Restoration Hardware: International Expansion

Disclaimer: This interview is for informational purposes only and should not be relied upon as a basis for investment decisions. In Practise is an independent publisher and all opinions expressed by guests are solely their own opinions and do not reflect the opinion of In Practise.

I wanted to talk about Restoration Hardware, specifically focusing on the internal work done on international launches. I want to know about the analysis conducted and how the company approaches these new ventures. Additionally, I'd like to touch on the product refresh cycle and your thoughts on that. Before we dive into those topics, could you share a bit about your background?

I've been in corporate retail throughout my career, focusing on the luxury furniture space and the high-end market. I started at Williams Sonoma and have mostly worked in inventory management, financial planning, and sales forecasting. I also had a brief stint in merchandising.

I was at RH for 11 years and left about three-and-a-half years ago, just as they were beginning their international planning. This was slightly before the actual launch of their stores in Madrid and Germany. I can speak to the planning and thought process involved.

More recently, I returned to Williams Sonoma, managing inventory for our kitchen division, but I've kept a close watch on RH's activities and maintain some connections there.

You were with RH for a long time, so you must have valuable insights on when the international expansion opportunity began. Could you describe how it started and how it developed over the years?

I think the initial impetus for the whole thing was real estate. The original idea was to start the international expansion in London. They were working on a real estate deal right in the heart of London, in a really cool neighborhood. I forget the name, but that was what launched the idea initially.

Then it was about brainstorming how to get that off the ground. I think it ended up falling through mainly because there was some issue with the contract on the building itself. But that also led to travel over there and then the Aynho property. Being in England and having the opportunity to experience the Aynho property, which is different from a traditional gallery, was unique.

The opportunity for other locations came about by taking over leases of old Abercrombie & Fitch stores. That was a deciding factor on where to launch and the timing, specifically because of those locations they were taking over.

Can you remind me when the Abercrombie deal was struck? I was trying to remember, and I had to go back, but I don't recall offhand.

It was probably around 2019.

Regarding the original London real estate deal that fell through, what was the timeframe for that?

That was before, maybe a year or so before that. It was in Mayfair. I just remembered. It was a very cool neighborhood, an amazing location. It was something they weren't able to finalize. They might still be working on it, but I know they shifted their focus to Aynho and have locations in Germany and Spain.

I've been trying to understand how to think or feel about the narrative. Before the international launch, Gary Friedman, on the earnings calls, talked about how the platform is much bigger, the brand is bigger, and it could access a bigger market with fewer galleries internationally because people already know the brand, especially the target consumer.

You don't need 30 galleries in England or the UK to address the whole market. You can address a lot of the market with just a couple of properties spread across the country. Then it turned into launching Aynho and showcasing this amazing gallery, something no one had done before. A year later, it was like, well, we didn't expect much from Aynho. It was always meant to be London and Paris first, but it was never communicated that way before the launch of Aynho. This has only been filled in after a slow launch of Aynho or internationally overall.

I'm trying to figure out if, in the planning process, it was always intended to be a lower volume gallery, but something that spoke to the branding and positioning of the brand in a new territory. Or do you think they're just way behind plan and this is the reverse engineering of the reasoning for that?

I believe it's a bit of both. Initially, we underestimated the challenge of launching in a different country due to manufacturing issues. Regulations differ; for example, upholstered sofas have different standards in England compared to the US. We work with our manufacturers to ensure the product quality matches what you'd find in the US, while also meeting local regulations, which is challenging.

Additionally, understanding sizing differences is crucial. For instance, bed sizes differ; a queen bed in the US is technically a full in England. This affects not just beds but mattresses and bedding components. We also had to consider price points. In the US, our competition is at a slightly lower price point, but RH occupies a unique space. In Europe, high-end brands like B&B Italia offer sofas at lower prices due to local manufacturing and discounts, similar to buying a Gucci purse cheaper in Italy than in the US. These factors created roadblocks when entering the market.

I also think Aynho was a marketing strategy, similar to RH's ventures into jets, yachts, and hotels. These aren't major profit centers but serve as branding tools. The Aynho experience enhances brand awareness, acting as a marketing tool since RH doesn't engage in traditional marketing like social media or print ads.

Right, that aligns with the brand strategy. I wonder if there was hope that Aynho would quickly launch a bigger business. The description today suggests an Abercrombie portfolio of locations with F&B added in London and Paris, which extended timelines, compounded by Covid.

They also launched in Düsseldorf, Brussels, and Munich without F&B, which was faster but not the desired brand launch approach across the continent. Does this align with the team's thinking during your time there?

I think the excitement was definitely around London and Paris, especially being off the Champs-Élysées. That was a huge priority. I was surprised they launched in other locations, but looking back, it was probably easier to get to market. They were likely starting to take over some of these locations from a lease perspective. It would be a financial drain if they didn't get their product out there and start selling.

It's not the preferred sequence, but it happened that way due to the timing of leases and the Abercrombie deal. It's interesting because as a brand, Gary tends to delay things, like the San Francisco gallery, which was delayed for years to get it right. It seems there's careful management of how things are sequenced and released. It's odd that there's so much attention to detail in the source book, with changes and optimizations, but then they launch in a way that doesn't fit their usual decision-making around launches.

Yes, everything you're saying is true. They will change things up until the last minute. Even products launched online aren't available for months due to last-minute changes, ensuring everything is detailed. There must have been a strong financial reason to launch these galleries.

Yes, you can't just have costs sitting there for years while waiting for London, Paris, and Milan.

Also, it might have been a walk-before-you-run situation. We were struggling to determine the right size and what customers would react to because home styles in Europe differ from America, with less large spaces. It was probably twofold. It gives them an opportunity to read the business and walk before they run and not launch in huge markets where they could screw it up. They can get a good idea of how things are going and what the appetite is for certain collections. The Cloud sofa, which is the number one sofa, might not sell as well because it's too big for a London apartment or a smaller home. You probably can't even get it up most staircases there. Taking the time to read the business in smaller markets might have been a strategy as well.

It does seem like a very data-oriented organization, so gathering some of that data is definitely helpful. Although culturally, it feels like an odd way to launch. I understand the communication evolved over time in a way that didn't sound great.

I'm sure he was adjusting the strategy because it had to change for some reason.

In terms of merchandising, since that was related to inventory, you mentioned this before. I didn't fully appreciate how challenging it might have been to have different rules and regulations on different products. I knew about the sizes and all that. But if you're talking about opening for business in England, Belgium, Germany, France, can the same products go into all those countries, or does it have to be country-specific products for each?

When I was there, the strategy was to use the same products and apply the most stringent regulations. I think England had the strongest regulations for upholstered furniture. So that regulation would work across other countries.

So there should be the same product across Europe, but it would be different from the US product unless something with those regulations changed from the time I was there.

I was going to ask about that. Even though you could get better economies of scale with the same product across Europe and the US, you'd still split them for various reasons instead of just doing high volume of one type according to the most stringent standards.

That was the strategy when I was there, specifically for upholstered furniture. That's where you have the strongest or most differentiated regulations. It was related to smoke and fire regulations that Europe had, which the US did not. So they had to use a different foam and a different type of fabric in certain cases. The idea was to have a separate sofa that met the same quality and sit. We were getting samples to ensure our US sofa and the sofa specifically for England met the regulations, sat the same, felt the same, looked the same, and were of the same quality.

Is it a materials thing or a build thing?

It's the materials.

So is it about taking a subset of the total available material options in the US and eliminating some options we have here or changing them?

Yes, like the foam. The foam in your sofa needed to meet different regulations.

In terms of how to think about the ramp of the international business, it hasn't yet reached the materiality clause threshold to start disclosing contributions separately. If you consider an A-minus outcome for the international business over the next few years, with the launch of Paris and London and opening bigger markets, what would an A-minus outcome look like three years after?

Are you asking about a percentage of the total RH business or a total dollar amount?

I'm thinking in terms of dollar amount and percentage of the business. The percentage is hard to determine because it depends on overall performance. I don't have a clear sense of what reasonable success looks like across the continent.

It's a difficult question without knowing the strategy and plans. I understand the locations like London and Paris, but the product assortment and whether all products are included are factors. Without diving into the business, it's hard to predict what success would look like.

Do they expect it to be a billion-dollar contributor?

I don't think that was ever the goal.

What is your take on the hospitality elements of the business? It seems like the obvious answer in the US and probably everywhere is to include F&B. You were there before the galleries, starting with Chicago, which was the first to include food and beverage. How did you assess the impact of having those in the galleries?

It's interesting because when you launch a new gallery in a market, you typically see a good arbitrage. It lifts the market by maybe 20% to 30%. When we started incorporating food and beverage, the stores became much larger, and we could showcase a lot more products. With the addition of food and beverage, we saw an additional 20% to 30% lift in those markets, almost doubling the impact.

We attributed part of this to the food and beverage, but also to the larger galleries, which were more standalone spaces rather than mall locations. The elevated design experience, the membership program with free design services, and the quality of our staff contributed to this lift. These elements, combined with brand awareness and non-traditional marketing tools, created a strong market presence. Even if someone wasn't initially in the market for a sofa, after dining at RH several times and enjoying the experience, it became their first choice.

Regarding advertising, since you've mentioned it a few times, what do you think about the strategy of not following traditional advertising and branding paths?

I think it's a unique and smart strategy. Especially compared to places like Williams Sonoma, where the market is saturated, traditional methods like social media posts or emails don't stand out as much. These innovative strategies move the needle further, although they are more expensive. The P&L might not be immediately favorable, but in the long run, it builds sustainable brand awareness. A significant development in RH's business, which took about four years, is the launch of new products. They recently launched an interiors line that they had been waiting for, and it's making a substantial impact.

I wanted to ask about that since you were involved in inventory planning and merchandising. The first new book came out, and although they did contemporary in 2022, it was somewhat of a flop, seeming overpriced.

Yes, exactly. The contemporary line was indeed a flop.

But around late summer last year, they released the big interiors book. They refreshed modern, contemporary, and outdoor collections, launching over 80 new collections over the last year.

It feels like the rush of newness that was paused during the Covid period has finally come through. As you've watched from the outside, how do you think they've done so far in terms of hitting the trends right, getting the pricing where it should be, and how the brand is positioned stylistically and from a quality perspective with the new collections?

Regarding the new collections, without taking a stance on their appearance or price points, the fact that they've launched new products is significant. The focus had shifted so much from product launches to other things, especially during Covid. When I was leaving, everyone was focused on contemporary, like the San Francisco gallery, which was delayed and leaned contemporary, and projects like the plane and the guest house. But that's not the core of RH. They need to launch products and newness regularly to give people a reason to return and buy new items. So, it's very positive that they've shifted their focus back to the product itself and are getting new items out there.

If you don't mind a follow-up question on this. Gary has mentioned a few times on recent earnings calls that they're more focused than ever. When I saw the private jet, the yacht, the guest house in Aspen, it seemed like these were more marketing and advertising efforts. But from what you're describing, it sounds like internally they were more of a distraction from the core business than I realized.

Yes, that and the contemporary line.

Why do you think they drifted that way?

Well, Gary is the final decision maker on pretty much everything. For one person to manage all of that simultaneously is very challenging. It's difficult to stay focused on product development when he's also trying the food for San Francisco, which is supposed to open soon, or meeting with the team building the jet in Atlanta. He's often away for days, which can be distracting. As the figurehead and final decision maker, he sometimes makes last-minute changes. Even if we've signed off on a product, he might decide to change something like the hardware on a sideboard.

This can derail progress. Right or wrong, he has the vision that makes RH what it is. But it creates a circular reference, making it challenging to get things done, and it takes a long time.

Basically, he took on too many side projects, which slowed down and distracted from the development of the core. I'm sure the Covid-related supply chain disruptions and inflation across the supply chain made it less of a focus to try to introduce new products during that time. It was operationally challenging and expensive.

We couldn't travel, and we couldn't get to Vietnam to see the product. The core product was selling very well because everyone was buying new items for Covid. So it wasn't made a huge priority because people were buying whatever was available.

When that stopped, it seems they didn't anticipate the big drop-off. I left before it happened. We were still running double-digit comps when I was there. They didn't seem to anticipate the drop-off, or they would have had a huge product launch ready. In hindsight, that would have been the best approach.

Right, yes, I think that makes sense. Your point is that the brand coming out with a new product for the first time in about five years is significant.

You don't even have to judge how good it is or how it competes in the market. Just bringing out something new for the first time in four or five years is a big deal for the brand.

A huge deal. You're also up against a timeframe over the last two years where business really dropped off. Your comp base is much lower, so this new product will obviously perform better than the old products that had been out for four or five years. No matter what.

They're doing a great job of refreshing the brand, moving it forward, and being more trend-focused. We had collections that were our number one and number two in the assortment for years, and we were always hesitant to change them. Coming out of that timeframe, it took so long to launch new products that we started seeing those sales decline. They weren't on trend anymore, and people weren't reacting as well. Bringing in new items, those old collections have been clearanced. I think they've done a great job repositioning and moving those old collections out of the top spots.

What were the number one and number two collections? Can you name any of them? I'm curious if I would recognize or know them. I'm sure I would.

For many years, our furniture collections, like the St. James bedroom furniture, featured very ornate beds, side tables, and nightstands. That was a significant collection in bedroom furniture. Maison was also a huge collection, with items like the balustrade dining table featuring large columns. These were our top collections for ornate furniture.

Right before Covid, we launched the Campaign collection with the Van Thiels and the French Contemporary collection, which started to become our top collections. The breadth of the assortment was key, with availability in four finishes, different colored hardware, and every imaginable size. These collections began to dominate.

Now, the focus is on newness. It's like the chicken or the egg. You put something out there as the number one collection that you want to sell. If you put it in the galleries, and tell the sales associates to sell it, and buy the most of it, and it's available and in stock in the right fabrics, that becomes the collection that will sell the best. It seems they're leaning more contemporary, even with their core interiors.

Yes, the reeded wood collection is currently very popular, with Byron, Mulholland, and Genevieve offering different styles.

I totally agree.

It seems they've figured something out and are leaning into it more.

From a sofa perspective, they're still fully supporting the Cloud, which remains their number one. On the website, the top sellers are prominently displayed, and the Cloud is still at the top of the seating collections.

They recently launched Motion, which I think is a significant development.

I noticed that too, very recently. It looks appealing; I kind of want one.

It's like an elevated La-Z-Boy. The person who launched it is the son of the person who launched the Cloud sofa.

Timothy Oulton, the creator of the Cloud sofa, passed away about two years ago. Now they're working with his son, Oliver, to launch Motion.

That's some very good inside baseball there. One of the things they've discussed about the relaunch is the sequencing of events. It's not just about announcing or printing a new book and expecting sales to take off immediately. It takes time to read, react, order, refresh the galleries, and reduce shipping and delivery times. This is an exceptionally large refresh of the entire collection or assortment, right?

Yes, this is likely going to take much longer than usual.

In a more typical year, how would you approach this cycle for the company, considering the extensive changes they're implementing this time?

Typically, when we launched new products, such as two or three new collections, it involved about an eight-week ramp. By the time we launched, it would take about eight to 10 weeks to see the full impact. This was often due to timing. For example, if we launched a new product in February, it might not be available until May. This delay was due to factors like last-minute hardware changes. Even if we launched something, the product might not be immediately available.

Timing also affected when products became available in galleries. Under normal circumstances, it took eight to 10 weeks to fully realize sales. After transitioning to the membership model and eliminating random promotions, product sales remained consistent week over week, with few deviations. We didn't have a seasonal business, so there was no reason for sales to fluctuate significantly.

I want to ensure I understand your terminology. Are you saying that eight to 10 weeks after releasing a new product, it reaches its full run rate and then remains steady for a while?

Yes.

There isn't another phase? Because the way they've described it, you can put it online and in a book, but it might not be in the galleries yet.

You would definitely see a much bigger lift once it's in the galleries. If you launch it online and in the book without changing anything, it takes eight to 10 weeks. However, if you launch it online and in the book, and then place it in the gallery eight weeks later, you'll see a much bigger lift.

There are always these little adjustments we plan the business around. For example, from this point forward, we're going to sell at a certain run rate. In March of next year, we're planning to introduce it in the galleries. Four months before that, we need to order all the display quantities for the galleries. We also have to order based on a much higher sales rate, and we plan for that in the business.

When you make that decision, I assume you want to see the first eight weeks of ramp for all the new products. Then you decide which ones are the winners of the new collections. These are the ones you want to put in the galleries in another eight to 10 weeks. So the whole read and react cycle might take about 15 to 20 weeks?

Yes, and even after the eight to 10 weeks, if something stands out, you have to ensure that whatever we remove from the gallery will be outperformed by the new product. You have to determine if it's going to get a lift, and if the current product in the gallery will be surpassed. These were the decisions we had to make. From the time the decision is made, it takes four to five months to get the product into the gallery due to lead times, manufacturing, and shipping.

This is for a more standard refresh. If we go back a year, they launched a product, and two months later, they would have a decent run rate. They could then decide if some of the new products would outperform what's already in the galleries. It would then take four or five months after that decision to populate the galleries with the new products.

That's under normal circumstances.

It was a six to seven-month process from launching a new product to its appearance in the galleries.

Yes, unless they made the decision earlier. With a lot of the new products launched now, they identified what they wanted to support and moved away from older products in the gallery. I assume they made the decision before the product launch and expedited the process. They aimed for a new look, leaning more contemporary, and I think they've painted many gallery interiors.

They lightened up, giving it a refresh. Overall, I think they're painting the exterior of many galleries. The one near my house has scaffolding going up. They're moving away from that big, gray building to something probably closer to what the San Francisco gallery looks like.

I live in Newport Beach and drive by the new gallery going up at Fashion Island. It's just three minutes away from me. It's funny that they have the Abercrombie & Fitch portfolio internationally because I feel like the brand is evolving from that dark look to something much brighter and warmer.

They're probably going to change. They'll likely have to do a lot more than that.

Yes, I'm sure. The refresh cycle you mentioned was for a normal cycle when you're doing half of the assortment in a year or 80% in two years.

When making this decision, you're doing the source book and the gallery at the same time. They're saying, "This is going to be our new number one collection." We're going to change it in the gallery right away. We're ordering it at the same time we would order, but it will still be a few months later than the book launch because the product is always delayed.

Where do you think RH has the best competitive positioning across all assortments? For some reason, it feels to me like outdoor. I was going to say outdoor, but I'm not sure why.

Outdoor is interesting because it's a seasonal business. If you don't launch and get the products to people in time, you miss a whole season. It's a $100 million or $200 million business now. So no matter what, there has to be a focus on outdoor. It has to launch in February and be productive and available by mid-March. Gary has to focus on it.

That says a lot. There's new product every year, and there's a huge risk to the business if it's delayed, not launched on time, or not available when it should be. That's a big deal.

Are you saying that because it's so seasonally sensitive, it always gets Gary's attention and is prioritized, ensuring it's as fresh as it should be?

Yes, 100%.

Whereas with interiors or contemporary or modern, the book could be delayed by one, two, three, or four months to get it perfect, and it wouldn't necessarily show up as an obvious hit to the business.

Exactly.

It's amusing how much this business reflects Gary, almost like a magnified version of him.

Yes, it's significant because he's not getting any younger.

Yes, indeed. I wanted to ask you something, and if you're not comfortable discussing it, we can skip it. Gary has mentioned the intersection of design, quality, and value as essential for the product and brand to compete. He argues that it's currently the best it's ever been. When I look at the pricing and collections compared to brands like Our House or similar ones, the pricing seems sharper than I remember. I'm curious about your thoughts on the value proposition they're offering across various dimensions—service, design, and product quality and price. How do you think the brand is positioned in the marketplace now?

When I was there, it was challenging to identify our direct competitors. Our House was smaller and less active. There weren't as many smaller brands attracting attention. Now, there's more competition, like Lulu and Georgia or Simply Modern. Our house is expanding, opening galleries, using a model similar to RH. Their chief merchant is an RH alum, applying what she learned and making progress.

When they launched something like Contemporary, they aimed for higher quality products. The strategy was to climb the luxury mountain, reaching a higher price point with better quality, using Italian factories. It probably didn't work as well as anticipated, so they're adjusting. I believe RH offers great value. I have a lot of their furniture, and it's held up well. People are proud to buy from there. It's not like a first home brand like Pottery Barn, which is for when you have less to spend.

They had to pull back due to increased competition and more options for consumers. There's more trend-forward stuff at lower prices, and competitors are emerging. Have you heard of the brand Quince?

No, I haven't.

They are positioning themselves as a brand that removes the middleman, going directly from factory to customer, which allows them to offer much lower price points. They compete with high-end clothing lines, claiming to offer the same quality at a much cheaper price. They recently launched a leather sofa similar to the Maxwell sofa we have at RH in leather. They sent an email comparing prices between Our House, RH, Pottery Barn, and possibly another competitor, highlighting the same manufacturing and leather quality but at a lower price point. There are companies targeting them, and I am unsure if RH is producing the product cheaper due to strong vendor relationships or if they are taking a margin hit on some items while balancing it with higher-margin products.

I have looked into this in the past, and Gary mentioned that as the business declined over the last couple of years, margins have been impacted, which is expected. Product margins have decreased due to clearance activities on older collections, introducing new products, and being a smaller business today compared to the peak of Covid. However, he claimed that there is nothing inherently different about the product margins and that they have negotiated terms with suppliers to maintain high product margins despite sharper pricing. It seems RH might offer higher order quantities and commitments to suppliers. I am curious about other variables RH could use to achieve sharper pricing across the board, as it is hard to understand how lower retail prices can be maintained without affecting margins.

I believe RH's relationships with their vendors are unique, having worked with the same vendors for a long time. This gives them negotiating power, possibly through longer-term commitments or higher order quantities. They might also play with the product mix, taking a higher cost on some items and a lower cost on others, maintaining a certain product margin mix based on sales. Additionally, they might be working with new manufacturers or supporting vendors with new machinery to increase efficiency.

I would be surprised if they are. Even before Covid, we continued to raise prices, and our margin increased significantly, as costs were not rising.

The only variable factor was the cost of shipping, which started to rise, especially during Covid. However, the cost of the product for older collections remained stable for years, even as we raised prices annually. This resulted in higher margins. We might just be returning to pre-price increase levels.

How did you approach raising prices on the top collections over time? Was there a specific strategy or rule of thumb?

We would assess the tipping point. Until we reached it, raising prices by 2%, 3%, or 4% didn't significantly impact the business. We maintained certain price points, like under $1,500, for example, $1,499. We continued to gradually increase prices until we felt the impact. Selling fewer units at a higher price point benefits the bottom line because it reduces the volume going into the distribution center, requires fewer staff, and decreases back orders.

I want to wrap up by discussing the luxury market, which Gary has often mentioned. Furniture doesn't traditionally behave like luxury items, such as those from Hermès, because it doesn't appreciate in value. When you buy a Cloud sofa, it's not something people want to replace frequently. What does luxury look like in the furniture world, in your opinion?

The product doesn't appreciate immediately, unlike luxury items. What does luxury mean in the furniture industry to you?

I believe it's largely about the experience. When you enter the gallery, meet with a designer, and see how the product is delivered, it all contributes to the experience. The packaging and the delivery, now accompanied by ambassadors with every furniture delivery, are part of it. The presentation of the product is another significant aspect. The strategy involves these beautiful, clean source books that make you want your house to look like the images, or you want all that product in your own home.

The people selling it play a crucial role as well. Someone who helps you choose, understands how the product is made, and the collaborations, like with Timothy Oulton and Oliver Oulton adds to the luxury. The Van Thiels contribute to telling that story. Having a product that lasts, and if it doesn't, standing behind it is vital. If a product fails, like the Cloud sofas, RH replaces them without question. This is part of the luxury experience, ensuring customer satisfaction.

I noticed that in their design services there are three different tiers, Foundational, Comprehensive, and Bespoke. There is a minimum of $300,000 spent on RH furnishings to get the Bespoke service, which makes it feels like a whole home design kind of project. How far do you think they can take this design service?

We were doing a lot of that before realizing the need to set a minimum purchase requirement. Designers in the galleries were creating floor plans and helping customers design their homes, often visiting them. It was initially to build the sale, but now there's a minimum purchase to access that service. This is partly because we had to hold a lot of products until they were ready to be shipped, with 3% or 4% of our inventory held for customers.

I'm sure that affects different timeframes.

Yes, and customers often say their home won't be ready until a certain date, while the product arrives earlier, creating logistical challenges.

Restoration Hardware certainly has a specific look and feel. I've wondered, when flipping through Architectural Digest, everyone takes pride in the uniqueness of their furniture, which is the point of the publication. But I wonder, for people who can spend $300,000 plus on RH, how many prefer that much RH versus something unique they found in a boutique during their travels?

I think there's actually a lot. We often focus on niche markets on the coasts, like New York, LA, and San Francisco. But there's a whole other country out there. In places like Houston, Dallas, and Boise, people are buying huge homes and visiting RH galleries. Many are purchasing large second homes in Montana and want everything done for them without having to think about it.

How do you think Newport Beach will perform when they open it?

I think it's going to do great. It's a fantastic location.