Creation of a hotel ( Hospitality Management )

Creation of a hotel ( Hospitality Management )

Paper instructions:
Assessment details-
Creation of a hotel’s (Resort) business plan.
1) Marketing plan & 2) Human resources. 1000 words approximately on each. Excluding references. Graphs explanation when necessary.
The hotel is in Cabo San Lucas, Mexico and the name of this hotel is Banyan Tree. You are supposed to only write about the Marketing plan and the Human resources for this hotel, the money will be in United states dollar only. In simple words this is an imaginary hotel based on the Company Banyan tree, which is already located in Mayakoba. To get a clear idea there are two plans which are attached to this material known as the HUMAN RESOURCE and MARKETING PLAN, these are examples of exactly what the tutor wants and they are written work from last year.

Pauline Ng  prepared this Case under the supervision of Cathy Enz of Cornell University and Ali Farhoomand of The University
of  Hong  Kong   for  class  discussion.  This  Case  is  not  intended  to  show  effective  or  ineffective  handling  of  decision  or  business
processes. Banyan Tree is a fast evolving company, the case only contains information up to August 2006.
©  2008 by The  Asia  Case Research  Centre,  The  University of Hong Kong.   No part of this publication  may  be  reproduced  or
transmitted  in  any  form  or  by  any  means—electronic,  mechani cal,  photocopying,  recording,  or  otherwise  (including  the
internet)—without the permission of The University of Hong Kong.
This is part of the FocusAsia Business Leaders Series. It  is  accompanied by a 30  minutes DVD  featuring the  company  and its
executives. To order a copy of the “Ho Kwon Ping and Banyan Tree Holdings Ltd” DVD, please visit www.acrc.org.hk
Ref. CSVS/108C

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BANYAN TREE: SUSTAINABILITY OF A BRAND
DURING RAPID GLOBAL EXPANSION
Within  the  next  five  years,  if  we  play  our  expansion  card  right  and  we
manage our growth properly, we have a reasonable, credible opportunity to
become one of the top two or three dominant players in a global space which
is very niche but nevertheless very global.
– K.P. Ho, CEO of Banyan Tree Holdings Limited
1

On 14 August 2006, exactly two months after its  initial public offering (“IPO”), Banyan Tree
Holdings  Limited  announced  second-quarter  results  for  the  period  ending  on  30  June.
Revenue  had  more  than  doubled  to  S$71.4
2
million,  largely  due  to  recovery  following  the
2004 Indian Ocean tsunami. The company felt that this was only the beginning, however, and
had earmarked part of the IPO proceeds to finance an ambitious expansion plan.

At the core of its business development plan was a proposal to open 21 new resorts
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over four
years  that  would  span  non-Asian  territories  fr om  Greece  to  Mexico.  Banyan  Tree  CEO  Ho
Kwon Ping’s vision was to “string a necklace [of Banyan Tree properties] around the world”.
The Asian Financial Crisis of 1997, the SARS crisis of 2003 and the Indian Ocean tsunami of
2004  had  taken  their  toll  on  the  travel  and  tourism  industry  [see  Exhibit  1].  Although
recovery  was  on  the  horizon,  Ho  understood  the  need  to  diversify  risks  across  geographical
regions and the IPO provided the finances to venture out of familiar territory. Two challenges
lay  ahead  for  Ho  as  he  considered  how  the  company  should  manage  growth  without
distracting from the qualities customers associated with the Banyan Tree brand. First was the
issue  of  adequate  manpower  and  infrastructure  to  continue  delivering  a  consistent  Banyan

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Company interview
2
S$1 = US$0.63 in August 2006.
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This figure was revised to 26 by August 2006.
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Tree experience. Second was the danger of brand dilution if it were to spread itself too thin or
venture into locations that could have a negative impact on the brand and its bottom line. For
a  company  founded  on  delivering  holistic  experiences  to  guests,  it  was  imperative  that  the
Banyan Tree ethos, culture and skill set not be lost in the process of growth.
Company Background
Leadership
Experience  from  his  family’s  mini-conglomerate  business  had  convinced  Ho  that  any
business had  to be unique among its competitors in order for it to be sustainable in the long
run.  Competing  on  cost  alone  had  been  a  successful  formula  in  the  1970s  and  1980s,  but
when manufacturing efficiencies and low-cost production had reached their limits, businesses
found that they could no longer compete. Bitter lessons had been learned and Ho was of the
opinion  that  proprietary  advantages  other  than  costs  should  form  the  basis  for  sustainable
competition.

At the age of 40, Ho set out to build a consumer brand that would be sustainable not only in
Asia  but  in  the  global  marketplace.  He  viewed  this  as  an  imperative  for  survival  that  would
become  the  driving  force  behind  his  business.  Hotels  and  resorts  became  the  vehicles  for
realising this vision.

Banyan Tree Hotels and Resorts, a subsidiary of the Singapore-based Banyan Tree Holdings
Limited,  was established in 1992  as  a  family  business  with  Ho  Kwon  Ping as  the  chairman,
his wife, Claire Chiang, as the senior vice president of the retail and merchandising arm, and
his brother, Ho Kwon Cjan, as the head architect of the company. As a private developer and
operator of boutique hotels, resorts and spas in the Asia-Pacific region, the company grew in
leaps  and  bounds  under  the  leadership  of  Ho.  More  than  250  awards  and  accolades  spoke
volumes for its success while Ho himself had won the 2003 Innovation Award from the Hotel
Investment  Conference  Asia  Pacific,  the  20 05  Entrepreneurship  Award  from  the  London
Business  School  and  the  2005  Ernst  &  Young  Singapore,  Lifestyle,  Hospitality  and  Retail
Entrepreneur Award [see Exhibit 2 for a list of awards].
Vision, Corporate Culture and Management Team
I  see  my  role  in  motivating  and  inspir ing  people.  […]  A  leader  is  someone
who takes people’s deepest fears and concerns and anxieties and transforms
these to aspirations  and  hopes. […] My  colleagues  are  not  necessarily your
hotshots  or  top  software  engineers  in  Silicon  Valley.  They’re  people  who
work in local communities; they have their concerns; they have their normal
livelihood issues; they need to raise kids and handle the mundane anxieties of
life. And if I can inspire them to have a vi sion of a better life for themselves
and  their  families  and  to  be  involved  in  the  community  and  the  company
which they take pride in, then I think I am doing my work.
– K.P. Ho, CEO of Banyan Tree Holdings Limited
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The  company’s  vision  was  to  build  upon  its  brands,  Banyan  Tree  and  Angsana,  to  create  a
diversified  group  of  niche  resorts  and  hotels  in  strategic  locations  throughout  the  world  that
would be complemented by residence and property sales and spa and gallery operations. The
revenue  base  should  ideally  be split evenly between property  sales, hotels and fee-based

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Company interview
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income, such as architectural design fees. Ho was sure that, over 14 years, Banyan Tree had
nurtured  a  corporate  culture  that  could  successf ully  take  the  strengths  of  the  Banyan  Tree
brand  beyond  the  Asia-Pacific  region.  These  strengths  included:  the  corporate  social
responsibility  (“CSR”)  philosophy  the  Ho  family had instilled at the outset; Ho’s insistence
on  having  a  proprietary  advantage  other  than  cost  and  which  was  to  be  found  in  the  unique
experience  associated  with  the  Banyan  Tree  brand;  and  staff  across  the  Asia-Pacific  region
who  shared  the  Banyan  Tree  ethos  of  CSR  and  continuously  sustaining  innovation  in  an
experiential brand.
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Core  members  of  the  senior  management  team  had  been  instrumental  in  the  company’s
development since the inception of Banyan Tree in 1992. Their multi-disciplinary and multi-cultural  mix  of  skills  and  experiences  contributed  significantly  in  the  areas  of  product
innovation,  branding,  productservice  design,  an d  construction  and  operations.  Of  its  5,000
employees,  35  nationalities  were  represented.  Its 40 top managers came  from  20  different
countries.  Ho  believed  that  this  diversity  of  backgrounds,  skill  sets  and  cultures  was  what
gave  Banyan  Tree  a  genuine  global  perspective  and  a  collective  strength  and  resilience  in
various environments.
Branding
When I created Banyan Tree, I decided at that time that brand-building had
to  be  one  of  the  most  important  imperatives  of  Banyan  Tree,  perhaps  even
more so as we are in the hospitality industry.
– K.P. Ho, CEO of Banyan Tree Holdings Limited
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The  first  Banyan  Tree  resort  opened  in  1994.  The  brand  was  targeted  primarily  at  highly
affluent  travellers  wanting  a  luxury  retreat  where  they  would  experience  romance,  intimacy
and rejuvenation. Positioned in the niche resort, hotel and spa market segment, Banyan Tree
pioneered  the  concepts  that  became  the  signature  feature  of  many  of  its  resorts  and  spas,
including the tropical garden spa and the pool villa. All Banyan Tree branded hotels, spas and
galleries reflected the natural environment, culture and heritage of their locations.

In  2000,  Angsana,  the  sister  brand  of  Banyan  Tree,  was  launched.  Angsana  offered  a
refreshing  and  contemporary  experience  re flected  through  its  interior  design  and  spa
treatments.  Targeted  at  a  younger  customer  segment  than  Banyan  Tree,  this  brand  was
associated  with  youth  and  revitalisation.  It appealed to young families and pricing was
typically 20–30% lower than Banyan Tree resorts.

Angsana  was  created  to  be  a  broader  brand.  But  we  recognised  that  […]  it
would  probably  be  less  exclusive  than  Banyan  Tree  because  it  is  the  more
normal,  mainstream  brand.  The  Angsana  brand  was  created  to  precisely
compete  with  the  Sheratons  of  the  world,  whereas  Banyan  Tree  is  very
focused.
– K.P. Ho, CEO of Banyan Tree Holdings Limited
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Under the name  Colours of Angsana, the Angsana brand also offered an experience that was
centred  on  cultural  tourism  and  soft  adventure,  often  located  in  less  frequented  destinations
such as Laos, Sri Lanka and China. Consisting of a range of boutique resorts and hotels, each

5
An experiential brand is defined as a brand that emphasises “the experience customers can have surrounding the purchase, use
or ownership of a good” or service.  Pine, B.J. and Gilmore, J.H. (1999) The Experience Economy, Harvard Business School
Press: Boston, Massachusetts, p. 17.
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Company interview
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Company interview
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was an existing property that had been refurbis hed with modern adaptations of the indigenous
culture and heritage of its respective location. Colours of  Angsana debuted in August 2003 in
Shangri-La, Yunnan, China with the Gyalthang Dzong Hotel.

Through  Banyan  Tree  and  Angsana,  distinct  customer  segments  were  targeted.  The
motivation behind this differentiated branding strategy was to expand its customer base while
minimising  brand  dilution  and  cannibalism.  Furthermore,  each  brand  and  product  line  gave
rise  to  cross-selling  opportunities,  which  helped to reduce the adverse impact of external
events such as SARS and terrorist bombings. Being located in different countries and having
a  geographically  diverse customer  base  cushioned the impact of  such events. Banyan Tree’s
experience  showed  that  its  brands  were  capable  of being extended to tap into new market
segments.

One issue that Ho was continuously preoccupied with was how his company should “innovate
the product without diluting the brand
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” and without losing site of the core values that defined
its  corporate  culture  and  CSR  commitment.  This  issue  was  constantly  debated  at  senior
management  meetings.  Contrary  to  press  opinion,  Ho  advocated  that  Banyan  Tree  and
Angsana  were  neither  luxury  nor  exclusive  brands;  rather,  he  likened  them  to  aspirational
brands.
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He  was  keen  to  evoke  a  customer  response  of,  “yes,  it  was  expensive,  but  it  was
really worth it
10
”. The association of a memorable experience or emotion with a brand would
be  the  associative  value  of  the  brand.  Such a  response,  he  thought,  could  command  loyalty
and premium pricing. He was convinced that an aspirational brand could continually increase
its market reach.

Spas  were  a  valued  feature  of  the  resorts  and  hotels  and  were  an  integral  part  of  the  brand
experience. The Banyan Tree Spa Academy at Banyan Tree Phuket provided its staff of over
500  therapists  theoretical  and  practical  training.  In  addition  to  having  a  spa  at  each  of  its
locations,  the  company  was  often  approached  by other reputable hotel companies to open a
Banyan  Tree  or  Angsana  Spa.  These  opportunities  allowed  the  company  to  expand  its  spa
business into new markets and promote its brand without incurring capital costs. Banyan Tree
Spas and Angsana Spas each offered distinct product offerings and experiences. Banyan Tree
Spas  offered  a  more  traditional,  luxurious  environment  with  a  classic  design  and  the  use  of
natural herbs and spices and more complex techniques as recipes for its treatments. Angsana
Spas offered a more modern and colourful décor with emphasis on flowers and fruits. Oberoi
Spas  by  Banyan  Tree,  a  brand  operated  under spa  management  agreements  with  the  Oberoi
Group of India, blended the Oberoi tradition of quality with Banyan Tree’s spa expertise.
Corporate Social Responsibility Philosophy
CSR  is  something  that’s  been  very  much  part of the Banyan Tree ethos. We
have not been milking this in a cynical manner because it’s now the thing to
do. We’ve always had it as part of our values, we will always espouse it very
fervently, and it has now become part of the brand.
– K.P. Ho, CEO of Banyan Tree Holdings Limited
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From  the  outset,  the  founders  were  adamant  that  the  company  should  consider  the  physical
and  human  environment  when  making  business  decisions.
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Construction  projects  used

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Company interview
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An aspirational brand is defined as one that a consumer segment has exposure to and wishes to purchase or experience, but for
economic or supply reasons cannot. The product or service associated with the brand resonates positively with the consumer, and
there is a fair probability that, at a certain point in the future, the consumer can purchase or experience it.  See: Wikipedia ,
“Aspirational Brand”, http://en.wikipedia.org/wiki/Aspirational_brand (accessed 5 January 2007).
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Company interview
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designs  and  techniques  that  minimised  damage  to  the  environment  as  far  as  practicable.
Where  options  were  available,  environmentally  friendly  methods  were  adopted,  such  as
installing a  biological  waste  water  treatment system  at Banyan Tree  Bintan to  recycle waste
water for irrigation purposes. Opportunities were actively pursued to support local businesses
and communities. Each of its resorts carried out community development and environmental
projects.

The Green Imperative Fund was established in 2001 to expand and formalise the company’s
environmental conservation and community develo pment efforts. Guests of Banyan Tree and
Angsana  resorts  and  hotels  were  given  an  opportunity  to  make  a  contribution  of  US$2  or
US$1 respectively for each night they stayed at the resort or hotel. The company would match
the  guests’  contributions  to  develop  the  fund.  By  March  2006,  the  fund  had  raised
approximately  US$1  million.  A  committee  of  executive  staff  members  of  local  origin  made
recommendations for projects to support. These  projects ranged from marine conservation to
education and health assistance.

The  people  around  us  recognise  that  this  is  a  company  that  looks  at  issues,
whether it’s dealing with design or the way we hire and train or the materials
we  use  […]  we  actually  reflect  indigenous  cultural  capital.  It  is  this
harnessing  of  local  capital  and  using  it  to  translate  it  into  our  brand
attributes—whether it is the way we build or what we stock in our gallery—
that I feel makes us stand out.
– Claire Chiang, senior vice-president of retail and co-founder of Banyan Tree
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Ho believed that Banyan Tree and Angsana guests were those who had purchasing power and
consciously chose to utilise that purchasing power  to align their value associations with those
of Banyan Tree. In that sense, CSR was seen as a profitable proposition that won the value of
all  stakeholders  and  had  gained  numerous  awards  for  the  company,  which  in  turn  generated
brand  awareness  as  Banyan  Tree  came  to  be  recognised  as  a  company  that  espoused  good
CSR  practices.  As  part  of  the  non-cost-based  proprietary  advantage  proposition  for
sustainable competition, CSR was very much ingrained in the experiential brand value of the
company. Until August 2006, however, company expansion had been concentrated mainly in
the  developing  countries  across  the  Asia-Pacific  region,  where  CSR  practices  had  an
immediate and noticeable impact.
Business Operations
Banyan  Tree  managed  and  owned  interests  in  upscale  niche  hotels  and  resorts  usually  with
50–100 rooms that commanded high-end rates. These included 18 resorts and hotels, 49 spas,
53 galleries and two golf courses
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spread across nine countries ranging from Indonesia to the
Maldives.  As  of  the  end  of  March  2006,  the  total  room  inventory  was  1,986.  The  flagship
development,  Laguna  Phuket  in  Thailand,  alone  boasted  five  resorts,  five  spas,  14  galleries,
an  18-hole  golf  course  and  three  resort  residential  developments  fo r  private  sale,  covering
1,000  acres  [see  Exhibit  3 for a summary of significant events in the corporate history of
Banyan Tree].

12
Banyan Tree Group website, “Green Imperative Fund”,  http://www.banyantree.com/greenimperative/index.htm (accessed 5
January 2007).
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Company interview
14
Banyan Tree Holdings Limited (26 May 2006) IPO prospectus, p. 3.
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As of June 2006, the activities of the company were divided into six business segments [see
Exhibits  7– 10  for details of operating profits, revenues and employee numbers across
different business segments and regions].
Hotel Investment
Revenue  was  derived  from  resorts  and  hotels  w ith  ownership  interest.  This  was  the  largest
business  segment,  accounting  for  59.7%  of  th e  company’s  revenue  in  the  financial  year
ending 31  December  2005.  The company  had  majority ownership  interests  in  ten  hotels and
resorts as of 31 March 2006.
Hotel Management
Revenue  was  generated  by  way  of  management,  incentive  and  other  fees  received  for
managing  Banyan  Tree  and  Angsana  resorts  and  hotels.  It  also  included  reimbursement  of
fees received from the sales and marketing services Banyan Tree provided to the resorts and
hotels  it  managed.  Banyan  Tree  and  Angsana  resorts  and  hotels  had  average  room  rates  of
S$601.60 and S$277.00,
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respectively, as of 31 March 2006. Management fees were typically
3% of total revenue, incentive fees were typica lly 10% of gross operating profit of the hotel or
resort managed and reimbursement fees were calcu lated as a percentage of room revenue [see
Exhibit 4 for a list of hotels and resorts owned and managed by Banyan Tree and  Exhibit  5
for room rates offered by Banyan Tree Group].
Spa Operations
Revenue came from the management of spas a nd royalties received from licensing the use of
the Banyan Tree brand according to spa manageme nt agreements. Spas were often considered
by guests to be one of the key features at Banyan Tree’s resorts and hotels. In 2005, Banyan
Tree  Phuket  won  the  Crystal  Award  for  Best  Spa  in  Asia  from  SpaFinder’s  Readers’  Poll.
Under  spa  management  agreements,  royalties were  typically  10–15%  of  each  spa’s  total
revenue.  Incentive  fees  of  around  10–15%  of  ea ch  spa’s  gross  operating  profit  were  also
received.

Banyan  Tree  spas  were  located  exclusively  at  Banyan  Tree  resorts  and  hotels,  with  the
exception  of  Banyan  Tree  Spa  at  the  Westin  Shanghai,  which  provided  brand  exposure  in
China. Angsana spas could be found in all othe r resorts managed or owned by the company as
well as in other operators’ resorts and day spas in Guam, Australia, Hong Kong, Taiwan and
Chiang  Mai,  Thailand.  Oberoi  Spas  by  Banyan  Tree  all  operated  under  spa  management
agreements  in  India,  Bali  and  Lombok,  Indonesia,  Mauritius  and  Egypt.  Management  and
incentive  fees  as  a  percentage  of  revenues  and  gross  operating  profit,  respectively,  were
received  from  these  operations.  Spa  treatment  prices  were  based  on  premium  services  and
branding. Unlike room rates, which were subject to seasonal adjustments, spa treatment prices
were  not  seasonally  affected.  Each  spa  had  its own pricing structure and offered different
packages to increase usage during off-peak hours [see  Exhibit 6  for details of spas].
Gallery Operations
Revenue  was  generated  from  the  sale  of  brande d  gifts,  spa  products,  indigenous  or  cultural
handicrafts  and  artefacts  and  other  souvenirs  at  outlets  located  in  resorts,  hotels  and  many
spas. Standalone city outlets, such as the one in Singapore, helped to promote the company’s
brands.  The  Museum  Shop  by  Banyan  Tree  was  an  affiliate  brand  of  Banyan  Tree  Gallery.
The Museum Shop offered a unique collection of museum replicas, objects of fine art, ethnic
craft arts, apparel and jewellery  modelled after pieces displayed in the National Museums of

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S$1 = US$0.61 in March 2006.
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Singapore.  There  were  four  Museum  Shop  outlets.  In  2003,  the  Banyan  Tree  Gallery  and
Angsana  Gallery received the Pacific Asia Travel Association Gold Award for Heritage.
Property Sales
Revenue was derived from the sale of resort re sidences, primarily in Laguna, Phuket. Banyan
Tree’s  policy  was  to  engage  only  in  the  development  and  sale  of  properties  where  these
developments were closely integrated with its  resorts and spas. Most buyers resided in Asia-Pacific and Europe. Sales were directly affected by the state of these economies and the state
of  the  property  market  around  the  world,  particularly  in  Phuket.  Various  local  laws  also
affected  construction  and  ownership  rights.  For  example,  under  Thai  law,  foreigners  could
own buildings or  properties developed on land leased by them, but not the land itself. Thus,
foreigners  could  either  lease  the  property  or  form  a  registered  company  in  Thailand  to
purchase  the  property.  Banyan  Tree  therefore  resolved  to  offer  non-Thai  citizens  three
consecutive  30-year  leases  as  Thai  law  imposed  a  maximum  of  30  years  on  each  lease.
Construction  costs in Phuket had increased by 25%  over  the  two  years  ending  31 December
2005.
16
Up to June 2006, the company had sold 470 resort residences at Laguna, Phuket and
the  average  price  of  each  property  was  Thb  16.5  million.
17
Banyan  Tree  operated  a  flexible
room  inventory  management  policy  whereby  unsold  properties  would  remain  as  part  of  the
resort’s  available  room  inventory,  thus  increasing  hotel  investment  revenues.  Previously,
property sales had generated funds to finance future hotel investments.
Design and Other Services
Revenue  came  from  the  provision  of  design  services,  office  rental  income  and  income  from
golf courses. The in-house design and planning division helped to choose each site and design
the  entire  resort  or  hotel,  including  the  architecture,  engineering  and  interior  design.  On
finalising the design, the  owners’ project services department would establish and monitor a
budget  for  the  project,  oversee  construction  and  work  with  resort  and  hotel  managers  to
procure  furniture,  fixtures  and  equipment.  Th e  in-house  project  division  would  supervise  all
renovations,  alterations  and  extensions.  Owners  of  each  resort  and  hotel  would  pay  all  the
costs of construction, renovation and alteration.  In addition, a fee equal to a fixed percentage
of construction costs for each project and an equivalent fee for construction management were
charged  to  the  owner.  Banyan  Tree  strongly  believed  that  maintaining  in-house  design  and
construction services ensured advantages of faster design times, better cost and quality control
and consistency in design.
Market Positioning
Marketing
If you knew that Banyan Tree has won 260 awards, you would say, “well, the
experience must be good”. So, there is a proxy validation for that experience.
Then on top of that, there is the word of mouth, which is very important to us.
We actually spend very little money on advertising because, for a small group
like  ours,  a  strategy  of  using  sort  of  a  broad  shot-gun  approach  for
advertising doesn’t really work.
– K.P. Ho, CEO of Banyan Tree Holdings Limited
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16
Banyan Tree Holdings Limited (26 May 2006) IPO prospectus, p. 53.
17
Thb 1 = US$0.027
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Company interview
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To  position  its  brands  distinctively,  Banyan Tree  generally  utilised  separate  distribution
channels for each brand. For the year ending 31 December 2005, the majority of reservations
were  made  directly  through  Banyan  Tree  regional  reservati on  centres  or  through  property
reservation teams.

The  strength  of  the  Banyan  Tree  brand  had  enabled  the  company  to  attract  quality  business
associates and partners, such as American Express, Citibank, Visa International, MasterCard
International  and  the  Oberoi  Group  of  India.  Banyan  Tree  maintained  brand  visibility  and
association  with  high-end  publications  in  key  fe eder  markets  such  as  Condé  Nast  Traveller
and  Tatler  UK.  Theme-based  signature  packages were also promoted through the corporate
website.  Membership  of  The  Leading  Hotels  of  the  World  and  Small  Luxury  Hotels  gave
Banyan  Tree  access  to  high-end  customers  an d  provided  an  endorsement  of  quality  and
luxury  by  association.  They  also  offered  the  benefits  of  their  worldwide  reservation  and
distribution systems, as well as their global marketing program.

In  2003,  the  Sanctuary  Programme  was  launched  as  a  recognition  program  that  rewarded
qualifying  guests  of  Banyan  Tree  resorts  with  complimentary  stays  and  incentives.  The
program  introduced  other  Banyan  Tree  hotels,  re sorts  and  spas  to  the  guests  to  encourage
repeat patronage.

Major  international  tradeshows,  such  as  the  World  Travel  Market,  Internationale  Tourismus
Börse  and  Asean  Tourism  Forum,  were  used  to  promote  the  Banyan  Tree  brands  and  also
provided a platform for signing contracts with wholesalers for upcoming travel seasons.
Wholesalers
During  the  year  ending  31  December  2005,  a  majority  of  total  room  revenue  was  derived
from  a  diversified  portfolio  of  over  1,000  whol esalers.  These  preferred  partners  combined
Banyan  Tree’s  product  offerings  with  flights  and  other  holiday  components  to  provide
complete vacation packages. Wholesalers were allocated a certain number of available rooms
at discount prices for periods of 12 to 18 months, with discounts ranging from 35–40% off the
standard  rack  rates.  For  each  of  the  three  financial  years  of  2003,  2004  and  2005,  the
percentage of total room revenue derived from wholesalers exceeded 55%.
19
Discounts of 15–
25% were also offered to corporate clients and groups.
Locations
The  locations  of  hotels  we’ve  chosen  do  give  us  an  advantage  because  we
have  generally  dared  to  be  very  different  from  other  people;  we  believe  in
being a prime mover rather than a follower.
– K.P. Ho, CEO of Banyan Tree Holdings Limited

Banyan  Tree  preferred  to  be  the  price-maker  rather  than  a  price-taker.  It  sought  locations
where  the  typical  industry  player  would  offer  room  rates  as  low  as  a  tenth  of  what  it  would
charge. On numerous occasions, this strategy worked. In the Maldives, its room rate was four
times  higher  than  the  competition;  it  was  the  fi rst  to  discover  the  Seychelles  as  a  five-star
location;  and  it  was  the  first  to  go  into  Lijiang  in  China,  charging  US$400  when  the  next-highest  room  rate  was  US$65.  Experience  showed  that  such  premium  pricing  could  be
enjoyed  for  between  five  and  seven years  before competitors would move in to take market
share.

19
Banyan Tree Holdings Limited (26 May 2006) IPO prospectus, p. 51.
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9

Both the product and the location had to be excellent to command such prices. In choosing the
right location, the following criteria were used: its natural beauty; whether it had features that
were characteristic of a Banyan Tree or Angsana resort or hotel; its potential to achieve high
price-to-cost  ratios;  accessibility  of  the  location;  potential  market  demand;  the  potential  to
establish a niche position in the lo cation; and the existing basic infrastructure of the location.

“Sanctuary  for  the  senses”  was  a  tagline  used  to  bring  together  the  brands  and  the  location-unique  experiences.  By  leveraging  the  natural  surroundings  unique  to  each  location  and
adding  consistency  in  the  designs,  facilities  (inc luding  spas),  ambience  (including  romance)
and services (including warm hospitality) offe red, Banyan Tree created strong brand identity
and  a  unique  value  proposition  that  was  associated  with  self-indulgence  and  pampering
experiences.  Such  location-unique  experiences  included  sandbank  dining  in  the  Maldives,
spa-on-the-beach at Bintan, the Jade Dragon Snow Mountain views from the villas in Lijiang,
and  staying  in  a  Tibetan  lodge  at  Ringha,  lo cated  3,200  metres  above  sea  level  in  Yunnan
Province, China.
Pre-IPO Status
Since its inception, the company had operated in low-cost environments where it was able to
charge premium prices for room and spa treatments. This made for strong operating margins
and  revenue  grew  41.9%  from  2003  to  2004,  in  spite  of  difficult  industry  conditions  [see
Exhibit  11 for details of hotel room occupancy rate s  and  room  rates  for  the  financial  years
ending 31 December 2003, 2004 and 2 005]. Operating profits also grew 53.7% over the same
period  [see  Exhibit  7].  Profit  from  hotel  operations  was  46.1%  (S$19.1  million)
20
and  61%
(S$38.9  million)
21
of  total  operating  profits  in  2003  a nd  2004  respectively,  but  dropped  to
23.5%  (S$2.8  million)
22
in  2005  due  to  the  impact  of  the  Indian  Ocean  tsunami,  which
affected hotel occupancy at many of Banyan Tree’s resorts. In 2005, revenue from the Phuket
resorts decreased by 40.1% year-on-year and revenue from the Maldives resorts decreased by
15.7%.
23

Property sales generated more then half the ope rating profits for the year 2003. For the year
2005, with the depression in the hotel segment, profit from property sales represented 91.6%
of total operating profits. Even with the revival of tourism in the tsunami-affected areas in the
first  half  of  2006,  the  half-year results  fell  short  of  Banyan  Tree ’s target to  achieve an even
split  between  property  sales,  hotels  and  fee-based  incomes.
24
For  example,  two-thirds  of
earnings  from  Phuket  in  the  second  quarter  came  from  property  sales.  There  was  also  a
geographic  imbalance,  with  two-thirds  of  revenue  derived  from  South-East  Asia  (Thailand,
Indonesia  and  Singapore)  in  2005  [see  Exhibit  8].  Correspondingly,  3,480  of  the  4,177
fulltime employees were located at the hotels and resorts in South-East Asia [see  Exhibit 10].

Salaries  and  related  expenses  accounted  for  33.5%  of  operating  expenses  in  2005  [see
Exhibit 9 ]. Attracting competent and highly qualified employees was crucial to the business.
Local hires were the preferred choice, though expatriate expertise was  sometimes necessary in
locations  that  offered  an  insufficiently  qu alified  workforce,  which  increased  operating
expenses.  Higher  operating  costs  were  experienced  in  the  Seychelles  and  Australia  due  to
high costs of labour in those locations. Apart from higher salaries, restrictions on the import
of food and other goods into the country resulted in higher excise tax in the Seychelles. Other

20
S$1 = US$0.57 annual average in 2003.
21
S$1 = US$0.59 annual average in 2004.
22
S$1 = US$0.60 annual average in 2005.
23
Banyan Tree Holdings Limited (26 May 2006) IPO prospectus,IPO Document p. 51.
24
Warden, G. (9 October 2006) “Inside Asia: Banyan Tree Hit by Another Wave”,  The Edge Singapore.
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exceptional  operating  expenses  in  the  Seyche lles  included  the  necessity  to  generate  the
resort’s own electricity.

In  the  12  months  leading  up  to  the  IPO,  Banyan  Tree  had  extended  its  business  into  other
regions  outside  the  Asia-Pacific  region  through  management  agreements  in  Abu  Dhabi  and
Barbados.  It  appeared  that  the  strength  of  its  brands  gave  Banyan  Tree  a  strong  negotiating
position with potential business associates.
IPO and the Expansion Plan
For us in the tourism industry, expansion into more areas is diversification of
risks. […] We were caught with the tsunami—nine of our hotels were affected.
If  a  tsunami  should  hit  again,  hopefully  we  will  be  so  spread  out  over  the
world that only a small portion of our hotels would be hit.
– K.P. Ho, CEO of Banyan Tree Holdings Limited
25

Timing
With  the  turmoil  of  the  Asian  Financial  Crisis,  terrorist  activities,  SARS  and  the  tsunami
behind it [see  Appendix  1 for details of the impact of these events on the travel and tourism
industry], 2006 presented the first opportunity in five years for Banyan Tree to go ahead with
its  long-awaited  IPO.  Launched  on  26  May  2006,  the  IPO  raised  S$368.7  million
26
through
the sale of 380.1  million shares at the S$0.97  offering price, which was in the middle of the
S$0.87 to S$1.07 price range se t before the IPO. Critics raised concern that the company had
been  overvalued  and  speculated  that  the  share  price  could  take  a  beating  on  the  first  day  of
trading on 14 June. On the first trading day, the closing price was S$0.85.
Geographic Expansion
In  the  IPO  document,  the  company  committed  to  investing  S$70  million  in  new  resorts  and
hotel developments. Banyan Tree planned to incr ease its geographical presence and diversify
its  revenue  base.  Geographic  expansion  would  not  only  spread  the  risks  of  natural
catastrophes,  but  also  reduce  the  impact  of  cyclical  and  seasonal  fluctuations  in  the  tourism
industry.  Strategic  expansion  was  targeted  at  low-cost  locations  close  to  Banyan  Tree’s  key
customer  markets  [see  Exhibit  12 for details of customer mix and  Exhibit  13 for a map of
Banyan Tree’s global presence]. This would give existing customers easier access to Banyan
Tree  and  provide  reach  to  affluent  customer  segments  within  these  operating  countries.  It
would also allow the company to take advantage of cross-marketing opportunities. The ability
to command premium rates would be the key consideration in its geographic expansion.

Staff from existing hotels were se lected to form pre-opening teams that assisted with training
new staff and operational aspects of the new hotels on a secondment basis.

Projects  in  which  the  company  had  equity  in terests  were  to  be  financed  by  cash  from
operations,  loans  from  financial  institutions  and  proceeds  from  the  IPO  [see  Exhibit  14 for
details of proposed investments].
Resort Expansions and Residential Property Sales
Apart  from  plans  for  new  resorts,  existing  resorts  were  to  be  expanded.  Several  of  the
company’s resorts had additional land for buildin g new rooms or villas, including Chiang Mai,

25
Company interview
26
S$1 = US$0.63 monthly average in May 2006.
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Lijiang,  Acapulco  and  Cancun  [see  Exhibit  15 for details of available landbank]. This was
considered  to  be  a  cost-effective  way  to  incr ease  its  revenue  base  and  provide  new  product
offerings without incurring significant new capital expenditure. Cash flow generated from the
sale of residence developments would be used to  offset investment outlay for resort and hotel
developments and expansion of existing resorts and hotels. The value of land surrounding its
resorts and hotels was generally expected to appreciate as the resort or hotel matured. This in
turn was expected to command higher sale prices of residences.

Plans  were  in  place  to  commence  selling  resort  residential properties in Lijiang, China and
Bangkok, Thailand toward the end of 2006. In addition, 22 Banyan Tree DoublePool Villas of
Banyan  Tree  Phuket  and  28  Pool  Villas  of  Dusit  Laguna  Resort  Hotel,  Phuket  were  due  for
completion  by  end  of  2007.  These  resort  villas  wo uld  be  part  of  the  resort’s  available  room
inventory  and  would  be  available  for  sale  and  lease  back  to  the  resort.  The  new  “Laguna
Village” residential housing project was underway and Phase 1 comprised the construction of
36  villas,  28  Laguna  Townhomes  and  12  Lag una  Residences.    These  branded  residence
projects  were  two  years  in  the  making.
27
A  new  property  sales  initiative,  Banyan  Tree
Residences, was  about to be launched  at the time of the IPO. Owners of Banyan Tree villas
and resort residences at Banyan Tree Phuket, Banyan Tree Lijiang and Banyan Tree Bangkok
would enjoy privileges at all Banyan Tree and Angsana hotels, resorts and spas. Unit owners
could expect a guaranteed return of 6% per annu m for the first six years, after which owners
would  receive  one-third  of  actual  room  revenues.  Members  could  also  benefit  from  an
exchange program enabling unit owners to enter into exchanges with other unit owners on a
voluntary basis to visit other resorts within a 30-day period of free usage.

A select group of industry analysts and commentators were keen to remind Banyan Tree that
its  reliance  on  property  sales  to  fund  the  fu ture  development  of  resorts  and  hotels  might
backfire.
28
At  the  same  time,  other  analysts  we re  bullish  on  Banyan  Tree’s  property  sales
business and saw it as a good way to reduce investment layouts. As always, there were risks
involved  when  selling  residential  properties.  These  included  various  uncontrollable
circumstances other than natural and man-made crises, such as political instability and foreign
ownership  laws,  particularly  in  Thailand,  an d  government  restrictions  on  the  sale  of
residential property in China.
Management Only versus Ownership Management
Apart  from  developing  and  selling  its  own  resi dences,  Banyan  Tree  intended  to  enter  into
management agreements to  manage  premium  serviced  residences in selected  locations. Such
premium serviced residences would operate under one of its brands. For a Banyan Tree resort
or  hotel,  the  company  generally  had  ownershi p  interest  dependent  on  a  list  of  variables
including familiarity, profitability and partners.  For Angsana resorts and hotels, it preferred to
focus  on  management  agreements.  Management  agreements  brought  the  benefit  of  building
brand  awareness  quickly  without  huge  capita l  expenditure.  For  its  spa  operations,  the
company planned to expand into new locations through leases, management agreements and
strategic  alliances.  In  addition  to  stand-alone  sp as,  it  was  expected  that  new  spas  would  be
opened  wherever  a  new  resort  or  hotel  was  to  be  opened.  Banyan  Tree  had  to  weigh  the
benefits  and  drawbacks  of  organic  growth  as opposed to management-only contracts and
growth through acquisitions.

27
Warden, G. (9 October 2006) “Inside Asia: Banyan Tree Hit by Another Wave”,  The Edge Singapore.
28
Warden, G. (9 October 2006) “Inside Asia: Banyan Tree Hit by Another Wave”,  The Edge Singapore.
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Competition in Niche Markets
Maintaining  a  niche  position  as  markets  matured  was  an  ongoing  issue  for  the  company.
During 2003–2005, significant price competition was experienced in the Maldives, Bangkok,
Australia and  Bintan in Indonesia.  New  hotels competed for the same customer segments in
locations where Banyan Tree previously had a leader advantage. For example, in 2001 a JW
Marriott hotel opened in Phuket in direct competition with Laguna Resorts and Hotels for key
market  segments,  including  the  corporate  meeting  market.  Shangri-La  Hotels  and  Resorts
announced  plans to open a resort at the  Seychelles in 2007. The re-branding of  two existing
four-star  hotels  in  Phuket  (the  Hilton  Arcadia  in  2004  and  the  Conrad  in  2006)  also  fuelled
competition.

Competition usually focused on factors such as room rates, the qualit y of accommodation and
services,  brand  recognition,  convenience  of  the  location  and  the  quality  and  scope  of  other
amenities. At the location level, competition depended on political stability, social conditions,
market  perception,  accessibility  of  the  locatio n,  local  culture,  the  location’s  success  in
promoting itself as a tourist destination and other macro-level factors.

Apart  from  competition  within  a  specific  location,  there  was  also  competition  between
locations.  Following  the  Bali  bombings  in  2002,  some  international  travellers  opted  for
Phuket  as  their  alternative  vacation  destination.  However, other locations took preference
following the outbreak of SARS in 2003 and the 2004 tsunami.

Typically, Banyan Tree did not compete with large-scale hotel operators, as most of its resorts
had  fewer  than  100  rooms  or  villas  and  focused  on  a  niche  market  in  premium  resorts  and
hotels. Banyan Tree’s closest competitors were the Amanresorts, COMO Hotels and Resorts,
Six  Senses  Hotels  &  Resorts,  One-and-Only  Resorts  and  the  Four  Seasons  Resorts.  For
Angsana  resorts  and  spas,  the  competitors  were  different  at  each  location  and  included  the
One-and-Only Kanubura and larger operators such as Shangri-La Hotels.
Amanresorts
Amanresorts  was  named  the  world’s  leading  international  hotel  group  by  the  2006  Zagat
Survey of Top International Hotels, Resorts and  Spas. Its 18 properties spanning 12 countries
and  four  continents  also  received  individual  recognition  from  Zagat:  Amankila  in  Bali  was
rated  Asia’s  top  resort  and  first  in  the  survey’s  dining  category;  Amanpuri  in  Phuket  was
awarded  the  region’s  top  service  position;  a nd  Amandari  in  Indonesia  was  rated  the  top
destination spa.

Adhering  to  the  “less  is  more”  philosophy,  the  focus  was  on  small  and  intimate  hotels  with
contemporary  designs  that  offered  lifestyle  experiences  in  faraway  cultures.  It  indulged  the
appetite for pampering and appreciation for creativity and el egance. Each resort was different
in location, look, mood and guest experience, wi th environmentally friendly and aesthetically
appealing characteristics. The intention was to impress an indelible mark on guests.
29
Villas of
a  number  of  locations  (eg,  Turks  and  Caicos Islands,  Pamalican  Island  in  the  Philippines,
Jackson Hole in the US and Marrakech in Morocco) were offered for sale or exclusive rental.
Each resort took advantage of the idyllic local surroundings (for example, open views of rice
fields,  forest  and  mountain  peaks  at  Amanda ri)  and  local  interior  design  and  furnishing
following a creed of ‘ethnicity in design’.. Villas typically had swimming pools with pristine
beach fronts or garden views.

29
See the Amanresorts website: http://www.amanresorts.com (accessed 5 January 2006).
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The  trademarks  synonymous  with  the  Amanresorts  brand  were  its  serene  pavilions,  infinity
pools  and  Zen  courtyards.  These  trademarks  and  the  exotic  destinations  fashioned  a  loyal
following  of  “Aman  junkies”.
30
Facilities  and  services  were  typical  of  luxury  resorts,
including  exotic  spa  treatments,  but  at  its  latest  resort (the Amanyara in Parrot Cay), guests
were provided with a recording studio and a private screening room, which reflected the high
proportion of its guests who worked in media an d music industries. Fixtures and fittings were
shipped  in  from  Asia  and  staff  were  brought  in  from  other  Aman  resorts  (about  half  were
Filipino),  ensuring  a  consistent  Asian-style  serv ice  consistent  with  its  other locations. Rates
varied from US$650 per person per night for a tent in Aman-i-Khàs to US$10,300 for a four-bedroom ocean villa in Amanyara. The company was privately owned by its founder Adrian
Zecha.
COMO Hotels and Resorts
COMO  was  created  by  Christina  Ong,  one  of  Asia’s  style  icons.  Her  husband,  B.S.  Ong,
owned  five  of  the  Four  Seasons  Hotels.
31
COMO  operated  seven  resorts  ranging  from
exclusive  urban  locations  (London  and  Bangkok)  to  resorts  in  secluded  locations  (the
Maldives and Bhutan) The COMO Shambhala (meaning “centre of peace and harmony”) spa
was a uniquely branded feature that claimed to be a sanctuary for the body, mind and spirit.
At  its  island  resorts,  reverence  for  nature  was its  focus.  At  Parrot  Cay,  a  1,000-acre  private
island  hideaway  in  the  Bahamas,  50%  of  th e  staff  were  Asian  (hailing  from  Thailand,
Indonesia, Java and Japan). The Asian connection extended to the menu of massages on offer
and  therapists  came  from  their  treatment’s  c ountry  of  origin.  World-leading  yoga  teachers
were contracted to provide dedi cated retreat weeks. City locations were hip and contemporary,
appealing to trendsetters and  travellers seeking to be at the centre of the action.
Six Senses Hotels & Resorts
Established in 1988, the company operated under four brands. Soneva offered “luxuries of the
highest international standard together with a sensitivity and local feel in design, architecture
and  service”.  Evason  was  a  five-star  resort  with  a  philosophy  of  “refining  experiences”.
Evason  Hideaway  offered  “a  personal  environment  whilst  capturing  the  essential  essence  of
the  Soneva  brand”.  Six  Senses  Spas,  a  key  elem ent  of  all  Six  Senses  properties,  provided
treatments  for  “balancing  senses”
32
The  company  promoted  itself  as  a  resort  and  spa
management and development company with 2,500 employees. It held equity stakes in most
Six Senses-managed resorts. In creating a “memorable experience”, the company focused on
the  combination  and  harmony  of  the  attitude  of  its  employees,  the  smells,  the  sounds,  the
textures and the pleasing sights that blended together at each resort. Its signature Six Senses
Spas  were  also  operated  at  third-party  resorts.  While   Soneva  was  in  direct  competition  with
Banyan  Tree,  Evason  competed  with  Angsana  in  terms  of  customer  segments.  Soneva  was
about creating a unique experience with emphasis on privacy, choice and tailor-made services.
Evason was tailored to the family market with a large kids’ club and professional Montessori
teachers on site. The intention was to create an overall experience that could be absorbed by
all the senses, and to deliver this experience consistently. The company was privately owned
and founded by Eton-educated Sonu Shivdasani.
One-and-Only Resorts
One-and-Only  was  owned  by  Kerzner  Internatio nal  Limited,  an  international  developer  and
operator  of  destination  resorts,  casinos  and  luxury  hotels.  As  its  brand  name  suggested,  the

30
Fearis, B. (16 April 2006) “The ‘Aman Junkies’ Get a New Fix in Caribbean”, The Observer.
31
Robb Report, “Best of the Best: Spas”, http://www.robbreport.com/Articles/Leisure/Relaxation-Rejuvenation/Best-of-the-Best-Spas.asp (accessed 5 January 2007).
32
Six Senses Hotels & Resorts website:  http://www.sixsenses.com/corporate/document/company_profile.pdf  (accessed 5
January 2007).
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company  was  a  luxury  resorts  operator  that  was  committed  to  offering  guests  a  unique
experience.  Each  award-winning  resort  was  set  in  one  of  the  most  beautiful  locales  in  the
world  and  guests  experienced  the  distinctive  style  and  personality  of  the  local  culture.  In
addition  to  its  Bahamas  resort,  One-and-Only  operated  in  the  Maldives,  Mauritius,  Dubai,
Mexico and South Africa. On its website, the company defined the heart and soul of One-and-Only by its core value, which was to “blow away the customer”.
Four Seasons Resorts
Four  Seasons  was  founded  in  1960  and  had  a  presence  in  major  city  centres  and  resort
destinations around the world. Appealing to business and leisure travellers, the company had
73  hotels  in  31  countries.  It  claimed  to  be  the first  to  introduce  now-standard  items  such  as
bath amenities, terry-cloth robes and hairdryers in North America. Its founder, chairman and
CEO  Isadore  Sharp  said,  “we  have  aspired  to  be the best hotel in each location where we
operate”.
33
The company had focused on redefining luxury as a service and claimed to be the
world’s leading operator of luxury hotels.

The  company  operated  13  unique  resort  properties  worldwide.  Its  unique  selling  points
included  extra-spacious  baths  and  architectural   design  that  maximised  views,  privacy  and
enjoyment  of  the  natural  surroundings.  In-room  services  included  “home  cooking”  with  a
personal  chef  and  customised  menu,  customised  massage  and  aromatherapy  and  in-room
exercise equipment on request. Assuming time was the most precious commodity for guests,
whether  on  business  or  leisure,  the  company  de signed  its  services  to  make  efficient  use  of
guests’ time. Other conveniences included the No Luggage Required program to assist guests
who had lost luggage and the Kids for All Seasons program that offered scheduled activities
for kids. Beginning in 2001, each resort offered spa services. The company had thrived on its
philosophy  of  managing  rather  than  owning  hotels.  In  the  new  millennium,  the  company
announced  plans  to  develop  more  than  20  new  properties  around  the  world  located  at
“exceptional” destination resorts and world fina ncial centres. The expansion was expected to
increase its international presence by nearly one-third.

In  1997,  the  company  introduced  an  extension  to  its  brand,  Four  Seasons  Residential
Properties. Such properties provided full and partial ownership of city and vacation homes in
locations around the world, including San Francisco, Nevis, Miami and Punta Mita. Facing a
similar predicament as Ho regarding global expansion, Sharp remarked, “it is this quality of
service  that  is  so  critically  important  to  our guests,  and  the  degree  to  which  we  can  provide
and evolve it, worldwide, is also the degree to which we can differentiate ourselves and stay
ahead of the rest”.
34

Shangri-La Hotels and Resorts
The  Hong  Kong-based  company  was  the  larges t  Asian  hotel  group  in  Asia  and  the  Middle
East. It boasted 49 deluxe hotels and resorts in key cities, seven of which were Trader Hotels,
a  four-star  sister  brand  that  sought  to  deliver  high-value,  mid-range,  quality  accommodation
to  business  travellers.  The  Shangri-La  branded  ho tels  were  five-star  venues  targeted  at  the
luxury  segment.  The  company  announced  plans  for  aggressive  expansion  with  40  new
projects  worldwide  over  four  years.  Two-thirds  of  these  new  developments  were  located  in
China, notably in the second-tier cities, and India.
35
Shangri-La was confident that expansion
into  China  would  underpin  future  growth.  By  the  time  of  the  2008  Olympics,  the  company

33
See the Four Seasons Hotels & Resorts website:  http://www.fourseasons.com/about_us/aboutus_10.html (accessed 5 January
2007).
34
See the Four Seasons Hotels & Resorts website:  http://www.fourseasons.com/about_us/aboutus_10.html (accessed 5 January
2007).
35
Klan, A. (11 May 2006) “Shangri-La Hotels Look to China, India for Growth”,  The Australian .
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aimed to have 37  hotels in China, nearly half  of its worldwide  total.
36
However,  unlike Four
Seasons,  the  company’s  plan  was  to  develop  and  retain  ownership  of  the  new  hotels.  It  had
also  signed  management  agreements  to  open  hotels  in  the  US,  Canada  and  Europe  in
prominent cities such as Chicago, London, Vanc ouver and Las  Vegas. Its cautious approach
to overseas expansion translated into smaller hotels, offering 140 rooms in Paris, 200 rooms
in Chicago and 147 rooms in Miami, while the average hotel in China featured 420 rooms. To
ensure  consistency  in  the  quality  of  service,  employees  would  undergo  training  for  up  to  12
months in Beijing, Hong Kong and Singapore with the aim of conveying the essence of Asian
culture. Shangri-La’s occupancy rate reached a record 73% in 2005. The company anticipated
that, by 2010, 50% of its business would come from Asia, particularly China.
37

Post-IPO and the Global Company
Scanning  the  competitive  landscape,  Ho  was  confident  that,  within  five  years,  Banyan  Tree
could  become  a  dominant  player  in  the  small-  to  medium-size  (roughly  150  rooms)  luxury
hotels segment, as no dominant player had emerged so far. However, to reach that position he
had to overcome a few challenges.

Ho claimed that branding had been the key to the company’s success and the platform for its
global expansion. The company had played its cards right so far. Its future success depended
on  its  ability  to  manage  growth  while  at  the  same  time  preventing  brand  dilution.  Investors
and analysts eagerly awaited more telling results.

36
Financial Times (27 February 2006) “Shangri-La Begins Aggressive Expansion”.
37
Klan, A. (11 May 2006) “Shangri-La Hotels Look to China, India for Growth”,  The Australian .
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APPENDIX 1: TRAVEL AND TOURISM IN ASIA, 1997U2005

In  1991,  the  World  Travel  and  Tourism  Counc il  (“WTTC”)  claimed  that  tourism  was  the
world’s  largest  industry.
38
In  particular,  the  Asia-Pacific  region  was  noted  to  be  the  fastest
growing tourism region in the world.
39
Between 1980 and 1995, touris t arrivals and receipts in
the  region  rose  at  an  average  annual  rate  of  10%  and  15%  respectively,  and  accounted  for
15.2% and 19.4% respectively of world touris t arrivals. The UN Worl d Tourism Organization
(“UNWTO”) projected that, by 2010, Asia-Pacific would surpass the Americas to become the
world’s second-largest tourist region, with 229 million visitors.
40
Fuelled by economic growth,
increase  in  disposable  income  and  leisure  ti me,  liberalisation  of  air  transport  and  political
stability, the worldwide and regional travel and tourism industry looked set to explode in the
new millennium. Demographic shifts and changes in lifestyle were having a positive effect on
the  industry,  while  technology  and  the  internet  ex tended  the  global  reach  of  both  travellers
and industry players.

However, the years surrounding the turn of the  millennium brought the industry to its knees
and  accentuated  its  dependence  on  international  peace,  prosperity  and  nature’s  grace.  A
sequence  of  crises  severely  challenged  all  stakeholders,  from  airline  caterers  to  hotels  to
tourist  attraction  parks.  So  much  so  that,  in  its  2003/2004  annual  report,  the  WTTC
acknowledged  that  “never  before  have  so  many   issues  become  entwined  and  caused  a  crisis
that has lasted so long”.
41

Asian Financial Crisis, 1997
In  mid-1997,  a  period  of  economic  unrest  which  came  to  be  known  as  the  Asian  Financial
Crisis  triggered  a  ripple  effect  across  the Asia-Pacific  region  and  resulted  in  economic
slowdown in other parts of the world. At the  macro level, several Asian countries saw sharp
reductions  in  values  of  currencies,  stock  markets  and  other  asset  prices.  Indonesia,  South
Korea,  Thailand,  Hong  Kong,  Malaysia,  La os,  Singapore  and  the  Philippines  saw  their
currencies  dip  significantly  relative  to  the  US  dollar.  Businesses  went  into  bankruptcy,
millions  of  people  fell  below  the  poverty  line  and  redundancy  levels  rose  rapidly.  The
economic crisis also generated political unrest.

Not  only  did the  Asian  Financial  Crisis  have  a lasting  effect  on  international  investors,  who
became  reluctant  to  lend  to  developing  countries,  but  consumers  within  Asia  Pacific  and
visitors  to  the region  found  that their disposable income  was suddenly depleted. Aggravated
by  a  downturn  in  the  US  economy,  a  prolonged  global  recession  ensued.  For  the  travel  and
tourism industry, the nightmare had just begun.
Terrorist Activities
The series of coordinated terrorist attacks on the United States on 11 September 2001 initiated
a “war on terror” by the Bush administration. Military readiness extended to countries such as
the Philippines and Indonesia, wher e internal conflicts with Islamic extremists was rife. In the
days  that  followed  the  attacks  and  for  the  first  time  in  aviation  history,  all  non-emergency

38
Harsha, E. and Chacko, E. (1997) “Positioning a Tourism Destination to Gain a Competitive Edge”,  Asia Pacific Journal of
Tourism Research,  http://www.hotel-online.com/Neo/Trends/AsiaPacificJournal/PositionDestination.html  (accessed 20
December 2006).
39
Singh, A. (1997) “Asia Pacific Tourism Industry: Current Trends and Future Outlook”,  Asia Pacific Journal of Tourism
Research ,  http://www.hotel-online.com/Neo/Trends/AsiaPacificJournal/AsiaPacificTourismOutlook_1997.html  (accessed 20
December 2006).
40
Singh, A. (1997) “Asia Pacific Tourism Industry: Current Trends and Future Outlook”,  Asia Pacific Journal of Tourism
Research ,  http://www.hotel-online.com/Neo/Trends/AsiaPacificJournal/AsiaPacificTourismOutlook_1997.html  (accessed 20
December 2006).
41
World Travel & Tourism Council (2003) “Annual Report”,
http://www.wttc.org/aboutWttc/pdf/Progress%20%20Priorities%202003.pdf  (accessed 21 December 2006).
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civilian  aircrafts  in  the  US  and  several  other  countries  were  grounded.  Passengers  were
stranded across the world  and governments  issued  travel warnings. Even with the reopening
of  North  American  airspace,  air  travel  decreased  significantly.  Air  travel  capacity  was  cut
back by 20%, further distressing the already ailing US airline industry.
42
Global international
arrivals  declined  by  0.6%,  marking  the  first  ye ar  of  negative  growth  for  the  industry  since
1982.
43
The  series  of  subsequent  direct  terrorists  assaults  in  Bali,  Moscow,  Mombasa  and
elsewhere  and  the  war  in  Iraq  weakened  the  economy  of  APEC  members  and  delayed
recovery. The direct threat to air travel and destination security resulted in an immediate fall
in  demand  in  travel  and  tourism.  For  example,  the  Bali  bombings,  which  resulted  in  202
deaths  (88  of  whom  were  Australians),  saw  40%  of  Australian  tourists  cancel  bookings  to
Bali.
44
Occupancy  rates  in  large  hotels  fell  from  74.8%  on  11  October  2002  to  33.4%  on  19
October, with several reporting 10% occupancy. Accommodation across the board suffered a
drastic fall in demand. Terrorist bombings continued through 2003, but as Augusto Huéscar,
UNWTO  chief  of  market  intelligence  and  promotion,  said,  “these  had  far  less  impact  than
expected as the public seems to have grown accustomed to living in an unsafe world”.
45

Severe Acute Respiratory Syndrome (SARS)
The growth in arrival rates at destinations in Asia and the Asia-Pacific region in January and
February  2003  was  short-lived.  The  emergen ce  of  SARS  and  the  Iraq  war  had  widespread
consequences in the affected region. Even destin ations not directly affected by SARS, such as
Australia,  Indonesia,  Japan,  Korea,  the  Philip pines  and  Thailand,  noted  a  10–50%  drop  in
tourist  arrivals.
46
The  outbreak  of  this  transmissible  new  disease,  which  spread  across  the
globe  through  routes  of  international  air  trav el,  resulted  in  8,100  cases  worldwide  and  916
deaths.  Although  97.7%  of  the  cases  were  in  Hong  Kong,  China,  Taiwan,  Singapore  and
Canada,  the  impact  on  travel  and  tourism  was  crippling.  For  example,  Malaysia,  whose
tourism  industry  was  its  second-largest  foreig n  exchange  earner,  contributing  about  7.8%  of
GDP  in  2002,  reported  five  incidents  of  SARS  and  saw  tourist  arrivals  drop  30%  and  hotel
occupancy fall 30–50% from April 2003 to April 2004.
47
In the same period, airline bookings
dropped  by  40%.  It  was  estimated  that  three  milli on  people  lost  their jobs  in  China,  Hong
Kong,  Singapore  and  Vietnam,  which  collectively  experienced  a  loss  of  US$20  billion  in
GDP  output.
48
The  collapse  of  tourism  in  the  region  was  caused  by  induced  panic  that
convinced travellers that the disease was virulent, rampant and out of control. All of Asia was
viewed as unsafe and even Chinatowns in other parts of the world were forsaken.

The UNWTO reported positive figures emerging in the second half of 20 03, but the recovery
was  slow.  Reflecting  on  the  turmoil  of  the year,  Francesco  Frangialli,  UNWTO  secretary
general,  said,  “the  travel  industry  was  affected  […]  but  it  did  not  collapse.  The  decline  was
limited,  and  in  such  a  hostile  environment  this  very  fact  confirms  the  resilience  of  tourism,
based  on  the  incomprehensible  need  for  travel  and  leisure  that  characterizes  consumers  in

42
Wikipedia, “September 11, 2001 Attacks”,  http://en.wikipedia.org/wiki/September_11,_2001_attacks (accessed 21 December
2006).
43
Wilks, J. and Moore, S. (2004) “Tourism Risk Management for the Asia Pacific Region: An Authoritative Guide for Managing
Crises and Disasters”, APEC International Centre for Sustainable Tourism , Asia-Pacific Economic Cooperation. p. 12.
44
Wilks, J. and Moore, S. (2004) “Tourism Risk Management for the Asia Pacific Region: An Authoritative Guide for Managing
Crises and Disasters”, APEC International Centre for Sustainable Tourism , Asia-Pacific Economic Cooperation. p. 48.
45
UNWTO Market Intelligence and Promotion Section (29 October 2003) “UNWTO World Tourism Barometer Rising, Iraq and
SARS Influences not yet Overcome”, http://unwto.org/facts/wtb.html  (accessed 29 December 2006).
46
Wilks, J. and Moore, S. (2004) “Tourism Risk Management for the Asia Pacific Region: An Authoritative Guide for Managing
Crises and Disasters”, APEC International Centre for Sustainable Tourism , Asia-Pacific Economic Cooperation. p. 9.
47
Wilks, J. and Moore, S. (2004) “Tourism Risk Management for the Asia Pacific Region: An Authoritative Guide for Managing
Crises and Disasters”, APEC International Centre for Sustainable Tourism , Asia-Pacific Economic Cooperation. p. 9.
48
Wilks, J. and Moore, S. (2004) “Tourism Risk Management for the Asia Pacific Region: An Authoritative Guide for Managing
Crises and Disasters”, APEC International Centre for Sustainable Tourism , Asia-Pacific Economic Cooperation. p. 20.
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post-industrial  societies”.
49
Through  the  three  difficult  years  of  2001–2003,  the  UNWTO
recorded an increase of 1% in international tourist arrivals, representing an overall increase of
seven million visitors ov er the year 2000.
Tsunami, December 2004
The  UNWTO  forecasts  for  2004  were  optimisti c  as  there  were  positive  signs  of  economic
recovery in the US, Japan and Western Europe,  and the retreat of SARS and military conflict.
At  the  end  of  the  year,  the  UNWTO  reported  “a  spectacular  rebound  of  tourism”  in  all
regions.
50
Annual international tourist arrivals worl dwide increased by 10% over the previous
year  to  760  million.
51
Asia-Pacific  led  the  growth  with  an  exceptional  increase  of  29%  and
received 154 million tourist arrivals. The rebound was fuelled by the rapidly growing Chinese
outbound  market  and  the  revival  of  the  Japanese  market.  All  destinations  in  Asia  posted
double-digit growth.

Then,  the  Indian  Ocean  tsunami  on  26  December  2004  dealt  another  blow  to  the  travel  and
tourism industry in Asia.

Figure 1: The Indian Ocean Tsunami
52

Many of the countries hit by the tsunami were dependent on tourism for their local economies.
The  WTTC  estimated  that  the  tourism  and  travel  industry  accounted  for  19  million  jobs  or
8.1% of total employment in South-East Asia.
53
In the Maldives alone, tourism provided two-thirds  of  employment  and  the  majority  of  GDP.
54
Within  days  of  the  devastation,  hoteliers
were adamant that they would be open for busi ness within weeks and appealed for travelers to
come, but in reality, most of the countries wrote off tourist revenues for 2005.
55
Recovery was
slow,  with  arrivals  in  August  2005  down  by  as  much  as  50%  and  53%  in  Phuket  and  Sri
Lanka,  respectively.
56
For  the  first  six  months  of  2005,  international  arrivals  to  Phuket

49
UNWTO Market Intelligence and Promotion Section (27 January 2004) “Global Troubles Took Toll on Tourism in 2003,
Growth to Resume in 2004”,  http://unwto.org/facts/wtb.html  (accessed 29 December 2006).
50
UNWTO Market Intelligence and Promotion Section (27 October 2004) “Spectacular Rebound of International Tourism in
2004”,  http://unwto.org/facts/wtb.html  (accessed 29 December 2006).
51
UNWTO Market Intelligence and Promotion Section (2 February 2005) “International Tourism Obtains its Best Results in 20
Years”, http://unwto.org/facts/wtb.html  (accessed 29 December 2006).
52
BBC News (22 March 2005) “At-a-Glance: Tsunami Economic Impact”,  http://news.bbc.co.uk/1/hi/business/4154277.stm
(accessed 29 December 2006).
53
BBC News (8 January 2005) “Tsunami Resorts ‘Ready in Weeks’”,  http://news.bbc.co.uk/1/hi/uk/4156775.stm (accessed 24
March 2006).
54
BBC News (7 February 2005) “Tourism Revival Key for Maldives”, http://news.bbc.co.uk/1/hi/world/south_asia/4237389.stm
(accessed 24 March 2006).
55
BBC News (31 January 2005) “UN Holds Emergency Tourism Summit”,  http://news.bbc.co.uk/1/hi/business/4222077.stm
(accessed 24 March 2006).
56
Travel Video Television News (13 March 2006) “Tsunami Recovery: More than One Year On”,
http://travelvideo.tv/news/more.php?id=8256. [PLEASE PROVIDE A DATE OF ACCESS]
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dropped  by  72.7%  to  0.45  million  compared  to  1. 66  million  arrivals  in  the  same  period  the
pervious year.
57

Despite the challenges of continued terrorist attacks and natural disasters, annual international
tourist arrivals worldwide exceeded 800 million  for the first time and grew by 5.5% year-on-year.
58
In Asia, average growth was 7% with North-East Asia, Taiwan and China experiencing
double-digit  growth.  However,  the  Maldives  reported  a  39%  decrease.  Arrivals  in  Indonesia
and Sri Lanka fell by 9% and 0.4% respectively.  The first half of 2005 showed a 6% decline
in arrivals for Thailand.

Overall,  the  turmoil  and  challenges  faced  by  the  travel  and  tourism  industry  between  1997
and  2005  were  short-lived  [see Exhibit  1 for industry trends and figures]. Its resilience to
adverse  events  and  crises  reinforced  speculations  of  its  long-term  growth  potential.  But  the
experience of those years also highlighted that  the industry was extremely vulnerable to short-term  shocks,  both  naturally  occurring  and  ma n-made.  It  was  against  this  backdrop  that
Banyan Tree established its presence in Asia-Pacific.

57
Banyan Tree Holdings Limited (26 May 2006) IPO prospectus, p. 85.
58
UNWTO Market Intelligence and Promotion Section (24 January 2006) “International Tourism Up by 5.5% to 808 Million
Arrivals in 2005”, http://unwto.org/facts/wtb.html  (accessed 29 December 2006).
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EXHIBIT 1: TRAVEL AND TOURISM INDUSTRY TRENDS AND FIGURES

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Source:  UNWTO Market Intelligence and Promotion Section (24 January 2006) “International Tourism up by 5.5% to 808 Million Arr ivals in 2005”,
http://www.unwto.org/newsroom/Releases/2006/janua ry/06_01_24.htm (accessed 29 December 2006).

International Tourist Arrivals by (Sub) region
Full year                                      Average        Share
2000 2001 2002 2003 2004 2005*  03/02 04/03 05*/04  05*/04 05*/00  2000-2005*  2000 2005*                 abs.(million)        change(%)     abs.(million)     Change (%)        (%)
World  689  688  709  697  766  808     -1.7  10.0  5.5     42.3  119.2     3.2     100  100
Europe  396.2  395.8  407.4  408.6  425.6  443.9    0.3  4.2  4.3    18.3  47.7    2.3    57.5  54.9
Northern Europe  44.6  42.3  43.8  44.5  48.4  51.8    1.8  8.6  7.1    3.4  7.2    3.0    6.5  6.4
Western Europe  139.7  135.8  138.0  136.1  138.7  141.1    -1.4  1.9  1.7    2.3  1.4    0.2    20.3  17.5
Central/Eastern
Europe  71.2  74.0  78.1  80.3  89.1  92.3    2.8  11.0  3.6    3.2  21.1    5.3    10.3  11.4

Southern/Mediterranean
Europe  140.8  143.7  147.6  147.7  149.5  158.8    0.1  1.2  6.2    9.3  18.0    2.4    20.4  19.6
Asia and the Pacific  111.4  116.6  126.1  114.2  145.4  156.2    -9.4  27.3  7.4    10.8  44.8    7.0    16.2  19.3
North-East Asia  58.3  61.0  68.2  61.7  79.4  87.5    -9.6  28.6  10.2    8.1  29.2    8.5    8.5  10.8
South-East Asia  37.8  40.7  42.8  37.0  48.3  50.2    -13.6  30.3  4.1    2.0  12.5    5.9    5.5  6.2
Oceania  9.2  9.1  9.1  9.0  10.2  10.6    -0.9  12.4  3.9    0.4  1.3    2.7    1.3  1.3
South Asia  6.1  5.8  5.8  6.4  7.6  7.9    10.2  18.1  4.5    0.3  1.8    5.4    0.9  1.0
Americas  128.2  122.2  116.7  113.1  125.8  133.1    -3.1  11.2  5.8    7.3  4.9    0.8    18.6  16.5
North America  91.5  86.4  83.3  77.4  85.9  89.4    -7.1  10.9  4.1    3.5  -2.1    -0.5    13.3  11.1
Caribbean  17.1  16.8  16.0  17.0  18.2  19.2    6.5  6.7  5.4    1.0  2.1    2.3    2.5  2.4
Central America  4.3  4.4  4.7  4.9  5.8  6.6    4.2  17.8  13.6    0.8  2.2    8.6    0.6  0.8
South America  15.2  14.6  12.7  13.7  16.0  18.0    7.9  16.2  12.7    2.0  2.8    3.4    2.2  2.2
Africa  28.2  28.9  29.5  30.7  33.3  36.7    4.1  8.4  10.1    3.4  8.5    5.4    4.1  4.5
North Africa  10.2  10.7  10.4  11.1  12.8  13.6    6.6  15.5  6.1    0.8  3.4    5.9    1.5  1.7
Subsharan Africa  18.0  18.2  19.1  19.6  20.5  23.1    2.8  4.5  12.6    2.6  5.1    5.2    2.6  2.9
Middle East  25.2  25.0  29.2  30.0  35.9  38.4     2.9  19.8  6.9     2.5  13.2     8.8     3.7  4.8
Source: World Tourism Organization (UNWTO)                    (Data as collected by UNWTO January 2006)
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EXHIBIT 2: BANYAN TREE\S LIST OF RECENT AWARDS AND ACOLADES

Ernst & Young Entrepreneur of the Year
Award
Lifestyle, Hospitality & Retail
Entrepreneur of the Year, Singapore
2005
Mr Ho Kwon Ping

The World’s Top 25  2006
Banyan Tree Spa Bangkok

Hotel Spas—Asia & Indian
Subcontinent
Banyan Tree Spa Phuket

Hotel Spas – Africa, Middle East &
Indian Ocean
Banyan Tree Spa Maldives

Conde Nast Traveller UK Gold List 2006
Best for Rooms
Banyan Tree Bangkok

2006 Singapore 1000/SME 500 Awards
Singapore 1000: Highest Net Profit
Banyan Tree Holdings Pte Ltd

Singapore International 100 Ranking
2006
Singapore Top 100 International
Company
Banyan Tree Holdings Pte Ltd

Conde Nast Traveller UK
Best Hotel Pool
Banyan Tree Seychelles

Luxury Travel Gold List 2006
Best Overseas Spa
Banyan Tree Spa Phuket

Best Overseas Resort
Banyan Tree Phuket

Best Overseas Golf Resort
Banyan Tree Phuket

Best Overseas Resort
Banyan Tree Maldives

Conde Nast Traveler US 2006 Gold List
World’s Best Places to Stay – Asia,
Australia & Pacific Nations
Banyan Tree Phuket

2006 T+L 500 World’s Best Awards
500 World’s Best: Asia
Banyan Tree Phuket

Source: Banyan Tree website: http://media.banyantree.com/ (accessed 28 December 2006).

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EXHIBIT 3: SUMMARY OF SIGNIFICANT EVENTS IN THE CORPORATE HISTORY OF
BANYAN TREE

1984  LRH
59
acquires over 550 acres of land on the site of an abandoned tin mine at Bang
Tao Bay, Phuket, Thailand.
1987–1992  After extensive rehabilitation of the site, LRH launches Dusit Laguna Resort Hotel
and Laguna Beach Resort.  LRH begins to market Laguna Phuket as a destination
within Phuket.  LRH launches a residences and property sales business with the
sale of Sheraton Island Villas in Laguna Phuket.
1993  LRH lists its shares on the Stock Exchange of Thailand.  Banyan Tree Hotels &
Resorts Pte Ltd, a resort and hotel management company, is established, as well as
companies to operate spas and galleries.   Sheraton Grande Laguna Phuket and the
Allamanda are launched.  LRH begins to sell units at the Allamanda.
1994  Banyan Tree Phuket is launched as the first Banyan Tree resort.  The resort
includes the first Banyan Tree Spa and Banyan Tree Gallery.
1995–1999  Banyan Tree Maldives and Banyan Tree Bintan are launched.
2000  The Angsana brand is launched with the opening of Angsana Bintan and Angsana
Great Barrier Reef.
2001  The Banyan Tree Spa Academy is opened.  Angsana Maldives and Angsana Oasis
are launched.
2002  A strategic alliance with the Oberoi Group of India to manage spas is established.
Banyan Tree Seychelles is launched.  Laguna Residences, Phuket, Thailand is
launched.  An additional 450 acres of land is purchased in Bang Tao Bay, Phuket,
Thailand for resort and property sales development.  Westin Banyan Tree is re-branded to Banyan Tree Bangkok.
2003  The Colours of Angsana product line is established and Gyalthang Dzong Hotel in
Shangri-La, Yunnan, China is launched.  Banyan Tree Spa Shanghai is launched.
Laguna Townhomes begin sales.
2004  The second Colours of Angsana hotel, Deer Park Hotel, is launched in Sri Lanka.
2005  The third Colours of Angsana hotel, Maison Souvannaphoum, is launched in Laos.
The company’s first resort in China Banyan Tree Ringha, Shangri-La is established
and Thai Wah Plaza, which includes Banyan Tree Bangkok, is acquired.
2006  The company’s first villa-style Banyan Tree resort in China Banyan Tree Lijiang,
and its first resort in the Middle East, Banyan Tree Bahrain are launched.

Source: Banyan Tree Holdings Limited (26 May 2006) IPO prospectus, pp. 95–96.

59
LHR was a subsidiary of Banyan Tree Holdings Limited. Banyan Tree Holdings held 51.8% of LRHs outstanding shares
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EXHIBIT 4: RESORTS AND HOTELS OWNED AND MANAGED BY BANYAN TREE AS OF
31 MARCH 2006

Number
of            Form of    Year
available    Ownersh
ip
manageme
nt    opened/
Name of Resort    Location    rooms    Owner
interest(
5)
arrangeme
nt
Re-branded
Banyan Tree Phuket
Phuket,
Thailand   127  LRH(1)   51.8%(6)
Technical     1994
assistance                  Banyan Tree Maldives  Maldives    48    Vabbinvest    96.7%
(6)
Management  1995
Vabbinfaru          Maldives Pvt Ltd      agreement
Banyan Tree Seychelles
Seychelle
s    47    Banyan Tree    30.0%
(6)
Management  2002
Resorts    agreement          (Seychelles)              Limited                      Banyan Tree Ringha
Yunnan,
China   32  Jiwa Renga  96.00%  Management 2005
Resorts Limited   agreement                  Banyan Tree Bangkok  Bangkok,    197    Thai Wah Plaza  51.8%
(6)
Management  2002
Thailand        agreement                  Banyan Tree Bintan
Bintan,
Indonesia    70    PT. Bintan Hotels  –(8)
Management  1995
agreement                  Angsana Resort & Spa
Cairns,
Australia    64    Manwin     –(7)
Management  2000
Great Barrier Reef          Properties        agreement
Limtied(2)                      Angsana Resort & Spa
Bintan,
Indonesia    113    PT. Bintan Hotels  –(8)
Management  2000
Bintan                  agreement
Angsana Oasis Spa &
Bangalor
e, India    43    Prestige Leisure   —    Management  2001
Resort          Resorts Private      agreement
Limited                      Angsana Resort & Spa  Maldives    45    Maldives Angsana  96.7%
(6)
Management  2001
Maldives Ihuru          Pvt Ltd        agreement
Colours of Angsana—
Yunnan,
CHINA    47    Gyalthang Dzong  79.20%    Management  2003
Gyalthang Dzong
Hotel          Hotel        agreement
Colours of Angsana—
The
Beruwela
, Sri    77    The Deer Park    —    Management  2004
Deer Park Hotel  Lanka        Hotel (Pvt) Ltd        agreement
Colours of Angsana—
Luang
Prabang,   24  Souvannaphoum   —  Management 2005
Maison
Souvannaphoum  Laos        Pvt Ltd        agreement
Dusit Laguna Resort
Hotel
Phuket,
Thailand    224    LRH    51.8%
(6)
Managed    1987
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Externally              by Dusit              Thani              Corporation              Limited                  Velavaru Island Resort  Maldives    84    Maldives Bay Pvt  77.40%    Management  2005
Ltd    agreement                  Laguna Beach Resort
Phuket,
Thailand    252    LRH(3)    25.8%
(6)
Jointly    1991
managed by              LRH and              InterPacific              Investment              Limited(9)                  Sheraton Grande
Laguna
Phuket,
Thailand    289    LRH(4)    51.8%
(6)
Managed    1992
Phuket                  Externally
by Sheraton              Overseas              Management             Corporation                  The Allamanda
Phuket,
Thailand    203    Phuket Hotel    —    Technical     1993
Limited    assistance               agreement                  Total        1,986
Notes:
(1
)
Banyan Tree Phuket is owned by Laguna Banyan Tree Limited, which is 51% owned by TWR-Holdings Limited and 49%
owned by LRH.
(2
)
Reef Services Pty Ltd has leased the resort from Manwin Properties Limited and unit holders for ten years commencing on 1
November 2001 and expiring on 31 October 2011.
(3
)
Laguna Beach Resort is owned by Laguna Beach Club Limited.  Please refer to “General and Statutory Information—
Subsidiaries and Associated Companies” for ownership details of Laguna Beach Club.
(4
)
Sheraton Grande Laguna Phuket is owned by Bangtao Grande Limited, which is 100% owned by Laguna Grande Limited, a
100% owned subsidiary of LRH.
(5
)  This column reflects our effective ownership interests in the companies which own the various resorts.
(6
)
For details of our ownership interest in this company, see “General and Statutory Information—Subsidiaries and Associated
Companies”.
(7
)
LRH, through TWR-Holdings Limited and Laguna Banyan Tree Limited, has a 19.8% interest in Tropical Resorts Limited,
which in turn has a direct interest in 100% Of the shares of Manwin Properties Limited.
(8
)
LRH, through TWR-Holdings Limited and Laguna Banyan Tree Limited, has a 19.8% Interest in Tropical Resorts Limited.
Tropical Resorts Limited has an effective interest in 49.5% of the shares of PT. Bintan Hotels.
(9
)
Laguna Beach Resort is co-managed by LRH and InterPacific Investment Limited, an unrelated party.  A four-person
executive committee which consists of two representatives of LRH and InterPacific Investment Limited meets quarterly to
manage this resort.  Banyan Tree Holdings Limited receives no management fees for co-managing this resort.

Source: IPO Document, pp. 105–106.
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EXHIBIT 5: BANYAN TREE RESORTS\S PUBLISHED ACCOMMODATION RATES

Banyan Tree Resorts  Published Rates
Bangkok, Thailand
Deluxe view suite at Thb 14,400
60
to presidential suite at Thb
80,000
Bintan, Indonesia  Valley villa at US$470 to spa pool villa at US$1,450
Lijiang, China  Garden villa at US$400 to deluxe pool villa at US$700
Vabbinfaru, The Maldives  Ocean view villa at US$765 to Vabbinfaru villa at US$1,330
Phuket, Thailand  Deluxe villa at US$580 to 2-bed doublepool villa at US$2,080
Ringha, China  Tibetan suite at US$310 to Ringha lodge at US$740
Seychelles
Hillside pool villa at €1,010
61
to Independence Pool Villa at
€ 1,610
Angsana Resorts
Bintan, Indonesia  Superior room at US$181 to 2-bed suite at US$388
Great Barrier Reef, Australia
1-bed pool view suite AU$370
62
to 3-bed beachfront suite at
AU$620
Ihuru, The Maldives
Beachfront villa at US$700 to deluxe beachfront villa at
US$770
Bangalore, India  Executive resort room at € 140 to Angsana suite at  €315
Velavaru, The Maldives  (Rates unavailable on the corporate website)
Colours of Angsana
Maison Souvannaphoum, Laos  Garden room at US$140 to Laos suite at US$280
Deer Park Hotel, Sri Lanka  Duplex cottage at US$110 to Angsana cottage US$175
Gyalthang Dzong Hotel,
Yunnan, China  Deuxe room at US$60 to suite at US$90

Allamanda Laguna Phuket  Junior suite at US$170 to Allamanda suite at US$370

Source: Banyan Tree website: http://www.banyantree.com/ (accessed 5 January 2007).

60
Thb 1 = US$0.026 monthly average in August 2006.
61
€ 1 = US$1.28 monthly average in August 2006.
62
AU$1 = US$0.76 monthly average in May 2006.
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EXHIBIT 6: OPERATING DATA OF SPAS MANAGED BY BANYAN TREE

For the three
For the year ending    months ending
31 December    31March
(unaudited)    (unaudited)
2003    2004    2005       2006
Banyan Tree
Number of spas      6    7    9      8
Average rates per hour of use per room per day (S$)  83.00    82.30    87.40      88.80
Average hours of use per room per day    4.40    4.70    3.52      3.86

Angsana
Number of spas      13    18    18      26
Average rates per hour of use per room per day (S$)  64.10    64.50    64.50      68.70
Average hours of use per room per day    2.70    2.40    2.40      2.62

Other spas
Number of spas      14    15    15      15
Average rates per hour of use per room per day (S$)  58.30    58.30    60.90      64.40
Average hours of use per room per day    1.70    2.70    3.14      3.32

Source: IPO Document, p. 60.

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EXHIBIT 7: BANYAN TREE\S OPERATING PROFIT BY BUSINESS SEGMENT

For the year ending 31 December
For the six
months
(audited)
ending 30
June
(unaudited)
63

2003
(1)
2004    2005   2006
Percentage    Percentage    Percentage
of total    of total    of total
Operating    operating    Operating    operating    Operating    operating    Operating
Profit    profit    Profit    profit    Profit    profit    Profit
S$ million    %    S$ million    %    S$ million    %    S$ million
Operating profit/(loss)
Business segments
Hotel investment  17.0    41.0    35.1    55.0    2.3    19.3    28.3
Hotel management  2.1    5.1    3.8    6    0.5    4.2    (0.3)
Spa operations  5.1    12.3    6.1    9.6    1.5    12.6    4.4
Gallery operations  0.9    2.2    1.8    2.8    0.3    2.5    0.4
Property sales  22.5    54.2    18.4    28.8    10.9    91.6    21.4
Design fees and others  (8.7)    (21.0)    (7.2)    (11.3)    (5.4)    (44.5)    (2.1)
38.9    93.8    58    90.9    10.2    85.7    52.1
Other operating profit  0.9    2.2    4.1    6.4    1.7    14.3    N/A
Amortisation of                          N/A
negative goodwill  1.7    4.0    1.7    2.7    –    –    N/A
41.5    100.0    63.8    100.0    11.9    100.0    52.1

Source: IPO Document, p. 63.

63
Banyan Tree Holdings Limited, “Unaudited Results for the Second Quarter Ended 30 June 2006”, p. 18.
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EXHIBIT 8: BANYAN TREE\S REVENUE BY BUSINESS SEGMENT AND BY GEOGRAPHIC REGION

Year ending 31 December    Six months ending 30 June
(audited)   (unaudited)
64

2003(1)
2004    2005    2006
Percentage    Percentage    Percentage    Percentage      of total    of total    of total    of total    Revenue  Revenue  Revenue  revenue  Revenue  revenue  Revenue  Revenue
S$
million   %
S$
million   %
S$
million   %
S$
million   %
Revenues
Business segments
Hotel investment  82.3    53.4    133.9    61.2    111.6    59.7    84.7    56
Hotel management  6.8    4.4    9.0    4.1    6.6    3.5    2.5    2
Spa operations  14.3    9.3    16.8    7.7    17.1    9.1    11.3    7
Gallery operations  6.3    4.1    7.8    3.6    6.8    3.7    4.9    3
Property sales  39.3    25.4    44.1    20.1    31.0    16.6    40.9    27
Design fees and others  5.2    3.4    7.2    3.3    13.8    7.4    7.8    5
Total revenue  154.2    100    218.8    100    186.9    100    152.1    100
Other operating income  2.5        5.8        1.7        N/A
156.7    224.6    188.6    152.1
(1)  LRH’s expenses have been consolidated from 1 April 2003.

64
Banyan Tree Holdings Limited, “Unaudited Results for the Second Quarter Ended 30 June 2006”, p. 17.
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Year ending 31 December    Three months ending 31 March
(audited)    (unaudited)
2003(1)
2004    2005    2005    2006
Percentage    Percentage    Percentage    Percentage    Percentage
of total    of total    of total    of total    of total
Revenue  revenue  Revenue  Revenue  Revenue  revenue  Revenue  revenue  Revenue  revenue
S$
million    %
S$
million    %
S$
million    %
S$
million    %
S$
million    %
Revenues
Geographic region
South-East Asia
(2)
105.4  68.3  180.2  82.4  142.2  76.1  24.8  71.1  64.4  79.8
Indian Oceanian
(3)
25.7  16.7  33.8  15.4  32.4  17.3  7.7  22.0  13.4  16.6  North-East Asia
(4)
0.3  0.2   1.0    0.5    2.7    1.5    0.2    0.6    0.6    0.7
Rest of the world  22.8    14.8    3.8    1.7    9.6    5.1    2.2    6.3    2.3    2.9
Total revenue  154.2    100.0    218.8    100.0    186.9    100.0    34.9    100.0    80.7    100.0
Other operating income  2.5        5.8        1.7        0.5        0.6
156.7        224.6        188.6        35.4        81.3

(2)  Thailand, Indonesia and Singapore.
(3)  The Maldives, Sri Lanka and India.
(4)  China, Japan, Hong Kong and Taiwan.
(5)  Australia, New Zealand, Guam, Morocco, Ireland, Bahrain, United Arab Emirates, South Africa and Egypt.

Source: IPO Document, p. 58.

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EXHIBIT 9: BANYAN TREE\S OPERATING EXPENSES

For the year ending 31 December    For the three months ending 31 March
(audited)    (unaudited)
2003
(1)
2004    2005    2005    2006
Percentage    Percentage    Percentage    Percentage    Percentage
of total    of total    of total    of total    of total
operating    operating    operating    operating    operating
Expenses    expenses    Expenses    expenses    Expenses    expenses    Expenses    expenses    Expenses    expenses
S$ million    %    S$ million    %    S$ million    %    S$ million    %    S$ million    %
Operating expenses
Operating supplies  20.3    17.6    34.1    21.2    28.9    16.4    4.7    12.4    12.8    23.8
Salaries and related
expenses    35.6    30.9    48.4    30.1    59.1    33.5    14    37.1    17    31.6
Administrative
expenses    15.2    13.2    22.9    14.2    25.5    14.4    4.7    12.4    4.6    8.6
Sales and marketing
expenses    5.6    4.9    8.1    5    9.9    5.6    2.4    6.4    3    5.6
Depreciation of
property, plant and
equipment    12.2    10.6    15.5    9.7    19.9    11.2    4.5    11.9    5.4    10
Other operating
expenses    26.3    22.8    31.8    19.8    33.4    18.9    7.5    19.8    11.1    20.4
Total    115.2    100.0    160.8    100.0    176.7    100.0    37.8    100.0    53.8    100.0
Note:
(1)  LRH’s expenses have been consolidated from 1 April 2003.

Source: Banyan Tree Holdings Limited (26 May 2006) IPO prospectus, p. 61.
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EXHIBIT 10: BANYAN TREE\S FULLTIME EMPLOYEES BY BUSINESS UNIT AND
LOCATION

As of 31 December  By Business Unit    2003    2004    2005
Office and Operations  384    402    476
Resorts and Hotels  2,102    2,085    2,692
Spa Operations    262    311    429
Gallery Operations  49    61    68
Golf    89    89    90
Property Sales    360    414    422
Total    3,246    3,362    4,177

As of 31 December  By Location    2003    2004    2005
Australia    14    15    18
Indonesia    9    11    11
The Maldives    261    269    365
The Seychelles    3    3    3
Sri Lanka    99    67    68
Guam    10    12    12
Singapore    167    187    211
Thailand    2,683    2,798    3,258
China    —    —    147
Japan    —    —    7
South Africa    —    —    15
Dubai    —    —    35
Egypt    —    —    12
Malaysia    —    —    15
Total    3,246    3,362    4,177

Source: Banyan Tree Holdings Limited (26 May 2006) IPO prospectus, pp. 137–138.
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EXHIBIT 11: AGGREGATED OPERATING DATA FOR HOTELS AND RESORTS
IN THE BANYAN TREE GROUP

Aggregate operating data for the resorts and hotels managed by Banyan Tree and/or in which it had
an ownership interest for the periods indicated.

As of or for      As of or for
the year ending 31 December
the three months ending 31
March
(unaudited)      (unaudited)
2003    2004    2005      2005      2006
Number of properties    14    15            18       16      18
Average number of available
rooms
(1)
1,816     1,886     2,024       1,900      1,986  Average occupancy (%)
(2)
62.9    69.4    53.3      42.8      67.5
Average room rate (S$)
(3)
259.90    273.40    271.60      327.70      340.40
REVPAR (S$)
(4)
163.50    189.70    144.70        140.30      229.80
Total revenue (S$ million)    172.8    213.8    171.8      38.7      64.4

Aggregate operating data for the resorts and hotels managed by Banyan Tree for the periods
indicated.

As of or for     As of or for
the year ending 31 December
the three months ending 31
March
(unaudited)     (unaudited)
2003    2004    2005      2005      2006
Number of properties    12    13            16       16      16
Average number of available
rooms
(1)
1,303       1,373       1,511          1,387         1,448
Average occupancy (%)
(2)
59.6    66.8    54.5      46.9      66.5
Average room rate (S$)(3)    301.20    308.00    309.60      359.60      363.10
REVPAR (S$)
(4)
179.70    205.70    168.60        168.60      241.40
Total revenue (S$ million)    131.8    165.8    143.6      33.2      50.0

Aggregate operating data for the resorts that were operated under the Banyan Tree brand  for the
periods indicated

As of or for     As of or for
the year ending 31 December
the three months ending 31
March
(unaudited)     (unaudited)
2003    2004    2005      2005      2006
Number of properties    5    5              6       5      6
Average number of available
rooms
(1)
492        502        540          496         540  Average occupancy
(%)
(2)
65.9    74.1    65.7      64.0      70.7
Average room rate
(S$)
(3)
474.50    503.60    482.10      505.80      601.60
REVPAR (S$)
(4)
312.80    373.00    317.00        324.00      425.20
REVPAR (S$) (excluding
Banyan Tree Bangkok)  467.60    546.40    445.00      461.10      578.90
Total revenue (S$ million)    87.2    109.0    96.6      23.7      32.3
Total revenue (S$ million)
(excluding Banyan Tree
Bangkok)  68.7    83.9    70.9      16.8      24.1
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Aggregate operating data for the resorts that are operated under the Angsana brand for the periods
indicated

As of or for     As of or for
the year ending 31 December
the three months ending 31
March
(unaudited)     (unaudited)
2003    2004    2005      2005      2006
Number of properties    5    6              7       7      7
Average number of available
rooms
(1)
317        394        428          420         413  Average occupancy (%)
(2)
52.1    53.1    48.8      42.8      56.3
Average room rate (S$)
(3)
246.10    237.40    253.10      282.40      277.00
REVPAR (S$)
(4)
128.20    126.10    123.50        120.80      155.80
Total revenue (S$ million)    23.9    32.1    30.1      6.8      8.6

Notes:
(1
)
Average number of available rooms means the total aggregate number of rooms available for average occupancy for
each day during the relevant period divided by the number of days in that period.
(2
)
Average occupancy means the number of paid room nights during a period divided by the total number of available
rooms during that period, expressed as a percentage.
(3
)
Average room rate means the total room revenue earned during a period divided by the number of paid room nights for
that period.
(4
)  REVPAR equals average room rate multiplied by average occupancy.

Source: Banyan Tree Holdings Limited (26 May 2006) IPO prospectus, pp. 19–20 .

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EXHIBIT 12: BANYAN TREE\S CUSTOMER MIX BY COUNTRY OF RESIDENCE

For the year ending   For the three
31 December
months
ending 31
March
(unaudited)   (unaudited)
2003    2004    2005    2006
As a percentage of total room nights
Europe(1)  25.5%    32.3%    31.2%    46.6%
Americas(2)  4.3%    4.8%    6.3%    6.7%
North Asia(3)  42.0%    38.3%    26.9%    24.5%
South Asia(4)  21.1%    15.1%    22.2%    14.6%
Oceania(5)  5.3%    6.8%    10.1%    5.8%
Others(6)  1.7%    2.6%    2.9%    1.8%
Notes:
(1)  Europe includes United Kingdom, Germany, France, Switzerland, Russia and Italy.
(2)  Americas includes the United States, Canada and South America.
(3)  North Asia includes Japan, Korea, Hong Kong, China and Taiwan.
(4)  South Asia includes Singapore, Malaysia, India and Thailand.
(5)  Oceania includes Australia, New Zealand and other Pacific nations.
(6)  Others include the UAE, the Middle East and Saudi Arabia.
(7)  The information above is based on information provided by our customers as to their country of residence.

Source: Banyan Tree Holdings Limited (26 May 2006) IPO prospectus, p. 106.

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EXHIBIT 13: MAP OF BANYAN TREE\S GLOBAL PRESENCE

Source: Adapted from Banyan Tree (26 May 2006) “Prospectus”.
CSVS/108C  Banyan Tree: Sustainability of a Brand During Rapid Global Expansion

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EXHIBIT 14: BANYAN TREE\S PLANNED CAPITAL EXPENDITURE AND PROPOSED INVESTMENTS IN NEW RESORT AND HOTEL DEVELOPMENTS

Estimated
opening  Estimated  Estimated BTH
Location    date    project cost    equity investment
(12)
Estimated investment per annum               2006  2007  2008          S$ million    S$ million    S$ million  S$ million  S$ million
Capital expenditure
Angsana Swanee Hotel
(1),(13)
Sri Lanka  First quarter 2008  16.7   6.7  0.0  3.2  3.5  Angsana Phuket
(2), (13)
Thailand  2008    48.0   24.0  8.0  16.0  0.0
Angsana Velavaru
(3)
Maldives  2007    24.3   12.2  9.8  2.4  0.0  Banyan Tree Chiang
Mai
(2), (13)
Thailand  2009   20.0   10.0  0.0  3.3  6.7  Banyan Tree Ubud
(2),(13)
Indonesia  First quarter 2008    25.0   12.5  0.0  6.3  6.2
Banyan Tree Aloofushi
(2),(13)
Maldives  2009   30.0   15.0  0.0  9.8  5.2  Banyan Tree Bangkok
(4)
Thailand  Fourth quarter 2007
and first quarter                  2008   16.8   4.2  3.2  1.0  0.0  Banyan Tree Phuket
Phase 1 of DoublePool
villas
(5)
Thailand  Third quarter 2006  31.2   7.8  7.8  0.0  0.0    Phase 2 of DoublePool
villas
(6)
Thailand  Fourth quarter 2007  30.0   7.5  0.0  7.5  0.0  Sheraton Grande Laguna
Phuket
(7)
Thailand  Fourth quarter 2006  11.6   0.0  0.0  0.0  0.0  Furnishings, fittings,
equipment and small
capital projects        Not applicable    29.0    Not applicable    10.7    9.2    9.1
282.6   99.9  39.5  58.7  30.7
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Investments
Banyan Tree Lijiang
(Phase 1)
(8),(13)
China Second quarter                    2006   48.3   18.3  18.3  0.0  0.0  Banyan Tree
Mayakoba
(9),(13)
Mexico    2008    176.5    10.0    2.5    5.0    2.5
Banyan Tree Punta                       Diamante
(10),(13)
Mexico    First quarter 2008    50.0    5.0    0.0    5.0    0.0
Banyan Tree Ras A1                       Khaimah
(11),(13)
UAE    2009    50.0    5.0    0.0    5.0    0.0
324.8    38.3    20.8    15.0    2.5
Notes:
(1)  This project is to be approximately 40% equity financed and 60% debt financed.

(2)  This project is to be approximately 50% equity financed and 50% debt financed.

(3)  This project involves the renovation and re-branding of the hotel and is to be approximately 50% equity financed and 50% de bt financed.
(4)  This project will include the conversion of the low yielding office floors in Thai Wah Tower II to provide higher yielding  hotel inventory and to provide better banqueting and meeting facilities and will be
approximately 25% equity financed and 75% debt financed.
(5)  The phase 1 of 22 Double Pool Villas is under construction and will be completed by the third quarter of 2006.  It is appro ximately 25% equity financed and 75% debt financed.
(6)  The phase 2 of 30 Double Pool Villas will be commenced in the second half of 2006 and will be completed by the end of 2007.   It will be approximately 25% equity financed and 75% debt financed.
(7)  The 45-room extension was completed in early 2006 and the room renovations will be completed by the end of 2006.  This proj ect is 100% debt financed.
(8)  This project is to be approximately 65% equity financed and 35% debt financed.

(9)  We have an equity stake of 20% in this project.  Our equity contribution is capped at the lower of US$6 million or a 20% stake.  We have the option to increase our equity contributions to maintain our share
at 20%.
(10)  We have an equity stake of 15% in this project which will be approximately 50% equity financed and 50% debt financed.  Our initial equity contribution is capped at US$3.0 million.
(11)  We have an equity stake of 15% in this project.

(12)  Ignoring minority interests.

(13)  These projects involve the construction of a new resort/hotel.

Source: Banyan Tree Holdings Limited (26 May 2006) IPO prospectus, pp. 81–82.
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EXHIBIT 15: BANYAN TREE\S AVAILABLE LANDBANK AS OF 31 MARCH 2006

Location
Expected commencement of
sales
Acreage
(currently
developing)
Acreage
(landbank
available)
Laguna Phuket    2006    101    228
Seychelles    2006 (under construction)    4    207
Chiang Mai    2007 (Phase 1)    –    93
Lijiang    2006    4    28
Total        109    556

Source: Banyan Tree Holdings Limited (26 May 2006) IPO prospectus,  p. 135.
 

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