Banyan Tree Case Study Essay

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Banyan Tree Case Study Essay
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  • University/College:
    University of California

  • Type of paper: Thesis/Dissertation Chapter

  • Words: 965

  • Pages: 4

Banyan Tree Case Study

What is Banyan Tree doing to target travellers seeking a “Banyan Tree” experience but are more price-sensitive? Do you think this will work? Please elaborate. Banyan Tree Hotels and Resorts (BTHR) identifies itself as the pioneer company to adopt the concept of designing individual villas as love nests for couples on holidays. “Banyan Tree experience” emphasises on complete privacy and provides an oriental getaway so customers can indulge and rejuvenate themselves within the villas, away from the bustling cites. Unlike most top-class hotel chains and resorts, BTHR saves on lavished common areas such as the lobby, and focuses on the interior décor and facilities of the villas by having themed bedrooms or installing private swimming pools for the Pool Villas. Furthermore, BHTR reverts to traditionally-styled spas which are non-air-conditioned and masseuses are barefoot, allowing them to set a wider price range from as low as US$33 to target price sensitive travellers. These strategies create a competitive advantage to capture the price sensitive customer bases who are seeking for a “Banyan Tree experience”. We could use Michael Porter’s Five Forces analysis to assess if BTHR’s strategies are working as well as its competitiveness in the market. Threat of new entrants or potential competitors- Low pressure:

There are high barriers to entry such as heavy investment costs in acquiring suitable land size in recent years. Governments have also set stricter regulations on ownership of land as well as greater environmental responsibility for firms in the industry. Threats of substitute products- High pressure: Various options are available for travellers to get accommodations. Travellers may succumb to budget hotel chains if their aim is to tour as much of the country within the smallest budget. Backpackers may look to home stays if they aim to seek out more authentic, and localized living experience. Rivalry among existing firms- Medium to high pressure: Within the luxury resort market, BTHR successfully positioned itself to capture the interest of price conscious customers that still seek for premium services through excessive branding and advertising. Few companies are willing to choose exotic sites which are secluded and inaccessible, reducing competition of similar services. However, high end competitors such as Aman Resorts have a strong customer base which BTHR may be missing out from. Bargaining power of customers- Low to medium pressure: Though one tenth of the target market segment is made up of corporate clients that may drive prices downwards, a main bulk of BTHR’s guests are couples looking for romance and intimacy who are individual buyers with low bargaining power. Bargaining power of suppliers- Low pressure: Instead of contracting external companies, the firm has its own work team to manage resort’s development. This reduces pressure from suppliers as well as inefficiency costs in decision making. From the above analysis, I would suggest that BTHR’s strategies would work in the short run especially in Asia-Pacific region due to its strong brand equity. With fewer direct competitors, customers have lesser choices if they are seeking for oriental and value for money experiences.

However, since majority of BTHR’s guests are couples, customer loyalty may be weak since they may seek for different experience each trip. Furthermore, it may lose out to other competitors as they have captured a large market from families and corporate clients that have higher likelihood to return. Low customer return rate may limit its growth in the long term as its market share erodes. The high barriers to entry may also imply potential challenges if BTHR is considering expanding into new areas, this could impeding its growth internationally. For BTHR to grow in the long run and at international level, BTHR also has to consider the opportunities and threats which I will analyse with the PEST model below. PoliticalThreat| Emphasis on environmental friendliness may compromise on quality of services such as saving on air conditioned facilities invited complaints. | EconomicsOpportunity/ Threat| In current times of low economic performance, customers would prefer affordable resorts to high end luxurious resorts. It may be a double edged sword; opportunities may be created for BTHR to attract these price sensitive customers but yet at the same time, these customers may be attracted away by those even lower-end resorts or hotel chains. | Social Opportunity| Increasing demand for getaway trips to distress, away from the bustling city life. Customers may appeal to BTHR’s seclusion concept for short escapes.| TechnologyOpportunity| Customers may recommend the resort through various forms of social media if they had good experiences, accelerating word of mouth marketing impact which is deemed most effective.| According to the PEST analysis, there seems to be more opportunities to allow growth for BTHR in the industry. However, if BTHR were to expand in the west, the firm may have to restyle its resorts according to the western countries’ cultures, losing the initial oriental touch that it has branded itself upon. This may result in brand dilution which could damage its market position. In my opinion, if BTHR were to persist on with its oriental concept, it might be popular with the western consumers as it is a breath of novelty and fresh air amidst the persistent bad economic conditions and stressful work pace respectively. This might be especially attractive to price sensitive travellers since such resorts will be located closer to them, allowing cost savings on flight expenses. Thus I would conclude from the two analyses that BTHR’s strategies are currently working well and the firm will continue to remain competitive if they constantly engage in product innovations to cater to consumers’ desire for refreshing concept resorts while still providing high quality of privacy and services at reasonable prices.

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Banyan Tree Case Study Essay

Facebooktwittergoogle_plusredditpinterestlinkedinmail
Banyan Tree Case Study Essay
Rate this post

  • University/College:
    University of California

  • Type of paper: Thesis/Dissertation Chapter

  • Words: 1251

  • Pages: 5

Banyan Tree Case Study

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 “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.

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