Design Firms Expand Services, Add Hotel Restaurants, Healthcare, Spas
April 11, 2003
BRIARCLIFF MANOR, N.Y. - Hospitality design firms have spent the last couple of belt-tightening years specializing, extending their service or hunting renovation work as they await economic turnaround and a surge of new growth opportunities. The consensus at ALIS (the Americas Lodging Investment Summit) was that any flow of new business is at least a year away.
Below, executives from four design firms - Hirsch Bedner, Ricca Newmark Dierks, TFL and WATG - tell how the long limbo has influenced the work and goals of their companies, and where they see the best opportunities for new business when it does come.
Alex Kravetz, managing associate of Hirsch Bedner's London office:
What geographic markets does the London office of HB deal with?
U.K., Europe, the Middle East and Africa.
Which of those have the most earning opportunity for you now?
The Middle East is more active than Europe is at the moment. We have quite a few new developments mainly in Dubai and Abu Dhabi, and big developments in Egypt. We also have some work in Lebanon. Some of the projects are new, some aren't: 40 percent renovation, 60 percent new.
What sector has the strongest earning power right now?
We are moving into other directions quite aggressively, particularly from London, addressing anything related to hospitality. That could be high-end residential, high-end medical facility, retirement homes, standalone spas, golf club houses, service apartments.
Is this a natural progression for the firm or a reaction to market changes?
We're reacting to market changes. But at the same time we're drawing on our experience in hotel design; it's a natural progression for us to expand our exposure and contribution to a variety of clients. There are so many parallels you can draw among sectors. Style, design innovation and luxury are relevant to all sectors. Sometimes medical facilities are practically five-star hotel developments.
We have been working in some of these areas for quite a few years. Service apartments, for example, but they've never been our mainstream specialty. It's definitely an opportunity for growth, and quite a substantial one.
Something else we're actively looking at - I think we should be linking up with development companies and private individuals to put deals together so we're not sitting at the end of the train when the master plan comes together, so to speak.
How does the volatile situation in the world affect your planning/approach, especially as Hirsch Bedner's stronger areas are in the middle of it?
There is one phrase that I like rather a lot: You cannot plan for disaster. We are planning for the future and looking at the bright side of life. As business proves over and over again, it's cyclical. There is a dip today, but while it is the case we have an opportunity to get stronger.
We would like to capitalize on every opportunity.
Bradley Cox, chairman of TFL International, (London):
What geographic markets does your firm deal with?
We're dealing with the whole of the U.K., Mainland Europe and parts of the Middle East, the Gulf states, Kuwait, Saudi Arabia, Jordan, Oman, Bahrain. Hotels are our strongest niche.
Which of those have the most earning opportunity for you now?
We don't have a strong market anywhere at the moment. The strongest market, I suppose, has to be in the Gulf states because they are developing these enormous projects down there.
Palm Island is a huge development off the U.A.E. I forget how many hotels - I think it's in the hundreds - several thousand department stores, clubs and restaurants. We did the design concept for the Burj al Arab, the original design concept. This Palm Island is along the coast from there. And they're doing the same thing, they're creating an island like a palm tree. They're building huge state-of-the-art hotels from 300 bedrooms down to boutique hotels. That is going to be boom time for a lot of the industry, that kind of hospitality-cum-residential complexes.
They're selling the flats now. Many have been sold. It's so big you can actually see it from the air. It's coming out of the ground, or out of the sea rather. It's going to be the project of the early 21st century. That's going to stimulate a market for our particular kind of business and it's going to be the biggest part of the world for one concentrated period of time. We expect that there's such a lot of opportunity there that I'd be disappointed if we didn't get any business out of it.
Which different sectors or geographic regions has the firm targeted for new growth opportunities?
We've gone into the pure leisure business like health clubs and golf clubs and that sort of thing. Also residential healthcare. They're all sort of similar, too. They all have restaurants and public areas. Some have bedrooms like the major golf clubs, but many don't. The hotel industry is really decimated. It does rely a lot, of course, on people from America coming to Europe and when they don't, there is a big hole in the market. There was a lot of money spent making a market for American tourists and that has just died a death.
The really big hotels spend out of revenue, not borrowing. If the revenue is not there, they don't spend. They're doing little bits and pieces, and hotels that were under construction are being finished, but nothing like what it was from the middle Ô60s through the time when you had that awful thing that happened in America, 9/11. This war going on now doesn't help. It doesn't help anyone around the world, not the stock markets, not the companies.
What kind of opportunities do you foresee in Beijing around the Olympics?
The Chinese market is just incredible the way it's moved. I would imagine the Chinese could practically contain their own infrastructure and building without anyone else in the world. It's quite amazing the way they have lifted their standards. I attend the biggest exhibition in the U.K. for home furnishings fabrics and that kind of thing. Two years ago I hardly saw a Chinese company there. This year, the whole place was flooded with imports from China. It was surprising to see the price and the quality. It's good to see - the country is becoming self-sufficient. Whether they can actually keep it up is another question.
The standard has dramatically improved. They've been into the markets and bought the products and brought them home and are producing them now in state-of-the-art factories with excellent quality control. The whole world had better watch out, the whole developed world, that is, because the prices are not able to be compared to the Western product. We're not in the technology side of anything; I'm just talking really about furniture and furnishings products. They are extremely good. It'll be a huge market for us, but not for 10 years' time.
Katharine M. Capra, director of business development at Ricca Newmark Design (Centennial, Colorado):
How has your firm changed while business remains slow?
We're trying to concentrate on other markets. You have to diversify your markets to fill the gaps and just keep proposing. It's very competitive. You have to start adding more service, adding markets.
We're trying to promote full restaurant design in signature hotel restaurants- from concept, planning, menu, to back of house. We're creating the ultimate dining experience. These are the hot spots now. They are becoming profitable and they are getting written up. Now they're trying to draw other people, having outside entrances.
We're trying to offer services to hotel operators and chains. We're just trying to get in at the operator chain level.
We can help them design their own restaurant. We'll do demographic studies and planning. We'll do market research to find out what's the best restaurant for that area. Sometimes operators don't know what kind of restaurant they want to put in.
How has the bidding process changed as a result of the competition for projects? Is it so competitive that firms might spy on one another?
People get competitive bids from three or four or five firms. A lot of that is based on fees. You can talk to them about the scope and try to narrow it down.
More and more hospitality projects are being awarded based on fee. I think that the fees are more competitive and may not be as profitable for firms. It seems that firms ''just want the work'' and are willing to take less fee. It's pretty amazing that a firm can have a great relationship [with a client] and then lose a project on fee alone. The clients ARE ''getting more for their money.'' As far as ''spying,'' I think firms are watching to see which firms are awarded projects and asking more detailed questions of the clients on why they weren't selected.
Bruce Blouse, senior designer and manager in WATG's Honolulu, Hawaii office:
What geographic markets does Wimberly, Allison, Tong & Goo deal with?
WATG's work is rooted in the design and planning for the international hotel and resort market.
What geographic markets represent new growth opportunities for WATG?
We've branched out into China. It has become an up-and-coming thing with us. And hotels, especially, are our new projects in China.
What sectors are growing?
Health spas. We've gotten into that market aggressively and we're starting to do a lot of health spas internationally and domestically. Many are in existing hotel properties. They find that these are profitmakers for others in their chains and they want one. So we're doing a lot of different prototypes.
We're doing some hospitals and some residential things that we haven't necessarily taken on in the past. We're doing them now because of the economy and the direction of the whole interior design field.
Has WATG begun to offer any more or fewer services in light of the slow rate of hotel construction?
We've taken on more aspects of the architecture process, which we haven't traditionally done. We've developed ''interior'' offices in each of our locations. We do conceptual design and development and feasibility studies on the front-end of an architectural project.
That arises out of the fact that we have lost a certain amount of the money we were used to getting because of the economy, because we feel integration of design is crucial, and [because] we feel economically this works well for us and gives us a competitive edge in the Design industry. And also because many of the clients we've had have asked us, ''Why don't you do those things? Give us a sort of one-stop-shop option.'' It's easier to deal with just one consultant instead of numerous.
We have a department that does feasibility studies. Potential clients approach us and ask, ÔCan we put this hotel in this market?' We address the factors around that and determine [the answer]. We send them to different groups for financing. They talk with our architects through the process. We can watch over [the project], and we help them decide which pillows they will use. We're the only one from what I know that does one-stop shopping. We know who our competitors are and they are not full-service.
We work with clients and negotiate fees for the textiles. We have a purchasing agent in house so we can conceptually control it all.
In 1999 interior design services came on, and in 2000 advisory services came on board in a response to service our client needs and, again, to help us be a one-stop shop.
Does the economy influence WATG's bidding?
Things have tightened up, [but] I don't think it's tightened up our industry in a huge way. We can streamline what we do and cut out certain things and make it more feasible for an owner to take us on. We have a talented group of people who know how to make things work more efficiently.
Conceptually we should be able to undercut our competitors. All of our interiors people have come from other firms. We know what the other ID firms out there are doing and we have our eyes and ears open. We have really senior people who know what people have done in the past. That gives us a good base.
In interiors, the bidding process is more of a subjective issue than architecture. They've had a hard time with interiors. It's different with architecture, which is more formulaic.
Why is that?
The biggest factor is the lack of understanding from the people who we deal with. Nobody really knows what interiors does, so expectations are widely different among clients. They don't know the time involved, which is a big factor in whether they take your proposal. It looks really easy to pick a fabric, but there are a lot of things going on: what kind of treatment, what kind of backing. It's very meticulous, but nobody really knows the depth of it unless they do it - and they don't want to know.
[A good bid means knowing] how long it takes us to do that job adequately and knowing what the owner needs and wants. We have to tap into that; we have to be really aware of who our clients are. Our job is at the whim of a client.
Below, executives from four design firms - Hirsch Bedner, Ricca Newmark Dierks, TFL and WATG - tell how the long limbo has influenced the work and goals of their companies, and where they see the best opportunities for new business when it does come.
Alex Kravetz, managing associate of Hirsch Bedner's London office:
What geographic markets does the London office of HB deal with?
U.K., Europe, the Middle East and Africa.
Which of those have the most earning opportunity for you now?
The Middle East is more active than Europe is at the moment. We have quite a few new developments mainly in Dubai and Abu Dhabi, and big developments in Egypt. We also have some work in Lebanon. Some of the projects are new, some aren't: 40 percent renovation, 60 percent new.
What sector has the strongest earning power right now?
We are moving into other directions quite aggressively, particularly from London, addressing anything related to hospitality. That could be high-end residential, high-end medical facility, retirement homes, standalone spas, golf club houses, service apartments.
Is this a natural progression for the firm or a reaction to market changes?
We're reacting to market changes. But at the same time we're drawing on our experience in hotel design; it's a natural progression for us to expand our exposure and contribution to a variety of clients. There are so many parallels you can draw among sectors. Style, design innovation and luxury are relevant to all sectors. Sometimes medical facilities are practically five-star hotel developments.
We have been working in some of these areas for quite a few years. Service apartments, for example, but they've never been our mainstream specialty. It's definitely an opportunity for growth, and quite a substantial one.
Something else we're actively looking at - I think we should be linking up with development companies and private individuals to put deals together so we're not sitting at the end of the train when the master plan comes together, so to speak.
How does the volatile situation in the world affect your planning/approach, especially as Hirsch Bedner's stronger areas are in the middle of it?
There is one phrase that I like rather a lot: You cannot plan for disaster. We are planning for the future and looking at the bright side of life. As business proves over and over again, it's cyclical. There is a dip today, but while it is the case we have an opportunity to get stronger.
We would like to capitalize on every opportunity.
Bradley Cox, chairman of TFL International, (London):
What geographic markets does your firm deal with?
We're dealing with the whole of the U.K., Mainland Europe and parts of the Middle East, the Gulf states, Kuwait, Saudi Arabia, Jordan, Oman, Bahrain. Hotels are our strongest niche.
Which of those have the most earning opportunity for you now?
We don't have a strong market anywhere at the moment. The strongest market, I suppose, has to be in the Gulf states because they are developing these enormous projects down there.
Palm Island is a huge development off the U.A.E. I forget how many hotels - I think it's in the hundreds - several thousand department stores, clubs and restaurants. We did the design concept for the Burj al Arab, the original design concept. This Palm Island is along the coast from there. And they're doing the same thing, they're creating an island like a palm tree. They're building huge state-of-the-art hotels from 300 bedrooms down to boutique hotels. That is going to be boom time for a lot of the industry, that kind of hospitality-cum-residential complexes.
They're selling the flats now. Many have been sold. It's so big you can actually see it from the air. It's coming out of the ground, or out of the sea rather. It's going to be the project of the early 21st century. That's going to stimulate a market for our particular kind of business and it's going to be the biggest part of the world for one concentrated period of time. We expect that there's such a lot of opportunity there that I'd be disappointed if we didn't get any business out of it.
Which different sectors or geographic regions has the firm targeted for new growth opportunities?
We've gone into the pure leisure business like health clubs and golf clubs and that sort of thing. Also residential healthcare. They're all sort of similar, too. They all have restaurants and public areas. Some have bedrooms like the major golf clubs, but many don't. The hotel industry is really decimated. It does rely a lot, of course, on people from America coming to Europe and when they don't, there is a big hole in the market. There was a lot of money spent making a market for American tourists and that has just died a death.
The really big hotels spend out of revenue, not borrowing. If the revenue is not there, they don't spend. They're doing little bits and pieces, and hotels that were under construction are being finished, but nothing like what it was from the middle Ô60s through the time when you had that awful thing that happened in America, 9/11. This war going on now doesn't help. It doesn't help anyone around the world, not the stock markets, not the companies.
What kind of opportunities do you foresee in Beijing around the Olympics?
The Chinese market is just incredible the way it's moved. I would imagine the Chinese could practically contain their own infrastructure and building without anyone else in the world. It's quite amazing the way they have lifted their standards. I attend the biggest exhibition in the U.K. for home furnishings fabrics and that kind of thing. Two years ago I hardly saw a Chinese company there. This year, the whole place was flooded with imports from China. It was surprising to see the price and the quality. It's good to see - the country is becoming self-sufficient. Whether they can actually keep it up is another question.
The standard has dramatically improved. They've been into the markets and bought the products and brought them home and are producing them now in state-of-the-art factories with excellent quality control. The whole world had better watch out, the whole developed world, that is, because the prices are not able to be compared to the Western product. We're not in the technology side of anything; I'm just talking really about furniture and furnishings products. They are extremely good. It'll be a huge market for us, but not for 10 years' time.
Katharine M. Capra, director of business development at Ricca Newmark Design (Centennial, Colorado):
How has your firm changed while business remains slow?
We're trying to concentrate on other markets. You have to diversify your markets to fill the gaps and just keep proposing. It's very competitive. You have to start adding more service, adding markets.
We're trying to promote full restaurant design in signature hotel restaurants- from concept, planning, menu, to back of house. We're creating the ultimate dining experience. These are the hot spots now. They are becoming profitable and they are getting written up. Now they're trying to draw other people, having outside entrances.
We're trying to offer services to hotel operators and chains. We're just trying to get in at the operator chain level.
We can help them design their own restaurant. We'll do demographic studies and planning. We'll do market research to find out what's the best restaurant for that area. Sometimes operators don't know what kind of restaurant they want to put in.
How has the bidding process changed as a result of the competition for projects? Is it so competitive that firms might spy on one another?
People get competitive bids from three or four or five firms. A lot of that is based on fees. You can talk to them about the scope and try to narrow it down.
More and more hospitality projects are being awarded based on fee. I think that the fees are more competitive and may not be as profitable for firms. It seems that firms ''just want the work'' and are willing to take less fee. It's pretty amazing that a firm can have a great relationship [with a client] and then lose a project on fee alone. The clients ARE ''getting more for their money.'' As far as ''spying,'' I think firms are watching to see which firms are awarded projects and asking more detailed questions of the clients on why they weren't selected.
Bruce Blouse, senior designer and manager in WATG's Honolulu, Hawaii office:
What geographic markets does Wimberly, Allison, Tong & Goo deal with?
WATG's work is rooted in the design and planning for the international hotel and resort market.
What geographic markets represent new growth opportunities for WATG?
We've branched out into China. It has become an up-and-coming thing with us. And hotels, especially, are our new projects in China.
What sectors are growing?
Health spas. We've gotten into that market aggressively and we're starting to do a lot of health spas internationally and domestically. Many are in existing hotel properties. They find that these are profitmakers for others in their chains and they want one. So we're doing a lot of different prototypes.
We're doing some hospitals and some residential things that we haven't necessarily taken on in the past. We're doing them now because of the economy and the direction of the whole interior design field.
Has WATG begun to offer any more or fewer services in light of the slow rate of hotel construction?
We've taken on more aspects of the architecture process, which we haven't traditionally done. We've developed ''interior'' offices in each of our locations. We do conceptual design and development and feasibility studies on the front-end of an architectural project.
That arises out of the fact that we have lost a certain amount of the money we were used to getting because of the economy, because we feel integration of design is crucial, and [because] we feel economically this works well for us and gives us a competitive edge in the Design industry. And also because many of the clients we've had have asked us, ''Why don't you do those things? Give us a sort of one-stop-shop option.'' It's easier to deal with just one consultant instead of numerous.
We have a department that does feasibility studies. Potential clients approach us and ask, ÔCan we put this hotel in this market?' We address the factors around that and determine [the answer]. We send them to different groups for financing. They talk with our architects through the process. We can watch over [the project], and we help them decide which pillows they will use. We're the only one from what I know that does one-stop shopping. We know who our competitors are and they are not full-service.
We work with clients and negotiate fees for the textiles. We have a purchasing agent in house so we can conceptually control it all.
In 1999 interior design services came on, and in 2000 advisory services came on board in a response to service our client needs and, again, to help us be a one-stop shop.
Does the economy influence WATG's bidding?
Things have tightened up, [but] I don't think it's tightened up our industry in a huge way. We can streamline what we do and cut out certain things and make it more feasible for an owner to take us on. We have a talented group of people who know how to make things work more efficiently.
Conceptually we should be able to undercut our competitors. All of our interiors people have come from other firms. We know what the other ID firms out there are doing and we have our eyes and ears open. We have really senior people who know what people have done in the past. That gives us a good base.
In interiors, the bidding process is more of a subjective issue than architecture. They've had a hard time with interiors. It's different with architecture, which is more formulaic.
Why is that?
The biggest factor is the lack of understanding from the people who we deal with. Nobody really knows what interiors does, so expectations are widely different among clients. They don't know the time involved, which is a big factor in whether they take your proposal. It looks really easy to pick a fabric, but there are a lot of things going on: what kind of treatment, what kind of backing. It's very meticulous, but nobody really knows the depth of it unless they do it - and they don't want to know.
[A good bid means knowing] how long it takes us to do that job adequately and knowing what the owner needs and wants. We have to tap into that; we have to be really aware of who our clients are. Our job is at the whim of a client.
