Ace Hotels’ Power of Design

Editors Note: The most creative companies in the world understand that design is about creating experiences that consumers crave. In a new book, Design Is How It Works: How Smart Companies Turn Products Into Icons, former BusinessWeek reporter Jay Greene explains how several companies, including Ace Hotels, which was founded in Seattle, use design to address needs consumers never knew they had. Heres an excerpt:

Rooms at the Seattle Ace Hotel feature custom prints by the artist KAWS. Photo courtesy Ace Hotel.

The thermometer shows 102 degrees, but the proprietors of the Ace Hotel & Swim Club, one of the newest and hippest hotels in Palm Springs, California, arent cooling off by the pool. Ace partners Alex Calderwood and Doug Herrick, and hotel manager Jonathan Heath are scouring local consignment shops and used-furniture stores for a few pieces to add a bit more character to the place.

At the moment, Calderwood is obsessed with macrame. Hed love a huge piece to hang in The Commune, the event center at the hotel. Heath, though, has stumbled on something else that catches his fancy. Theres a pretty cool coyote out there, he tells Calderwood at a consignment store where a handful of gems nestle amid the second-rate chaises, dining tables, and sofas.

Oh, my god, thats really great, Calderwood enthuses upon seeing the stuffed but still slightly cheerful coyote perched on a piece of wood. He looks at the price tag$350. Thats really cheap for taxidermy, he says, the voice of a man whos clearly purchased a few dead animals in his time. The three debate whether to put the coyote in the bar, the restaurant or the lobby before Herrick encourages the others to hold off on the purchase. The budget is limited and macrame is the order of the day. Im the voice of reason, Herrick says.

Since 1999, Ace, launched from the imagination of three Seattle friends, Calderwood, Herrick and Wade Weigel, has opened four of the most talked about new hotels in the travel press. The first was the Ace Hotel Seattle, once a down-and-out maritime flophouse just north of downtown. Calderwood and company spit-polished the place more than refurbished it. The hotel retains much of its well-worn charm, still sporting its original wood-plank floors and rough brick walls. It wasnt outfitted with new fixtures and furnishings; much of the decor was salvaged from spots such as a demolished nursing home and the old Boeing surplus outlet. Thats one reason the rooms are a bargain, starting at seventy-five dollars a night for a minimalist flat with shared bathrooms down the hall.

Ace Hotel, Portland. Photograph by Jeremy Pelley.

The simplicity of the Seattle spot resonated with travelers so much that eight years later, the group opened a second retro-chic hotel three hours south in Portland. In February 2009, Ace debuted its third hotel, this one with a bit of midcentury modern minimalism, in swank Palm Springs. A few months later, Ace launched its most ambitious project yet: a 258-room hotel in one of the most competitive travel markets in the worldNew York City.

The nascent hotel chain has leaned heavily on design to distance itself from rivals and has won plaudits not just from the traditional travel press but also from design magazines such as Monocle, I.D., Wallpaper*, and Dwell. But the Ace experience isnt aimed at well-heeled travelers accustomed to valet service for their BMWs and instantaneous delivery of Dom Perignon by room service. Instead, Ace uses design to win over cost-conscious travelers, content with three-star accommodations but not with cookie-cutter chain-hotel mediocrity.

The Ace Hotel in Palm Springs is a former motel. Photo courtesy Ace Hotel.

While the Palm Springs hotel is a resort, it still has much of the rough-hewn feel thats come to be Aces signature. We like things a little imperfect, Calderwood says. When the company refurbished the placeonce a Howard Johnsons motel that had sat unused for yearsit ripped out the carpeting in the rooms and never replaced it. Left behind are concrete slabs with cracks that spider out randomly, with the barest of coverings from southwestern-style throw rugs. The curtains and bedspreads are canvas painters tarps, and bathroom hooks are made from the elbows of plumbing pipes.

If all of this just sounds like something thats merely cool and not great business, think again. Those design decisions have led to huge cost savings. In the hotel business, bean counters keep their eyes on FF&Efurniture, fixtures, and equipmentone of the benchmark expenses in hotel construction.

Ace Hotel, New York City, Courtesy D.L. Thompson & Jon Johnson.

In New York, FF&E for a nice three- or four-star hotel can run as high as $40,000 per room and is typically in the $25,000 range, according to Jonathan Sebbane, vice president at hospitality industry consultant HVS. Ace pulled off the remodel of the century-old Hotel Breslin in that city for $15,000 a room. That means Ace can charge less for rooms there than can rivals at the plusher hotels and siphon off some business.

It works because Ace avoided creating a bland experience that is palatable for everyone but loved by no one. We designed a place where we wanted to stay, Herrick says. The Ace partners developed a brand that they are passionate about, believing that would be enough to fuel the same enthusiasm among customers. So far, its worked.

Adapted from Design Is How It Works: How Smart Companies Turn Products Into Icons, by Jay Greene by arrangement with Portfolio, a member of Penguin Group (USA) Inc., Copyright Jay Greene 2010.