Banyan Tree Case Study Essay

Banyan Tree offers a unique experience with its hotel and spa experiences in the South East Asian region. Labeling itself as an aspirational brand, the company was established by the Ho family in 1992 and has boasted a gross profit of $52. 1 million in 2006. Its superior branding, excellent corporate social responsibility practices and its careful investment and expansion strategies attribute to its success. As the company goes public it faces the new possibilities, offered through increased capital, and new challenges such as demands imposed by shareholders. How will the company continue to expand its profitability while preventing brand dilution through overexpansion? Key issues Branding Banyan Tree is an exclusive brand, catering to affluent travellers. In order to expand its customer base, Banyan Tree launched a brand, Angsana, which meets the needs of a broader customer base. Angsana does not currently operate in the same regions as Banyan Tree hotels, this separation has occurred to prevent cannibalization and dilution of the brand. While being effective, this reduces the number of locations in a given area. Spreading the company’s resources and knowledge over many regions may not be cost effective. Banyan Tree should continue to be cautious in expansion but not over cautious as to limit the brands` profitability. The brand has also been extended to offer spa services, retail outlets and other shops. The company continues to manage its brand portfolio while preserving its distinctive identity and strong brand image. The strong brand image has allowed Banyan Tree to open 3 brands of spas throughout the world. Opening spas is one way Banyan tree can build an image, gain regional knowledge and assess profitability prior to opening a resort in that area or location. Banyan Tree relies on customer experience as its strongest promotional tool. Delivering a consistent product may be challenging in the service industry because of the products’ intangible product nature, employees must be properly trained in order to continue to deliver superior service. As Banyan Tree continues to grow it must ensure through recruitment and training that the services delivered continue to be consistent, a challenging and important issue in any service offering. Corporate Social Responsibility (CSR) Banyan Tree operates under strong CSR principles including building and operating resorts with minimal environmental damage and involvement in community development and environmental projects. Banyan Tree is an international company, it is important that it continues to gain the support of local governments, who will assist and support Banyan Tree, should any conflicts arise. The CSR principles also affect the brands image, and the company should continue to operate under these principles to deliver a consistent, positive brand image. These CSR efforts are noticeable in developing countries and the media coverage has helped build the brand’s image and credibility. These guiding principles should continue to be implemented as the entire brand communications strategy has been based on third party endorsements and word-of-mouth and public relations. Business operations Banyan Tree operates a variety of profitable business segments, including hotel investment and management, spa operations, gallery operations, property sales and design and other services. The largest percentage of profits comes from hotel investment and the second largest percentage is derived from property sales. Banyan Tree conducts property sales primarily in Thailand, where laws prevent foreigners from owning land, Banyan Tree sells resort residences on the land, and leases the land to the buyers allowing foreigner investors to â€Å"own† property in Thailand under local law. Property sales can be volatile and risky, it is an important factor in the profitability of Banyan for any given year, but the company should continue to realize that hotel investment and other business segments are the core of the company’s operations. Currently Banyan Tree resorts are almost exclusively in the South East Asian region. The concentration of business in this region exposes the company to risk should natural disasters or other crises occur in the area. Banyan Tree has a successful business model which could be replicated in other emerging tourist destinations globally. Banyan Tree should expand its operations outside of the area in order to diversify its operating risk. As Banyan expands its locations it must continue to ensure that hotels and spas are built surrounded by natural beauty, as this continues to be a key part of brand distinction. Initial Public Offering (IPO) Banyan Tree was recently offered as a publically traded company. This will allow an expansion of the company’s capital in order for it to continue expansion. It also changes the operating atmosphere the company faces. The shift from private investment to public investment requires some change in operating procedures as well as new demands from shareholders. Banyan needs to manage and meet these new demands while maintaining its core values and company image. Competition As South East Asia gains popularity as a tourist destination, both Banyan Tree and Angsana are facing increased competition. The Banyan Tree resorts face competition from other niche hotels, customer preference in this product category include quality, brand recognition, location and the scope of the amenities. As competition increases, customers tend to become more price sensitive as the number of options increases. One way to ensure that Banyan Tree highlights its exclusivity is to draw the attention of critics in order to increase the rating of their resort locations. The Angsana resorts are facing competition from mainstream luxury hotel chains, such as four seasons and Shangri-La Hotels and resorts. These competitors are huge, boasting over 50 hotel locations, their size allows them to maintain a stronger brand image. Strategy and Conclusion Banyan Tree has consistently offered customers a unique experience at both its resorts and spas. The unique design highlights the characteristics of the natural beauty surrounding its select locations. It continues to meet the needs of this high end, niche market with its superior service. Previously run exclusively by the Ho family, after the initial public offering, must ensure that its brand image and exceptional service delivery are not diluted by shareholder demands for higher profit margins. Branding and corporate responsibility will continue to be an important factor in the company’s operations and marketing strategy. Banyan Tree should continue to use the Angsana brand to broaden its customer base but focus on retaining Banyan Tree as its core brand because of its limited competition and premium profit margins. This successful brand continues to expand its operations, currently the company operates heavily in the South East Asian region, Growth strategy 1. Resource allocation tradeoff. The challenge is to balance two distinct brands Banyan Tree and Anagsana. And differentiate them without diluting either, the leading brand Banyan Tree in particular. 2. Banyan Tree needs to keep innovating and exceeding customer expectations which require substantial resources, management focus, and control of the brand portfolio to stay relevant and competitive. 3. Although the entire brand is based on the unique Asian touch and cultural heritage, Banyan Tree has to evaluate its relevance and sustainability carefully as it enters new territories. It can localize its offerings to better suit the local tastes and environments, but Banyan Tree should be sensible about the extent of localization.