Is the US Interiors industry facing collapse?
Things are going from bad to worse in the US economy. Many in the design industry are reportedly losing hope. At the recent Hospitality Design Summit in Florida it was predicted that 30% of the industry would disappear in the next twelve months.
HotelDesigns correspondent comments of the event:
“Depressing would be generous. They had 4 different economists blasting the latest updated specifics…one even finished his hour long lecture with his PowerPoint image of “ Yes, We are fucked” blasted across the end of the ballroom. Another had an image of the Titanic sinking – with the words ‘Our Industry’ written across the bow.”
One leading US design company is rumoured to have lost $21 million in the last quarter, and two are closing their international offices as workloads disappear, a situation analogous to the 1990/91, which saw one practice have £8 million/$10 million of contracts cancelled in an afternoon, the kind of reversal that is almost impossible to overcome.
Globally the competition is just as fierce. The situation in the Gulf is patchy with Abu Dhabi reportedly busy, but Dubai in a state of recession with the major construction company in the region, Nakeel, announcing the redundancy of 15% of its workforce recently. Tourist numbers are down, not helped by reports of sewage on the beaches, and a collapse in property prices.
US brands are 80% of the US market, and reported that for the most part all plans for any type of expansion have now been put on hold (although Marriott recently confirmed it is to continue its investment programme). They claim to be more stressed than the design practices.
“They also said that they are not in the mood to talk to designers because they have nothing to say or information to share. They are laying off in droves and are re-evaluating the viability of their products/brands. Choice Hotels and Hilton were in this conversation. Starwood just laid off designers, reportedly including their lead designer D. B. Kim” reports our ear.
Some brands such as the Marriott Courtyard and Hilton Garden Inn are still going strong (watch for a Review of a US Courtyard coming soon on HotelDesigns)
In Europe where the brands are less than 30% of the market individual hotels are more strongly linked in to their specific local tourist markets and mostly less reliant on the corporate business bookings. As the Times said recently “Relax a little: sterling’s slump has a silver lining” because the fall, over 40% against the Euro, not only makes British products more competitive in prices but also has brought new waves of tourists to the country, with many reports of bookings up for home holidays (the staycation). Certainly a London theatre visit this last Saturday revealed busy bars and restaurants and a theatre full of Americans – the falling interest rates and lower sterling appear to be helping (but why are hotels cannibalizing their own rates with such heavy discounting already – surely they will have problems reversing this if the numbers coming rise?)
In the 1990/91 recession when the design industry took a major hit, one consequence was increased competition on fees. In general this led to a long term fall in achieved fee from around 12% down to 8% average. Firms were able to remain profitable only by changing working practices – often reducing what they did for the fee, but also increasing the use of computers and CAD to reduce personnel requirements, Architectural practices suffered more as the focus moved to refurbishment rather than to new build, and this picture is being repeated both here and in the US. Fee competition is also reappearing amongst design practices.
As yet the UK industry does not appear to be hit as hard as our friends across the Pond. We can only hope that measures being brought in by Governments to overcome recession will be effective, and that the thieves and fraudsters in the banking system will be prosecuted to the full extent of the law (not that there is any sign of this happening in the UK).
Globally the competition is just as fierce. The situation in the Gulf is patchy with Abu Dhabi reportedly busy, but Dubai in a state of recession with the major construction company in the region, Nakeel, announcing the redundancy of 15% of its workforce recently. Tourist numbers are down, not helped by reports of sewage on the beaches, and a collapse in property prices.
US brands are 80% of the US market, and reported that for the most part all plans for any type of expansion have now been put on hold (although Marriott recently confirmed it is to continue its investment programme). They claim to be more stressed than the design practices.
“They also said that they are not in the mood to talk to designers because they have nothing to say or information to share. They are laying off in droves and are re-evaluating the viability of their products/brands. Choice Hotels and Hilton were in this conversation. Starwood just laid off designers, reportedly including their lead designer D. B. Kim” reports our ear.
Some brands such as the Marriott Courtyard and Hilton Garden Inn are still going strong (watch for a Review of a US Courtyard coming soon on HotelDesigns)
In Europe where the brands are less than 30% of the market individual hotels are more strongly linked in to their specific local tourist markets and mostly less reliant on the corporate business bookings. As the Times said recently “Relax a little: sterling’s slump has a silver lining” because the fall, over 40% against the Euro, not only makes British products more competitive in prices but also has brought new waves of tourists to the country, with many reports of bookings up for home holidays (the staycation). Certainly a London theatre visit this last Saturday revealed busy bars and restaurants and a theatre full of Americans – the falling interest rates and lower sterling appear to be helping (but why are hotels cannibalizing their own rates with such heavy discounting already – surely they will have problems reversing this if the numbers coming rise?)
In the 1990/91 recession when the design industry took a major hit, one consequence was increased competition on fees. In general this led to a long term fall in achieved fee from around 12% down to 8% average. Firms were able to remain profitable only by changing working practices – often reducing what they did for the fee, but also increasing the use of computers and CAD to reduce personnel requirements, Architectural practices suffered more as the focus moved to refurbishment rather than to new build, and this picture is being repeated both here and in the US. Fee competition is also reappearing amongst design practices.
As yet the UK industry does not appear to be hit as hard as our friends across the Pond. We can only hope that measures being brought in by Governments to overcome recession will be effective, and that the thieves and fraudsters in the banking system will be prosecuted to the full extent of the law (not that there is any sign of this happening in the UK).
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