Nov.17 -- Kwon Ping Ho, founder and executive chairman at Banyan Tree Holdings Ltd., discusses the impact of the coronavirus pandemic on the hospitality industry, the recovery in Asia and his outlook for his business. He speaks exclusively on “Bloomberg Markets: Asia.”
- Just first of all, it's been a horrid, horrid year, and I think the most commonly used word of late has been "unprecedented." Tell us now about whether the worst is behind us. And tell us a little bit about China as well, given the fact that we've talked to other hospitality groups who say that it's come back so strongly. Are you seeing the same thing, and elsewhere are we yet to see better days?
KWON PING HO: Well, first of all, I think every crisis seems to be unprecedented. When we saw 9/11, it was unprecedented and the whole world was going to change. And when the Asian tsunami hit, everything was unprecedented.
I think one thing we have to take from this is that this, too, will pass, as everything else will. So I think we have to take it in stride. We have to be resilient.
Now, in terms of the Asian economies, as we all know, China has performed very well. Many other Asian economies have also done very well in terms of keeping their economies relatively resilient, having controlled the first outbreak of COVID very well, and probably likely to prevent a second outbreak. I think the real question for the hospitality industry now in Asia is, when will Asia open up to itself, so that an overall Asian bubble can exist in order to mitigate everything that's happening with travel and tourism in the United States and in Europe?
China is doing extremely well. Our hotels in China have done even better than before, because there have been tens of millions of relatively wealthy Chinese who at this time of year would have gone out to travel to Europe and elsewhere, and they aren't able to travel. And domestic tourism, of course, is just booming, so that's doing very well.
In Thailand, in Vietnam, other places, Korea, Japan-- there's an attempt by governments to promote domestic tourism. But unfortunately, particularly in ASEAN, while domestic tourism has suddenly grown, it's just not enough to be able to fill all the empty rooms that we're all facing now.
- Kwon Ping, give me a sense of how the industry itself has been looking introspectively. Do you think a different type of hospitality industry will actually arise from in the post-COVID world here?
KWON PING HO: I think there will be definitely changes, but it's not as if the travel industry is going to go away. There are trends that we've all seen at different levels. For example, within companies themselves, all the gains that many companies have made, like ours, in terms of restructuring, reducing our costs, creating much more variable employment levels, and so on, all of these gains that are making us far more lean during this difficult time, and those of us who can survive through this, as we can, want to be sure that when the recovery occurs, all these gains that we've made are not just suddenly lost and we do not remain as lean as we've been now.
So that's one thing that will change in the hospitality industry. The restructuring that has happened I think will continue. On the other hand, travel itself has changed. Leisure travel, I think, will become much more purposeful.
Business travel will be purposeful, meaning you don't just travel for the sake of meeting your customers at a whim every week or so. You can do a lot of it by Zoom now. You also don't just jump on a plane and go somewhere for a few days, it will be for longer periods of time. So there'll be more purposeful, longer-term stays at each place.
So the nature, the nuances of travel will change, but fundamentally I think you will see, in fact, the pent up demand is one where when the recovery does occur, and inevitably it will, it will be a very big recovery. But the question now for most of us is, can we get through until the end of next year? It's going to be another one year possibly if the Asian economies do not resolve their intra-Asian travel arrangements, which we are all waiting for, and it hasn't really happened yet. Everybody's just defending themselves.
And the COVID-free countries, from Thailand to Vietnam to China, are just not really welcoming, not opening the doors to each other. And we need that to happen. otherwise there's no point to be super healthy and locked in your own economies while the tourism industry needs an opening up of a bubble within Asia itself.
- Kwon Ping, that's an interesting point, because it's not an equal recovery. And you look at the likes of Thailand, which is being hit incredibly hard by the fact that borders are shut. Where are you seeing potential areas of growth though at Banyan Tree as we look forward, and I guess, how do you adapt to this environment? Because you talked about the changing business traveler, do conferences come back?
KWON PING HO: I think conferences will definitely come back, definitely, you just look at people's practices over the last eight months. We all have found Zoom meetings to be great, but we also need physical interaction. So I think our confidences in my sector will bounce back in a very big way, bigger than ever before, because you will then have a hybrid [INAUDIBLE] industry where you can have a physical conference with many people who want to interact with each other still gathering to [INAUDIBLE] with each other. But they will always be augmenting it now, the virtual conference, so hybrid conferences will become, I think, a big thing.
In terms of leisure travel, as I've said before, not only will travel be more purposeful, but we in Banyan Tree have found that there are a lot of opportunities. Domestic tourism within ASEAN, 600 million people, all reaching a middle class status with millennials wanting to rediscover their own countries, and during this last eight months, in fact, finding that there's so much to discover within their own economies. COVID in a way, while it has hampered international travel, has given a big boost to domestic travel. And domestic travel has not gotten to the extent that it has in the United States or in Europe, so there's huge growth potential there.
At the same time, travel with a purpose, travel to see cultural sites, not just beaches, and sun, and sand, but to see cultural sites, travel for wellness, for rejuvenation, for nature. There's a whole new area of tourism that is going to grow in Asia, whereas in the past, leisure travel had largely been sun, sea, sand for Westerners coming. That's been the history of leisure travel in Asia for the last 50 years. After COVID, the bright side is that domestic travel, regional travel, travel for much broader purposes than just beaches and so on, will explode, and I think we are taking clear advantage of these opportunities.
- You're in a position to take clear advantage, too, though. What happens to some of the smaller players that could be pushed out? Do we see the end to the likes of boutique hotels?
KWON PING HO: I think you'll find-- that's an interesting point, because we're looking at that also. I think you'll find increasing consolidation and segmentation within the Asian travel industry. The real problem are not so much the international branded five star hotels, because A, the management companies are very well known, they've got a very good distribution system, good brands. They're likely to be able to survive. And very importantly, the owners of these hotels are generally very well endowed families, or corporations.
The problem is that the bulk of Asian tourism has been built on the backs of individual investors who have built very decent three, four star hotels that are unbranded, that are generally family managed and so on, and they are suffering very badly. So one of the things that we are doing in Banyan Tree is extending our hospitality capability. We are now not a single branded company, although Banyan Tree is the best known of our brands. We now have six brands that go, not only from luxury, but down to upscale and even mid-scale.
And we are finding that a lot of owners now, Asian owners, want to come to us and ask us to help them. Help them in flexible ways-- whether we manage their hotels completely, or we give them franchises, or we give them marketing arrangements, you're finding a lot of unbranded individual hotels beginning to realize that they need to modernize. And that's in the long-term a good thing, too, and we want to be able to contribute to that as much as we can.
- Kwon Ping, very quickly, is it a part of the market where you just can't go back to the old ways, if you will? Very quickly.
KWON PING HO: Yep, I think we will have to redefine luxury. Asian luxury was built on the back of cheap labor. And now I think you're going to find that we have to be much more smart about what luxury means. It does not, it can no longer mean simply piling on labor. It means having to add technology and having to redefine and reimagine what a Banyan Tree experience is in our particular case.