- Banyan Tree (SGX:B58) was established in 1994. The Group made its debut on the Singapore Stock Exchange in mid-2006 and has since expanded to 23 countries. It boasts of a diversified portfolio of resorts, hotels, spas, galleries, golf courses, and residences across 10 brands – Banyan Tree, Angsana, Cassia, Dhawa, Laguna, Homm, Garrya, Folio, Banyan Tree Escape, and Banyan Tree Vera.
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Investment Summary
(1) Global portfolio; well positioned to capitalize on China’s reopening
- Banyan Tree boasts of a global portfolio across 23 countries with 63 resorts/hotels and 59 spas and total room keys of 8,731. The group’s portfolio is concentrated in Asia, with 53 Resorts/Hotels and 49 Spas. Within Asia, China and Thailand dominate with 3,399 and 1,841 room keys respectively.
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- Capitalizing on outbound tourism from China; travel still has room to grow. Though global tourist numbers of 900m in 2022 were more than double that of 2021, it only amounted to 63% of pre-pandemic levels.
- The World Tourism Organization expects international tourism arrivals to range between 80-95% of pre-pandemic levels this year, as China, the world’s largest outbound market in 2019, pivots away from zero-COVID.
- China ranks as the number one source market for many destinations in Asia with double-digit shares of inbound arrivals across key Asia destinations. We believe Banyan Tree is well poised to benefit from the resumption of outbound travel in China as most of its resorts are in Asia.
- Occupancy levels on track for recovery; may go beyond pre-pandemic levels. While the occupancy of owned hotels in Thailand is now at 67% (just three percentage points shy of the pre-pandemic level of 70%) and most managed hotels in Asia ex-China also recorded an occupancy of 55% (marginally below pre-pandemic levels of 57%), there is good reason to believe that occupancy levels could exceed pre-pandemic levels. 1Q23’s forward bookings are showing good traction, increasing by 69% (vs. 1Q22) and exceeding pre-pandemic levels by 25%.
- At present, China’s weekly international seat capacity is ~50% below pre-COVID levels (according to CAPA). This implies that the effects of Chinese outbound travellers have yet to fully pan out and when it happens over 2023-2024, will be a key driver to earnings upside. We remain cognizant of China’s slowing economy, but believe that outbound travel momentum remains strong, evidenced by the surge in travel visa applications.
- Globally, consumers have also been prioritizing travel over other forms of discretionary spending. As such, we believe occupancy levels still have room to grow, barring significant slowdowns in the global economy.
(2) Strategic expansion sees room key growth exceeding 80%
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