Newsmaker: Ho Kwon Ping bites the bullet and restructures

Ho: Flatter hierarchy for Banyan

FACED with challenges like a prolonged economic downturn and consolidation in the hotel sector, Banyan Tree Hotels & Resorts (BTHR) is biting the bullet and restructuring the company to be fit, a process that began late last year.

The Singapore-listed parent company is also making large write-offs for doubtful debts such as delinquent payment of management fees, in order to face an uncertain economic environment with firmer footing.

A Project Zero late last year saw the group examining legacy costs, processes and structures with a view towards being flatter in hierarchy, more productive and agile. A Project One, currently on-going, sees the group rebuilding new structures.

Ho: Flatter hierarchy for Banyan

But the restructure is not just about cutting costs, but building the right platform that will enable BTHR to swim in new currents, according to Banyan Tree Holdings’ chairman, Ho Kwon Ping.

Corporate roles that are traditionally standard for a chain – regional vice presidents of operations, and a corporate vice president of sales and marketing – have been eliminated and replaced by new positions. Operational clusters of hotels based purely on geography have also been re-structured to reflect clusters by common ownership of hotels.

Raini Hamdi talks to Banyan Tree Holdings chairman Ho Kwon Ping about how he’s doing it.

Why Project Zero?

In the past few years our hotel management business has grown reasonably, with steadily rising management fee income. But corporate expenses grew even faster, so that the operating margins of the management company declined. This is like a hotel which enjoys increasing revenue but declining GOP margins. It is neither acceptable nor sustainable and the GM would have been sacked.

Even though we currently operate 40 hotels and have another 20 in the pipeline, we need to find increasing economies of scale. After all, with the recent spate of hospitality consolidations, the massive global giants are going to be even leaner than before. What pressures will that impose on the small guys like us?

We are in a unique dilemma: we are neither as small as we used to be, nor as big as we should be, to justify our global structure.  We also do not have a “sugar-daddy” parent-owner in the form of say, a big property developer, conglomerate, or private equity, which is quite common in Asia. For example, brands like Langham, Rosewood, Six Senses, Alila, Pan Pacific, Meritus, Mandarin Oriental, Shangri-La, are all owned by larger, very deep-pocketed conglomerates or private equity.  We are one of a few independent brands.

So late last year we launched Project Zero, which was to literally start from Zero, to examine all the ways we did things, with a view towards being flatter in hierarchy, more productive in people, and quicker to respond to market trends.

Then we launched Project One, which is to build new structures on the same foundation. The tagline for Project One is ‘One Team, One Goal’. It may sound (cheesy) to people but in our case, our hotel management structure was too fixated on itself and not providing enough synergies for our other ventures in property sales, spa and gallery operations, holiday clubs, etc.

What’s a good example of a legacy cost, process or structure?

Example one: A few years ago, we decentralised all support functions across our various BU’s (Business Units) so that each BU, from spa to gallery to hotels to property sales to architectural/interior design, all had their own relatively independent HR and Finance functions. This was to make each BU more accountable in theory, but it also resulted in an unnecessarily large number of senior managers and non-optimal use of people. So now we have recentralised group support functions to become Group Shared Services.

Example two: We organised our hotels entirely by geographic region, but never by ownership status. In an increasingly globalised world with more capable and assertive owners (including our own asset managers), it makes sense to organise by ownership status also. Our Clusters now partly reflect this.

Interesting that you got rid of VP Ops – why is it not needed and how is a chain better served with new positions?

We need a more de-layered hierarchy and regional VPs which constituted an entire layer of decision-making have been replaced by regional directors of operations who coordinate matters between the field and HQ, but are not a separate, decision-making hierarchy or authority unto themselves. Corporate HQ and the GM in the field now deal direct, but facilitated by regional directors of operations.

Will more cost-savings occur at corporate? Where are the other big areas?

I hope we’ve taken care of the big areas and we will digest the changes made before we do more.

One point to note, which we are proud of, is the fact that in the Project One exercise, 18 people have been promoted or have additional concurrent appointments. All of them are internal promotions, demonstrating a key Banyan Tree value, which is that we try to develop our own talent.

There’s less emphasis on marketing and more on sales and business development? What’s the thinking there?

No, not at all a reduced emphasis on marketing.  We’re simply delayering. In recent years and in the digital economy, sales and marketing have become very complex disciplines in themselves. Because sales is the lifeblood of a company, we have created a VP Sales role to reflect its importance. Marketing will now report directly to the MD.

What are the challenges specific to BTHR today and, apart from the restructure how are you reinventing the business?

I would be arrogant and presumptuous to say I’m re-inventing the business. Re-invention requires a vision that I don’t think I have. I only try to see some future trends and be prepared for them.

The operating environment is not getting easier for small, independent management companies, with pressure on fees, rates and occupancies, particularly in China. As a response, we launched two more brands to broaden our market reach and we will spend some time to see whether this has traction. We also ventured more into hospitality-related property development and will need time as well to digest this business.

But of course, as we always tell our associates, change is the only constancy. Every five years or so, we need to make changes – some big, some small – to remain relevant.

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