Mar 30, 2009

Night Life in New Kingston Who Will Surive in a Recession

There is no doubt, nightclub entertainment ventures often flourish in times of economic recession. This is seen with the success of Kingston’s newest entertainment lounges Pure and Fiction. Unlike their leisure industry bigger brothers, nightclubs or lounges are able to offer leisure product, which is local or specific to the consumer. In recessions, people tend to stay closer to home, and are less likely to indulge in more exotic forms of entertainment. Couple this with the increase in fuel prices and uncertainties about the economy a lot of people will be sticking close to home.

That however, does not mean that any type of partying indulgence is out of the question. In fact, quite the contrary. There are several leisure /recreation industries that thrive during a recession and because leisure diversion can be a necessity for many.

Who are the top contenders in a recession within the leisure entertainment arena?

  • • Movie theaters ( 2 for 1 Mondays at Carib 5, 2 for 1 Tuesday at Cineplex Sovereign )
  • • Gentlemen's clubs ( Polly Royal, Reef, Creasers )
  • • Nightclubs ( Quad, Asylum, The Office)
  • • Bars ( Medusa, Escape 247, Ribcage )
  • • Lounges ( Christopher’s, Pure, Fiction )
  • • Street Parties ( Passa Passa, Fresh Fridaze, Bembe )
  • These businesses perform exceptionally well because they're able to meet the three fundamental conditions of 'recession friendly', which is: • An low or relatively cheap ticket or gate price • Minimal travel • Excellent cost to party ratio

    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, be it adventure, fantasy, excitement, or love. In a recession, the more prominent emotions are despair, distress, and hopelessness. Naturally society 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 $1000 to $1500 ticket maximum. Let's first look at who/ what would not fall into the $1000 to $1500 window: • Exotic cruise getaways • Travel to lavish resorts • Most average, to high-end restaurants, parties and lounges • Anything requiring travel much beyond ones local area

    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 tangible necessities. While that's certainly a pragmatic perspective, it's also overly simplified...

    Various states of emotional turbulence amongst the masses are also a very real part of a recession and despite the fact that this aspect is rarely discussed in any significant detail across the broader spectrum media. Nevertheless, the emotional discomfort caused by the long term affects of a recession will drive many to seek relief of some sort and it's generally in the form of a short term diversion.

    But is nightclub entertainment the real answer for many?

    - As far back as the great depression, nightclub 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 time. During the great depression, many of these nightclubs operated 24X7 and there was never a shortage of business.

    The idea was to focus on the mass market consumer, as opposed to skewing demographic through the likes of one style or music format. The recession all but halted none essential transportation, thus creating a huge demand for localized, well-priced leisure entertainment. Halleluiah!!! This is one thing the nightclub industry actually got right! Too bad they didn't stay on this track.

    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 a social entertainment venue. 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 a recession.

    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 did 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…

    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 $150 and $200 (if possible). That will vary depending on where you are, costs, ,mixes, 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. Prices should be kept reasonable and you should be pursuing the "volume liquor sales" objective to generate most of your revenue in this case.

    But what is the real objective of a recession based entertainment venue? 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 do during the night to elicit fun /funny, and excitement.

    In essence, it means relating to a "distressed consumer" and the 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 understands 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.

    You're no doubt wondering how much money this nightclub can make Go ahead ask.. You know you want to. Ok, I can't provide specific numbers, as revenue performance is based on a host of variables. I can however, offer conservative guesstimates based on say.. a 300 person capacity room. - Average drinks per person 3.5 @ $200 each = $700 - Total throughput per night of 300 people - Total liquor sales: $60,000 - Average across 3 good nights of traffic: $150,000 per night / $450,000 a week - Total operating costs: Ballpark area of 44 to 53% - Net: Ballpark of $211,500 to $250,000 weekly

    As a side note, operating costs can be tricky to guesstimate at times, as there are a range of variables that can affect them. Some of these are based on costs directly associated with 'region specific' taxes and liquor costs, while others are related to overspending on advertising, or outsourcing entertainment product to 3rd party entities that while promise to attract an audience, also demand a sizable portion of your bottom line profits.

    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.


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