Stronger Every Day

As clients' design IQ improves, so does firms' income

Judith Davidsen and Wing Leung -- Interior Design, 10/1/2005 12:00:00 AM

Today's clients understand that design is a business tool, and they're willing to invest accordingly. By the close of fiscal year 2004, the Interior Design Giants in hospitality had earned a total of $274,240,070, up significantly from $176,352,201 in 2003. One major reason for the spike is that 65 firms performed well enough to merit inclusion this year, compared with 50 in years past. But average earnings of $4,219,078 were also a factor—that's 20 percent higher than in 2003.

So life is good. But how good?

Design has been affecting the hospitality industry's bottom line for several years now. Perhaps 18 months ago, our Giants really began to feel the impact: more projects, more fees, more hospitality orientation within firms, and more firms eager to compete for Giant status. Of this year's hospitality Giants, five more than doubled their fees; for two, fees almost tripled. Another 30 reported increases ranging from 1 percent all the way up to 88 percent. Only seven suffered a decrease, between 3 and 33 percent.

Hospitality projects can be measured in terms of chairs, guest rooms, and other nonspatial criteria, but the 48 Giants who supplied figures about total space were responsible for 88,013,900 square feet. That's an average of 1,833,623 per firm, up from 1,397,427 the year before. And the 52 that were good enough to report dollar values were responsible for installations worth $7,386,273,671, averaging $142,043,724.

For 22 firms, hospitality design was the only source of income—compare that with the previous year, when only 12 cast their lot exclusively with hospitality. At 12 firms, hospitality accounted for 90 percent of fees or more. On average, the current group reported that 46 percent of income came from hospitality, followed at a great, great distance by office design. (However, it's possible to become a hospitality Giant with less than 10 percent of income attributable to hospitality, as three firms proved.)

Of our 65 Giants, 56 contributed to the design of 924 restaurants. (A single firm was involved in half of these.) The same group also handled 295 luxury hotels, 265 mid-price and economy hotels, 111 country clubs, 98 gaming venues, 83 spas, 82 condominium and time-share hotels, 73 resorts, 58 bars and nightclubs, 2 cruise ships, and miscellaneous related facilities at sports arenas, convention centers, and universities.

Roughly 14 percent earned the majority of income from foreign jobs; two firms worked exclusively abroad. Another 46 percent earned at least some income outside the U.S. (China provided the largest number of projects, followed closely by Mexico and Canada.)

The potential work in hotels at home and abroad seems particularly interesting these days. With grande-dame properties being converted into elite apartments, the demand for replacement luxury hotels is already beginning to be felt. The fact that fashionable outsiders such as Giorgio Armani and Bulgari have moved into this space has upped the ante for decor. Meanwhile, demand for tourist-class hotels is greater than it's been for quite some time. And a new generation of business travelers has shown less interest in chandeliers than convenience, service, and fitness centers. All of this means renovations, often on a grand scale.

Hospitality Giants

Top 3 Most Admired Hospitality Firms in 2005
(poll of the 2005 Hospitality Giants)

Top 15 firms with hospitality outside the U.S.

FEE SCALES

HOSPITALITY FEES AND PERCENTAGE OF WORK BY CATEGORY

PERCENTAGE OF FEES BY PROJECT TYPE

New to the Hospitality listing in 2005