“A woman is an occasional pleasure but a cigar is always a smoke,” Groucho Marx once famously said. Many are the comparisons between women and cigars, whereby real cigar aficionados, when forced to choose, never doubt what comes first. If a cigar is indeed like a woman, than she must be Cuban, as the world’s most famous cigars all come hand-rolled from the Caribbean isle.

As is the case with grapes and wine, the taste of first-class cigars largely depends on the soil and climate in which the tobacco has been grown. And it just so happened that God created the perfect growing conditions for tobacco in the hot and humid Cuban province of Pinar Del Rio, which almost single-handedly turned the Cuban cigar into simply the best cigar in the world.

Some 25 percent of the 400 million cigars sold worldwide in 2008 were from Cuba. With the exception of the US market, as Washington has upheld a trade ban on all things Cuban since 1962, Cuba has 80 percent of the global cigar trade in terms of value. Spaniards, French, Germans and Cubans themselves are the world’s most fervent smokers.

Cuba’s cigar industry is a monopoly controlled by Havanna S.A. Its president, Manual Garcia, last February announced that the company saw worldwide sales in 2008 slip by 3 percent to amount to $390 million.

Garcia blamed the world financial crisis, which had reduced the demand for luxury goods, including cigars. An 11 percent drop in global travel had slowed cigar sales at duty free shops, which account for a quarter of the company’s business. Stricter smoking laws in Germany, France, Britain and United Arab Emirates, he said, had also decreased demand.

Where there’s smoke, there’s sales

Western Europe is Havanna’s top sales market, with 57 percent of total sales, followed by Latin America, at 14 percent. The Middle East and Asia together make up about 9 percent of the market or some 36 million cigars. Comparatively, in 2008, some 60 billion cigarettes were sold in the GCC.

Havanna S.A. was founded in 1994 as a joint venture between the Cuban government and the Spanish-French tobacco firm Altadis, with the latter subsequently being bought by Britain’s Imperial Tobacco Group in 2007. The company produces 27 premium cigar brands in some 80 formats, among which Montecristo, Romeo y Julieta and Cohiba are arguably the most famous.

The company distributes its cigars through its 144 Casas del Habano outlets around the world. According to one representative of Casa del Habano in Beirut, Lebanese cigar sales have not been affected by the crisis and are expected to continue to grow at an annual average growth rate of 15 percent. He did, however, expect Lebanese expatriates from the Gulf to spend less on cigars when they return for the summer holiday.

Lebanon and the Middle East are no exception from the rest of the world in the sense that Montecristo, Cohiba and Romeo y Julieta are the best selling brands. Montecristo is in fact the world’s bestselling brand with a 25 percent market share in terms of value, followed by Cohiba (23 percent) and Romeo y Julieta with 13 percent. According to Havanna President Garcia however, Cohiba rakes in the greatest profit.

Made with two types of tobacco leaf and put through extra fermentation to add flavor, the Cohiba is the company’s flagship cigar. It was especially created in 1966 for Fidel Castro and other Cuban leaders. It was made available on the open market in 1982.

An expanded selection

Cigar lovers will be happy to hear that Havanna this year announced the launch of a handful of new Cuban Delights, including the Montecristo Open and the Gran Reserva Cohiba Siglo VI, which were “designed” with the help of “master blenders, expert rollers, and tasters.”

Montecristo Open offers four new types and sizes: the Eagle (54 gauge x 150 mm long), Regata (46 x 135 mm), Master (50 x 124mm) and Junior (38 gauge x 110 mm long). The Siglo VI measures 52 by 150mm. Another major launch for Havanna in 2009 is the Robustos T (50 x 124mm), which is part of the Trinidad brand.

Then there are the limited editions: the San Cristóbal de la Habana O’Reilly (56 x 160mm), of which only 1,000 units will be sold, a special box with 50 Montecristo Doble Coronas cigars (49 x 194 mm), of which only 350 units will be sold.

If anyone thinks 194 mm is a long cigar, then think again: Cuban cigar roller Jose Castelar Cairo this year entered the world record books with a cigar no less than 45.38 meters long. Smoke that!

To define luxury from a buyer’s point of view is a complicated thing. For some, a $10,000 timepiece would satisfy their senses, while wealthier shoppers would have to pass the $100,000 mark to obtain the same satisfaction. From the viewpoint of watchmakers and retailers, luxury is certainly a lot easier to define. For them, a timepiece is characterized by the number of complications it has — the features beyond the normal display of time. These complications constitute the movement of the watch, which is its internal mechanism. So the more complications a watch has, the more complex is its movement, and thus the more luxurious it is.

Luxury watch brands are many. They include Breguet, Patek Philippe, A. Lange & Sohne, Vacheron Constantin, Cartier, Zenith, IWC, Jaeger LeCoultre, Harry Winston, and others. All these brands, and many more, are continuously coming up with innovative and unique complications designed to charm customers with the most captivating timepieces.

“Watch creations today are becoming more and more sophisticated with the latest innovative technology and movements,” says Patrick Normand, managing director of Cartier Middle East and South Asia.

Luxury watches with numerous complications are referred to as ‘Grandes Complications.’ These are hard to obtain as they are very complicated, man-made and take a few years to be manufactured. Thus they are the most expensive.

Among the world’s most complicated watches is the Patek Philippe Caliber 89 pocket watch. It was launched in 1989, on the company’s 150th birthday. The watch includes 33 complications, and is made of more than 1,728 components. The $6 million pocket watch took five years of research and development and four years of manufacturing. The most important features it includes are a thermometer, the date of Easter, a star chart and sidereal time. The most expensive pocket watch also lies in Patek Philippe’s portfolio. It is the Henry Grave Supercomplication, which was sold at Sotheby’s in New York City for $11 million.

As for wristwatches, the most expensive and at the same time the most complicated wristwatch is considered to be the Vacheron Constantin Tour de l’Ile. The $1.5 million piece includes 16 features and is made of 834 parts. These features include sunset time, perpetual calendar, second time zone and others. Only seven editions of the wristwatch were produced.

There remains a more expensive watch that is worth mentioning. The watch’s price does not lie in the complications, but in the precious stones included with it. The 201-carat Chopard is a watch bracelet that includes around 870 diamonds of every color, and costs $25 million.

Complicated watches are a big challenge for watch makers, and their complexity is reflected in their high price.

“That was a big challenge for us,” says Georges Bechara, the regional director of Zenith Middle East & North Africa, when talking about Zenith’s Defy Xtreme Tourbillon Zero-G which defies gravity — meaning it negates gravity’s effect on timekeeping — and took five years of research. Bechara further explains that the zero gravity complication was thought to be undeliverable, and too hard to manufacture.

“We are talking about a watch that has 744 components in the movement, all made and assembled by hand.”

Some watchmakers might be slowing down on their novelties since the financial crisis began, but others are still active in introducing new unique movements to the market. Cartier, for example, launched its fine watch-making collection, which features in-house movements created by the Cartier manufacturer in Switzerland.

“This reflects the house’s intense and ambitious research into mechanism, displaying the art of fine craftsmanship and savoir-faire,” says Normand.

Demand dropping off

Amid this global downturn, luxury shoppers, including watch enthusiasts, are less keen on spending and indulging themselves with palatial timepieces. Overall, the luxury sector faced a decline of 15 to 20 percent in the first half of the year, according to the ‘Luxury Goods Worldwide Market’ report published by Bain & Company, a global business consulting firm. According to their research,overall the watch and jewelry market declined 12 percent.

Worldwide, the drop in luxury sales is expected to be 10 percent for 2009, given that the market is expected to stabilize in the second half of the year. The report estimates the drop in the Americas to be around 15 percent, and 10 percent in Europe and Japan. These three markets account for 80 percent of the global sales. The Middle East and China are faring better, and might even witness a projected growth of 2 percent and 7 percent respectively, said the report.

More precisely in Dubai, Tony Jashanmal, a director of the Jashanmal Group of companies, told Reuters that sales of luxury products have dropped around 45 percent.

For luxury watches, Bechara from Zenith says “sales have dropped between 30 percent and 35 percent versus the first half of 2008 [in Dubai].”

At the other end of the region, Lebanon’s luxury market seems to be affected as well. Barkev Atamian, business manager at Ets. Hagop Atamian in Lebanon, said sales of high-end luxury watches in the country have come down by around 50 percent.

“People affected are the high society, and even if they have the money to buy, they are not in the mood,” says Atamian, explaining that 85 percent of his demand comes from Lebanese, and most of these are expatriates who are cutting their spending.

Zeina Kahwaji, general manager at Cadrans in Lebanon, retailers of luxury brands like IWC, A. Lange & Sohne and Patek Philippe, says that the drop is about a 20 to 30 percent decrease in year-to-date sales.

“But we have not entered the high season yet,” she says.

Kahwaji also says people are shifting to less expensive and less complicated watches.

“Instead of buying the most complicated watches that have 16 complications, they buy timepieces with one or two complications.”

The Bain & Company report echoes Kahwaji, stating that customers are reaching the lower category of luxury products. The report says they are more focused on the “intrinsic quality of materials and the durability of luxury items instead of on fashion content.”

Atamian disagrees however, saying: “Some of these people have more than 100 watches in their cases. They buy each time a limited edition or a watch that is very rare [comes out]. They want to have something special, so I think they will wait until the market changes.”

Pink slips between the gears

With sales orders decreasing and uncertainty reigning over the market, industry players say layoffs look likely among many of the large watch companies.

“There will be a wave of firing,” says Bechara. “All the watch companies overstaffed because the orders were abnormal.”

Bechara also explains that with orders down by 40 percent, a company cannot continue at the same pace as before. 

“In the big groups, no one waits,” says Bechara, when talking about the possibility of companies retaining their employees until markets recover.

Eric Vergnes, Middle East’s general manager at Tag Heuer, agrees.

“There are many companies that have to lay-off employees,” he says, while indicating his was not one of them. “We cannot hire anyone, but we will not fire anyone.”

Takes a lickin’, keeps on tickin’

The coming months will be tough for the luxury market, since these products will remain out of the purchasing basket of most customers until the crisis eases. But what has helped the watch market is that 2008 was a year of record growth, which has enabled these companies to invest heavily in the region, thus securing a better position in the market.

“We are not suffering that much because we have invested heavily in 2008 in a new boutique which has opened in Dubai Mall in November,” says Vergnes. “It is somehow compensating for less traffic in other parts of the city.”

Normand from Cartier has the same experience.

“Since our recent boutique openings in Dubai and Qatar, we have experienced good sales with a substantial amount of footfall in our stores.”

Market players seem to be optimistic for the summer, since the effects of the financial crisis might soften on the luxury market, especially in the Middle East where luxury still remains in demand.

“The second half of the year will be better. [Then] there is Ramadan. We will get out of it soon but in small steps,” says Bechara.

In mid-June, a Saudi princess made headlines for failing to pay tabs worth hundreds of thousands of dollars at luxury clothing shops in Paris. What does it say about the Middle East luxury clothing market when even a Saudi royal can’t pay the bills?

On the one hand, the region has obviously been affected by the economic crisis, with some, such as leading Dubai retailer Tony Jashanmal of the Jashanmal Group of Companies, reporting a 45 percent drop in luxury retail sales. By the same token, the Saudi princess’ story makes it seem like the days when the regions fashionistas  could shop till they droped may be comming to an end.

Over the past decade, the region’s luxury retailing has generally been concentrated in Beirut and the Gulf, particularly Dubai and Saudi Arabia, with Kuwait playing a fledgling role. Beirut has long been home to many of the region’s top couturiers, hosting a number of European flagship stores. In the past five years, the greater levels of wealth in Gulf Cooperation Council states has led to the availability of these same luxury brands across Dubai, Saudi Arabia and Kuwait, either through franchises or homegrown luxury department stores and boutiques, such as Boutique 1 and Villa Moda. In 2006, ACNielsen called the UAE the “most promising market” for luxury clothes and accessories.

But that was then…

This year, sales of luxury items are predicted to drop by 10 percent worldwide, according to a report by the consulting firm Bain & Company. For the MENA region, however, some forecasts remain relatively strong, with the Bahrain-based investment bank Investcorp predicting a 10 percent rise in the luxury sector, an optimistic outlook compared with Bain & Company’s projection of a 2 percent rise for the region this year. Investcorp further estimated that the MENA’s share of the $300 billion worldwide luxury market would rise by 5 percent, thanks to continuing oil and gas wealth and a young, affluent demographic in the GCC.

The industry’s big names, however, have suffered greatly in developed markets where their revenue bases have existed for decades. Now, emerging markets like the MENA are taking center stage and drawing the attention of the industry’s biggest names.

“We have a crisis in the US, especially in the department store [sector]. But with the UAE it’s not a crisis. It’s our highest growth in the world,” Philippe Fortunato, managing director of the Fendi Group, told Gulf News in June upon his arrival in the UAE to open Fendi’s third store.

Fortunato now has 11 Fendi stories in the GCC, and is planning to open three new Fendi stores in Morocco by the end of next year.

Optimists can also point to the region’s continuing fashion exhibitions to prove that the affinity for high-end fashion is still present. Seamus Flanagan, commercial director at Mecom Exhibitions, the company that organizes Fashion Arabia and the Shoe and Leather Fair Middle East exhibitions, said that because European high-end retailers have been “hit hard” by the global downturn, and they are increasingly looking towards the “UAE and the GCC because of the regions insatiable appetite for bling and high-end fashion.”

That said, the overall picture remains spotty. While newspapers have relayed lurid details of Dubai’s deserted shopping malls and parking lots full of abandoned cars, retailers in Beirut insist they’re doing as well as ever, thanks in large part to the relative political stability the country is experiencing. Flanagan explained that even though high-end retailers are focusing more on the region because they are looking “for more opportunities than their own markets,” they are still being “realistic and treating the situation with caution.”

Joseph Moussa, the marketing manager for Italian luxury goods brand Salvatore Ferragamo in downtown Beirut, claims that this year has been even better than last year. Then again, that’s hardly a gauge, because Beirut’s downtown was ground zero for the economic woes of the last three years of political turmoil in Lebanon.

“It’s difficult to have an idea of how the crisis is affecting us because before this year, the shop was pretty much closed because of the sit-in. The army was closing the street every day. So now it is doing better than before,” he told Executive.

Moussa estimated that sales have increased by 30 percent year-on-year, with the holiday season proving particularly lucrative.

“The holiday season always does very well in Lebanon. I’d say 40 percent of our customers came during the third and fourth quarter,” he said, adding that these clients were mostly Lebanese, rather than foreign tourists.

Accessories, rather than clothing, were the top sellers, he said. The fashion house is noted for its high-quality leather goods such as shoes and wallets.

“Accessories work better than fashion, because fashion is too expensive for now. We’ll see if that changes when foreign customer come,” he said, referring to the large number of tourists mostly from the Gulf. “Handbags and leather goods are products that everyone can buy and offer as gift items,” he noted.

Still, he acknowledges that the crisis might eventually start to jab Lebanon, and if the summer is slow, he has planned in advance how to cope, by receiving his stock at the earliest date possible, and choosing to buy less stock.

“With prestige brands, you have to get the goods very early, so you can start the discounts very early. I also negotiate with the supplier to buy less,” he said.

Nora Yagmur, the general manager at Plum concept store in Beirut’s central business district, cites a “natural growth” trend in sales that she attributes to the political stability.

She contrasts Beirut’s market with Dubai’s, noting that while “Dubai has been affected by the economic crisis, growth in Beirut was not as fast as growth in Dubai, which depended on the property business.”

Therefore, says Yagmur, her local customers are still going strong.

“We haven’t seen any negative effects due to the crisis,” she concludes.

In order to compete with other markets like Dubai and in Europe, they are offering special services to their VIP customers.

“We offer something special” for these clients, says Yagmur. “Because today they are traveling around as well, and are part of lists elsewhere that are offering discounts, like in Europe where they offer 40 to 50 percent discounts.”

“Dubai has been desperate,” she continues. “We did not take that direction. Dubai is flooded with brands — some brands are in almost all the luxury malls,” she said, referring to its saturated market, another factor that analysts have pointed to as a factor in its dismal retail performance.

By contrast, she said, “We are a concept store, and we keep changing our brand portfolio.”

The small size of their operation and close contact with their client base has enabled them to be responsive in a way that brands that rely on other distribution channels, such as third-party resellers or wholesalers, cannot.

In this respect, those at the highest end of the high-end clothing industry have a distinct advantage. Couturiers like the Lebanese Walid Atallah can make only what they know they will sell, and are rarely left with excess stock.

According to Atallah, he has not had to lower his prices either, which range from $19,000 to $1.25 million for his dresses.

“They don’t want me to make lower prices… [the client] doesn’t want another woman who has less money to wear it,” he told an audience at the Reuters Global Luxury Summit held in early June in Dubai.

He and other couturiers, who generally work out of private ateliers, are also spared the problem of competing for space in Dubai’s crowded malls. Retail rents have soared in the past few years, but developers have been less inclined to reduce rents than their colleagues in the residential property market. Instead, they must respond to the individual whims of their clientele, which Atallah said in his case means less jewelry, or smaller jewelry sets.

“In the beginning my clients used to complain to me about how much money their husbands have lost during the crisis… but now if ladies don’t wear beautiful dresses they aren’t ladies,” he said at the summit.

Sounds like a justification the Saudi princess could have mumbled to herself, as she bought nearly $100,000 worth of lingerie.

Luxury knows no limits at the Burj al Arab, the world’s only self-proclaimed “seven-star” hotel. The sail-shaped, suites-only hotel recently added four Rolls Royce Phantoms to its existing fleet of six, in order to pick up its high-end customers in style. With a price tag of $27,000 per night for its Royal Suite, the Burj al Arab is the flagship of the prestigious Jumeirah Group, which currently manages 11 hotels in Dubai, London and New York, while a further 14 outlets are under construction. By 2013 the group aims to have a portfolio of 30 luxury hotels.

Speaking at the Reuters Global Luxury Summit in Dubai, Jumeirah Chief Executive Officer Gerald Lawless played down the ripple effect of the global financial crisis, stating that visitors to the top-end hotel market “did not trade down.” Still, he admitted that the company was forced to cut jobs during the past nine months. It also froze recruiting — a measure the company said will only be reconsidered at the end of the year.

Dubai suffered a major economic downturn that has not left the hospitality sector unharmed. During the first quarter of 2009, the number of hotel nights spent in Dubai decreased by 16 percent to 3.87 million, according to the Department of Tourism and Commerce Marketing (DTCM), even though the total number of guests grew by 3.7 percent to 1.62 million. As visitors shortened their stays and hotels reduced room rates to stay competitive, revenues recorded a 15 percent fall to $854.9 million.

Tourists are traveling and spending less, while companies and multinationals have been forced to tighten their belts, sending their employees for shorter periods abroad and putting them up at less luxurious hotels.

Less cash doesn’t travel

According to the DTCM, three of Dubai’s key tourist markets (the United Kingdom, European Union and Russia) are in recession, which has led to reduced consumer and leisure spending. On a positive note, American tourists coming to the United Arab Emirates contributed $733 million to the local economy in 2008, up 85 percent when compared to the previous year. Still, average occupancy rates in Dubai hotels fell to 73 percent in the first quarter from almost 90 percent last year.

According to TRI Hospitality Consulting, January 2009 saw a 33 percent reduction in revenue per available room, and February a reduction of almost 40 percent. Occupancy rates in March improved, especially in Dubai’s beach hotels, yet seem to have come at the expense of room rates, as attractive offers were made to lure tour groups.

Lawless confirmed that key beach hotels saw occupancy rates of above 90 percent, yet conceded that room rates in Dubai had fallen by an average of up to 25 percent in the first quarter of 2009. He also said the Jumeirah chain had introduced a series of promotions.

Some positive signs were recorded in May, however, as passenger at the Dubai International Airport increased by 7 percent compared to the same period last year. Some 3.2 million people arrived, bringing the 2009 total to 15.9 million as of June 1. Dubai airport has attracted five new airlines in 2009, bringing the total to 130, which fly to more than 200 destinations.

Although the picture differs greatly by country, the global economic downturn has been less severe in the rest of the region. The same is true for the hospitality sector. The Syrian capital’s premier destination, the Four Seasons Hotel, hasn’t seen the extreme swing in rates or occupancy that has taken place in the Gulf. In fact, the hotel’s Director of Marketing and Sales, Julian Crane, expects a relatively strong summer ahead.

“The market in 2009 has experienced some decline in occupancy rates compared to 2008,” Crane said. “But it needs to be said that 2008 was an exceptional year for the hospitality industry here.”

In 2008, tourist arrivals in Syria increased by 15 percent to reach 5.9 million, some 56 percent of whom were Arabs, according to the Syrian Ministry of Tourism. Relatively, the number of Arab visitors actually fell by 13 percent. The uptick was the result of some 1.1 million non-Arabs, mainly Europeans and Iranians, visiting Syria in 2008.

With a daily rate of $366 for a double room and almost $9,000 for the Royal Suite, the Four Seasons is currently the business address of choice in Damascus. Yet competition is on the way with the announced arrival of the Kempinski hotel chain in the Syrian capital.

But the big luxury hotel chains are facing competition from a batch of recent boutique hotels opening in Damascus. Hotels like the Talisman and Beit Mamlouka in the capital’s old city are small but exquisitely rehabilitated old Damascene homes. Although the boutique suites may be more affordable, the rooms are booked for months in advance. Both hotels double room rates start at around $180, and suites are available in the $330 range.

Lebanon’s tourist arrivals in the first quarter of 2009 reached a record of around 434,000 which represents an increase of 57 percent compared to the same period last year. Summer traditionally is high-season, with lots of Lebanese expats returning, as well as Emirati, Saudi and Kuwaiti tourists. 

“Summer is peak season for tourism in Lebanon,” said Michelle Mallat Rishani, public relations and communication director at the landmark InterContinental Phoenicia hotel in Beirut. “Our main source market remains the GCC, and so far reservations have been very positive.” 

When Executive called in late June, the cheapest room available at the InterContinental was the $430 per night Phoenician class room.  The $15,000 per night Grand Royal suite was occupied, though. Prospective guests with deep pockets also have the option of the $9,000 per night Royal suite or the $5,000 Presidential suite.  

Mallat is confident business will continue to boom this summer, and that arrivals will be boosted by the fact that Lebanon has become a more accessible and convenient destination with more major carriers offering routes to the country, as well as the recent addition of low cost airlines such as flydubai and Jazeera Airways.

With the Lebanese elections passing without major incident, Lebanon’s Ministry of Tourism believes the country is to receive two million visitors in 2009, which would set a new record and could contribute some $2.5 billion to the country’s economy.

Luxury vehicles are an industry of pure prestige, and the Middle East is far from lacking in demand for opulent car brands. While numerous reports say that luxury sales in Dubai are down around 45 percent in the first two quarters of 2009 compared to the same time last year, most car manufacturers are surprisingly optimistic.

Since the financial crisis began, prices for luxury automobiles have not fallen. Instead, leading extravagant car brands have tailor-made their strategies, altering the supply to demand equation by offering fewer cars than they did before, while not lowering the asking price for each model.

The Gulf is highly dependent on expatriate spending, but the financial crisis has lowered their spending power, especially in the United Arab Emirates. But there is still much growth potential that stems from demand among the Gulf population. This situation leaves the luxury car market room to roam in the region.

Levant vs. Gulf

In Lebanon, a major speedbump for the deluxe car industry is high taxes. Nabil Bazerji, managing director of G.A. Bazerji & Sons Co., the country’s Maserati dealership, says the accumulation of taxes on luxury vehicles is outlandish.

First, consumers in Lebanon must pay a customs duties, which is 5 percent of the cost of the car. Next, customers spend another 45 percent of the car’s price tag on the ‘consumer tax.’ Then, buyers pay a value added tax of 10 percent of the car’s selling price, as well as registration taxes amounting to 7 percent of the product’s worth.

“When you pay 10 percent VAT, you’re paying it on the built-up costs, which includes taxes already,” says Bazerji. “When you pay the registration tax, you pay it on top of the selling price, including VAT. So we pay tax, on top of tax, on top of tax, on top of tax!”

Wissam Trad, director at Saad & Trad, Lebanon’s distributor for international luxury leaders Lamborghini, Jaguar, Bentley and Rolls Royce, agrees that the luxury vehicle taxes in Lebanon are absurd.

“This is too high and discouraging to potential buyers. Should these taxes be revised, I am sure sales would be even higher,” he says.

Consumers in Dubai get a much better tax deal. Assaad Raphael, chairman and general manager at Porsche Center Lebanon illustrates the drastic taxation contrasts between Lebanon and the GCC.

“[In the Gulf], there is a big tax incentive because the cars are taxed only 5 percent, which makes it the cheapest place in the world to buy a car,” Raphael says.

This benefit makes buying a luxury vehicle more reasonable in the GCC than in a country like Lebanon, where the taxes add up to more than 60 percent of the car’s total value.

Still, sales in Dubai have gone down rather noticeably. 

“They’re dumping prices and it’s another issue of flooding the Lebanese market and other markets with the overstock and excess products they have from their market,” Bazerji says. “This is a serious problem. We are losing opportunities and sales, especially since a lot of potential customers are taking advantage of registering their cars in the Gulf to avoid paying [the high taxes they would face in Lebanon].”

A question of sales

In times such as these, who would buy a brand new, luxurious, exclusive car? It seems the current economic circumstances have mostly affected the middle class.

“High net worth people are still today’s spenders,” says Raphael.

Frank Bernthaler, director of sales and marketing at Mercedes-Benz Middle East and Levant, believes consumers looking to purchase luxury vehicles may put a bit more thought into what they’re buying now than before the financial crisis.

In Lebanon, luxury vehicles have fared well amidst the global chaos.

“We are enjoying our best year ever in terms of Bentley and Lamborghini sales, and second best with Jaguar,” notes Trad. For Bentley, the Middle East represents 12 percent of the brand’s sales worldwide.

Maserati in Lebanon has also performed remarkably well in 2009.

“Sales in the first quarter of 2009 have been better than that of 2008,” Bazerji says. The brand’s opulent Quattroporte, which was launched in 2005, is the company’s bestseller.

Sales of lavish vehicles have, without a doubt, softened in the Gulf. Despite scarce liquidity and credit, GCC sales are expected to pick up as the crisis bottoms out.

Compared to the first quarter of 2008, Audi reported a 16 percent drop in sales in the first quarter of this year. A spokesman for the company says they remain optimistic.

“It is a tough time for the whole industry, but our outlook is very positive,” he says.

BMW sales have also dipped this year. Sales fell by 9 percent overall for the company. But the brand’s sales in Lebanon and Syria grew by more than 100 percent, while in Saudi Arabia they accelerated by 15 percent.

According to Stathis I. Stathis, general manager at AGMC in Dubai — the sole importer of BMW in Dubai — this year will present the industry with many obstacles, but hopes remain high.

“We anticipate 2009 to be challenging, but consumer demand in the luxury segment still remains healthy,” he says. “We have several new products planned for the year, so we are optimistic that 2009 will be another good year.”

Bernthaler of Mercedes notes that it hasn’t been all bad for the Middle East luxury car industry.

“Looking at the market in the Middle East and the Levant, we’ve seen year-on-year sales increase. Our most iconic vehicle, the evergreen G-Class SUV, grew by 139 percent in May 2009 compared to the same time last year.”

Candidly, Raphael admits that the global financial crisis has taken a toll on Porsche’s transactions.

“Of course, the economic crisis has had a negative effect on our sales, that’s for sure,” he admits.

Thankfully, Porsche’s production strategy has allowed them to avoid major fallouts.

The engine of strategy

“We forecast our deliveries from the factory one year in advance,” Raphael says. “So by the time the crisis happened in September 2008, the factory had time to react. The strategy of Porsche factory was to produce less cars, and the reason is that we’d rather sell one car less than discount our cars.”

Thus, by producing less the company itself modified the supply-to-demand equation in order to not feel the burn of the crisis.

Trad’s company also uses a similar approach to working around the financial crisis.

“In terms of adjustment, we are more careful with the way we order and stock cars compared to last year,” he says.

Regardless, most luxurious car brands only produce a small amount of each model in order to keep the exclusivity of each design. The crème de la crème of premium manufacturers remain confident that their grandiose brand images will help sustain their sales and consumer loyalty.

Sanguine about his dealership’s brands, Trad sees opportunities.

“We are confident that our portfolio of brands[Lamborghini, Jaguar, Bentley and Rolls Royce] are very strong and have a bright future,” he says. “For this reason, we are investing in new showrooms.”

Speeding past crisis

The epitome of luxury is the $1.4 million Maybach Landaulet. The 2009 limited edition model allows passengers in the rear to relax with the top down while the driver remains separated and covered. Maybach has produced only 20 units of the Landaulet for the entire global market, and the Middle East was the first to receive one of these vehicles.

Mercedes and Maybach are some of the top-selling brands in the Middle East. According to Bernthaler, one in every 10 Mercedes S-Class vehicles sold around the world is delivered to the Middle East. Porsche is also amongst the region’s favorite list.

“Porsche has had strong growth in the Middle East in the past six years,” says Raphael. “We have grown from 2,500 cars seven years ago to 8,000 cars this year.”

Compared to last year, 2009 sales have been rather exceptional and are even higher than 2007, according to Raphael. In the Middle East, the average age of the Porsche buyer is around 35 years old, whereas in Europe the profile is around 45.

The new Porsche 2009 Panamera is the brand’s luxurious new four-door sedan. This model is expected to alter the performance of the posh sedan market, as critics say it will create high competition with Maserati’s Quattroporte, a more expensive four-door sports car.

Although car sales in many places have dropped this year, most upscale players in the luxury market segment remain optimistic. With manufacturers such as Maybach rolling out new models like the Landaulet in 2009, who is buying? The richest of the rich, of course. For the rest of us, we’ll keep on dreaming.