INTERVIEW: Sotheby’s boss looks east

Tad Smith, Sotheby's boss, believes Saudi Arabia is an mportant supplier, as well as buyer, of objects. (Illustration: Luis Grañena)
Updated 24 March 2019
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INTERVIEW: Sotheby’s boss looks east

HOUSTON: When Tad Smith and I spoke early last week, we had one overriding thing in common: jet lag.
I was one day into an ordeal that, on past experience of West-East long-haul air travel, would last at least a week.
The 53-year-old chief executive officer of Sotheby’s, the international auction house, was midway through his torment, with the major part of a round-the-world tour of the firm’s main offices still ahead of him. “It’s a crazy week,” he said. I fuzzily concurred.
Smith’s week had begun by ringing the bell at the New York Stock Exchange, where Sotheby’s is the oldest listed company, to celebrate its 275th anniversary. Sotheby’s is older than the US, and older still than the UK, which it predates by 57 years. That is some legacy.
The thrust of recent strategy, however, has been toward the East, the next stop on Smith’s world tour. Just a few weeks ago, the firm reported better-than-expected earnings figures for 2018, boosted by $1 billion in sales from its Hong Kong hub — the best performance since it started in Asia 45 years ago.
It was achieved against some tricky macro-economic headwinds. “In the middle of the year the Chinese stock market softened a bit, and throughout the year expectation for Chinese growth softened,” Smith said.
There was also the growing threat throughout the year of a looming trade war between the US and China, and the risk that Sotheby’s might fall victim to anti-American sentiment on the part of Chinese buyers. So do Chinese customers perceive Sotheby’s as an American organization?
“I think they perceive us as a global company based in the US. We have literally centuries of British roots, so in so far as they think of it at all they also might think we’re in Britain,” he said.

We have a huge demand from our clients to buy modern Islamic and modern contemporary Arabic art.

Tad Smith


Of course, Sotheby’s is offering Asia something more refined than soya beans or oil-rig equipment, which have become bargaining pieces in the trade war negotiations. Old masters, luxury jewelry and watches, and fine wines — $100 million worth of it last year — are its stock-in-trade. Up-market real estate and vintage motor cars are handled through franchise operations that use the Sotheby’s brand, or through partnerships.
Smith explained the dynamic of the luxury auction business. “We’re encouraging people to provide us things that we then sell. We have both the need to get supply in, so we can fill our sales rooms, and the need to get demand in, so we can sell our items,” he said.
Several factors determine that balance between supply and demand, such as the number of estates that become available, financial pressures on asset-rich people, and — sometimes — family feuds. But the most important factor, “the crucial marginal growth driver,” he said, was “discretion.”
“If people are feeling their things will sell at acceptable prices, they’re more likely to sell and our sales will get larger. Anything that affects the psychology and dampens or conversely strengthens a prospective seller’s confidence that something will sell, will affect our business. If people don’t think trade wars or anything like that will affect them, they will sell,” he said.
Smith was in Dubai, at the firm’s offices in the swanky art hub, the Gate Village in the financial center, to spread the 275th birthday cheer and to prepare for an auction of rare watches this week. A previous sale of precious time-pieces attracted $2.6 million of sales.
“The Middle East is a very important part of what we do. When I came in four years ago as CEO we began the effort to invest in a permanent office in the UAE. We thought that having a very senior and more invested presence here would be important for our business, and we’re thrilled with the result. So, yes, the Middle East, all the way across the GCC countries, is very important for us,” he explained.
Saudi Arabia will continue to be an important part of that strategy, both in terms of supplying works for sale and as a plentiful source of buyers.
“Saudi Arabia has a rich archaeological, architectural and cultural history, and — with the establishment of MISK and the Al-Ula project — it is clear there is a keen focus, both on preserving that history, and on developing the artistic scene there. This kind of focus naturally means there is an interest in the range of works and services, including educational initiatives, that we offer,” he said.

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BIO

BORN

1966, Chapel Hill, North Carolina

EDUCATION

•Princeton University, BA

•Harvard Business School, MBA

CAREER

•McKinsey & Co — Adviser

•BMG Entertainment — Corporate executive

•Starwood Hotels and Resorts — Internet executive

•Reed Business Information (Part of Reed Elsevier) — CEO

•Cablevision Systems Corporation — President, Local Media

•Madison Square Garden Company — President and CEO

•Sotheby’s — CEO

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Are customers in the Middle East vendors or purchasers? “On balance, the Middle East is a significant provider of great objects to sell, but the most attractive portion of it for us is their buying. Mideast is a net purchaser, and that reflects their obvious wealth and financial importance,” he said.
What are people in the region buying? “Well, how about a spectacular Rembrandt for the Louvre in Abu Dhabi,” he said, in reference to the work “Study of the head and clasped hands of a young man as Christ in prayer” by the Dutch master bought at Sotheby’s London for £10 million ($13 million) last year and recently unveiled at the UAE capital’s new center of culture.
“They are buying beautiful art from all parts of the world. They’re buying amazing, dazzling watches, they’re buying incredible jewelry, with a really robust aesthetic and great taste. People with better taste than mine say they have great taste,” Smith said.
The region also increasingly supplies the rest of the Sotheby’s network with art works from its rich cultural tradition. “We have a huge demand from our clients to buy modern Islamic and modern contemporary Arabic and Iranian art. In the past four years we sold over $125 million worth of Islamic and Middle Eastern art to clients from all over the world. That’s what’s interesting about the Middle East sales — it attracts clients globally. It’s a big market for us,” he said.
It is also a rapidly changing global market place. The traditional image of an art sales room — a posh man with a gavel declaiming incomprehensibly in a smoke-filled baroque salon — is all in the past. “For one thing, it’s not necessarily a man, it can often be a woman,” said Smith, before outlining the rapid technological changes overtaking the art auctions business in the digital age.
“Last year 37 percent of things sold worldwide were sold online. It was an important year. More lots we’re purchased online than by any other method, either in the room or on the phone.
It was the first time in the company’s nearly three centuries of history. It’s grown gangbusters,” he said.
Sotheby’s has already tested a new time-based bidding system, along the same principle as used by eBay, which could soon lead to an all-electronic auction system. “That is a gigantic leap forward where you have electronic buying and electronic consignments. You can take your phone, fill an electronic form on our website and you can consign things that way too. Electronic consignments and sales will be a rapidly growing proportion of our business in the coming years,” he said.
Smith’s background is in keeping with the task of introducing 21st-century techniques to a business with 18th-century origins. A McKinsey alumni, he was an executive with various companies in the entertainment, leisure and information businesses, before joining the Madison Square Garden Company, the group that runs the iconic New York entertainment venue and other sports and leisure operations.
As with the rest of the companies that Smith has worked for, Sotheby’s is entering the digital age in a hurry. “Each of them has a certain creative part of the business that is attached to another part that is a selling organization and the support services for that, and crucially all of them are increasingly dependent on digital marketing technologies,” he said, like a true digital executive.
But the job with Sotheby’s appears to mean more to him than just another bit of Internet-age experimentation. “This really isn’t work, it’s a gift to be in an organization with these talented people and these beautiful objects and the ability constantly to learn. For the past four years I’ve had the opportunity to learn more about art and collectibles and jewelry and watches, and to see all parts of the world,” he said.
The only frustration of the role? He thought for a brief moment. “Jet lag,” he answered.


Saudi Cabinet approves new law to regulate petroleum, petchem sector

Updated 07 January 2025
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Saudi Cabinet approves new law to regulate petroleum, petchem sector

RIYADH: Saudi Arabia’s Cabinet has approved a new Petroleum and Petrochemical Law to ensure a reliable and secure supply of products within the Kingdom.

The law, which was approved on Jan. 7, is designed to optimize the use of raw materials in the sector and support the localization of the value chain, according to a report by the Saudi Press Agency.

The new legislation will replace the existing Petroleum Products Trade Law and is expected to achieve several key objectives, including regulating petroleum and petrochemical operations. It aims to accelerate the sector’s growth, foster economic development, and encourage increased investment in the industry.

Upon the law’s approval, Saudi Arabia’s Minister of Energy Prince Abdulaziz bin Salman expressed gratitude to the Cabinet, emphasizing that the law would help establish a robust legislative framework for the Kingdom’s energy sector. He added that the new directive would facilitate the optimal use of petroleum and petrochemical resources.

The law will regulate the use, sale, purchase, and transportation of petrochemical products, as well as oversee the operation of distribution stations and petrochemical facilities, the Saudi Press Agency report noted.

In addition to the Petroleum and Petrochemical Law, the Cabinet approved several other agreements on Jan. 7. These include a memorandum of understanding for cooperation between Saudi Arabia’s Ministry of Justice and Singapore’s Ministry of Law, an MoU on health cooperation with Morocco’s Ministry of Health and Social Protection, and an MoU to strengthen digital government collaboration between Saudi Arabia’s Digital Government Authority and Qatar’s Ministry of Communications and Information Technology.

The Cabinet also endorsed an air services agreement between Saudi Arabia and Eswatini, a Southern African nation.

Furthermore, the Cabinet reviewed ongoing development programs and projects aimed at diversifying the Kingdom’s economy, exploring new revenue streams, and maximizing the use of available resources.


EV maker Lucid becomes first global automotive manufacturing company to join ‘Made in Saudi’ program

Updated 07 January 2025
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EV maker Lucid becomes first global automotive manufacturing company to join ‘Made in Saudi’ program

  • Aims to increase industrial sector’s contribution to GDP to at least 20% by 2025
  • Move seeks to attract additional investments, enhance non-oil exports, and create sustainable job opportunities

RIYADH: Electric vehicle manufacturer Lucid Motors has become the first global automotive company to join the Kingdom’s “Made in Saudi” program as the country continues strengthening its industrial capabilities. 

The milestone grants Lucid the right to use the “Saudi Made” label on its products, symbolizing the nation’s focus on quality and innovation. 

The strategy aims to increase the industrial sector’s contribution to the gross domestic product to at least 20 percent by 2025, tripling the current industrial base. 

It also seeks to attract additional investments, enhance non-oil exports, and create sustainable job opportunities, aligning with Vision 2030’s economic diversification goal.

“This is a step that represents a strong push to enhance the image of the national industry and attract investments and global companies, which consolidates the Kingdom’s position as a global center for innovative manufacturing,” Minister of Industry and Mineral Resources Bandar Alkhorayef said in a post on his X account. 

In a separate statement, the minister said that Lucid Motors’ inclusion in the program underscores Saudi Arabia’s strategic transformation toward creating a fully integrated electric vehicle manufacturing ecosystem. 

The minister added that this initiative aligns with the objectives of the National Industrial Strategy, which focuses on empowering promising sectors and attracting high-value investments in advanced industries.

Lucid’s participation in the program follows the launch of its first international manufacturing plant in Saudi Arabia in Sept. 2023. 

Located in King Abdullah Economic City, the facility is the Kingdom’s first-ever car manufacturing plant and represents a key milestone in its efforts to build a domestic automotive industry. 

The facility can currently assemble 5,000 Lucid vehicles annually during its first phase. Once fully operational, the complete manufacturing plant, including the assembly line, is expected to produce up to 155,000 electric cars per year. 

Saudi Arabia is aggressively promoting the adoption of electric vehicles as part of its Vision 2030 strategy, which aims to achieve net-zero carbon emissions by 2060. 

A critical target of the initiative is for 30 percent of all vehicles in Riyadh to be electric by 2030, contributing to a broader goal of reducing emissions in the capital by 50 percent. 

To support the transition, the Public Investment Fund — a major backer of Lucid Motors — has been instrumental in establishing a domestic EV manufacturing sector. 

In addition to its stake in Lucid Motors, PIF has launched Ceer, the Kingdom’s first locally branded electric vehicle manufacturer, as part of its efforts to bolster the industry. 

Infrastructure development is also a core focus, with the Kingdom planning to deploy 5,000 fast chargers across Saudi Arabia by 2030 to facilitate the adoption of EVs. 

Consumer interest in EVs is steadily growing, with over 40 percent of Saudi consumers considering purchasing an electric vehicle within the next three years, according to a 2024 report by London-based professional services network PwC. 

Faisal Sultan, vice president and managing director for the Middle East at Lucid Motors, expressed the company’s pride in joining the program, saying: “We are delighted to join the ‘Made in Saudi’ program and have the honor of using the ‘Saudi Made’ label, which represents quality and excellence.”

He added: “We are committed to embodying the values of this national identity, such as sustainability, innovation, and excellence. With the increasing focus on electric vehicles in the Kingdom, we aim to deliver an advanced and unique experience to our customers.”

The minister said that Saudi Arabia has emerged as a central hub for electric vehicle production, supported by modern infrastructure, incentivizing policies, and a highly skilled workforce. 

He also said that major players like Lucid Motors strengthen the Kingdom’s position as a global center for future-focused industries while contributing to increased local content, non-oil exports, industrial localization, and knowledge transfer. 

Launched in March 2021, Saudi Arabia’s Made in Saudi program promotes domestic products and services, encouraging local consumption and boosting non-oil exports. 

The move aligns with Saudi Arabia’s broader industrial strategy, which aims to increase the sector’s gross domestic product contribution to 20 percent by 2025 and drive investments in advanced industries. 

It also supports Vision 2030’s goal of reducing the nation’s reliance on oil by fostering high-value sectors like electric vehicle manufacturing.


Closing Bell: Tadawul maintains upward momentum, closes at 12,113

Updated 07 January 2025
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Closing Bell: Tadawul maintains upward momentum, closes at 12,113

  • Parallel market Nomu dropped 54.97 points, ending the session at 30,809.12
  • MSCI Tadawul Index rose by 3.48 points to reach 1,514.39

RIYADH: Saudi Arabia’s Tadawul All Share Index extended its upward trajectory for the second consecutive day on Tuesday, rising by 8.60 points, or 0.07 percent, to close at 12,113.29.

The benchmark index recorded a total trading turnover of SR7.71 billion ($2.05 billion), with 124 stocks advancing, while 110 saw declines.

In contrast, the Kingdom’s parallel market, Nomu, dropped 54.97 points, ending the session at 30,809.12. The MSCI Tadawul Index also gained ground, rising by 3.48 points to reach 1,514.39.

The standout performer of the day was Almoosa Health Co., which made its debut on the main market. The stock surged by an impressive 14.96 percent, closing at SR146. Other notable gainers included Al Mawarid Manpower Co. and Saudi Reinsurance Co., whose share prices climbed by 10 percent and 9.23 percent, closing at SR125.40 and SR63.90, respectively.

On the flip side, Al-Baha Investment and Development Co. saw its share price fall by 4.44 percent, ending the day at SR0.43.

On the announcements front, Filling and Packing Materials Manufacturing Co. announced it had signed a Shariah-compliant credit facility agreement worth SR50 million with Al Rajhi Bank to finance its working capital.

According to a statement on Tadawul, the 12-month credit facility is backed by a promissory note covering its entire value. FIPCO clarified that there are no related parties involved in the agreement. The company’s stock inched up by 0.44 percent, closing at SR45.70.

Meanwhile, LIVA Insurance Co. revealed it had received a Baa2 insurance financial strength rating with a stable outlook from Moody’s. The rating reflects the company’s strong capital adequacy, solid asset quality, and conservative investment strategy, alongside moderate reserve risk.

LIVA emphasized that the rating underscores Moody’s confidence in the company’s enhanced underwriting discipline and its ability to maintain profitability and growth within the Saudi market. A Baa2 rating is considered medium-grade, indicating a company’s acceptable ability to meet short-term debt obligations. LIVA’s stock gained 0.57 percent, closing at SR17.60.


Saudi Arabia eases domestic worker quotas for HR firms

Updated 07 January 2025
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Saudi Arabia eases domestic worker quotas for HR firms

  • Only firms with 3,000 workers or fewer now have to meet the threshold
  • Firms with more than 15,000 workers are fully exempt from any domestic worker quota

RIYADH: Human resources firms in Saudi Arabia have welcomed the reform of a rule that required 30 percent of all employees to be domestic workers.

The change to the law, announced by the Ministry of Human Resources and Social Development, means that only firms with 3,000 workers or fewer now have to meet that threshold.

Those with a workforce ranging from 3,001 to 10,000 workers will instead be obligated to maintain a reduced quota of 20 percent, with that level dropping to 10 percent for companies with staffing levels between 10,001 to 15,000.

Firms with more than 15,000 workers are fully exempt from any domestic worker quota.

This policy shift is expected to balance supply and demand in the support workers sector, improving its legislative environment. 

It comes at a time when Saudi Arabia’s human resources management market is experiencing rapid growth, and prior to this decision market research firm Horizon Grand View Research projected the sector would expand by a compound annual growth rate of 11.1 percent from 2024 to 2030.

Companies affected by the changes issued statements on Tadawul welcoming the new rules, with Mawarid Manpower Co. stating that “this decision will have an impact on the company’s business, as it will alleviate the company’s obligation to recruit a specific percentage of the total workforce.”

Similarly, Saudi Manpower Solutions Co., also known a SMASCO, highlighted that “this decision aims to achieve a balance between supply and demand, thereby improving the legislative environment for the support (domestic) workers sector.”

Maharah Human Resources Co., which employs over 15,000 domestic workers, said that “it is not required currently to comply with any percentage for the household workers out of the total workforce.”

The company highlighted the cost-saving benefits of the new system, noting that “it is expected that this decision will have an impact on the company’s long-term business, as it will alleviate the company’s obligation to recruit a specific percentage of the total workforce and reduce recruitment costs for household resources to ensure compliance with previous percentages.” 

Additionally, the firm stated that the amendment “gives the company the ability to increase the workforce in the corporate sector to meet the growing demand without any constraints limiting that.”

The reform reflects Saudi Arabia’s broader efforts to modernize labor laws and streamline operations across key sectors. 


Saudi Arabia sees 45% annual growth in domestic flight bookings: report 

Updated 07 January 2025
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Saudi Arabia sees 45% annual growth in domestic flight bookings: report 

  • Domestic room night bookings also saw 39% yearly growth
  • Cities such as Makkah, Riyadh, Jeddah, Al-Khobar, and Madinah remain key attractions

RIYADH: Saudi Arabia recorded a 45 percent annual growth in domestic flight bookings in 2024, fueled by the Kingdom’s expanding tourism offerings and increased connectivity through low-cost carriers. 

According to Almosafer’s latest travel trend report, domestic room night bookings also saw 39 percent yearly growth. Additionally, combined domestic flight and hotel reservations contributed over 40 percent to the overall travel market, an 11 percent yearly increase. 

The growth in domestic travel is largely driven by a broader range of destinations, accommodation options, and experiences that continue to attract leisure visitors to explore their home country. Family and group travel have been key contributors to this upward trend, with bookings in these segments surging by over 70 percent.

Commenting on the trends, Muzzammil Ahussain, CEO of Almosafer, said: “These travel trends align seamlessly with the government’s vision to enhance in-destination value and increase domestic tourism as part of Vision 2030.”

Cities such as Makkah, Riyadh, Jeddah, Al-Khobar, and Madinah remain key attractions. 

However, emerging destinations like Abha, Al Jubail, and Jazan, as well as Tabuk and Hail, are gaining momentum due to their distinct offerings, including mountain views, beaches, landscapes, and desert experiences. 

“The growth of domestic tourism and the rise of family and group trips, with a focus on unique accommodation experiences and rich in-destination activities, showcase the success of the national agenda of building a thriving leisure tourism sector that contributes significantly to the economy,” Ahussain added.

Almosafer’s report highlights a notable shift in traveler preferences for accommodations. While luxury remains prominent, with 36 percent of room nights booked in five-star properties, budget-friendly stays in three-star or lower hotels now represent 35 percent of total bookings — a segment that has grown 100 percent for families and groups. 

Alternative accommodations such as vacation rentals and hotel apartments have also gained traction, with family bookings rising 90 percent and group reservations increasing 60 percent, reflecting growing demand for flexible and affordable lodging options. 

Low-cost airlines have also played a crucial role in the domestic travel boom. Increased capacity, expanded connectivity, and additional routes have made budget carriers more accessible to cost-conscious travelers. 

While flight bookings grew by 45 percent, the average order value decreased by 7 percent, demonstrating how expanded options are enabling travelers to secure more cost-effective deals. 

In-destination activities have become a cornerstone of travel value, with visitors increasingly opting for guided tours, adventure sports, and cultural experiences. 

Booking behavior also evolved in 2024, with mobile platforms dominating the market. App bookings grew by 67 percent and accounted for 76 percent of total bookings, while web reservations contributed 17 percent, reflecting 7 percent growth. 

Retail bookings, though representing a smaller 7 percent share, remain relevant for complex and higher-value itineraries as travelers seek in-person assistance for personalized planning. 

Flexible payment options have further transformed the travel market. Buy now, pay later plans have gained popularity, while Apple Pay accounted for 44 percent of all domestic bookings processed in 2024, reflecting the growing adoption of digital payment methods.