How to Penetrate the Luxury Market by Ken Bernhardt Regents' Professor of Marketing and Assistant Dean for Corporate Relations  Robinson College of Business, Georgia State University Atlanta Business Chronicle - July 27, 2007 My last column discussed my observations about marketing in rural Honduras, one of the poorest parts of the world. This column will report on my experiences in the United Arab Emirates (UAE), where I was teaching in the United Arab Emirates University MBA program during May and June. Its 2 major cities, Abu Dhabi and Dubai, have been featured in major stories recently in Fortune, New York Times, World Traveler, and National Geographic, among many others. Fortune called the capital of the UAE, Abu Dhabi, the richest city in the world, stating that its 420,000 nationals (28 percent of Abu Dhabi's 1.5 million total population) are worth about $17 million apiece. An indication of this wealth is that in the UAE, BMW sells more 7 series cars than 5 series, and more 5 series ones than 3 series, the only country in the world where that is the case. The extensive wealth in the UAE gave me the opportunity to study how a number of companies there have successfully targeted the luxury market. As examples, several hotels and airlines, many developers, and a number of high end retailers have done well in this highly affluent market. So what do they do to successfully penetrate this market? Let's look at hotels first. Dubai has the Burj Al Arab (burj-al-arab.com), the often photographed waterfront hotel shaped like a sail with a helipad where Federer and Nadal played tennis. It is the world's tallest all-suite hotel, and rooms cost from $1,000 to $15,000 per night. Institutional Investor magazine calls it the "best hotel in the world." The Emirates Palace Hotel in Abu Dhabi cost $3 billion to build and rooms cost about the same as at the Burj. Sixteen of the suites in the Emirates Palace are each 6,800 square feet. There are over 1000 Swarovski crystal chandeliers. Both of these hotels are true 7 star hotels providing 7 star amenities and service. At the Burj Al Arab, guests have the use of a chauffer driven Rolls Royce during their stay and the Emirates Palace has 5 employees per room, enabling significant personalized service. Other hotels are catching on. For example, Hyatt has built a Park Hyatt (its high end product) in Dubai with eight spa-themed rooms with spa treatment areas in the room. Another industry that has targeted the local affluent market is the UAE airline industry. The Dubai-based Emirates Air has been profitable for 19 of its 20 years by concentrating on the needs of the affluent consumers in the region. It buys the highest quality interiors for its virtually all-new aircraft, including first class seats that feature flat beds with built-in massage and personal mini-bars. Its in-flight entertainment includes 600 channels, email connections, and telephones at each seat which allow in-flight chats with other passengers. As the head of an aerospace private equity firm stated in the New York Times, "they are making an obvious distinction with American carriers that are nickle-and-diming the passengers." The lesser-known airline, Etihad Airways, is the national airline of the UAE. Founded in 2003, it has grown dramatically with 27 new planes serving 45 cities and plans to expand significantly in the next 5 years. They welcome everyone who flies with them as their "guest," not as a passenger. For those traveling between the UAE and New York in "Diamond" or "Pearl" class, Etihad has launched a complimentary chauffeur service to and from the JFK and Abu Dhabi airports, anywhere within a 70-mile radius. They are changing the rules of hospitality in aviation including a "mouth-watering in-flight dining experience." To attract the super-affluent tourist, the UAE is building the products that this market is seeking. If you Google Dubai and "world's largest" you get listings for world's largest hotel, shopping mall (twice as big as Mall of America), airport (under construction at a cost of $33 billion), theme park, office tower (when done in 2009, it will be 800 meters tall, almost twice as big as the Sears Tower in Chicago, the tallest in the U.S.), and indoor ski park (Ski Dubai is 25 stories high and has 5 runs 400 meters long - - see skidxb.com). In Abu Dhabi, on Saadiyat Island, they are building the Louve Abu Dhabi at a cost of $1.5 billion, together with a Frank Gehry designed Guggenheim Museum to out do the one he designed in Bilbao, Spain, and a performing arts center that will have a 2000 seat theatre, an 800 seat theatre, a 400 seat theatre, a 1200 seat opera house, and a state of the art symphony hall (which will undoubtedly make Sydney's look "ordinary"). What's the lesson here? For this market, expectations are incredibly high, and if you can deliver, this market will pay the price. On the other hand, if you are going to charge a super-premium price, you must (over)deliver what the market expects. Sample advertising copy I noticed included "peerless opulence awaits the elite few," "the most exclusive penthouses in the world," "a truly extraordinary level of service from specially trained staff," "newly designed to exceed guest expectations," and "attentive to every detail." Those that deliver on the promise will win and those that under-deliver will lose. This market knows the difference. The resources and needs may be different in the U.S. but the strategy of understanding the target market's needs and satisfying those needs at a price they are willing to pay is still a winning strategy.