Fire Breathers Meet Fancy Watches at LVMH Show in Dubai

(Bloomberg Businessweek) -- LVMH’s watch brands are flexing their muscles. Bulgari, TAG Heuer, Hublot, and Zenith—the four watchmakers owned by French conglomerate Louis Vuitton Moët Hennessy SA—gathered in Dubai on Jan. 13-15 for the first LVMH Watch Week, a posh junket put on to showcase each brand’s new wares for 2020. The Dubai shindig was a throwback to the devil-may-care luxury of the 1980s and ’90s, when these brands based much of their aspirational image on over-the-top experiences that made it into the gossip pages of glossy magazines.

About 200 journalists and 150 customers were wined and dined in the shadow of the glittering Burj Khalifa and invited to trek to the desert at night to watch fire dancers. In between they looked at timepieces including the diamond-studded $100,000 Hublot Big Bang Integral and Bulgari’s $220,000 Divas’ Dream Finissima Minute Repeater.

The event also served to demonstrate that LVMH’s watch companies can operate and compete as a group, rivaling the powerhouse squads from Richemont (which includes Cartier, Piaget, IWC Schaffhausen, and Panerai) and Swatch (Omega, Breguet, Longines, and Tissot). “We want to show that the LVMH watch division can be strong,” said Ricardo Guadalupe, the chief executive officer of Hublot. Bank Vontobel AG estimates the 40-year-old brand reached €550 million ($610 million) in revenue in 2018, putting it slightly ahead of Richemont’s Jaeger-LeCoultre (€535 million) and within range of Swatch’s Harry Winston (€614 million).

LVMH Watch Week is one of a couple of events that have broken off from the Baselworld watch expo, which normally takes place in March and which for many years served as the primary venue to introduce elite timepieces in Switzerland. But like automotive trade shows worldwide, the country’s fairs have endured an exodus of big-name participants as mobile apps such as Instagram and WeChat offer a more direct way to connect with consumers at a fraction of the cost.

Most notably, Swatch Group AG started hosting retailers at a more private event for its brands in Zurich last year. In response, Baselworld’s organizers teamed up with Geneva’s exclusive Salon International de la Haute Horlogerie, which primarily hosts Richemont brands and is usually in January. SIHH was renamed Watches & Wonders, and both fairs moved to adjoining weeks starting in late April. For companies planning their 2020 shipments, April was too late to start introducing products to the market, said Stephane Bianchi, the CEO of TAG Heuer, who oversees LVMH’s watchmaking group.

LVMH hasn’t decided whether it will participate in Baselworld after 2020, but the appeal of a roving LVMH Watch Week is strong. Baselworld is “outrageously expensive,” said Jean-Christophe Babin, CEO of Bulgari, as he looked across a sunny lawn in Dubai at the crowd sipping Champagne. (The brand saw an estimated €2.37 billion in revenue in 2018.)

Flying hundreds of retailers and journalists (as always, Bloomberg Businessweek paid its own way) to the gleaming Bulgari Resort Dubai in the United Arab Emirates turned out to be much cheaper for LVMH than building an elaborate booth at Baselworld. “With six hotels—and soon 10 in the world—Bulgari can host in the U.S. to Russia to China to Bali for the next decade,” Babin said.

Although certain markets are stronger than others for the various brands (Japan, China, and the U.S. are going gangbusters for most, and Southeast Asia for others), “differences between one market and the other are getting thinner and thinner,” said Zenith CEO Julien Tornare. “I think we all became kind of global clients, global customers.”

One dark spot on that luxurious globe is the environment of unrest in Hong Kong. Like Tokyo, the city had been a hub of shopping for travelers from mainland China and other Asian countries, making it a key market for the Swiss watch industry. It also typically offered higher margins because of lower taxes. “Hong Kong clearly is affecting the whole watch industry and luxury industry,” Tornare said. “For watches, the average is around 15% to 18% of the business for some brands. So we need to work on how we compensate.” Companies are optimistic, he said, because “some cities in China became unbelievable shopping destinations.”

As much as they talked about their corporate unity, the CEOs in Dubai didn’t want to discuss the LVMH acquisition of Tiffany & Co. for $16 billion, which was announced in November and is expected to go through in June. “There is no competition among us” in the LVMH family, TAG Heuer’s Bianchi said. “Of course, there is major competition with the others.”

To contact the editor responsible for this story: James Gaddy at jgaddy@bloomberg.net, Justin Ocean

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