Look at where the nucleophile can attack and how stable the leaving group is.
Case 1:
It can attack either the sp3 carbon via the Sn2 reaction, releasing phenol (a very good leaving group, pka ~10). Rather simple process with better leaving group.
Case 2:
Or it can attack the sp2 carbon on the benzyl, which only via resonance can kick out the -OC2H5 (pka ~ 17). Complicated process with worst leaving group.
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Case 1 would be favored.