Laguna Phuket, with its six hospitality properties, was once a barren, polluted tin mine but has been transformed into a luxurious integrated resort on Thailand’s largest island, Phuket.
Located on land previously devastated by decades of mining, the Laguna Phuket site was left in poor condition, with heavy pollution making it unsuitable for immediate use. In the 1980s, Laguna Resorts and Hotels, a subsidiary of Banyan Group (formerly Banyan Tree Holdings B58 ), purchased around 222 acres worth of land and decided to redevelop it. Intensive rehabilitation was required to convert the land into a habitable, eco-friendly environment.
Laguna Resorts and Hotels was listed on the Stock Exchange of Thailand in 1993, following the opening of Dusit Thani Laguna Phuket, Laguna Beach Resort, Sheraton Grande Laguna Phuket and the Laguna Phuket Golf Club. The first flagship hotel, Banyan Tree Phuket, opened in 1994.
Banyan Tree Holdings was listed on the Singapore Exchange
In an interview with The Edge Singapore, Eddy See, CEO of Banyan Group and president of Banyan Tree Holdings, says: “We had two main reasons for this rebranding exercise. Firstly, we wanted to refresh the group, as we were growing big and becoming multi-branded. We wanted to refresh the positioning of all the brands, especially the newly created ones and give them a good platform.”
The second reason for the rebranding, See says, was defensive in nature. With a portfolio of brands, including the globally recognised flagship Banyan Tree brand, the hospitality group can better position the brands to fit new properties while keeping its brand identity to consumers. “We want the other brands to be detached from the Banyan Tree brand, but the rebranding also cannot be so different that we will have to start the education process all over again,” says See.
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The brand equity in the company is represented by its rising net asset value per share compared to its net tangible assets as its intangible assets grow (see Chart 1).
Creating a township
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Laguna Phuket is Asia’s first integrated resort with about six world-class hotels, several residential developments, one of Phuket’s busiest golf courses and more. It is an expanded township with over 50,000 people depending on Laguna Phuket for income. As its owner, Banyan Group is now Phuket’s largest private landowner and hospitality developer, with 4 sq km (43 million sq ft) of beachfront and forested hinterland. Ho Kwon Ping, executive chairman and founder of Banyan Group, reckons that the group’s landbank is “about two-thirds the size of Chua Chu Kang” in Singapore.
Although the large piece of land at the Laguna township was perfect for a resort, no hotel operator was interested in the land, as it did not have beach access.
As Ho tells it, he and his wife, Claire Chiang, the group’s senior vice-president, decided to start their own hotel on a plot of land within Laguna. Instead of the traditional beach resort, the couple introduced private pools in every villa while having the property as part of the golf course to attract guests. Banyan Tree is also well-known for its award-winning spas in its resorts and standalone spas in several cities.
Although Banyan Tree Phuket celebrates its 30th anniversary this year, the Laguna township is far from complete. “There is still a lot more value to unlock here in Laguna,” says See, adding that there is still about US$4 billion ($5.2 billion) to US$5 billion of value to be realised in Laguna over the next one to two decades.
“To date, the invested value amounts to around US$2 billion in the region, and we believe we are the largest private developer in Phuket. By the end of this decade, the invested value across hotels and residences are expected to exceed US$7 billion,” says See, adding that the group works closely with the Phuket government and has a longstanding and collaborative relationship with local authorities on multiple fronts, ensuring that the development aligns with regional economic and sustainability goals. “Our collaboration involves ongoing discussions regarding infrastructure improvements, tourism development and community engagement initiatives.”
See explains that while the group will still hold some of its legacy assets that he emphasises are profitable, the group is continuing its asset-light strategy as it has previously announced. The group currently operates 12 owned assets and 77 managed hotels.
Laguna Phuket is not just a township with six existing hotels. It is an integrated resort that brings in locals, tourists and immigrants. Apart from the hotels and resorts, Banyan Group has developed its own branded residential properties within the township. According to See, the residential properties, although commanding a premium compared to those outside of Laguna, have seen a good uptake, with several international buyers looking to buy a holiday home in sunny Phuket.
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Ho says: “We’re seeing a huge demand for new homes in Phuket this year, due to a whole range of factors from trends such as urban flight, geopolitical issues and simply the fact that Phuket has become a great place to live with world-class international schools and hospitals and all the benefits of a year-round tropical lifestyle.”
“High-quality property is still significantly cheaper in Phuket than in most of the buyer source markets like Hong Kong, Singapore or Europe, which is also an important factor,” he adds.
The group’s residential property business is also moving towards an asset-light strategy. Apart from Laguna Phuket, its other residential properties around the world are currently not developed by Banyan Group. Instead, the group “lends” its premium residential property branding to developers and collects royalties from the partner.
“We have done residential properties in Australia and China previously. But no more. We are concentrating on Phuket and it is the right move because we want to ride the tourism and investment boom in Phuket. This creates a marketplace for property sales,” says See.
Moving forward, See expects the Laguna community to double once the group has completed its construction of residential properties, which is currently underway. To expand the township and offer its residents and staff more convenience, malls, schools and medical facilities have opened, further attracting medical tourism to the Laguna Phuket township.
In celebration of the group’s 30th anniversary, THB30 million ($1.17 million) has been pledged to help fund social sustainability projects in Phuket. “Looking ahead, we support the need for a master plan for the Andaman Coast that addresses over-tourism and infrastructure challenges. Our ongoing collaboration with local authorities is crucial to ensuring Laguna Phuket continues to contribute positively to the region’s economic growth and social welfare,” says See.
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Lightening the books
Banyan Group started the expansion of its own brand of spas and resorts with Bali in 1995, Maldives in 2001 and China in 2005.
However, in 2017, following its partnership with Accor and China Vanke, Banyan Group started its asset-light strategy after two straight years of losses in 2015 and 2016.
The group started by divesting several of its properties, including five properties to Vanke, of which it still manages. Two out of the five hotels in China were part of a fund of which the group started for the China hospitality market.
In 2018, the group divested its three owned hotels in China and the two under the fund to Vanke. As part of the deal, Banyan Group entered into a joint venture with Vanke to manage all of the group’s properties in China, where Banyan Group held a 40% stake.
However, due to Vanke’s shift to focus on real estate, Banyan Group decided to buy back the 60% stake in the JV company back from Vanke for RMB480 million ($88.6 million) in December 2023. This transaction allowed Banyan Group to regain full control of its China management company to operate all 31 of its current properties in China under third-party management agreements.
By the time Covid hit, Banyan Group was already a few years into its asset-light strategy. This strategy helped the group recover faster due to lower costs, freeing up capital to invest in new brands with high return on equity (ROE) and return on investment (ROI).
Banyan Group will continue to own its legacy assets in Phuket and Maldives. However, future expansion will lean on its asset-light strategy, where it will merely operate its 12 hotel and resort brands for third-party property owners, much like the business models of The Ascott, Accor, IHG and Marriott.
In its FY2023 ended December 2023, group revenue rose 21% y-o-y to $327.9 million on the back of the recovering tourism industry while earnings surged to $31.7 million from $767,000 in FY2022.
All three of the group’s key hotel investments, fee-based and residences segments contributed to FY2023’s earnings growth. Revenue per available room (RevPAR) rose 35% y-o-y in FY2023. The Hotel Investments segment, which holds the ownership of the hotels in Thailand, achieved 68% occupancy in FY2023, surpassing FY2022 by 17 percentage points (ppts) and pre-pandemic FY2019 by 1%.
In the fee-based segment, revenue shot up 55% y-o-y, driven by new openings of managed hotels in Asia ex-China. Occupancy in FY2023 reached 48%, surpassing pre-pandemic levels by 1%.
In the Residences segment, FY2023 saw record total annual sales of $267.8 million. As at Dec 31, 2023, unrecognised revenues surged to $377.7 million, reflecting a substantial 62% increase compared to a year ago.
In its latest 1HFY2024, earnings saw a significant jump to $6.2 million from just $981,000, while revenue was 25% higher y-o-y at $179.7 million. Most of the earnings came from core operating profit. RevPAR for owned hotels for the first half period also saw a 17% y-o-y gain (on a same-store basis) and the Residences segment recorded a record-breaking $198 million in sales.
Over the past 10 years, the group has seen its fair share of poor results, for example, in 2015 and 2016 and again during the Covid-19 pandemic, when it was in the red as the global tourism industry came to an abrupt halt.
However, despite its improving financials and the recovering tourism industry, Banyan Group’s share price has yet to reflect its growth, trading at 34 cents as at Oct 7, just 1.5% higher year-to-date. The counter traded at a high of 43 cents in May and June.
When asked about the group’s muted share price growth, See says: “The primary reason is the limited liquidity of our stocks, as long-term strategic shareholders, including institutional investors, hold the majority. Therefore, this leaves only a small portion available for retail investors.” Banyan Group’s free float stands at 35.47%.
“Despite the stock’s structural constraint, our financials have shown a strong performance with revenue increasing by 25% and operating profit almost doubling in 1HFY2024 compared to 1HFY2023. As our fee-based revenue grows and our residences segment continues to deliver strong sales, we expect these efforts to contribute to improved share price performance over time,” he adds.
Expansion mode
Banyan Group has about 140 property openings in the pipeline, with See admitting that the group has had an “exponential jump” in hotel openings in the past three to four years.
“For the longest time, pre-Covid, we had no more than 50 properties. Between then and now, we have doubled our property count, and we hope to double that again as we go along. These numbers are based on hotel management agreements (HMA) that we have signed with property developers and owners and not numbers on a wish list,” says See.
Having said that, See is cautious and aware that it is common for projects to be delayed and sometimes aborted. However, he is confident that in the next few years, the group should have a pipeline of at least 100 properties with a goal of opening at least 20 properties a year for the next five years.
He is mindful that Banyan Group differs from Marriott or IHG in size and experience. Hence, the group is prudent regarding the launch and opening of new hotels and resorts.
Instead of letting the whole group be acquired when it previously had offers from major hotel groups in 2016 when the industry was seeing a consolidation, Banyan Group stood its ground. “The fastest way to grow is to buy, but Banyan Group is not for sale. We want to remain a mid-sized independent hospitality group not owned by a larger group,” says See.
Instead, Banyan Group entered into a unique and strategic partnership with French hotelier Accor, after turning down their acquisition offer.
In December 2016, Banyan Group and Accor entered into a long-term partnership where both parties intend to collaborate to develop and manage Banyan Tree branded hotels around the world. Banyan Tree will also have access to Accor’s global reservations, sales network and loyalty programme.
As part of the partnership, Accor invested $24 million in Banyan Group, and both parties co-develop brands owned by Banyan Group around the world. This investment was made through a mandatory convertible debenture that, at conversion, gave Accor an approximately 5% stake in Banyan Group and the option to purchase an additional approximately 5% stake.
According Banyan Group's 2017 annual report, Accor's stake is found in Qatar Holding LLC and Qatar Investment Authority's (QIA)interest. As at March 6 this year, QIA owns 23.73% of Banyan Group. As at end-Dec 2023, QIA owns 8.9% of Accor.
In 2016, Ho saw this agreement as an “innovation for the global hospitality industry” amid several consolidations happening at that time. “Our strategic alliance with Accor allows us to remain an independent company, enabling us to continue securing hotel management agreements on our own and yet accelerating Banyan Tree’s speed and scope of expansion but with Accor helping us grow our brands worldwide. We believe this agreement will propel our brands rapidly to global reach and range, strengthening our ability to embrace change and innovation in the hospitality industry with a strong global partner,” says Ho when the group entered into the agreement.
Indeed, the group’s partnership with Accor has been fruitful. See says: “With this partnership, we are able to piggyback on Accor’s marketing and loyalty platform. We even look into business development together.”
Banyan Group expects to launch its 100th property in Singapore. The group will be launching the Mandai Rainforest Resort, managed by Banyan Tree.
The resort is part of the Mandai Wildlife Reserve, owned and managed by the Mandai Wildlife Group. The Mandai Rainforest Resort operates as a white-label resort to emphasise its unique identity and connection with the Mandai Wildlife Reserve.
See has identified Asia as a key growth area. Half of the group’s portfolio is in China. “We still believe in the (long-term opportunities) in China although the economy is not the greatest today and there are some conflicts,” says See, but he emphasises that the market in China remains vast and continues to be core.
And, of course, Phuket is a strong focus, with billions of dollars in value to be realised within the Laguna township.
Meanwhile, the group is seeing new areas of growth in the Americas and Europe. See admits that the group may not have a stronghold in these areas but is looking to acquire management companies in those markets to accelerate its growth plans.
See is not discounting the introduction of more brands in the future. “There’s no such thing as enough is enough,” he says.
