Is the nightclub industry off to a good start in the 21st century?

This document encompasses several issues. The first discusses the rapid proliferation of self-acclaimed nightclub experts. The amount of questions /emails I receive on this one continues to grow, so I'll comment on it, again… The rest of the document discusses why nightclubs continue to maintain an enormously high failure rate, while the broader level leisure entertainment arena has flourished into a multi billion-dollar industry. Why has the nightclub industry failed to gain acceptance or legitimacy within this larger circle of players? We'll discuss it all here…

I'm still asked the question, Do you consider yourself a nightclub expert?

For the 100th time... I've never assigned myself the title of expert or professional. Expert seems to be an over used term in this industry and in many cases, with little or no means (beyond a reasonable doubt), to verify the sea of outlandish claims and success stories associated with them. One could conclude from most nightclub industry websites, that 80% of people associated in any way with a nightclub, or related website are experts… Yet with all of these experts, the failure rate in this business remains staggering. Now how can that be?

Secondly there are at least two other sources that I qualify as pro-class operators /advisors. They're not as prominent in the consulting arena as nightclubbiz.com, but pack comparable experience and maybe even more in some cases. There is most certainly some award-winning talent out here, however sifting through the mounds of absolute crap in order to discover it can take some time. So no.. I do not believe, nor claim that I stand alone in terms of the scope of my experience and background. There ARE others out here, but it can be like searching for a needle in a haystack, when the needle is the same color as the hay!

Some off-topic commentary...

Through years of observing the many ongoing antics amongst both operators and the newer breed of web-based nightclub experts, it does pose some interesting questions regarding their underlying objectives, or at least some of them... At times, it almost seems to attract a lot of people that either A: Appear to suffer from a profound sense of insecurity, or B: View this industry as an easy way to obtain the attention or professional status they could not in conventional occupations.

I have no such personal issues, other than I speak my mind a lot… Whether I'm netting $350,000 a year or $25,000 changes nothing with me. I have always been driven by a passion and love for the social entertainment business, even as far back when I started at age 12. I love to celebrate victory, but at the same time have absolutely no problem admitting a failure. I have no problem admitting I was wrong. I have no problem with saying 'I'm sorry'. My occupation does not serve as a remedy for any underlying social or emotional disorder.

How is any of this relevant?

Early in my career, I saw how ego, arrogance, and vanity seemed to get a whole lot of people into a whole lot of trouble in this business. From numerous nightclub failures, socially dysfunctional management, to a slew of operational problems resulting from it, I observed "what I believed" was the NUMBER 1 cause of failure in nightclub entertainment venues -just plain EGO.

Ego keeps many in the dark.. Many from expanding their minds… Many from learning from their mistakes… And many generally ignorant... As much of a shock as it may come to most of you, "operational ignorance" is the single #1 cause of fights, shootings, under age violations, disgruntled management, marginal profits, unhappy staff, owners that are always in trouble with authorities, and 98% of nightclub venture failures!

If I were a betting man, I'd guess many of these issues to be centered on chromosome 11 -home to the genes that affect overall personality :-)

In any event... After several years of observing these disasters, I decided I was not going to become one. The ultimate defense against this (for me anyway) was 'emotional discipline'. In essence, not allowing the overwhelming desire to act on impulse to determine the fate of a potentially serious situation and in this business there are many! That's not really a major accomplishment, given the fact that most of the business world fosters this approach as well :-)

Education anyone? Anyone at all?

Not a widely accepted term in this business and it shows… Back in 1991, Fortune 500 magazine accurately predicted the leisure hospitality industry flourishing into a multi billion-dollar giant. Since this time, everything from hotels, lodging resorts, restaurants, theme parks, motels, and even some large shopping malls are well into their 3rd generation concepts.

This era also spawned the birth of another 50-billion dollar industry of exotic cruise line carriers and super resorts, such as Club Med, Hedonism II, and Hedonism III to mention a few. In some ways, it seems there's no end to what the consumer will pay for the ultimate leisure experience. Wasn't the nightclub industry paying any attention to this development? Over 10-years in the making and no one took notice?

Wow.. This is a real surprise… There's little or no acknowledgment of nightclubs within the broader scope leisure entertainment industry. Why?

Oh you know… Nightclubs are still immersed in an operational mindset indicative of the 80's. While the rest of the leisure industry has progressed several generations since the early 90's, the overall nightclub industry has yet to resolve their age old problems of:

• Trying to sustain one or two nights of profitable business
• Staying out trouble with local authorities
• Keeping out of the Monday morning headlines
• Fighting off accusations of serving liquor to minors
• Yet another after hours shooting
• Yet another after hours fight involving 30 people
• Yet another nightclub raided for drug trafficking
• Yet another nightclub closed down by law enforcement
• Yet another nightclub bankrupt in just under 6-months

Perhaps if those opening these many nightclubs would take a little time to "enlighten" themselves, instead of "thinking" they know it all, the nightclub sector too would have progressed and matured in parallel with the broader based leisure entertainment industry. For this reason, you hear of few nightclub related billion dollar companies, or ever so much as a mention of the nightclub business in prominent industry or business publications.

I mean really… In the light the nightclub industry is portrayed in right now, what small, intermediate, or institutional class investor could possibly take a nightclub related venture seriously? Oh sure.. There's a couple of small nightclub entities that have gained some modest investor confidence, but overall, you just don't see too many nightclub venues on the front page of investor magazines.

So as an observer and I tend to look beyond the superficial hype of our industry and more into why the model continues to stagnate, while almost all other leisure entertainment related industries surge forward in terms of progress, growth, and revenue performance.

There is certainly no shortage of demand for quality social entertainment product, and in fact, far more now than 20-years ago. The digital revolution, combined with record high divorce rates, separation rates, and many waiting well into their late 20's /early 30's to marry has radically transformed the leisure entertainment landscape. Perhaps the most significant change in market climate is a much more educated, thus demanding consumer.

Has there been any quantifiable evolution in the overall industry since the 80's?

That depends on what one considers evolution. If newer décor, lights, and speakers are your idea of progress, then yes. As for the operational business model, there is not a whole lot different now than the 80's. Little thought is invested into a real business model or acknowledging the broader level social demographic. Cheese, such as cheap drinks, free cover for the ladies, and whatever cheap promo most can get there hands on is still the main course offering.

The vast majority of nightclubs continue to target the lowest spending consumers in the marketplace, thus the only card they can play is the "discounted liquor one." After all, how do you attract consumers with not much more than $10 to $20 is their pocket? Most can barely sustain one or two nights of profitable business. And most really have no clue as to the direction they're taking from one night to the next.

Truly a business model reminiscencent of the 80's… But at least this model was actually profitable then :-)

More reading… More enlightenment… Less ego!

In short, the nightclub entertainment sector needs to develop more of a willingness to enlighten themselves on what is otherwise a radically different leisure entertainment landscape compared to that of the late 80's. Fewer juvenile based antics, and more time invested into broadening ones mind would be a good start.

Get it through your heads... The entertainment consumer is becoming increasingly complex. More time invested into acknowledging the scores of failed nightclub operations and… Taking a long hard look at what went wrong in a number of these venues would likely benefit most of you.

And finally, way more time invested into understanding the mindset of today's social entertainment consumer, as opposed to arrogantly assuming that you already know what your market wants. Remember the high failure rate… This does not exactly instill investor confidence into what otherwise are an awful lot of failed operations, and the many so-called experts that apparently directed these operations to their death.

Just look around you tonight… Whether you have 2 nightclub venues in your marketplace or 20, how many of them are packed 9:00 PM? How many ever near capacity at all? How many are able to sustain any discernible traffic much beyond one or two nights a week? How many are lined up right now? How many are in trouble? How many have died and gone to heaven in under a year?

In closing, the nightclub industry may to reconsider its paradigm approach to the broader level leisure entertainment marketplace. If not, it may find itself standing still, while other service offerings continue to surge ahead at light speed. At very least, it may find itself limited to a very tiny slice of the substantially larger market share.

Food for thought!

Dave Hollingworth
http://nightclubbiz.com/