Banyan Tree hopes to replicate Phuket success in Vietnam
By Pamela Almeda, Channel NewsAsia | Posted: 13 December 2007 2053 hrs

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	Related News • Banyan Tree to triple investment in Vietnam resort to US$900m

SINGAPORE : Investors are cheering plans by Banyan Tree Holdings to expand in Vietnam.

The luxury resorts operator announced earlier this week that it was pumping nearly US$900 million into an integrated resort in Danang, more than triple the amount initially committed.

Its share price has been gaining ground over the past few sessions.

Banyan is hoping to replicate its success in Phuket, Thailand. It is also eyeing yields of more than 20%.

Banyan Tree is raising the stakes in Vietnam by aggressively expanding its master plan for the country's first integrated resort.

It now intends to build 7 hotels - two more than earlier planned. Room capacity will be vastly increased to 2,400 rooms from just 750.

Under the new plan, the number of resort residences to be built will jump to 1,000, from 180.

Banyan Tree is optimistic about its investment, saying that it expects to see an internal rate of return of more than 20%.

To fund the project, Banyan Tree plans to open a private equity fund by the end of the month, of which it will take a 15% stake.

"We are looking at a fund size of US$300 million to US$400 million. The substantial portion of this fund will be invested into Laguna Vietnam where about US$300 million will be for the development of this integrated resort in Vietnam," said Ariel Vera, Group Managing Director of Banyan Tree.

Banyan Tree will receive management fees from the fund. It also expects to see additional revenue from managing and operating the spas in the resort and two of the hotels.

Loh Hoon Sun, Managing Director of Phillip Securities, said: "I think this investment, now on a bigger scale, is good for Banyan Tree because if you are to build a project, you might as well build a big enough one, so that you can achieve that economies of scale.

"And I think this will help the company in the long term, in attracting the right people because they are in the high-end resort business."

Construction on the project is expected to start by April next year. The seven hotels are scheduled to be completed by 2012. - CNA /ls