Nightclubs recession proof?Polls
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| Nightclubs a recession proof business? |
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| Monday, 08 February 2010 12:25 |
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There is no doubt, many types of social entertainment flourish in times of economic recession. Unlike their leisure industry bigger brothers, nightclubs are able to offer product, which is local to the consumer. In recessions, people tend to stay closer to home and are less likely to indulge in more exotic forms of leisure diversion. This however, does not mean that any type of leisure indulgence is out of the question.
Not exactly in this order..
These businesses perform exceptionally well because they're able to meet the three fundamental conditions of 'recession friendly', which are:
One or more of the following four items must be present in virtually all leisure entertainment offerings
These 3 items represent many billions of dollars in sales across a broad spectrum of leisure-based industries annually. These key components are also the primary driving force behind theme parks, cruise lines, Vegas, exotic resorts, gaming, and virtually all forms of leisure entertainment.
But wait! We're in a recession... Yes… And this is where you really need to understand how recessions, leisure, and mindset converge. First of all, most forms of leisure are not purchased for practical purposes, but for emotional ones. Now, in a recession, the more prominent emotions are despair, distress, and hopelessness.
And no big surprise... People will seek ways to counter these emotions, but not with the dollar power available in a healthy economy. In short, this means you must be able to offer extraordinary bang for the buck. In a recession, that's generally a $15, to $30 maximum. Let's first look at who/ what would not fall into the $15, to $30 window:
It's not to say the above industries perform poorly during a recession, but that their market reach will be limited to those still able to afford the higher prices.
But how can social entertainment be justified in a recession? The long answer would require some study into social science, which would provide some perspective on consumer mindset and the associated purchasing decisions in distressed economic times. We'll save that for another article.
With recessions come a great deal of doom and gloom. It's often assumed that people will simply lock themselves in their homes, while spending only on domestic necessities. While that's certainly a pragmatic perspective, it's also overly simplified... Recessions are more taxing emotionally than fiscally on society. The emotional discomfort caused by the long term affects of a recession will drive many to seek relief of some sort. For some this is home entertainment, while for many others something of a more social nature is sought.
But is social entertainment the real answer for many? As far back as the great depression, social entertainment has always been a proven winner in the darkest of economic times. While not official, it's often suggested that nightclub cabarets set down their initial roots in the great depression, or at very least gained most of their popularity during this era. During the great depression, many of these nightclubs operated 24X7 and there was never a shortage of business.
In the early 70's, quadrupling of oil prices by OPEC coupled with high government spending due to the Vietnam War lead to stagflation in the United States. A new era in nightclub entertainment emerged, which was the discothèque and essentially the birth of the dance club as we know it today.
The Iranian Revolution sharply increased the price of oil around the world in 1979, causing the 1979 energy crisis, thus the early 80's recession. This recession, spawned yet another era in social entertainment, which was the top/40 party bar. Actually this was a combination of disco, funk, and top/40, focused on attracting a broader demographic. The 80's recession all but halted none essential transportation, thus creating a huge demand for localized, well-priced leisure entertainment.
Understanding Social mindset in a recession The Social mindset of the broad level public is affected at various levels in the midst of a recession. A clear understanding of this mindset is important when considering a means to address it through social entertainment product. As a result, the mindless one-fits-all recession buster entertainment venue /promotion is not in the realm of remote possibility here, although many Cornflake class nightclub experts will no doubt be offering everything from the book of success, to a quick, fast means of making millions in what otherwise is a rather complex social landscape at this point. Please don't buy into this nonsense.
And the 6-million dollar question is… What type of nightclub entertainment venue is most likely to yield the best results in a recession? Not really expensive ones! How's that for starters :-) Actually, determining the right type of venue is highly reliant on ones ability to obtain a highly accurate perspective of the given target market. There are some markets, such as Miami for example that will always demand an elaborate type of venue and will pay for it as well, however Miami is one of the exceptions -not the rule in a recession.
In most markets, your intermediate class social entertainment venue will yield the best results. In other words, something that does not cost so much to build, you need to charge a $20 entrance fee and $10.00, to $15.00 a drink to sustain it. That's not very recession friendly… Avoid big box clubs like the plague... You'll end up with 25,000 square feet to fill, while limiting your demographic reach to 19 to 24 year olds. You'll end up broke within 6-months...
As one elementary example… Your 5,000, to 8,000 square foot room, which packs a decent sound and lighting system, and a modest décor theme would be a better bet in most markets. Door charge should be minimal or nonexistent if possible. Beer and cocktails should average between $4.25 and $5.00 (if possible). This of course, will vary depending on where you are, costs, taxes, etc.
Remember… If you're in a marketplace hit hard by a recession, you're trying to get people out -not scare them away with outrageous prices. You should be pursuing the "volume liquor sales" objective to generate most of your revenue in this case. Again… market depending and there are many variables involved here. Please NOTE... We are NOT suggesting a cheap booze joint. If you attempt,pt this, you'll be filled with kids, bargain shoppers, and freeloaders. Product must to be affordable, but not cheep.
It's so easy, yet so many get it wrong. Firstly, the mindless approach of cheese promos, one-night wonders, and beat mixing monkeys will not work here. You actually need to KNOW HOW TO ENTERTAIN -a concept foreign to a sizable majority of nightclub operators.
If you're marketing to a recession based audience, then understand your target objective, which is creating an environment that is actually fun, friendly, none intimidating, and actually meaningful!! People are short on money, stressed over that mortgage payment, scraping to make a car payment, and generally bummed out over the state of the economy.
Here's your chance to "CREATE" an environment that will allow them to escape that for a few hours. That means fun music -not crap that no ones ever heard before… It also means a lively host MC that can actually PUMP UP a room -not a speechless drone. It means spontaneous, fun things the staff does during the night to elicit an audience response nothing short of fun /funny, and exciting.
In essence, it means relating to a "distressed consumer" and their associated mindset. You have a little under 2.5 hours on average to take their mind off it all. That's not a lot of time to get it right. You need properly trained staff with a good work ethic.. You need staff that FULLY understand the broader entertainment objective.
MAKE SURE YOU UNDERSTAND... You all need to be on the same page with respects to what the 'entertainment objective' is, and ALL staff need to contribute to it. It's yet another concept many nightclubs are oblivious to, which is the power of "Concerted Effort" What??? You figured you were going to simply setup camp, play tunes, and crank out the booze? That's the classic, mindless approach… Take it and join the many that have earned themselves a plot in the Nightclub Cemetery.
Another note on music format.. Music format must be perfectly implemented and highly focused! Dancing may be a part of the offering as well, BUT… Music in a recession-based venue becomes MORE important than ever! It's the clubs way of addressing and shaping the rooms emotional mindset, which in turn will greatly affect the direction it takes, but most importantly… It's revenue performance. This is NOT a job for your classic no frills local hiphop DJ, house music DJ, or the proverbial beat mixing addict. Only those with an "Extensive knowledge" of music, across several eras and styles should be considered!
The classic party bar is one approach… The recession based entertainment venue is only as good as the crowd it can sustain week after week. The party needs to be consistent… You need regulars.. You need loyalty.. The only way to accomplish this is to create your "own brand" of party and something that is consistent and "familiar" week after week. Avoid one-night wonders and outsourced events... You don't build atmosphere or brand this way. Done correctly, you'll enjoy a 3 to 4 night a week busy establishment and the high volume sales to go along with it. All it is, is a careful balancing act of the right components. The net result: What you're really offering is 4-hours of high-energy fun for under $30.00, which should position you as a well operated, recession based nightclub at the top of the list in terms of 'excellent price to performance ratio'. Make no mistake… Well thought out leisure diversion concepts will always blaze in times of economic recession.
You're no doubt wondering how much money this nightclub can make Go ahead ask.. You know you want to. Ok, we can't provide specific numbers, as revenue performance is based on a host of variables. We can however, offer conservative guesstimates based on say... a 300 person capacity room.
Hey.. They're your profits, so you decide what you want to do with them. If you know how to develop your own identity, brand of party and loyal market following, then you're 'self sustained'. If you need to rely on 3rd party entities, then your 'actual' operating costs could increase as much as 30%.
Conclusion: This is not your $350,000 a month nightclub entertainment venue, but in most smaller, to midsize markets during a recession, these smaller party bars can generate some decent income and much more than many businesses could during distressed economic times.
If you're considering a recession based entertainment venture and need to help in sifting through the numerous considerations, or just coming up with a concept, consider grabbing a mini consult with us here.
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| Last Updated on Saturday, 27 February 2010 19:49 |