PARIS — Luxury has had a vintage year, propelled by robust growth in North America and Asia and resurgent sales in Japan. But the Middle East, flush with cash from the pumped-up oil market, has been the real gusher for the industry.
Sales gains in the Gulf region have been vibrant, executives said, adding that the market is ripe for further growth because of burgeoning tourist trade in cities such as Dubai and Abu Dhabi in the United Arab Emirates.
Meanwhile, they noted local customers, long privy to expensive watches and gold jewelry, have evolved sophisticated fashion tastes and are shopping more at home.
“Sales this year have been excellent in the region,” said Cartier International president Bernard Fornas, who last month christened the luxury brand’s first boutique in Qatar. “The gains have been well above those of our other markets.”
Ditto for Corum president Severin Wunderman, who said the Swiss luxury watch brand’s sales have increased 30 percent in the Middle East compared with last year.
Chopard vice president Karl-Friedrich Scheufele said the Swiss watch and jewelry house’s sales in the zone have gained 15 percent since last year. “That’s stronger than any other single region,” he said.
Meanwhile, Bulgari chief executive officer Francesco Trapani said the Italian house was concentrating on the region. “Wealth in these countries is extraordinary. We expect to see more buying, both locally and abroad.”
Trapani said Bulgari planned to soon open a seventh address in the United Arab Emirates, adding to shops the jeweler operates in Bahrain, Egypt, Kuwait, Lebanon and Saudi Arabia.
Though hard goods — watches and jewelry — have reaped the majority of the fruits of the Middle Eastern oil surge (the market is estimated to account for 10 percent of high-end watch sales), fashion houses also said the region presents opportunity.
Michele Norsa, ceo of Valentino Fashion Group, said the nature of wealth has changed in the region.
“It is not only sheikhs or emirs who are rich now, but the money is more widespread within the population,” Norsa said. “Perhaps the population is not so large, but there is a lot of spending power.”
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Kuwaiti retailer Sheikh Majed Al-Sabah, who three years ago opened his first Villa Moda luxury fashion and accessories store in Kuwait City, said the Middle Eastern appetite for luxury has grown beyond glitzy watches and jewelry, show-off cars and expensive couture.
“We can now replace that list with limited-edition handbags, shoes and [general] well-being [services] like spas and plastic surgery,” he said. “People here spend very cleverly. They love mixing luxury brands with denim and Zara.”
Belief in the region’s rosy luxury future prompted Al-Sabah to plan for an 11-story emporium in Kuwait City that will offer everything from top-shelf European brands to the chance to play the stock market, store heirloom jewelry and even get teeth whitened. It is slated to open in 2007.
“The [region’s] best markets are Kuwait, Qatar and the UAE, because they have the highest income per capita, followed by highly populated and underdeveloped markets like Syria, Egypt, Iran and Saudi Arabia,” said Al-Sabah, who plans to open a 3,800-square-foot Villa Moda in the Damascus spice market this spring. He also operates stores in Qatar and Dubai.
“The [region’s] boom is not only from oil prices,” he said. “The post-Saddam Hussein political stability has allowed many international institutions to invest in the region.”
On that list is Harvey Nichols, the British retailer, which in December is to open a 120,000-square-foot store in Dubai, its first Middle East address. Meanwhile, Saks Fifth Avenue, which has stores in Riyadh, Saudi Arabia, and Dubai, plans for further expansion into Qatar, Kuwait and Bahrain.
High-profile real-estate projects are on tap, too. Giorgio Armani has a venture to open a hotel in Dubai in 2008, and Donald Trump have signed a joint venture to develop his own luxury hotel/apartment complex in the Gulf city.
“There is considerable potential in the region,” said Chopard’s Scheufele, who also noted tastes have become more sophisticated.
“They want the latest,” he said. “They know what is in. It’s no longer the richest style around. In the old days you could identify pieces that were marketed for the Middle East.”
Though tourism in the fast-growing destinations of Dubai and Abu Dhabi has generated luxury sales, executives said Saudi Arabia remains the region’s top luxury market.
It is the region’s biggest economy — and it’s growing. This year economic growth is expected to reach 7 percent, the fastest rate in the kingdom in two decades, thanks to oil sales that are expected to soar some 54 percent over last year to $163 billion.
The outlook is equally robust generally. The International Monetary Fund estimated imports of goods and services to the Middle East will increase some 15 percent this year, with similar gains predicted for 2006.
Goldman Sachs luxury analyst Jacques-Franck Dossin said the Middle East accounts for about 4 percent of the total luxury market. But he stressed there’s plenty of potential for Europe’s top luxury brands. He predicted sales growth of 40 to 50 percent this year in some Middle East markets.
“The region’s share of the global luxury market is set to rise further in the next few years,” he said.
— With contributions from Amanda Kaiser and Luisa Zargani, Milan