Hospitality Design Stays Strong

Of the 100 Hotel & Restaurant Giants, 82 are primarily interior design firms, seven are architecture firms, four are hotel departments, one is purchasing firm, and six classified themselves as “others.” Twelve firms actually derive more income from purchasing efforts than from design efforts. The average firm gets 84 percent of its fees from hospitality work, two percent higher than last year.

These firms installed 70,000 guest rooms this year, 25 percent less than last year; 180,000 restaurant seats, 40 percent less than last year; and 560,000 function room seats, half as many as last year. But common area space completed was ten percent more this year than last. Overall, the amount of work completed this year was substantially less than last year and even less than the year before.

As usual, costs continue to rise. Hotel costs rose this year, around eight percent more than last year. New hotel work rose to over $130 per sq. ft., with about $45 of that for furnishings and $87 for construction.

Renovated hotel costs were substantially less, but five percent more than last year; the total cost was over $39 per sq.ft. for furnishings and $65 for construction. Almost everything else rose along with the rate of inflation. New restaurants cost almost $54 per sq.ft. for furnishings and over $96 for construction. Renovated restaurants costs $53 per sq. ft. for furnishings and $80 for construction. The cost of common spaces was about $108 per sq. ft., while guest rooms cost nearly $61 and function rooms $75.

The average fee for public spaces in dollars per rentable sq. ft. stayed about the same this year, $4.78 versus $4.70 last year. But fees for rooms went up slightly, from $2.23 to $2.52 per sq. ft. And fees for restaurants went up even more, from $5.58 to $6.36 per sq. ft.

Fees in terms of percentage of work in place were more variable. The average fee for public spaces went from 11.3 to 10.3 percent; for rooms the average rose from 6.7 to 7.7 percent and for restaurants the average fee stayed almost the same, 12.0 to 12.1 percent (CHART THREE).

Confusing the issue even further, the average “fair” fees for hospitality work expressed in dollars per hour rose strongly for all kinds of work (CHART FOUR). The billing rates for public spaces rose from $68.99 to $77.78 per hour; for restaurants it rose from $69.29 to $78.33.

This would imply that the average billing rate per hour should have risen substantially, which is true. Notable were increases ranging from a low of seven percent for senior drafters and project designers to a high of over 30 percent for CADD operators. Increases averaged between 10 and 15 percent for project managers, job captains, junior drafters, senior designers and junior designers (CHART FIVE).

Those results, in turn, suggest that salaries have risen quite strongly this year. They have, but less so and more uniformly. Staying about the same, or less than five percent more than last year, were project managers, senior drafters, project designers, junior designers and non-billable staff. Those enjoying between five and 15 percent were job captains and junior drafters. Those most gratified since last year were marketing people, up 25 percent, and CADD operators, up 33 percent.

If billing rates rise more sharply overall than salaries, the implication is that the multiple (the number that multiplies the salaries-plus-fringes to generate a billing rate that also covers overhead) is rising. Typically, billing rates are 2.6 times the direct personnel expense (salaries plus fringes). This year’s Hotel & Restaurant Giants are averaging 2.8.

Total employment rose just slightly from 2,322 staff members last year to 2,381 this year. The only notable changes in percentage of staff were the reduction of non-billable members, from 20 to 18 percent, and the doubling of the marketing staff, from three to six percent. It is probable that the increased marketing costs resulted in a higher multiple, as delineated above.

The average use of consultants slipped somewhat this year with only five (lighting, food, art, purchasing and audio/visual) used in more than ten percent of the projects.

The special areas that we track each year increased significantly. Conference centers grew from 45 to 51 percent of all projects, while physical fitness installations increased from 41 to 50 percent and business services doubled from 21 to 43 percent. Also, 18% of hotel facilities ended up with entirely new point of sale configurations. Not surprisingly, considering the awareness of the need for them, day care centers shot up from three to eight percent.

Some 58 percent of hospitality work this year was new work, compared to last year’s figure of 56 percent. Continuing a trend, these firms were hired even more often by top management than last year, up from 62 to 64 percent. And fewer jobs this year were determined by the lowest bid, 36 versus 39 percent.

The firms most respected by their peers are: Hirsch/Bedner & Associates in Santa Monica, California (#1 again this year on the following listing); James Northcutt in Los Angeles (#21); Frank Nicholson in Cambridge, Massachusetts; Trisha Wilson of Wilson & Associates in Dallas (#5); and Pat Kuleto in California and New York. Among some of the installations most admired by this year’s Hotel & Restaurant firms were: Postrio restaurant in San Francisco; the Mirage Hotel/Casino in Las Vegas; and two Four Seasons installations, one in Santa Barbara (see Interior Design, February 1990) and the other in Chicago.