Rooms to Grow

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Interior design firm HBA/Hirsch Bedner Associates has always had a focus on luxury hotels – the world of five stars.

But now the Santa Monica company is expanding its reach with the launch of a division that caters to more affordable lodgings.

The new division, called Studio, handles all parts of the interior design process for two-, three- or four-star hotels, the type that cater to business travelers and budget-minded families.

That strategy has apparently paid off. Studio is growing quickly, and as a result, HBA is finding more contracts in the United States than it has had in years.

The work is coming from hotel operators that are making renovations after years of belt-tightening as well as new owners who scooped up properties on the cheap during the downturn.

“There’s a huge pent-up market for assets that were undervalued,” said David Dunphy, principal at Studio in Santa Monica. “They were long overdue for a repositioning.”

The work been has been most prevalent in Los Angeles. Studio has designed for properties including the Hyatt in downtown Los Angeles, Plaza La Reina Hotel in Westwood, the Hilton in Woodland Hills and the Sheraton in Universal City as well as the forthcoming Courtyard by Marriot and Hampton Inn in Santa Monica.

HBA plans the remodels and it purchases decoration elements. A job typically involves choosing furnishings, colors, floor coverings and lighting. Some jobs are for public spaces only; others call for redecorating guest rooms as well. Projects can take anywhere from one to three years to complete.

Studio’s fees vary widely, but are most often in the low six figures for a project, or more for bigger jobs. By comparison, HBA’s fees for luxury work can go into the millions for a casino renovation, for example.

HBA expects the Studio division to help grow its U.S. revenue to as much as 20 percent of global revenues within two years. By comparison, the firm’s U.S. business dwindled to 1.5 percent of total revenue in 2012. HBA expects to generate about $110 million in revenue this year.

But entering a new segment of the hotel world has brought a special set of challenges. For example, chain hotels usually have consistent design elements, requiring a different approach than working with a boutique.

‘Next emerging market’

HBA was founded in Santa Monica and landed its first gig doing design work at the Beverly Rodeo Hotel in 1965. The firm later established an overseas focus, and opened up an office in Hong Kong in 1977. HBA now has 16 offices and 1,200 designers worldwide. Its five-star projects include remodels of the Beverly Hills Hotel and the Alpina Gstaad in Switzerland.

The Studio concept launched in India three years ago, then moved to China, capitalizing on the growing middle classes in those countries. The firm brought it to the United States in 2012 to address an impending need for postrecession renovations.

“We call the United States the next emerging market,” said HBA Chief Executive René Kaerskov.

The U.S. Studio division was launched by Dunphy and now employs about 15 of HBA’s 115 staff in Santa Monica. Studio also recently opened an office in Atlanta.

Bob Amano, executive director at the Hotel Association of Los Angeles, said Studio’s focus fits in with the kinds of hotels that are breaking ground in Los Angeles.

“The development trend is towards limited-service properties,” he said. “In L.A., the market is for that type of a corporate destination.”

Another reason Studio has been able to succeed in the United States is the firm’s experience working closely with Chinese hotel owners, who are increasingly investing in Los Angeles. In 2012, Chinese interior design firm Gold Mantis Construction Decoration Co. Ltd. purchased a 70 percent stake in HBA for $75 million. The deal bolstered the firm’s presence in Asia, although Kaerskov said the deal stipulated that Gold Mantis would not change the fundamentals of HBA’s business.

Both the Hyatt in downtown and the Sheraton in Universal City were purchased by Chinese firms in recent years. Kaerskov said working with those firms in Los Angeles is a natural extension of the firm’s overseas business.

“We do 60 percent of our business in China,” he said. “The Chinese have come to the United States and they like working with us.”

Dunphy said the firm is also tapping into something else – the desire of chain hotel operators to add some different touches to a brand’s usual formula to create some individuality at each location.

For example, Studio is working on a design theme for the forthcoming Courtyard in Santa Monica that is based on a cross-country journey on Route 66, which ends near the hotel. The nearby Hampton Inn will be infused with blue designs to highlight its oceanside locale. Dunphy said distinguishing a chain hotel’s design in those ways can also help an operator charge higher room rates.

“These hotels are trying to make signature statements despite the fact that their brands aren’t known for a boutique look and feel,” he said. “We’re doing a boutique look to distinguish them so they have a local sense of place and to justify a higher room rate and occupancy.”