Banyan Tree: Targeting Price-Sensitive Travelers

What is Banyan Tree doing to target travellers seeking a “Banyan Tree” experience but are more price-sensitive? Do you think this will work? Please elaborate. Banyan Tree Hotels and Resorts (BTHR) identifies itself as the pioneer company to adopt the concept of designing individual villas as love nests for couples on holidays. “Banyan Tree experience” emphasises on complete privacy and provides an oriental getaway so customers can indulge and rejuvenate themselves within the villas, away from the bustling cites. Unlike most top-class hotel chains and resorts, BTHR saves on lavished common areas such as the lobby, and focuses on the interior décor and facilities of the villas by having themed bedrooms or installing private swimming pools for the Pool Villas.

Furthermore, BHTR reverts to traditionally-styled spas which are non-air-conditioned and masseuses are barefoot, allowing them to set a wider price range from as low as US$33 to target price sensitive travellers. These strategies create a competitive advantage to capture the price sensitive customer bases who are seeking for a “Banyan Tree experience”.

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We could use Michael Porter’s Five Forces analysis to assess if BTHR’s strategies are working as well as its competitiveness in the market. Threat of new entrants or potential competitors- Low pressure:

There are high barriers to entry such as heavy investment costs in acquiring suitable land size in recent years. Governments have also set stricter regulations on ownership of land as well as greater environmental responsibility for firms in the industry. Threats of substitute products- High pressure: Various options are available for travellers to get accommodations.

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

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