2020
Hospitality Giants

Doesn’t 2019 seems like a long time ago? A fair time of maskless shopping, sold-out sporting events, and a drink with friends at the bar of your choice. It turns out—as we parse the latest business trend data from the Interior Design Hospitality Giants—that 2019 was a very good year for the design business. In some respects, record-setting.

Of course, 2020 being 2020, these numbers may not be much of a consolation. Hotels, bars, restaurants, essentially all places and people and things hospitality, have been devastated by the COVID-19 pandemic. The fact is, we just don’t know exactly how the numbers will play out in next year’s survey, rendering the forecasts the Hospitality Giants made in this year’s survey hopeful, at best. Next year will no doubt be a game-changer. But this year’s data shows just how robust the hospitality design business had become.

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The 75 firms making up our Hospitality Giants collected a record $1.25 billion in design fees in 2019. Not only is that the first time breaking the billion-dollar ceiling, it also crushed 2018’s total of $829 million, as well as the $852 million forecast.

At the time of our survey—which does not reflect COVID-related business downturns—the Hospitality Giants may have considered their billion-dollar largess to be a fluke, as they forecast 2020 at a slightly-less-exciting-but-still-impressive $1.02 billion. Grain of salt officially taken here, of course.

Where did all this new money come from? Luxury hotels. Overall, hotel work didn’t jump—it remained a healthy but steady 54 percent of the overall hospitality pie, in line with previous years. But the luxury segment grew from 24 percent of all business to 32. The Hospitality Giants didn’t see this coming, as they forecasted luxury work to remain steady or rise slightly. But now they expect it to be even bigger business, rising to 36 percent of their work in 2020.

Market Sector

The Hospitality Giants saw another big jump in the multiuse segment (hospitality/residential/retail). In 2018, it accounted for a mere 5 percent of business. This year it hit 18 percent. Again, there is a flukiness to this total, as the Hospitality Giants see this total dropping back down to 7 percent.

Which segments took a hit? In hotels, the economy sector fell back quite a bit, down to 10 percent from a routine level in the mid-teens (17 percent in 2018). Boutique hotels also slipped, but restaurant work was cut in half (from 15 down to 8 percent of all work, with no rebound in the forecast) and resorts dropped from 11 percent to 7. Here’s where the data gets interesting. While fee totals are eye-popping, the total number of design jobs dropped from nearly 5,000 in 2018 to 4,519 this year. Which means firms are getting much higher fees for each job, which is terrific news.

This part of the data set also reinforces where the big money is right now. Consider: Restaurant work accounted for 23 percent of all jobs (more than 1,000), yet only brought in 8 percent of the fee pie. Meanwhile, economy hotels were 17 percent of the total jobs (785) while bringing in 10 percent of the total fees. But luxury hotels? One out of five jobs was a luxury property (889 total), but they brought in 54 percent of all fees. Yes, half of all fees came from 20 percent of the jobs. No surprise, then, that the Hospitality Giants are looking for bigger things in this segment. More data backing up the higher-fee-per-job angle: The total square footage for all these jobs was only 14 percent higher than the previous year, 263 million from 229 million.

Total number of design staff rose only slightly to 11,178, but has risen every year since 2016. Most of the additions were designers and project managers/directors. They expect to add another 1,082 staffers in 2020, but again, we’ll see.

The Hospitality Giants tallied an average of $223,000 in fees per employee, the highest ever by far and beating 2018’s total of $176,000 (the median fees per employee were $156,000, up from $149,000). That number historically rises and falls but has ticked upward for three years straight now.

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Growth

Design work outside the U.S. has been declining. Back in 2014, the Hospitality Giants did a third of their work abroad. This year it was just 15 percent, the lowest amount in a decade. That said, a dozen firms do 90 percent or more of their business outside the U.S., so that’s the core business for some despite the overall declines. They predict that business in most global regions to remain steady but predict a decline in China and potential gains in Europe and Mexico. Domestically, the Hospitality Giants expect growth to continue, particularly in the Northeast and Midwest, and a potential drop in the South.

The furniture and fixture/construction product business also remains robust at $19.4 billion installed. That’s a “modest” $200 million gain from 2018 but still well below the $23.7 billion logged the year before. The Hospitality Giants forecast $20.2 billion.

The areas where Hospitality Giants say they’ve seen the biggest innovation leaps are fabric, wall covering, furniture, kitchen/bath, and acoustical products. Lighting also continues to impress (as it does annually), but the Hospitality Giants were noticeably less impressed with smart tech this year. That said, tech innovations continue to be widespread in the industry, specifically 3-D printing, virtual reality, and artificial intelligence—all of which are transforming how firms interact with clients. “The evolution of technology has expanded our design process immensely,” a NicoleHollis rep says. “The ability to 3-D print a design draft allows us to show our clients various custom fixtures and hardware options without the added material cost and production time. Virtual reality and fly-through renderings have become integral to our process as well.”

We’re pleased to report all this good news, of course, but it remains problematic because by the time we turn the page on 2020, the record fees and robust numbers will be old news. It’s anyone’s guess if and when hospitality as an industry will rebound—and how well it can. It’s currently impossible to know if we’ve seen the worst or—as new infection numbers grow in the U.S. and abroad—a cold-weather next wave is about to break.

Until the day when we can have that relaxing drink indoors at our favorite bar, all we can do is stay resilient—and stay safe.

Global Growth Potential for Next 2 Years
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Methodology

The annual business survey of Interior Design hospitality Giants ranks the largest design firms by hospitality design fees for the 12-month period from July 2019 through June 2020. Hospitality design fees include those attributed to:

  1. All hospitality interiors work.
  2. All aspects of a firm’s hospitality design practice, from strategic planning and programming to design and project management.
  3. Fees paid to a firm for work performed by employees and independent contractors who are full-time staff equivalent.

Hospitality design fees do not include revenues paid to a firm and remitted to subcontractors that are not considered full-time staff equivalent. For example, certain firms attract work that is subcontracted to a local firm. The originating firm may collect all the fees and retain a management or generation fee, paying the remainder to the performing firm. The amounts paid to the latter are not included in fees of the collecting firm when determining its ranking. Additionally, where applicable, all percentages are based on responding hospitality Giants, not their total number. The data was compiled and analyzed by Interior Design and ThinkLab.