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Banyan Tree cuts jobs ahead of anticipated recession

Banyan Tree Hotels and Resorts will slash 12 per cent of its 1,400- plus workforce over the next few months as part of a restructuring ahead of a “relatively prolonged” global downturn.

Three of the hotel management company’s top executives – Mr David Spooner, vice-president of sales and marketing; Mr Andrew Langston, vice-president of operations, Asia Pacific; and Mr Abid Butt, chief executive – have resigned as a result of the restructuring.

“The restructuring is not just a pure cost-cutting exercise. It is a periodic restructuring to become more lean, more efficient. The cost savings are expected to run into the millions,” Banyan Tree Holdings executive chairman Ho Kwon Ping told The Straits Times yesterday.

As part of the changes, Mr Des Pugson, former vice-president of China operations, will become the head of Banyan Tree Hotels and Resorts. The position of vice-president of sales and marketing has been replaced by a new position, vice-president of sales.

The position of vice-president of operations, Asia Pacific, has been eliminated and replaced by new positions. As well, there will be 18 new and concurrent appointments in sales, operations and business development.

The company embarked on the restructuring late last year to “cut away many legacy costs, processes and structures”, Mr Ho said in a Feb 5 letter to staff.

“We are anticipating the coming recession to be a relatively prolonged one, so we are clearing the decks to write down potential bad debts and uncollectible fees as a precaution,” he told The Straits Times. “Anyone who doesn’t restructure now is going to end up a dinosaur.”

Of the estimated 168 positions to be terminated, about 20 are in the Singapore office, with the rest in Bangkok, Phuket and Shanghai.

In the past few years, the firm’s revenues have increased considerably but operating margins have dropped due to spiraling expenses, Mr Ho said.

Banyan Tree said its third-quarter Ebitda – a measure of profit before tax, interest and other items – fell 26 per cent to $5.7 million for the three months to Sept 30 due to higher sales and marketing expenses. Revenue for the quarter jumped 12 per cent to $81.4 million due to higher sales recognition from property transactions. But this was partially offset by lower contributions from hotel operations in Thailand, the Maldives and the Seychelles.

“The economies of both Europe and Russia, our key source markets, remain weak. The bombing incident in Bangkok in late August (last year) has affected our business in Thailand. The economic slowdown in China may affect our income contribution from China,” it said.

Mr Ho added: “Russian outbound travel and purchases of holiday homes have gone down a lot, but Chinese purchases of holiday homes have gone up in safe havens, which is why we are launching new properties in Australia.”

Banyan Tree Yangshuo

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