Ho, the brand champion

A SPECIAL REPORT FOR HICAP 2002

Of late, the chairman of Banyan Tree Hotels & Resorts, KP Ho, has been making the headlines a lot. The sudden burst of publicity has prompted some to wonder if the man credited with building up Banyan Tree into a global brand is preparing the company for a public listing. There are, of course, many other reasons why Ho is enjoying the limelight - Banyan Tree was recently named the third top brand in the world by Interbrand in a Financial Times publication, after Virgin and Pizza Express. Yeoh Siew Hoon talks to Ho on what's next.

Q: There is a lot of talk in Singapore about local companies creating global brands - you see Banyan Tree in the same global light?
Ho: We do see ourselves as aspiring to be a global brand - out of choice, not ego - in the small space we occupy. If we are not global, we won't survive in the long time. Our market is global, our customers global, our competitors global. Our customers are as comfortable in Ecuador or Costa Rica or Bali or Philippines. They are of that income group and segment that sees the world as the place for their holidays. We have to think in their mindsets.

Q: If this was a full-length branding race, what part of the race would you say you were at?
Ho: One-third. We are relatively strong in Asia/Pacific but not that exposed to the European and North American markets.

My goal is not to be in every place like a Starwood but to string a necklace of properties around the world. Our strategy is not to go into high cost areas due to capital limitations but to go for countries with international room rates and development country costs. For instance, if we want to get into Europe, there is no need to go into London or France, but we might go to Tunisia or Morocco, the playgrounds of Europeans. Our resort in Seychelles is within three hours of Europe - that's our first breaking out of Asia. We have also signed in South Africa for several properties, one will be a Banyan Tree.

Q: You cite capital limitations but surely, you can expand through management contracts?
Ho: We are not terribly interested in doing pure management contracts, neither consistently 100 percent ownership unless like Bali, there is strategic interest. Our preference is minority equity in the asset with a strong local partner.

Q: Where else are you eyeing?
Ho: We finally got into North-east Asia. We are opening a spa in Hong Kong, an Angsana City Club and Spa in Taichung and a Banyan Tree spa in Shanghai. Our strategy is where we can do hotels, we will but if there are places where there are no obvious hotel opportunities, we will go in with a spa or city club. It's the fastest way with lowest risk to enter a market. Taichung will be our first city club and spa. The opportunity came for the city club and we jumped on it.

Q: You don't see it as diluting your core competence?
Ho: We are very clear about our core competence. We have been offered a lot of things that we wouldn't do, for example, factories that supply our resorts or wineries. That would be getting out of our core competence - and our three areas are gallery, spa and resort. Previously, the spa and gallery depended on the resort for business but both are standing on their own now.

Q: You talked about capital limitations - is that holding you back from growing faster?
Ho: If we always go in as minority shareholder, that limits us to two a year.

Q: Are you contented with that?
Ho: It is part of our brand strength. We haven't grown for growth's sake but according to our capabilities. We have done no acquisitions but designed everything from scratch. The advantage is the product is strong; the disadvantage is it is very slow.

Q: But you are a man in a hurry?
Ho: I am always in a hurry but in this business, you can't go for numbers. There is a trade off between brand strength and development.

Q: What's the new business landscape?
Ho: I see a lot more consolidation. The weaker players, the less differentiated, will be absorbed. We are seeing that already. Six Continents, Starwood, Accor and Marriott - we have a core of truly global players. They will grow more rapidly and grow stronger.

Other hotel chains will have a problem - I am not sure of the space the Kempinski and the Meridiens of this world will play in. Tiny players will do well.

Q: But even your space is getting crowded?
Ho: Yes, more and more people are getting into the boutique business. In any business, once it matures, the only way is to continue to have a point of differentiation so that you stand above the noise.

Q: Is it an advantage that you started earlier or a disadvantage being first-mover in this space as it were?
Ho: We've had time to establish a brand and build brand loyalty. This business doesn't move as fast as the dot.com world - the product cycle for spas is longer. But I am very well aware that change is part of life and I have no illusion that the spa boom is driven by demographics - the same way that discos were the big thing when baby boomers discovered it. The disco generation has grown up into the spa generation. If spas evolve into something else, we will take that person along with us - we have to be there.

Q: What is the next wave in spa development? More health-focused as in Europe?
Ho: It's not where we are going. We might go into a destination spa concept - there is no real destination spa in Asia except for Chiva Som. So maybe we will do a Chiva Som but not so clinical - perhaps more of a spa retreat.

Q: Your definition of a destination spa?
Ho: A place where the spa is the major reason to go instead of the spa as an amenity.

Q: There's been a lot of debate in Singapore lately about foreign talent - what's your stance?
Ho: It's a non-issue. We have 4,500 staff with 32 nationalities. Talent rises to the top.

Q: You're playing an active role in the education of young minds with your chairmanship of the Singapore Management University. What's your vision with SMU - how will you encourage more creativity and entrepreneurship?
Ho: At SMU, we want students to have the ability to think critically and independently, link it to considered judgement, and then express their views. This is absolutely vital for the next generation. Our lecturers are facilitators and students are out in an environment when they end up talking. Projects are done on a group study basis like in real life.

People say Singaporeans are non-creative and passive but that's because they are products of a system. You change the system and you bring out something else.