Is late night dead?

Saturday night in Ealing, West London, and there’s a buzz in the air as groups of young women and men move from pubs and bars to restaurants and nightclubs, frequently standing in queues despite the early spring chill in the air.

It’s a scene that has been repeated up and down the country for decades. And yet, despite the laughter, the shouting and the raucous flirtation, the crowds are smaller than they might have been just a few years ago. The choice of venue is slightly more limited and the spend less.

Ealing, like many towns and cities, is seeing its night time entertainment scene shrink or, at least, evolve in a way that is presenting businesses in the sector with challenges – and new opportunities. The current financial difficulties faced by Revolution Bars and nightclub group Rekom vividly illustrate the disruption that the night-time hospitality and entertainment sector is facing at the moment. Their predicament suggests that a format and consumer proposition that has worked for many years is no longer viable.

The gloomy statistics are all too familiar, but they’re worth repeating as they underscore the magnitude of this evolution. According to the Night Time Industries Association, nearly a third (31%) of nightclubs closed between June 2020 and June 2023. Research published in December last year by analysts IBISWorld, reveals that nightclub revenues fell by 7.5% to £1.6bn between 2019 and 2024. Meanwhile, the Music Venue Trust (MVT), a charity which acts to protect the UK’s Grassroots Music Venues (GMVs), recently reported a drop in members from 960 in 2022 to 835 in 2023.

The reasons for this decline are both financial and sociological. Rising rents, stubborn inflation and increasing staff costs and are squeezing profit margins while the cost of living is hitting the typical night-time entertainment demographic. According to findings by the RSA, “More than half (56 percent) of young people in work are experiencing financial precarity…and around one in five (19 percent), sometimes have trouble meeting their basic living costs because their income varies each month.”

Rick Jones, hospitality, sports, and leisure leader at PwC UK, dates the current challenges back to the Licencing Act 2003, which allowed licensed venues such as pubs and restaurants to apply to have their licensing hours extended beyond 11pm.

“This had a double effect on the late-night market,” he told MCA. “It introduced more supply which made it more difficult for the incumbent operators to continue to charge for admission, which had been a high margin and profitable revenue stream. The impact of this pressure on the top line was then compounded by the increased costs which the entire multi-site leisure and hospitality industry has faced – rent and property costs, people costs, energy and recently inflation.”

Alongside these trends, younger people simply don’t drink as much as older age groups.

Figures published by NHS for 2021 reveal that 38% of 16- to 24-year-olds and 21% of 25 to 34-year-olds in England either don’t drink or haven’t drunk in the previous 12 months. In 2011, these figures were 19% and 16% respectively.

Many of the pandemic habits have continued with the growth of food deliveries. According to KPMG research, nearly a third (31%) of consumers have at least one takeaway a week, while nearly four in ten (38%) of 18-24-year-olds do so at least two to three times a week. What has been described as “the hermit consumer,” means that people have less need or inclination to venture out.

Even working from home (WFH) has probably had an impact – if you’re not at the office then drinks and dinner with colleagues after work requires more effort and is less appealing. The rapid rise of dating apps has also reduced the incentive for people, especially those in their twenties and thirties, to go out and socialise.

One industry player that is bucking this downward trend is Broadwick, although its portfolio would not be considered to be traditional nightclubs. Drumsheds is situated in an old IKEA store in north London and has a whopping 15,000-capacity and although the group’s heritage is in music it now hosts fashion shows, Michelin starred pop up restaurants, immersive theatrical events and cultural experiences. The group has just unveiled its latest venture, Broadwick Studio, a smaller event space in Canary Wharf, London.

“We create brands that audiences want to engage with by reusing old buildings and under-valued assets,” founder Simeon Aldred said to MCA. “There are a lot of amazing clubs and spaces opening in London. Independence is key. You’ll see chains and groups that are not moving forward closing. [Venues with] new formats and large-scale human connection…that are innovating [for] their tribes…will win.”

When they do spend what little disposable cash they have, it seems that younger people especially want something more than food, drink, and music only. Just as retailers look to increase services in-store alongside products, with the night-time economy, they’re looking for experiences.

Another successor to the traditional bar or nightclub is competitive socialising. Mischievously named Swingers mixes crazy golf with drinks, music, and street food and its parent company has just closed a $52m round of funding. Monopoly Lifesized describes itself as “an immersive, physical version of the world’s favourite family game brand played on a 15metre-by-15metre, life sized Monopoly board,” while Crystal Maze is based on the cult TV programme. Augmented reality darts and axe throwing are on the menu at Boom Battle Bars.

According to research published last year by MINTEL, a global market intelligence agency, “Overall, participation in competitive socialising activities has increased by 13 percentage points between 2019 and 2023. Around seven in ten (71%) consumers now say they have taken part in a competitive socialising activity, compared to 58% in 2019. Young consumers lead the way, with as many as 93% of Gen Zs having taken part in competitive socialising, compared to just 60% of Baby Boomers (aged 59-77).”

PwC’s Rick Jones points out that, unlike nightclubs, competitive socialising venues can easily operate during the day as well as the night. There are other attractions for customers. “By providing a venue throughout the evening with food, drink and other services, these operators also have a greater share of wallet,” he said. “This is particularly important in the current market, where customers are more discerning about how they spend.”

Those venues offering a variety of activities have seen the most explosive growth, some 455% over the past five years, according to estate agents Savills. The ingredients of a successful competitive socialising venue are simple – games with a familiar concept, that is sociable, that don’t take themselves too seriously and that requires only a minimal amount of skill.

Make it Instagram-able and add cocktails and street food. But, like Broadwick’s large, multi-event venue concept, it also leverages the trend by a growing number of consumers to opt for the occasional, all bells and whistles blow out, rather than the traditional, little-but-often approach to evening entertainment.

“Because of the increased cost of living consumers are more likely to save up and go out for fewer but bigger occasions and they want more entertainment when they do,” Tom Whittington, director of retail and leisure research at Savill’s told MCA. For operators this involves developing a “blended offer” with more activities and attractions, resulting in more effective use of the property as an asset class. “This means creating a flexible space, a format that can accommodate multiple offerings throughout the day rather than somewhere that only opens Friday and Saturday night.”

Night-time economy businesses also need to be more agile, according to Whittington, able to quickly drop one activity as it goes out of fashion and replace it with something else.

There is demand from younger consumers, aware of the effect that the online world can have on their mental health, for in-person connections and social situations again, according to trend forecasters WGSN.

“Youth will turn to hobbies, and they will seek hobby-driven spaces and dining experiences to socialise and connect with friends and loved ones,” Liz Tan, Insight Strategist for WGSN told MCA. “Workshops, sports communities, and craft cafes are popping up to host those searching for activities to strengthen their relationships and friendships. For brands that focus on experiences for young consumers, our guidance is to invest in community hubs to facilitate interest-based communities or run workshops that can become go-to hangouts for young people.”

Consumers, especially the younger demographic, are clearly keen to go out and enjoy themselves in the evening as they always have done. However, when they’re watching every penny and they have access to such a wide range of entertainment and food and beverage in their homes at the tap of a screen, venue owners will have to develop a more exciting, imaginative, and rapidly evolving product to coax them off the settee.

• Simon Brooke is a freelance journalist who has been published in the Financial Times, The Sunday Times, The Times, the Daily Telegraph and the Daily Mail on subjects including business, travel, property and retail.