in eco-tourism due to increased in environmental awareness. Hotels such as
Banyan Tree, which provide an exotic and yet environmentally friendly experience is able to
attract such travellers.

Physical: The tourism industry, and by extension, the hotel industry is particularly
susceptible to effects of natural disasters and epidemics. For example, areas in Thailand
affected by the floods in 2008 saw a decrease in tourism and SARS resulted in a standstill in
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the Chinese tourism industry at the peak of the outbreak. As such, the hotel industry can
expect to experience setbacks during such disasters and epidemics.

Global: The slow and gradual shift in economic power from the West to Asia could mean
greater diversification in the hotel industrys consumer base. To cater to the ever-changing
needs of the consumers, the hotel industry might look into expanding and improving on its
product offerings.
2.2. Porters Five Analysis (Hotel Industry)

Figure 1 Hotel Industry Porter's Five Analysis
Threat of New Entrants (Low): Barriers of entry are very high, due to huge capital
requirements and hotel development know-how. This is coupled with a high possibility of
retaliation from existing hotel chains, which enjoy strong brand equity. Therefore, it is
difficult for new entrants to enter the industry or reap above average returns.

Bargaining Power of Suppliers (Moderate): The hotel industry is heavily reliant on
services. Examples of key supplies include labour and hotel room supplies. Hotel room
supplies are not specialized products and the threat of forward integration by suppliers is low.
However, labour can be specialized and crucial to a firms daily operation, allowing the
employees to possess a relatively high bargaining power. Additionally, landowners and
developers possess significant bargaining power. This is because a premium is placed on
locations, while development costs incurred are often passed through to the hotel owner.
Nevertheless, property transactions only occur on one-time basis. As such, hotels face low to
moderate bargaining power of suppliers in their daily operations.

SuIier Iover
uyer Iover
Threal of
Subslilule
Degree of RivaIry
Threal of Nev
Inlranls
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Bargaining Power of Buyers (Moderate High): Retail consumers enjoy low monetary
switching costs between hotels. However, hotel chains attempt to increase this switching cost
through its service offering, by providing differentiated services or passing cost savings to the
consumers. This in turn lowers consumers bargaining power as they develop brand loyalty
towards the hotels. Conversely, corporate customers enjoy a higher degree of bargaining
power, as corporations often enter into contracts with hotels for business trips or conferences.
Such business contracts represent high recurring incomes, thereby increasing the bargaining
power of corporate customers.

Threat of Substitute Products (Moderate): The Internet has increased awareness of
alternative lodging arrangements (bed and breakfast arrangements, hostels, couch surfing).
Consumers have the ability to switch between these options, and might especially turn to
such substitutes during an economic downturn. However, the overall experiences these
alternatives provide are vastly different and it is unlikely that customers would switch down.

Intensity of Rivalry among Competitors (High): The hotel industry is characterized by
high level of rivalry amongst competitors. This leads to different hotels pursuing different
competitive strategies. While some hotels focus on cost (and to some extent price) leadership,
others focus on differentiation to create a unique experience, all in a bid to increase market
share.

From Porters Five analysis, the hotel industry is clearly not a favorable industry to enter, due
to high competitive pressures which limits the ability to earn above average returns.
2.3. Future Trends
Travelers today are well informed with information and comparison of service standards is
readily available on the Internet. As such, competition is expected to stiffen as hotels
compete aggressively to achieve competitive advantages and operational efficiencies.

This competition may in turn lead to higher innovation, and more value-added service
offerings. An example is the rise of the boutique hotels, which operate under a unique service
concept while offering full service accommodation. Moving forward, hotel chains are
expected to compete by offering more innovative products and services, ultimately benefiting
the consumer.
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2.4. Competitor Analysis
We have picked 2 competitors Club Med and Starwood to be the most similar to Banyan
Tree Holdings. Overall, the 3 firms have market commonality to varying degrees.

Club Med operates all-inclusive resorts with a similar focus on eco-tourism. Market
commonality between Club Med and Banyan Tree is high, as both companies are active in
the Asia-Pacific region. However, Banyan Tree possesses a stronger presence in China while
Club Med has a stronger presence in Europe.

Starwood, like Banyan Tree, is currently pursuing an aggressive expansion into China, where
it has opened 20 Chinese hotels in 2012. Unlike Banyan Tree, Starwood has a good mix of
eco-resorts and urban hotels. This limits the market commonality between these two firms,
as there will be less direct competition.
3. INTERNAL ENVIRONMENT
In this section, we will be examining Banyan Trees internal environment with regards to its
four core competencies, as illustrated in the following table.

Core Competencies Valuable Rare Costly-to-
imitate
Non-
substitutable
Comments
a. Brand ! ! ! ! Above-average profits
b. Management team ! ! ! ! Above-average profits
c. Organizational culture ! ! ! ! Above-average profits
d. Innovation ! ! ! ! Above-average profits
Figure 2 Banyan Tree's Core Competencies
3.1. Banyan Trees Core Competencies
Brand: Banyan Tree has established itself as a reputable brand in the medium-size luxury
resort industry, winning over 971 international awards and was termed Asias Leading
Resort Brand at the World Travel Awards 2012. Banyan Tree has built a niche branding
based on two core values: being a sanctuary of the senses and a socially and
environmentally responsible company. To achieve the former objective, Banyan Tree utilizes
its physical and innovation resources, placing strong emphasis on its villas design, facilities
and service offering to create a romantic and relaxing ambience for all visitors. For the latter
objective, Banyan Tree actively manages its corporate responsibility through the Triple
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Bottom Line approach of attaining economic, social and environmental success. Banyan Tree
could also deliver a high level of service quality due to its human resources; essentially
fulfilling the service offering which it is branded upon.

Banyan Trees brand and reputation are valuable intangible resources for the company.
Leveraging on its core competency, Banyan Tree is able to build strong brand equity and
stand for a luxury experience to its consumers. This allows Banyan Tree to capture value by
attracting new and retain existing customers. Additionally, Banyan Trees brand and its core
values are rare in the industry, with none of its close competitors possessing this unique mix
of attributes. Since Banyan Trees branding has been built over several years, unique
historical conditions prevent easy imitation by its competitors. Additionally, there are also no
strategic equivalents for brand and reputation. Therefore, Banyan Trees niche branding is
one of its core competencies, with brings about above-average profits.

Management Team: The competency of Banyan Trees management team is built on its
human resources and expertise. The founder, Mr. Ho Kwon Ping is an iconic figure who
charts the overall strategic direction for the firm and believes actively in building the Banyan
Tree brand. The management team boasts of an excellent track record since Banyan Trees
inception, with many years of experience in the hospitality industry under its belt, while a
diversity of opinions fosters innovation at the group level. In all, the combined expertise of
the founder and the management team allows Banyan Tree to build and grow on its success.

Bayan Trees management team is a valuable asset for the company. The team spearheads
brand-building initiatives and possesses superior expertise at choosing choice sites, while
ensuring exceptional execution of resort development and management. While other
competitors may possess their own management teams, the proven track record of Banyan
Trees management team is considered rare and unique in the industry. In the aftermath of the
2008 subprime crisis, having an effective management team is especially important to steer
the company out of crisis. In contrast, due to poor control and execution by the management
team, competitors such as Club-Med currently face dire financial situations. Additionally, it
is difficult to imitate the management team, as it is a result of social complexity. Lastly, there
is no strategic equivalent for an effective management team. Therefore, Banyan Trees
management team is considered to be a core competency for the company.

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Organizational Culture: Banyan Tree has established a strong corporate and employee-
centric culture, due to its human and reputational resources. Banyan actively provides local
employment opportunities for the communities that it operates in. It also gives back to the
local community, by helping to eradicate social and environmental issues. This has helped
built a strong local reputation for Banyan Tree and deepens employees appreciation to the
company, which has a positive influence on service standards. Furthermore, Banyan Tree has
its own spa academies to provide certified training for spa therapists, while the Banyan Tree
Management Academy develops its future managers. Lastly, there is a high sense of
empowerment and self-responsibility in the employees. Employees view themselves as
proactive facilitators of memorable experiences, which in turn increases their willingness to
take initiatives and participate in problem solving.

Bayan Trees employees and culture are valuable tangible assets for the company. The
unique culture delivers a high level of customer service to the consumers and is key to the
well-known Banyan experience. Banyan Trees corporate culture can also be considered as
rare, as it is built on local community involvement. Additionally, competitors may find it
difficult to imitate Banyan Trees culture since it is the result of unique historical conditions
and social complexity. Lastly, there is no strategic equivalent for a corporate culture. Hence,
Banyan Trees corporate culture is a core competency for the firm.

Innovation: Banyan Trees vertically integrated organizational structure, where training, spa,
location and service design are all conducted in-house, facilitates innovation which improves
on service levels. This creates a conducive environment for idea generation and collaboration
between all service elements of a resort. The management team also takes on an experimental
approach to innovation by encouraging staff to give creative service. This has resulted in
synergies between the various segments, leading to innovative ideas such as the Banyan
Trees tropical garden spa pavilions for couples, a first in the industry.

Banyan Trees innovation capability allows for the firm to capture value at higher price
points. Thus, customers are willing to pay for a more customized service instead of a
standardized one. It is rare as most hotels and resorts do not have the same resources in-house
and actually outsource many of these functions. Social complexity and the pooling of minds
from different functional areas render it costly to imitate. It is also intangible and cannot be
easily substituted. Therefore, Banyan Trees innovation capability serves as a core
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competency. These core competencies effectively serve as a source of a sustainable
competitive advantage for Banyan Tree.
3.2. Banyan Trees Value Chain Analysis
To better understand the activities that Banyan Tree can leverage its core competencies on,
we will be conducting a value chain analysis on the companys business model. With
reference to the previous section, we have identified Banyan Trees four core competencies
to be the following: brand, management team, organizational culture and innovation.

Primary Activities
Marketing: Centralized marketing capabilities have enabled Banyan Tree to build up its
branding, which serves as a core competency. This is done through public relations and
global marketing programs, where travel editors and writers are encouraged to make visits to
its resorts. Banyan Tree also chose to work only with agents specializing in exclusive luxury
holidays targeted at wealthy customers. By being meticulous about its marketing collaterals
and strategies, Banyan Tree has succeeded in preserving a refined and upscale image, which
serves to satisfy customers needs and attract new customers.

Operations: Banyan Trees management team sets service standards based on customer
satisfaction, rather than specified technical terms such as times and quantities. The process of
service delivery could vary according to the local culture as long as it is consistent with
Banyan Trees brand promise and a high level of service quality. This has resulted in service
excellence and created a customized guest experience. The culture of flexibility while
affording quality service creates value for customers and is difficult for competitors to copy.

Support Activities
Procurement: Banyan Trees management team has developed expertise in working with
local communities and has since developed positive relationships with local suppliers. This
allows them to source for inputs which range from building materials of Banyans hotel and
resorts, food ingredients at Banyans in-house dining restaurants, to artistic crafts sold at
Banyans galleries. By sourcing locally, Banyan Tree is able to deliver value to its customers
by lowering costs and reducing its ecological footprints.


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Overall Value-Chain Analysis:
In general, Banyan Trees core competencies are value creating in both the primary and
supporting activities. However, for the firm to sustain long-run profitability, the key lies in
extending activities involving the core competencies, or simply developing more core
competencies through the relevant value chain activities.
4. BUSINESS-LEVEL STRATEGY
4.1. Description
Within the hotels and resorts industry, Banyan Trees hotel investments arm employs a
focused differentiation strategy to create value. This is achieved through its two signature
brands: Banyan Tree and Angsana, which compete in narrow competitive scopes. Banyan
Tree targets a niche market: affluent travellers who desire exclusivity, private and intimate
accommodation in a luxury villa setting. Angsana targets another niche market: the modern
traveller with contemporary and chic tastes. Banyan Tree has since emerged as one of the
leaders in the Asian hospitality industry, with its brand synonymous with a blend of distinct
product features (Spa and Art Galleries), rich local flavor and excellent customer service.
This essentially forms a unique competitive advantage, which Banyan Tree exploits to create
value.

Banyan Tree also targets the sharp price gap between the higher-end luxurious Aman resorts
and the other lower-end resorts in the luxury resort market. For example, Amanpuri in
Thailand charged a rack rate ranging from US$650 to over US$7000 a night, while other
resorts such as Shangri-La Hotel in Thailand charged below US$350. Hence, Banyan Tree
offers a niche product which bridges this price gap, where rack rates are priced between
US$1200 to US$5000 a night. This is through its positioning as a romantic escapade, and
building customers relationships through increasing richness and affiliation to enhance
customer satisfaction. Products and services offered were conceived with the desired
customer experience in mind, effectively delivering superior value.

In a departure from the luxury segment, Banyan Tree is in the midst of developing a third
hotel brand, which will entail offerings that are more affordable. It would bear the same
hallmarks: design, innovation and quality experience of the Banyan Tree brands. This
represents yet another niche market, which is concerned about design, quality, and at the
same time more price conscious.
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4.2. Assessment
Focused Differentiation in its External Environment: Effective branding has helped
Banyan Tree avoid strong price competition and intense rivalry in the mass hotel
accommodation market. This focused differentiation service has in turn built customers
loyalty, insulating Banyan Tree from customer price sensitivity, reducing bargaining power
of buyers and preventing customers from switching to lower cost substitutes. Moreover, it
erects barriers to entry, as competitors would have to invest significant resources to build a
similar offering. The need for differentiated supplies such as excellent customer service
would lead to an increased bargaining power of suppliers. However, Banyan Trees niche
offering allows it to reap margins which could negate the high costs.

Key Risks: A key risk to the focused differentiation strategy is that competitors could deem
Banyan Trees niche segment worthy of competitive pursuit and develop similar concepts.
This can be seen in popular destinations such as Bintan and Bali, where there is a steep
increase in the number of luxurious resorts over the last few years. To fend off the
competition, Banyan Tree has attempted to increase its product differentiation and build on
its unique branding. Additionally, it has attempted to diversify its concentration risk by
creating Angsana, a more contemporary and affordable brand to cater to the younger crowd.

Banyan Tree is also subject to cyclical conditions due to its high-end target market. This has
in turn forced Banyan Tree to put off expansion plans in Europe and the Americas following
the 2008 subprime crisis. Hence, Banyan Tree seeks to diversify to other geographic regions
to reduce its exposure to cyclical conditions in Asia.
4.3. Business-level Cooperative Strategy
Banyan Tree engages in horizontal complementary strategic alliances, where it shares
resources and capabilities with other resorts. As part of this strategy, Banyan Tree has joined
external tour operator programmes and listed itself as a member of Small Luxury Hotels.
These strategic alliances help Banyan Tree overcome its low arrivals from long haul markets,
as sales and marketing were targeted at regional markets. By sharing resources in marketing,
Banyan Tree is able to extend its reach to international tourists from France, England and
Germany. It has since proved to be an advantageous alliance, where Banyan Tree has since
partnered with other Small Luxury Hotels resort partners, credit card companies and
international travel clubs.
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Banyan Tree also engages in vertical complementary strategic alliances, partnering travel
booking websites such as Agoda and Booking.com. Essentially, such travel sites serve as an
intermediary between Banyan Tree and its retail customers, allowing Banyan Tree to have
more contact points with potential customers.
4.4. Recommendations
Banyan Trees unique competitive advantage centers on its branding. This is in sync with
Banyan Trees focused differentiation strategy. Competitors, who focus on the mass-market
hotels, would not be able to brand its service offering as effectively it would in the luxury
resorts segment. As such, Banyan Tree should continue executing a focused differentiation
strategy and building on its entrenched reputation.
Creating a separate high-end brand (Angsana) to target another niche segment of the luxury
resorts market has proven to be successful for Banyan Tree. This has prevented brand
dilution as Banyan Tree and Angsana represent different experiences in customers minds. It
important for Banyan Tree to continue managing both brands effectively and prevent
confusion to their customers. For instance, spas of Banyan Tree and Angsana resorts may
share the same procurement but can be managed differently to cater to their respective
markets.
However, the introduction of the third hotel brand, which focuses on affordability, could lead
to negative spillover effects to the Banyan Tree brand. We would not recommend Banyan
Tree to venture into the affordable hotel segment. Instead, it should concentrate on
developing luxury resorts in new locations under the existing Banyan Tree and Angsana
brand. Banyan Tree should not widen its product scope too broadly and cater to too many
markets at the same time.
On a product level, Banyan Tree could look into offering additional differentiated features
and further customizing the Banyan Tree experience. This can help to provide further value
and enhance the relationships with its customers. Examples may include improving on the
customer relationship management through customization bonds and capturing the
preferences of their customers through loyalty program databases. Providing preferred drinks
and snacks in the minibar or newspapers they would like to receive in the morning are
practical examples. Financial benefits in the form of airport transfers could also be introduced
to create a seamless travel experience where customers are well taken care. However,
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discretion should be exercised when introducing these features. The focus should not be on
providing a large variety of product features, but what the customers would appreciate. Costs
and benefits should also be effectively balanced.
5. CORPORATE-LEVEL STRATEGY
5.1. Description
At the corporate level, Banyan Tree utilizes related constrained diversification, with interests
in numerous industries that are linked to the hotel industry. Hotel Investments, Banyan Trees
core business area, generated 55.5% of revenue in 2012, indicating a relatively high level of
diversification. Banyan Tree has since adopted a vertically integrated business model, with its
ancillary businesses sharing product, distribution and operational links with its core business
of the ownership and management of resorts. Its practice of owning several links in the value
chain, such as resort design, land development, and marketing and branding, as well as by
developing and managing complementary product offerings, such as Spa services and Golf
courses, is crucial in controlling the service experience at the Banyan Tree Resort.

Value-Creating Diversification
The links between Banyan Trees various concerns allow the company to exploit economies
of scope and increase its market power. Banyan Tree is able to benefit from increased
corporate relatedness where it transfers its core competencies. An example is exploiting its
core competency: its experienced management team, which provides strategic insights on
building the Banyan Tree brand and performing effective integrated brand communications
across different functions. Moreover, Banyan Tree creates value through operational
relatedness, sharing both primary and support activities of differing industries. The Company
shares and consolidates marketing, branding and promotion resources across its subsidiaries
through its wholly owned subsidiary, the Canopy Marketing Group. These increases market
power as centralized marketing of Banyan Trees businesses effectively brings costs down.

Spa Operations: Banyan Tree is able to enjoy economies of scope through its spa operations.
Banyan Tree transfers its core competencies (branding) to the Banyan Tree Spa where
together they build on each others product to offer a sanctuary for the senses. They also
share support activities, where all the staffs are trained in-house. Additionally, the staffs are
instilled with a strong sense of corporate culture, a core competency of Banyan Tree.

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Gallery Operations: Banyan Tree Gallery is built upon the vision of preserving and
promoting traditional craft skills from the local communities where Banyan Tree operates.
This is important to Banyan Tree, which is known for its environmental friendliness and
social responsibilities. Additionally, this creates value by successfully showcasing and
inspiring appreciation for local culture and heritage, improving on Banyan Trees signature
local-flavored resorts.

Architecture and Interior Design: In its architectural and interior design business
Architrave, Banyan Tree leverages on its experience and knowhow in developing luxury
resorts to service third party hotels and resorts, such as Le Meridien, India. This creates value
through economies of scope and the sharing of design capabilities. Furthermore, Architraves
designs have been tried and tested, and successful design concepts are not easily imitable.

Property Sales: Property sales mainly consist of the sale of resort residences in Laguna,
Phuket. This is where Banyan Tree leverages on its experience to take on the role of a real
estate developer in popular tourist destinations. Some of these sales take the form of sales
and leaseback schemes, where Banyan Tree manages their residences for a fee.

Real Estate Hospitality Funds: Banyan Tree Capital was set up to tap on private equity and
other sources of investments in order to provide a cost efficient structure to fund the Groups
future developments. This represented a method where Banyan Tree could access cheaper
sources of funding, while engaging in sale and leaseback of its hotels and resorts. While
Banyan Tree reaps valuation gains and recurring management income, fund investors would
in turn enjoy property rental yields and capital appreciation.

Value-Neutral Diversification
Uncertain Future Cash Flows: Banyan Tree operates in a cyclical hospitality industry,
which is affected by both the economy, and even natural disasters and epidemics.
Furthermore, Banyan Tree faces increased competition in the luxury resorts market. By
diversifying into fee-based businesses, Banyan Tree could earn stable cash flows.

Synergies and Firm Risk Reduction: Synergy exists as Banyan Tree creates value through
its multiple business units working together. This has led to increased innovation and
complementary service offerings, effectively creating a unique Banyan Tree experience.
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Increased interdependence between business units might increase its risk of corporate failure
and constrain the firms ability to respond. Hence, Banyan Tree only enters selected
industries which are related to the hospitality industry. This risk aversion allows Banyan Tree
to concentrate only on industries which create value.

Resources and Diversification: The competencies which underlie Banyan Trees
competitive advantage are valuable, rare, intangible and hard to replicate. Furthermore,
excess capacity of hotel service staff, marketing and free cash flow allows Banyan Tree to
create value and explore other product markets.
5.2. Assessments
Banyan Trees strategy of vertical integration and providing a complementary suite of
products and services has successfully helped Banyan Tree in differentiating itself.
Additionally, it has created value for the firm through the links between business segments.
For a firm like Banyan Tree, it is crucial to maintain the integrity of their brand, the quality
and consistency of service levels, design architecture, as well as provide an integrated,
holistic experience to their customers. Leveraging on its vertical integration, Banyan Tree
could build a resort from scratch in two years, compared to the industry norm of five years.
This was due to shared culture, flexibility, rapid and informal decision-making. Conversely,
other hotel chains may have to enter strategic alliances or outsource these functions.
5.3. Corporate-Level Cooperative Strategy
Banyan Trees utilizes a diversifying strategic alliance to share its resources or capabilities
and engage in both product and geographic diversification. An example is the strategic
alliance with Oberoi Group, to manage spa operations at Oberoi Resorts. The alliances allow
Banyan Tree to venture into operating spas at third-party resorts, and attain geographic
diversification in its spa business. Hence, Banyan Tree was able to exploit its spa capabilities
and generate higher revenue for the group. However, Oberoi Group has since decided in 2010
to exit the partnership and manage its spa operations in-house, because it has since developed
reputation and know-hows of a spa operation. This is a distinct example of knowledge
transfer and the threat of competition. Nonetheless, Banyan Tree still actively pursues more
potential strategic alliances with boutique hotel chains to operate Banyan Tree Spas. It
remains part of Banyan Trees goal to build a travel and leisure brand beyond hotel and
resorts. However, caution should be exercised to prevent history from repeating itself.
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5.4. Recommendations
Moving forward, we would recommend that the firm continue to pursue its interest in above-
mentioned industries. This is because it allows Banyan Tree to create substantial value
through its unique branding, while reaping the benefits of an asset rebalancing strategy. To
sustain its expansion plans, a larger emphasis can be placed on launching more specialized
real estate funds under Banyan Tree Capital. An example can be a Europe Hospitality Fund,
which concentrates on identifying suitable investment opportunities in Europe. Another
alternative would be the listing of a hospitality real estate investment trust (REIT) as the
hospitality REIT industry matures. This would afford Banyan Tree the financial resources
required by either developing resorts for sale to such funds, or managing more resorts on
behalf of these funds. Its strategy of vertical integration has worked well in the past, and the
firm continues to demonstrate the ability to create value across its businesses. Hence, we
would not recommend that they outsource these functions.
6. INTERNATIONAL-LEVEL STRATEGY
6.1. Description
Founder Hos vision was to string a necklace of Banyan Tree resorts around the world. He
has been successful to a certain extent, with Banyan Tree resorts currently operating in Asia
(primary market), Mexico, Morocco, New Zealand and Dubai. There are three underlying
reasons beneath its international strategy. By expanding overseas, Banyan Tree is able to
increase its market size by gaining access to foreign markets. An example of this is Bali in
Indonesia, where the company actively reaps key location advantages and assesses critical
resources such as choice locations. Additionally, international expansion allows Banyan Tree
to gain access to exotic locations with close proximity to a nice beach. These features are
keys to crafting the Banyan Tree experience. This would in turn bring a steady stream of
tourists to achieve a return on investments. Lastly, Banyan Tree would also reap economies
of scale where its marketing and design services costs are spread over a larger sales base.

Internationalization Strategy
Banyan Tree adopts a global strategy, where they essentially replicate a resort with the same
hardware and software in international locations. In terms of hardware, Banyan Tree resorts
all feature individual villas with private pools, access to a nice beach, Banyan Tree Spa and
gallery operations. With regards to the software, each resort adapts to its local environment
and hire local service staffs. However, service delivery processes may vary across countries,
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as long as it is consistent with the brands image of romance and intimacy. There is a need for
high global integration, since the resorts share resources such as marketing, branding, design,
spa and gallery operations. It is important to note that Banyan Trees target market is not the
host countrys citizens, but an international target market of tourists. Hence, local
responsiveness is not central to Banyan Trees strategy, as Banyan Tree does not differentiate
between an Asian or Western tourist. Instead, adapting to the local environment is imperative,
where a showcase of the culture of the host country is an attractive tourist draw.

Entry Modes
Through their global expansion strategy, Banyan Tree utilizes 3 different modes of entry:
Greenfield ventures, joint ventures and acquisitions.

Greenfield Ventures
Greenfield ventures are Banyan Trees dominant entry mode. Despite the high costs involved,
it allows for highest control and potential returns. It is imperative that Banyan Tree controls
most elements of its service offering, as close contact with customers, competent
management skills and customization are essential. However, Banyan Tree has to contend
with insufficient local knowledge and relationships, which might negatively impact the
establishment of Banyan Tree resorts. As such, Banyan Tree actively hires consultants or
host-country nationals to obtain information and knowledge on the new market.

6.2. International Cooperative Strategy
Banyan Tree also uses cross-border international alliances (Joint Ventures), though less
frequently. For instance, Banyan Tree has partnered Salvador B Zamora II, a prominent
businessman to develop luxury resorts in the Philippines. This allows Banyan Tree to exploit
their core competencies, while attaining key resources such as market access, regulatory
approval and financial capital. Equity stakes in such joint ventures range from as low as 20%
to majority stakes in accordance to the resources both partners commit, while it provides
learning opportunities for Banyan Tree in foreign institutional environments.

6.3. International Acquisitions
Banyan Tree Holdings participates in both cross-border vertical and horizontal acquisitions.
Firstly, Banyan Tree acquires companies, which own parcels of land (vertical) in premium
locations where they can develop a Banyan Tree Resort. Secondly, Banyan Tree also buys up
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existing resorts in various geographic locations (horizontal) such as Jayanne Internationals
villas in Seychelles. This allows Banyan Tree to overcome market entry barriers and
governmental regulations, where government licenses may be necessary. Furthermore,
participating in acquisitions reduces the time and risks Banyan Tree require entering these
new markets. Also, Banyan Tree can retain the customers from these existing resorts while
undertaking asset refurbishments before commence business. This is imperative as Banyan
Trees vision is to become a global hotels and resorts player, and acquisitions allow Banyan
Tree to enter the market in the shortest possible time.

Integration
Banyan Trees acquisition targets often have a low need for organizational autonomy and
strategic independence. This is because Banyan Tree will provide its branding and resort
management expertise, while its acquisitions are targeted at strategic assets such as land and
villas, and not to integrate two separate resorts. Hence, upon acquiring resorts and villas,
Banyan Tree would conduct extensive renovation works to upgrade their facilities, build new
spa amenities and a Banyan Tree Gallery. Essentially, the resorts and villas are transformed
into a typical Banyan Tree resort with the brands common attributes. This is hastened by a
creation of internal project teams, which consists of project, spa, general and purchasing
managers and architects. The group meets regularly and has the authority to make decisions,
hence reducing the time to market of the newly refurbished Banyan Tree resort.

Banyan Trees Disposal Strategy
Banyan Tree Holdings actively engages in asset disposals through sale and leaseback
arrangements. One such example is the sale of the Angsana Velavaru resort in the Maldives
to CDL Hospitality Trust, where CDL will lease the resort back to Banyan Tree under a 10
year management contract. Banyan Tree will receive a tiered management fee ranging from
20% to 40% of the propertys gross operating profit in excess of US$4.5 million. These deals
are usually a win-win for both parties, whereby CDL will acquire the real estate while
Banyan Tree keeps the hotel management contract and usually record a gain from sale. Hence
Banyan Tree realizes the value on its balance sheet, while releasing capital to further develop
other Banyan Tree resorts. Capital can then be utilized for future Greenfield projects or
acquisitions.


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Current Plans
Banyan Tree is currently looking to expand aggressively through the use of more joint
venture projects to gain market access to places such as China and Philippines. Moreover, it
is looking to expand to Europe and America, with its sight set on places such as Napa Valley
in California, Tuscany in Italy and Greece.

6.4. Assessments
Banyan Tree has already seen success on the international stage, where it has expanded
beyond Asia and into distant countries such as the UAE. This could imply further success in
in Europe and America in the future. It could also be an effective proxy to growth in Europe
and the United States, as they begin to recover from the 2008 subprime and Eurozone crisis.

However, the fact remains that the Banyan Tree brand is still seen as a pan-Asian brand and
the success of an Asian brand of tourism in Europe and America is far from guaranteed.
Moreover, the usage of multiple joint venture companies to expand quickly would also mean
increased risks for Banyan Tree. Such joint ventures might lead to possible incompatibility,
conflict and the possible creation of a new competitor.
6.5. Recommendations
Banyan Tree pursues a global strategy of replicating a Banyan Tree experience in different
host countries. This is underlined by its branding, which serves as a source of competitive
advantage. Hence, Banyan Tree has to define clearly its core and peripheral product offerings.
Our group believes that the core should concentrate on delivering excellent service, a private
and luxurious experience, with the peripheral being the adaptations to the local market.
When expanding to Europe and other regions, the core should be retained while the
peripheral can be altered to cater to the local environment. For example in Italy and France,
more emphasis could be placed on showcasing the countrys rich food and wine culture,
instead of Asian massages.

Furthermore, Banyan Tree has to develop itself as a lifestyle brand, instead of being just an
Asian brand. This is imperative for success in Europe and America, because tourists
travelling from Asia to Europe would not be looking for an Asian-branded resort. Similarly,
European travellers looking for a taste of Asia would rather visit resorts in Asia for a more
localised experience. In line with the above observation, Banyan Tree has to brand itself as a
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provider of exclusive and luxurious services with a touch of local flavors, as compared to
being an Asian centric resort. International tourists would then learn that a Banyan Tree
resort can be associated with certain attributes - a strong service culture and service standards
such that they can experience the best of the local country of interest. This would allow
Banyan Tree to capture value in the foreign markets, and successfully reap the success of a
global strategy.

Lastly, Banyan Tree should exercise caution in choosing its joint venture partners.
Furthermore, Banyan Trees minority stakes in some joint ventures render it low bargaining
power. It may be beneficial to find partners that do not operate in the hotel industry, but are
able to provide the necessary expertise e.g. financial and legal expertise and yet allow
Banyan Tree to retain control. Examples of such partners are conglomerates with diversified
business interests. This would prevent the creation of a competitor, and allow Banyan Tree to
impose its full service concept on the resort that it develops. By doing so, Banyan Tree would
reap the benefits of learning in a foreign country, while expanding and gaining market access.
7. COPORATE GOVERNANCE
Ownership Concentration: Banyan Trees ownership is heavily concentrated in the hands
of two corporations, namely Bibace Investments Ltd. and Qatar Investment Authority. Bibace
Investments Ltd is an investment vehicle of Executive Director Mr Ho Kwon Ping, with little
other public information available. Qatar Investment Authority meanwhile is a Sovereign
Wealth Fund owned by the State of Qatar. 3 other directors with a notable stake in the
Company are Group Managing Director Mr Ariel Pvera, Independent Director Mr Chia Chee
Ming Timothy and Independent Director Elizabeth Sam with 0.13%, 0.03% and 0.02% stake
respectively. As Banyan Trees managers are effectively high percentage owners, this implies
less agency problems arising from separation between ownership and managerial control.

Board of Directors: The Companys Nominating and Remuneration Committee (NRC)
reviews annually the size and composition of the Board and Board Committees, and their
skills and competencies to ensure an appropriate mix of expertise, skills. This aids in
managing the growing firm and increasing its returns. Moreover, the companys Articles of
Association require that every director retires once every three years and that one-third of
Directors shall retire and subject themselves to re-election by shareholders at every AGM.
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Most of the board is also made up of independent directors, which helps to improve
managerial monitoring and control, protecting the interests of shareholders.

Executive Compensation: The Company introduced The Performance Share Plan (PSP) and
Restricted Share Plan (RSP) to strengthen its competitiveness in attracting and retaining
talented key executives. These initiatives align the interests of both the key executives and
shareholders, improving performance and achieving sustainable growth for the Company
through fostering a culture of ownership among key executives.

External Corporate Governance Mechanism: There remain no takeover defenses for Banyan
Tree, and hence Banyan Tree is relatively susceptible to potential owners seeking to acquire
undervalued firms.
8. CONCLUSION
In conclusion, Banyan Trees overall strategies have been in-line with its internal core
competencies and the external environment. On the business level, we maintain that Banyan
Tree should not venture into the affordable hotel segment. Banyan Tree should also continue
to pursue its corporate level strategy of related constrained diversification, which helps to
create value across the value chain. Another challenge is fulfilling its global aspirations. Our
group proposes that aside from continuing its current strategy to expand in Asia, the company
could look into penetrating the European and American market, and replicate the Banyan
Tree experience. Additionally, Banyan Tree has to take steps to refine its brand image and
move away from its Asian bias in such countries. In all, these strategies will help Banyan
Tree to build a stronger and more reputable brand and allow the company to fend off the
intense level of competition in the industry.
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9. APPENDICES
9.1. APPENDICES FOR INTERNAL ENVIRONMENT

Figure 3 Banyan Tree Stock Prices from 2006 to 2013 Source: Yahoo Finance

Figure 4 Banyan Tree Growth from 2008 to 2012 Source: Banyan Tree Annual
Report 2012
Banyan Trees growth and decline through the years
Listed in 2006, Banyan Tree stock price reached a peak of $2.90 in July 2007. However, the
United States subprime crisis and subsequent global financial meltdown soon hit the
company. Coupled with the political instability in Thailand Banyan Trees primary market,
the company profitability fell. By March 2009, Banyan Trees stock prices fell to an all-time
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low of $0.26. Towards 2010, growth rebounced but was subsequently hit again in 2011 by
Thai election and Bangkok flood, European soverign debt crisis and the ongoing American
debt crisis. Today, Banyan Tree is still struggling from the aftermath of the world economic
crisis. As American and European tourists rate fell drastically while growth for Asian tourists
rates have moderated. Moving forward, Banyan Tree key challenge lies in regaining and
exceeding pre-ecomomic crisis growth rates.
9.2. APPENDICES FOR CORPORATE GOVERNANCE
Case Studies on Acquisition
I. ACQUISITION OF SHARES IN MALDIVES BAY PVT LTD:
The Board of Directors of Banyan Tree Holdings Limited (BTH/the Company) wishes
to announce that the Company has acquired the remaining 6.57% interest in its subsidiary,
Maldives Bay Pvt Ltd (Acquisition) which comprises 2,300,000 shares (Shares).
The Acquisition was for a consideration of US$2,567,484 (approximately S$3,181,113)
arrived at on a willing buyer, willing seller basis, based on Maldives Bay Pvt Ltds
audited net tangible assets as at 31 January 2013. The Companys internal resources
funded the Acquisition. Consequent to the Acquisition, Maldives Bay Pvt Ltd became a
wholly owned subsidiary of BTH.

II. ACQUISITION OF SHARES IN JAYANNE INTERNATIONAL LIMITED:
The Board of Directors of Banyan Tree Holdings Limited ("the Company") wishes to
announce that the Company's wholly-owned subsidiary, Banyan Tree Properties Pte. Ltd.,
has entered into an agreement with the Company's 30% associated company, Banyan Tree
Seychelles Holdings Limited ("BTSH") to acquire 2 ordinary shares of US$1.00 each fully
paid ("JIL shares") in Jayanne International Limited ("JIL") (such acquisition hereinafter
called "the Acquisition"). After the Acquisition, JIL became a wholly-owned indirect
subsidiary of the Company.

JIL, a company incorporated in the British Virgin Islands, is the holding company of
Jayanne (Seychelles) Limited ("JSL"), a company incorporated in Seychelles. JSL owns a
double pool villa built on a parcel of land of approximately 1250 square metres situate at
Intendance, Mahe, Seychelles. The total consideration for the Acquisition is
US$900,000.00, payable in cash on completion, and was arrived at on a willing-buyer
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willing-seller basis taking into account the net asset value of the JIL shares in the unaudited
financial statements of BTSH as at 27 December 2006

III. ACQUISITION OF SHARES IN HILL VIEW RESORTS HOLDINGS LIMITED:
Banyan Tree Holdings Limited (BTH/the Company) wishes to announce that it has entered
into an Interest Purchase and Sale Agreement (IPSA1) with Immobiliere Sorento S.A. (the
Seller) pursuant to which the Company has acquired the remaining 70% equity interest in
Hill View Resorts Holdings Limited (HVR), which was an associated company of BTH
and in which BTH already held a 30% interest prior to the acquisition, together with the
Sellers outstanding shareholders loan to HVR of US$29,229,900 in value, for a total
consideration of US$23.5 million (HVR Purchase).

HVR is a British Virgin Islands (BVI) company which has a 100% equity interest in Hill
View Resorts (Seychelles) Limited which in turn has a 100% equity interest in Ocean Estate
(Seychelles) Limited, both companies of which are incorporated in the Republic of
Seychelles.

Immediately following the execution of IPSA1, HVR entered into an Interest Purchase and
Sale Agreement (IPSA2) with the Sellers parent company, Lindere Investments Limited, a
BVI company, pursuant to which HVR acquired 100% equity interest in Lindere Villas
Limited (LVL) for a purchase consideration of US$1.5 million (LVL Purchase).

LVL is a BVI company, which has a 100% equity interest in Lindere Villas (Seychelles) Ltd,
a Seychelles company (LVSL) that in turn directly owns the property known as the
Presidential Villa which abuts the Property (as defined below).

On completion of the HVR Purchase and LVL Purchase (collectively, the Acquisition),
BTH will be the sole owner of (a) Banyan Tree Seychelles (the Resort), a resort comprising
60 pool villas, 3 restaurants, a bar, gym, a catamaran, and a Banyan Tree gallery shop and spa,
which sits on approximately 33.5 hectares of freehold land with direct beach frontage; and (b)
approximately 77.5 hectares of adjoining undeveloped freehold land which may be used for
future expansion (collectively, the Property).

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Of the aggregate consideration for the Acquisition of US$25 million, US$8.5 million shall be
payable upon completion and the balance shall be payable in three equal instalments of
US$5.5 million in each of the following three years. US$8.5 million (comprising initial
payment of S$7 million for HVR Purchase and S$1.5 million for LVL Purchase) shall be
funded by the Company's internal resources, while the remaining US$16.5 million shall be
paid with a promissory note from the Company secured by a bank guarantee issued by The
Hongkong and Shanghai Banking Corporation Limited.

Based on an independent valuation report by HVS dated 3 April 2012 (Valuation Report),
which was commissioned by the Company, the market value of the Property is US$61.7
million as at 31 March 2012. The Valuation Report is prepared in accordance with
International Valuation Standards Committees definition of market value.

Case Studies
I. Banyan Tree Holdings Limited (BTH/the Company) wishes to announce that its
indirect wholly-owned subsidiary, Banyan Tree Yangshuo (S) Pte. Ltd. (BTY), has
entered into an equity transfer agreement with Tianjin Wan Yue Investment Co., Ltd.
(the Purchaser), a company incorporated in the Peoples Republic of China, for the
transfer of 100% of BTYs equity interest in Yangshuo Banyan Tree Hotel Company
Limited (YBT) to the Purchaser (the "Transfer"). The Purchaser is an investment
vehicle of the Banyan Tree China Hospitality Fund (I) (the China Fund).
Consequently, YBT is no longer a subsidiary of BTH.

The consideration for the Transfer is RMB 15,052,000 (approximately S$2,933,382)
(the Consideration) payable to BTY in cash in full on completion of the Transfer. The
Consideration was arrived at on a "willing buyer, willing seller" basis after taking into
account, inter alia, YBTs unaudited net tangible assets as of the date of acquisition.

The transaction does not have any material impact on the Companys earnings per
share and net tangible assets per share for the financial year ending 31 December
2011.

Mr Ho KwonPing, Executive Chairman and a controlling shareholder of the Company,
Mr Ho KwonCjan, Group Chief Designer and a controlling shareholder of the
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Company, and Mr Ariel P Vera, Group Managing Director of the Company, are also
directors of the Purchaser. The Company, through its subsidiaries, has committed to
invest an amount equivalent to at least 5% of the total capital commitments of the
China Fund. Messrs Ho KwonPing, Ho KwonCjan and Ariel P Vera do not own
shares in the Purchaser nor do they have any personal interest in the China Fund other
than through the Company. The Companys wholly-owned subsidiary, Tianjin Banyan
Tree Capital Investment Management Co., Ltd. is the General Partner of the China
Fund. Save as disclosed, none of the Directors or controlling shareholders of the
Company has any interest, direct or indirect, in the Transfer.

II. On Jan 4, CDL Hospitality Trusts (CDLHT) said it would buy Banyan Tree Holdings
Angsana Velavaru resort, which stands at the southern end of the Maldives
archipelago, a 40-minute seaplane ride from Male. The price tag for the 113-villa
resort is US$71 million (RM214 million), or US$628,000 per key.

That was a touch below the propertys US$72.5 million valuation by consultants
CBRE. We believe the proposition for Maldives is extremely strong, says Vincent
Yeo, CEO of CDLHTs manager. We see this trend of rising affluence in Asia, and
we can envisage more demand emanating for special experiences, premium
experiences such as Maldives.

Under the deal, CDLHT will lease the resort back to Banyan Tree under a 10-year
management contract. The trust will be paid rent equivalent to the resorts gross
operating profit after deducting management fees, or a minimum rent of US$6 million.
Banyan Tree will receive a tiered management fee ranging from 20% to 40% of the
propertys gross operating profit in excess of US$4.5 million. Based on the propertys
performance for the nine months of 2012 (9M12), CDLHT would have seen an
annualized net property income (NPI) yield of 9.6%.

[The] property sales business is a natural extension of our hospitality business and
complemented by providing faster returns, explains Banyan Tree chief financial
officer Eddy See. Nevertheless, the hospitality business remains Banyan Trees bread
and butter business, providing stable, albeit slower, returns, he adds.

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Why did Banyan Tree choose to sell the Angsana Velavaru to CDLHT instead of
injecting it into one of its own funds? Currently, [Banyan Tree] has two hospitality
development funds Banyan Tree IndoChina Hospitality Fund and Banyan Tree
China Hospitality Fund but both are earmarked for their respective regions and to
develop greenfield projects, See explains.

Setting up a single asset fund might have proven to be difficult, he adds. Moreover,
the Angsana Velavaru is an operating resort that is already generating cash flow. That
made it suitable for a trust such as CDLHT. And, getting the property off its books
will enable Banyan Tree to free up capital to expand its portfolio of properties around
the world as well as pursue the development of more brand residences.

He is a hotelier by nature, DBS Tan says of Banyan Trees Ho. For Banyan Tree to
achieve its aim of being a global resort player, he adds, it has to be all over the world
and be able to do it fast. Heavyweight players such as French hotel group Accor are
also aggressively expanding in Asia-Pacific, particularly China, Tan notes. In his
view, Banyan Tree is likely to plough its gains from the sale of Angsana Velavaru
into expansion in China.

Board of Directors
Composition:
Ho Kwon Ping Executive Chairman
Ariel Pvera Group Managing Director
Chia Chee Ming Timothy Lead Independent Director
Fang Ai Lian Independent Director
Elizabeth Sam Independent Director
Tham Kui Meng Independent Director
Chan Heng Wing Independent Director

Currently, the Board comprises 7 Directors, 5 of whom are independent. As such, there is a
strong and independent element in the Board. The Independent Directors are Mr Chia Chee
Ming Timothy, Mrs Fang Ai Lian, Mrs Elizabeth Sam, Mr Chan Heng Wing and Mr Tham
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Kui Seng. The two Executive Directors are Mr Ho Kwon Ping, Executive Chairman, and Mr
Ariel P Vera, Group Managing Director.

Each year, the Nominating and Remuneration Committee (NRC) reviews the size and
composition of the Board and Board Committees, and the skills and competencies of their
members, to ensure that each member has the appropriate mix of expertise, skills and
attributes to discharge his/her responsibilities effectively. The NRC also ensures that there is
an appropriate number of independent directors for the Board and each Board Committee.
Taking into account the nature and scope of the Groups businesses and the regulatory
requirements, the NRC is of the opinion that the current composition and size of the Board,
as well as of each Board Committee, is appropriate and adequate.

Board Membership
The NRC is chaired by Mr Chia and comprises Mrs Fang, Mrs Sam, Mr Chan and Mr Tham,
all of whom are Independent Directors. Mr Chia is not associated with any substantial
shareholder.

The NRCs functions, which are set out in the Charter, include making recommendations to
the Board on new Board appointments. The NRCs selection process for candidates to be
proposed to the Board for new appointments takes into account various factors including the
relevant expertise and experience of the candidates and how these would augment the Board
and its existing Directors. Names of potential candidates are sought through networking
contacts and recommendations. The NRC also makes recommendations to the Board on the
re-appointment of Directors based on their contributions, a review of the range of expertise,
performance, skills and attributes of current Board members and the needs of the Board.

The NRC also determines annually the independence of the Directors. The process includes
the use of a self-assessment questionnaire which each Independent Director is required to
complete and submit to the NRC for review.

Audit and Risk Committee
The ARC is chaired by Mrs Fang and comprises Mr Chia, Mrs Sam, Mr Chan and Mr Tham,
all of whom are Independent Directors.
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The ARC usually meets with the Head of Internal Audit first, followed by the External
Auditors, prior to the commencement of each ARC meeting without the presence of
Management. These meetings enable both the Head of Internal Audit and External Auditors
to raise issues encountered in the course of their work directly to the ARC.

The ARC reviews, with the Head of Internal Audit and External Auditors, their audit plans,
the system of internal controls, audit reports, management letter and the Companys
management response. The ARC also reviews the quarterly, half-year, and full-year results,
as well as financial statements of the Group and Company before submission to the Board for
its approval, focusing in particular on changes in accounting policies and procedures, major
operating risk areas and overview of all Group risks on an integrated basis, including all
matters affecting the Groups performance and the effectiveness of the Groups key internal
controls including financial, operational, compliance and information technology controls.
The ARC also reviews all interested person transactions.

The ARC commissions and reviews the findings of internal investigations into matters on
suspected fraud, irregularity, failure of internal controls, and the infringement of any law, rule
or regulation which has or is likely to have a material impact on the Companys results and/or
financial position.

The ARC oversees the Groups Whistle-Blowing Policy which provides the mechanism by
which employees and the public may, in confidence, raise concerns about possible
improprieties. The ARC is satisfied that arrangements are in place for the independent
investigations of such improprieties and for appropriate follow-up actions and resolutions.

The ARC has full access to and the co-operation of Management and full discretion to invite
any Director or the Companys Senior Management to attend its meetings. The Company has
an Internal Audit team that, together with the External Auditors, reports its findings and
recommendations independently to the ARC. In the year under review, the ARC assessed the
strength of the internal audit team and confirmed that the team is adequately resourced and
suitably qualified to discharge its duty.

The ARC has undertaken a review of the nature and extent of all non-audit services
performed by the External Auditors during the year and is satisfied that such services have
!"#$"# &'(( )*+,-#./ +&, 18

not affected their independence. It recommends the re-appointment of the External Auditors.
In addition, the ARC also reviewed the appointment of different auditors for its subsidiaries
or significant associated companies to ensure that the appointment would not compromise the
standard and effectiveness of the audit of the Company or its subsidiaries or significant
associated companies.

Executive compensation
The NRC reviews matters concerning remuneration of the Board, Senior Management and
other employees who are related to the controlling shareholders and/or our Directors. The
NRC has access to the Head of Human Resources and may also seek expert advice from
external consultants on executive compensation. This is to ensure competitive compensation
and progressive policies, with suitable and attractive long-term incentives, are in place. No
Director is involved in deciding his own remuneration or the remuneration of any employees
who are related to them.

The employment contracts of the Executive Chairman and the Group Managing Director are
automatically renewed every year, unless otherwise terminated by either party giving not less
than six months notice in writing. The terms of these employment contracts do not provide
for benefits upon termination of employment with the Company.
The remuneration of the Independent Directors is paid by way of Directors Fees in cash only
although they are also eligible to participate in the Companys share-based incentive schemes.
All Directors Fees are subject to shareholders approval at the Companys AGM. The
amount of Directors Fees payable is dependent on the respective Independent Directors
level of responsibility and contributions.

The NRC sets the remuneration guidelines of the Group for each annual period including the
Banyan Tree Share Option Scheme and the Banyan Tree Performance Share Plan (the
Plan). The Plan comprises the Performance Share Plan (PSP) and Restricted
Share Plan (RSP). The PSP and RSP were introduced to strengthen the Companys
competitiveness in attracting and retaining talented key executives. The PSP and RSP are
also aimed at aligning the interests of key executives with that of shareholders, improving
performance and achieving sustainable growth for the Company, and fostering an ownership
culture among key executives. The Plan contemplates the award of fully paid shares or their
cash equivalent, when and after pre-determined performance or service conditions are met.
!"#$"# &'(( )*+,-#./ +&, 29

The selection of a participant and the number of shares to be awarded under the PSP or RSP
are determined at the discretion of the NRC. The NRC reviews and sets performance
conditions and targets where it thinks appropriate and after considering prevailing business
conditions.

Board Performances
The NRC has the responsibility of evaluating the Boards and Board Committees
effectiveness. During the year, the NRC evaluated the Boards performance based on a set of
performance criteria, including the structure, size and processes of the Board and the Boards
access to information, Management and external experts outside meetings, as well as the
effectiveness of the Boards oversight of the Companys performance. Each Director
completes a Board Evaluation Questionnaire to facilitate the NRC in its assessment of the
Boards performance as a whole. The NRC reviews the feedback received and presents the
findings to the Board. The assessment of the performance of the Executive Chairman and the
Group Managing Director was undertaken by the NRC based on both qualitative and
quantitative performance criteria, comprising profits, revenue growth and economic value
added. There was no individual assessment for the Independent Directors. Each member of
the NRC abstained from making any recommendations and/or participating in any
deliberation of the NRC and voting on any resolution in respect of the assessment of his own
performance or re-nomination as a Director


!"#$"# &'(( )*+,-#./ +&, 20

10. REFERENCES LIST

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!"#$"# &'(( )*+,-#./ +&, 21

Today Online (2013, August 17). Banyan Tree revives growth plans for Europe and
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Asia Daily Travel (2013, August 27). The shift to consumer-centricity in the travel and
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Yahoo Finance Singapore (2012, November 14). Banyan Trees 3Q Losses No Surprise;
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Forbes, A. (2011, December 11). Laguna Phuket boss counters low-end critics. The Phuket
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boss-counters-low-end-critics-35307.php

INSEAD (2003). Banyan Tree Resorts & Hotels: Building an International Brand from an
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"Corporate Governance - Code." Banyan Tree Hotels & Resorts. Web. 31 Oct. 2013.
<http://www.banyantree.com/en/corporate_information/corporate_governance_code>.