It’s been 20 years since Montage Laguna Beach opened its doors. Back then, global worry centered on SARS not COVID. Alan Fuerstman, meanwhile, was focused on his brand-spanking-new luxury brand, Montage Hotels & Resorts. He made what might not sound intrepid now, but back then was a bold bet: approachable luxury.
In the early aughts, luxury was still dominated by the legacy flags, Ritz-Carlton and Four Seasons, to name two, purveyors of heavy luxury. They had it down to an art form, all the way to the dense drapery. Fuerstman, now an Orange County resident by way of New Jersey, saw a gap in the market, the awareness that another type of luxury traveler existed who wanted a less stuffy experience that was still high end and high on style.
“My take on luxury was that it was too pretentious, too formal and that the next generation of luxury traveler was looking for something more humble in the form of style, service and culture,” Fuerstman, the founder, chairman and CEO of Montage International, told HOTELS about his vision some two decades ago.
By that time, he had worked his way up the ladder. A product of the 1960s, when idealism was a practice and not a fancy, Fuerstman worked part-time as a bellman at a local Marriott hotel until shipping off to Gettysburg College. Upon graduation, Fuerstman made his Horace Greeley move and headed out west on the invitation of a general manager he had worked for in New Jersey. Marriott at the time was opening a resort in Rancho Mirage, Calif. “I was just planning on going on an adventure out there with a friend,” he said. He was given the distinguished role of bell captain and it was then and there that hospitality burrowed in and embedded into his marrow. “I literally fell in love with the business. That was the real beginning of my career and I never looked back.”
Fuerstman’s luxury ethos was galvanized when he led The Phoenician resort in Scottsdale, Ariz., at a time when it was part of ITT Sheraton. It was the desert. It was the southwest. It was hot. Yet, still, the atmosphere suggested sport coats in the lobby and dining room. “What I took away was: Why don’t we make it more comfortable, but not lose any of the attention to detail, craftsmanship–the things that I feel are real markers of luxury,” he said.
“I thought there was an opportunity in the broader luxury space to create that kind of style of service coupled with an incredible physical property that didn’t look the same city to city.”
The seedling had been planted for Montage Hotels & Resorts. After a stopover in Las Vegas opening the Bellagio with Steve Wynn, Fuerstman created Montage in 2000 and opened the Montage Laguna Beach shortly thereafter. From the jump, Montage was an asset-none business, with a pure focus on management and creating the brand vision. Luckily, Fuerstman had a capital partner to help put the cash behind the inventiveness.
A FRIEND, INDEED
The dot-com bubble had many casualties. eBay was not one of them and its founder, Pierre Omidyar, just so happened to be a friend of Fuerstman’s. One day over lunch, Fuerstman dropped his idea of starting his own luxury hotel company. It wasn’t just about a favor; he had the prescience to understand the value of the real estate he’d be directing. The Phoenician had been acquired for $240 million when Fuerstman went to work there. Four years later when he left, it was worth $500 million. “I saw this incredible value appreciation that was created by operating the hotel extraordinarily well,” he said.
Fuerstman asked Omidyar if he was interested in diversifying and investing in a hotel, telling him, “I think there’s some tremendous opportunity here.” No one knows how much alcohol was drank that afternoon, but Omidyar was convinced and ended up investing in a handful of hotels through his family office with Fuerstman, including Laguna Beach, Beverly Hills and Deer Valley, Utah. Like Bogart and Rains, it was the continuation of a beautiful friendship.
In no time, Laguna Beach became a winner—a destination for the SoCal glitterati and the out-of-towners in search of a sybaritic experience that spoke to them and not their parents. “We were an early mover in that we could be ultra luxury but with a different approach,” Fuerstman said.
This was shortly after 9/11 and Fuerstman believed there was an opportunity to pick up luxury assets at a discount. This was one of very few faulty calculations by Fuerstman. Though the hotel industry was reeling in the wake of 9/11, banks were not taking assets back. Fuerstman quickly and assiduously pivoted to new-build opportunities, finding developers for which ultimately became Montage Laguna Beach and Beverly Hills. It was a fortuitous move: starting a new brand with a new asset is far better than beginning a brand with what ultimately is a retread of something else. (The Montage name, in fact, pays homage to the artist colonies in and around the Laguna Beach area.)
Ohana Real Estate, which Omidyar founded, currently owns two Montage hotels, Deer Valley and Los Cabos. In November 2022, Chinese insurance company Dajia Insurance Group sold the 259-room Montage Laguna Beach for a record $641 million, or about $2.47 million per key, to Houston Rockets owner Tilman Fertitta. For comparison, Ohana sold the asset to Strategic Hotels & Resorts for $360 million back in 2015.
As Fuerstman put it: “Our asset owners have done very well.” The current Montage roster includes seven hotels with one on the way: Montage Laguna Beach, Montage Deer Valley, Montage Kapalua Bay in Hawaii, Montage Big Sky in Montana, Montage Healdsburg in California wine country, Montage Los Cabos in Mexico, Montage Palmetto Bluff in South Carolina and the upcoming Montage Cay in the Bahamas, opening next year. (In 2020, Montage Beverly Hills was sold and the new owners folded it into the Maybourne Hotel Group as the Maybourne Beverly Hills.)
All Montage properties include a residential component, something that is an economic necessity.
“Branded residences are a critical component. There would have been no Montage Laguna Beach without it,” Fuerstman said. Development costs of luxury hotels are astronomically high; the sale of residential units makes the economics work. “It’s part of our DNA,” Fuerstman said.
Operating ultra-luxury hotels takes a village. And when you charge premium rates, which can reach well over four figures per night, you better have a very high value proposition. Unlike select-service hotels, where, especially during the lean days during the pandemic, you can cut back on some items or services to reduce expenses, at the high-end of the market, it’s not an option. Guests expect the moon for the money they are shelling out. “As you increase rates, and we’ve seen with inflation that hotel rates have gone up, we have to remember the value proposition, so, for instance, we don’t cut live entertainment because we think that’s an important component of the luxury offering,” Fuerstman said. “It’s expensive, but we think that’s driving more business. We don’t spend for the sake of spending. We do it because it’s something that our guests appreciate and effectively pay for.”
As expected in an ultra-luxury branded experience, food and beverage and other ancillary offerings, like a spa, play a huge day-to-day role. They are typically lower-margin businesses, but at the ultra-luxury level, they are table stakes. “We can’t look at it just as a margin,” Fuerstman said. “We aren’t taking the margin to the bank. We look at it as how much much profit are we generating per room and that’s a better marker of success.”
A SIBLING IS BORN
Still, it’s a hard, expensive business. In 2014, Fuerstman put forth a new brand called Pendry Hotels & Resorts, which he considers to be “contemporary luxury” that contrasts and doesn’t cannibalize from Montage. Styles of service are similar between the two brands, but whereas Montage has all the luxury trappings, Pendry is a bit scaled back. Consider a guestroom: at a Montage it might be 600 square feet compared to a Pendry at 350 square feet. And while a Montage bathroom would be a five-fixture experience, with a separate shower and bath and a private water closet, a Pendry might contain three fixtures.
“They play well together and it’s enabled us to expand into markets that maybe weren’t right for a traditional Montage.” (The brand can accommodate conversions.) Sagamore Pendry Baltimore is a great example, Fuerstman said. With a smaller footprint, Pendry properties also could be considered an easier fit for an urban landscape.
Pendry also has locations in New York City (where Montage does not, yet), as well as Chicago (which in a previous incarnation was the Hard Rock Chicago), Washington, D.C., San Diego, Park City and West Hollywood. Upcoming Pendry hotels include Tampa, Newport Beach, Calif., and its first international property in Barbados, a deal that was announced in April 2023.
Fuerstman calls the brand highly successful, but his biggest pride comes from the fact that he conceived it with his son, Michael, one of his four children and whose official title is co-founder & creative director. “He’s done a masterful job,” Fuerstman said of his son, who has an uncanny resemblance to dad. “He really has the pulse of that segment of the business.”
In the Pendry customer, the Fuerstmans saw someone who might be aging and was expecting a little more expensive service, but still wanted the energy and vibrancy that these lifestyle hotels provided. “We find that the Montage customer enjoys the Pendry experience and vice versa,” Alan Fuerstman said.
Twenty years is a long time for anything, but success for Montage International has come with the right attitude and right work ethic. “There are no shortcuts,” Fuerstman said.
With a dozen signed management agreements that are opening between now and the next four years, including a project in Saudi Arabia, you can bet Montage will be around for another 20 years, and beyond. “We’re incredibly excited about what’s in front of us.”