Banyan Tree: home of middle-class luxe
Banyan Tree has built its name on luxury accommodation but is exploring a new opportunity by selling more affordable holiday lodging across Asia
Ho Kwon Ping is best known for creating the five-star hotel chain Banyan Tree and the luxurious Angsana spas but as his company celebrates its 20th anniversary, he has his eyes set on entering a new space. The group recently announced the launch of a new brand called Cassia.
Positioned as a global chain of affordable holiday apartments, Cassia properties will first launch in the Thai beach resort town of Phuket, Bintan in Indonesia, Beruwala in Sri Lanka, Lijiang in China's Yunnan. Residences in every corner of the globe: Surfer's Paradise in Australia, Brisbane, New York and Tokyo are also on the way. The goal? To tap into a new and growing middle class audience in Asia.
"It used to be when developing holiday homes only the super rich would buy. [For example] US$2 million to US$3 million for a single, big pool villa," Ho said on a recent visit to Hong Kong, "Now you've got a big middle class around the world and younger people too who want an affordable holiday home."
Cassia residences will be modestly sized one to two-bedroom apartments ranging from US$250,000 to US$400,000.
Asked whether his targeting of the mid-market is in response to the crackdown on luxury spending on the mainland, where the group has more properties than any other country in the world, he responded: "The anti-graft campaign is very specific to China. It's not a reaction to that at all. The super rich wanting to throw US$3 million for a villa - there are still [those] people around, but not a lot of them anymore."
Ho added: "Those days have gone since the financial crisis. The positive side is people who want to spend on a real holiday home, not one that's super flashy just to show off to people, has increased."
The holiday home market is evolving in a similar way to air travel, he noted. While flying was once the reserve of the elite, it has now diversified to cater to a fuller range of customers.
"In my time it still wasn't something that common," he said. "When I went to university overseas, I wouldn't go home every holiday, maybe just once a year. [But in] my kids' generation, people travel all the time. You travel on the weekend and you've got a whole differentiated market now. You can go first class or you can go on AirAsia. You've got the whole democratisation of travel. I'm seeing that in the democratisation of holiday home ownership."
However, as his flagship Banyan Tree remains a prestige hotel resort business, it has not been immune to the backlash against lavish spending on top of the overall economic slowdown in the mainland.
"Of course we've had our fair share of reduced patronage of our restaurants but in terms of people staying in our hotels, I can't say that it's that measurable. Probably Hainan Island, Sanya during Chinese New Year the room rates would go up to three or four times the normal rate because people are buying up rooms for government officials. I'm sure that kind of business would've dropped a lot but it's very specific," Ho added.
Despite a less than ideal operating environment, the company is confident in the long-term prospects in China. It is opening three Banyan Tree hotels at the end of this year in Huangshan in Anhui, Yangshuo in Guangxi and Xian in Shaanxi, bringing the total to 14 hotels on the mainland.
"The Peninsula, Mandarin Oriental and Shangri-La [have expanded to] the US and it hasn't been so easy for them because a lot of five-star hotels became five-stars on the backs of labour. You just have a staff-to-guest ratio that's pretty high. That's throwing people at the problem," he said.
"Now Hong Kong is becoming pretty costly, the rest of Asia and even China is becoming costly. One of the things you will notice is if you look at how cars were made 50 years ago and how they are made today, the whole process is unrecognisable."
Ho noted: "If you look at how a hotel was run today and how it was run 50 years ago, there is essentially no change. It still is the traditional departments: the doorman, the bellman. The biggest change about labour saving and skill sharing is the front office receptionist will double up also to do something else.
"It's not a revolutionary change in looking at the whole process where can we save on labour and yet be innovative and deliver a unique experience."
One way to innovate is through what Ho calls "rainbow tourism" - a more diverse workforce to cater to the increasingly multicultural range of guests.
"If you look at it historically, modern tourism isn't very old, only about 150 to 200 years. Modern tourism started when the British district officer in Malaya or India or wherever had his girlfriend, mother and father visit him in the far reaches of the empire. That was the age of the single big name hotels, the Ritz's of the world. No chains. It was just really service oriented and very, very elitist. That I think lasted for about 100 years," he says.
The next cycle, according to Ho, was the European and American period of tourism.
"Now with the rise of China, Russia, India and the Middle East, you're seeing for the very first time … what I call rainbow tourism. On one hand the whole market has become a rainbow but the human capital has become a rainbow too."