Banyan Tree Grand Residences in Phuket Banyan Tree may restructure as business divisions snowballBy Raini Hamdi | April 14, 2023Share Singapore-listed Banyan Tree Group’s founder Ho Kwon Ping is contemplating to restructure the company as property sales and the hotel business go gangbusters. SINGAPORE -- When it marked the 25th anniversary of the Banyan Tree brand in 2019, the Banyan Tree Group had nearly 50 operating hotels with 7,000 keys under five brands. The joy was cut short when COVID-19 hit in 2020. But instead of wilting, the tree grew and grew. By 2025, there will be more than 100 operating hotels with 16,000 keys (see chart) under twice the number of brands.In the past five years, Banyan Tree Group has gained the number of hotels it took 25 years to achieve previously. It’s also becoming asset light. Managed hotels will comprise nearly 90% of the portfolio by 2025, from 34% in 2009, while 10% will be owned hotels, down from 66% in 2009.Of 20 management deals signed last year, half were for new brands, in particular Garrya, one of five new brands launched in 2021.Banyan Tree Group’s other key business, property sales, is off the charts. In 2022, sales totaled $163 million (S$217.2 million), double the best year ever in 2018 and 2019, which produced roughly the same result.This, along with a 30% increase over 2021 in RevPAR of all hotels to $95 in 2022, vaulted the group back to profitability. From a loss of $41 million (S$55.2 million) in 2021, the company had a net income of $575,764 (S$767,000) in 2022, on the back of a 33% increase in total revenue to $222 million (S$295.1 million).KP HoJudging from the volume sold in the first three months this year, property sales look set to be better than all of 2022 by mid-2023, according to Banyan Tree Executive Chairman Ho Kwon Ping in an interview with Hotel Investment Today.These days, he’s looking at “a lot of restructuring.”“Business is booming on the property side,” Ho said. “Yet we’re seen as a hotel management company and [a hotel owning company]. So, we’re assessing if we can separate all three into a pure asset-light hotel management company, put the hotels we own into a REIT perhaps, and hive off property development in Phuket, which is generating the bulk of profits currently.”In the midst of all this, Banyan Tree would like keep the shareholding as it is,” said Ho, when asked how he feels about Accor and China Vanke increasing their share in the group. Each owns 5%, with an option to buy another 5%, in deals signed in 2016 and 2017, respectively.Real estate or hotel company?Phuket was where it all happened. In 1984, long before sustainability became an industry watchword, Ho acquired 550 hectares of spoilt tin-mined land – 1.5 times as big as Central Park – and turned it into what is today the international destination, Laguna Phuket.From the birth of the first Banyan Tree resort there in 1994, this land is dotted with more hotels, hotel residences and home apartments and villas.While Laguna Lang Co in Vietnam and Laguna Bintan are two other integrated developments, Phuket remains the mothership. Ho said 40% of property sales in Phuket are in Laguna and areas within one to two-kilometer radius of it.So, is Banyan Tree Group a real estate player or a hotel company?“Our land bank in Phuket is so big and projects are selling so well right now,” Ho continued. “But if something happens here, we’d be stuck. Hotel management gives us a global exposure. So, it’s a very good way of diversifying risk.”Buyers of properties are global. “Phuket has finally joined the ranks of what people would consider to be an international destination,” Ho said. “Property buyers aren’t comparing its prices to Bangkok, but to other global resort destinations such as Ibiza and Majorca. Hence, our prices now are just about 10% cheaper than Ibiza and Majorca.”Ho added that global buyers, whether they are Chinese, Europeans, Russians, Ukrainians, Americans – “anybody who wants to escape the crazy things that are happening around the world today” – see Phuket as a safe haven. “Thailand is a beautiful country with tolerant people,” Ho said.The COVID reboundOn the hotel business, COVID-19 created massive opportunities for conversions, a reason the group is now on track to double the number of hotels in operation to more than 100 by 2025.They [owners] also found that they were the slowest to recover post-COVID because it’s a bit harder without an international brand working with you. So, we were actually doing a lot of conversions whereas before we would go only for newbuilds.KP HoShare this quoteHo spoke about “generational succession” where many founders who built and managed their own hotels in the 1980s were beginning to consider retirement and passing on the baton to their children and then came COVID-19.“Coming out of COVID, a lot of families still want to own hotels but realized that managing them was tiring,” ho said. “They also found that they were the slowest to recover post-COVID because it’s a bit harder without an international brand working with you. So, we were actually doing a lot of conversions whereas before we would go only for newbuilds.”Having brands that center on wellness and sustainability is also serendipitous.Another reason for the doubling is a more rapid deal flow after reaching some critical mass. “For example, we’ve spent so much time in Mexico because we see Mexico and the Caribbean and Central America as the gateway to the USA, which we eventually want to get to and we’re talking about some deals already,” Ho said. “With five properties in Mexico now after many years, you arrive at a point where people know you, and then it takes off on its own. It’s the same in China, where we have 25 to 30 hotels opened and now deals are coming in rapidly. Likewise in Vietnam, where we’ve invested in Laguna Lang Co for over 10 years.”But to-date, there are only two hotels that are operated jointly with Accor – Banyan Tree Doha and the Banyan Tree Al Ula, under a 50:50 joint venture where fees are equally shared. Asked if this was below target, Ho said “the momentum is building.”Two other co-managed Banyan Tree hotels in Varco Bay, Greece, and Clark, Philippines, have been announced but not yet opened. Another 10 projects have been signed, six of which are in planning/development stage.“Our cooperation with Accor is mainly for the Banyan Tree brand, although it’s not limited to the brand,” Ho said. “That’s because Accor has lots of upscale and midscale brands; there’s no reason for them to promote a Dhawa or Garrya [the group’s fastest-growing brands]. So, with Accor it started a little bit slowly but now it’s doing very well.”While a restructure is in the offing, leadership succession is already taking place, with Eddy See, who joined the company in 2004, at the helm as president and CEO. Ho’s daughter, Renyung Ho, who heads brand and commercial, is seen as an up-and-coming next-gen hotelier.Ho said he’s getting less involved in hotel management, which is “the most time and management-intensive part of the business.”“I have to approve all HMAs and determine their brands, but in the actual operational management, I’m just consulted on – they have their own Exco,” he said. “But I’m quite involved with our owned hotels, simply because I now live in Phuket. Property sales also reports directly to me.”Retirement clearly isn’t in the offing for this founder anytime soon.