Montage International Eyes Bigger Slice of Luxury Travel Market

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2:38Alan Fuerstman:Just pulling up on my Bloomberg, taking a look at shares of Hilton Worldwide. Stock's been up as much as 5 % today, right now with a gain of 3.5%. It is among the top gainers in the S &P 500. The stock rallying after the company boosted the lower end of its full year outlook for expanding its hotel network. Our next guest, Tim, also a big operator in the hospitality space. We've got back with us Alan Firstman, founder, chairman and CEO of Montage International. It's home to 15 luxury hotels and resorts. It also spans residences, golf courses and clubs all under the Montage and Pendry names. Based in Laguna Beach, Alan joins us here in the studio.

3:15Welcome. How are you? I'm terrific. It's great to be here. How is business? We've been spending a lot of time on the road. Things are packed. Things are crowded. It seems like the high end is doing very, very well. It has. The luxury segment in general, we read it's up 3%, 4 % over last year. We're actually up double that, about 8 % over previous year. And tremendous interest in luxury product, especially ours. Who's your customer? It varies from property to property. At the resorts, it's people coming for leisure. We do high-end meetings as well.

3:47Alan Fuerstman:Global customers? Globally, yeah. More North America-based, but a fair amount of international travel as well. How much is business versus fun? Not that business isn't fun. It varies by season and time of year. So in some of the properties, Hawaii, for example, it's almost all leisure. Other properties, we do much more on the meeting side of it. So it can vary. It could be as much as 50 % each. And in other properties, it skews more on the individual traveler. Have you seen the demographic shift since over the last year, basically, since President Trump took office for the second term? Somewhat of a crackdown on immigration, but we've seen, to a certain extent, international travel from Canada fall a little bit.

4:30Got some numbers here in New York, too. Is that affecting you at all? Not really. We've heard some anecdotal stories here and there. A group may have been planning on coming. But no, we really have not felt that. And we look at it quantitatively. we were actually up and we look at our group booking pace, which is the best leading indicator for the future. We look into next year right now and we're ahead of previous years. So all good indications, but we rely less on international travel than some of the other brands based on where our hotels are located. What about demographics in terms of age of the people who are coming to the resorts?

5:04Is it, is it full of people in their forties and fifties now? Yeah, we've always, we've always had an active, active clientele. and there's a youthfulness to that. But we also see a lot of multi-generational travel, the tradition, so... Grandparents bring in everybody. Grandparents bring three generations. It's really great to see.

5:23Alan Fuerstman:I am curious, too, about just the administration, some of the policies, how it's maybe impacted labor costs, food costs, building costs, because these are things certainly that we talk about a lot when we look at some of the inflationary pressures that we've seen in our economy. Yeah, we read about it, haven't really had the impact today in the operating costs yet. Even labor costs? And you're finding all the workers you want? Well, labor costs have gone up. That's been a challenge, market to market. But that's been happening for the last few years. Right. So it continues. It hasn't gone away.

5:59It continues. It has not stopped.

6:00Alan Fuerstman:Does the pushback on immigration make it even more tricky? No. Unfortunately, we've been able to attract the cream of the crop, it seems to be. But we keep an eye towards the challenge of finding great, great associates. I mean, it's the essence of who we are as a company. But in all parts of the resorts, I'm talking kitchen, housekeeping, still no issue with talent and labor there? It's market to market. Some markets, there's a real scarcity. Where is that scarce? Some of the seasonal resorts. So we rely on H-2B visas, J-1s to support, to bring in where we have to fill gaps. Seasonality is the biggest challenge.

6:45Will you still rely on those visas with the new restrictions coming into play? The restrictions that have been talked of late have been the H-1Bs. We rely on H-2Bs. So I think we've been... So you'll be okay. It appears that way. And as we're gearing up for ski seasons, we have two great ski, three great ski resorts. We got Montage Deer Valley, the Pendrian Park City, and then Montage Big Sky. And we've been filling out our roster there beautifully.

7:10Alan Fuerstman:Well, it's interesting, too, because I feel like, you know, when there was a pushback by the administration against immigration, and then some of the construction and hospitality industries did reach out to the administration. So has it, do you feel like you're being heard? Or go ahead. Well, there's a concern, obviously, as new development and what the cost will be associated with building the hotels. And we have 15 hotels today, but we have another 15 that are in various stages of development. So and some of those costs haven't been are still being put together. So there's an eye toward that.

7:43But it's unpredictable, I think, is the biggest challenge right now. We don't know exactly where it's heading.

7:48Alan Fuerstman:We're talking to Alan Firstman. He's founder, chairman and CEO of Montage International Luxury Hotels and Resorts. What are you guys building? Because you do hotels, you do resorts, you do residences, you've got golf courses, you've got clubs. Where's the growth for you guys? Well, we're seeing a lot of international growth. So, for example, in Mexico, we've got four new projects in development. We're opening in Mexico City, a pendry, next year. And then the year after, we've got both a montage and a pendry opening in Punta Mita. What would you say to people about, because Mexico City, as you know, can often be a target for concerns about safety.

8:26Alan Fuerstman:But what would you say, your experience? My experience has been terrific. We're developing in an area of town called Roma, which is a beautiful location, very European in feel, and a market that's been underserved in luxury hotels. And I think we'll do a great dining scene. It's going to be a great addition and an entry for us to further into Latin America. Tell us about a place that you've considered developing and you chose not to and why. Why did you pass on it? We pass on developing in markets where we don't think we can get the rate to support the levels of services we need to provide. And one of the biggest disconnects luxury hotel brands have, or if they put a hotel in a market that has a rate ceiling, and no matter what they do, they can't get the rate, you have an inherent disconnect where either you're going to have an unhappy owner of the asset because you're not being able to get the returns you want or you'll find those companies will reduce services commensurate with the rate they can charge.

9:23So I want to stay true to markets where I believe a luxury traveler will go. Is there a base rate in U.S. dollars that you have to have for a per night rate? I mean, I know it depends on where we are. It absolutely depends on where you are in the world, where you are in the country. I mean, broadly speaking, montage runs. To make it work. But broadly speaking, Montage runs an average rate north of$1 ,200,$1 ,300 a night. So we should be able to get$1 ,000 plus for a Montage. A little less on the Pendry. But we look at those. And then there's a factor based on the labor costs and others in a particular destination or market.

10:03But we factor that into where we think the hotel is today and where we think the market will be heading.

10:09Alan Fuerstman:What do you think if somebody – you know, it's interesting, the luxury space. I was looking at some of just the stories, because there's been some concerns, certainly for some of the luxury retail space. They've been under some pressure. The Chinese consumer holding back. But it was interesting. I think it was Hermes reported this week. And I was looking at our BI team who did some analysis. And what they saw was certainly signs for an improved second half. They saw 2025 earnings per share jumping. So when you think about the luxury space, healthy, you haven't seen any signs of weakness. We see it healthy.

10:44We look at the, obviously, the room rate is an indicator, but also the spend on the property. How our guests are consuming our spas and how they're consuming the food and beverage in our restaurants. We have a customer, an affluent guest that is looking for value, looking for great services, great product offering, and they'll pay for it.

11:06Alan Fuerstman:What does value mean for a luxury customer? Yeah, for$1 ,300 a night, what does value mean? Yeah, it means we'll exceed your expectations. You're going to come there and you'll be in an environment where you say, I'm made to feel special. The amount of people I've interacted with, their focus on my likes and dislikes, their personal attention, the lack of, the human touch is a big part of what we're offering and that relationships that we strive to develop with our guests. Are you talking at all or developing at all? This is going to sound weird, but developing it all for Instagram, for social media.

11:44I was just at a resort. It underwent a$30 million renovation. This part of the resort looks different than the other part of the resort. And I went to it. It's the pool. It overlooks the cliffs. I was like, this thing is made for social media. They want people here taking pictures and sharing this on social media. As we design hotels, it does cross our mind. what a great Instagrammable spot. It used to be, where's a great photo shot? We look at that. We see how much energy it creates and it's excitement. And so, yeah, that's very much a real thing. But the ability to see, one of the things that made launching a hotel company for us in this age, what helped level the playing field was the transparency that the consumer today has.

12:31They can go online and see the hotel. So a big, large conglomerate, large company can spend a lot more than we can, but we get the unfiltered, unbridled responses of real people, and that helps us.

12:50Alan Fuerstman:Holiday bookings. You talked about bookings. Can you give us just a little bit more color on holiday bookings? Very strong. The festive this year, I was talking to our general manager from Cabo. we have a record year coming up over festive down in Montajo Cabo so again something we're excited about the ski destinations look real strong heading into the pre booking period now so we're optimistic are people booking typically the same giving the same amount of lead time when they book for a holiday are they booking later well for the holidays they actually book earlier because we fill up we're actually trying to book we get you to rebook before you leave because the availability it's that special and holidays are the best for family traditions and and great resorts are the embodiment of family time over holidays and so we target that very very much safe to say no you don't see any signs of a recession or a slowdown in your space or we're always concerned i'm always worried it's fine i wake up every day, you know, is there something in the world that's going to put us on tilt?

13:59But no. And I remain optimistic. I look at the signs of the performance of our hotels and am optimistic.

14:10Alan Fuerstman:So things like the rate environment or anything in terms of the build out, you're okay with it? I don't have a choice. So we focus on delivering extraordinary service and being a differentiated product. Luxury is not a commodity. And if we can continue to perform at levels that are extraordinarily high, I think we'll be able to continue to weather economic challenges. You told us, I don't want to blow up your spot, but you told us you actually spend a lot of time at one of the resorts. You live at one of the resorts. I do. I live at Montage Laguna Beach, which was the first montage we did. and I spend time virtually at all of our hotels throughout the year.

14:52Excluding that one, which is your favorite? It's like asking which is your favorite kid. And, of course, then they say, okay, which one? But, no, the thing about Montage is the consistency of our products. We have seven Montage hotels. All seven are five-star hotels. And Forbes, who gives out the five stars, called me two years ago and said, Alan, congratulations. You're the only hotel company in the world where every hotel brand, every hotel is five stars. And that speaks to why I can't pick a favorite because they're amazing. And it's across the portfolio.

15:29Alan Fuerstman:All right. Well, so great to get some time with you. I know it's been a couple of years, so good to check in with you. Alan Firstman, founder, chairman, and CEO of Montage International, joining us right here in our New York studio.

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