Inside Track by Phil Mellows
Mintel’s new report on UK nightclubs reveals a sector that’s facing an increasingly tough challenge. The decline in student numbers, the growth in youth unemployment and the culture of preloading are all piling on the pressure for operators to broaden the offer beyond late-night drinking and DJs.
Since 2008, when the credit crunch started to bite and clubs were already fighting competition from late-opening pubs and bars following implementation of the 2003 Licensing Act, the value of the sector, by Mintel’s figures, has fallen by 28%. Now it forecasts a continuing decline to 2017 when the value could drop, in the best case, by a further 4.5%, or in the worst case by 27%.
Which of those figures turns out to be the most accurate will probably depend on how successful operators are in filling the revenue gap left by the 18 to 24-year-olds on which the sector has traditionally relied. Four factors have undermined the income generated by this age group:
1) Student decline. The increase in tuition fees, trebling from a ceiling of £3,000 to £9,000 a year, has overnight halted the expanding audience among students that has been the basis of many a club business in recent years. Student admissions have plummeted by 12%.
2) Youth unemployment. Young people have been hardest hit by the recession with unemployment among 18 to 24-year-olds soaring from 12.4% in 2007 to 19.2% in January this year.
3) Discounts. Lack of cash has meant clubs have had to discount on the door to lure drinkers in, hitting overall spend even as frequency of visits has declined.
4) Preloading. According to one piece of research, 26% of women’s alcohol consumption on a night out and 15% of men’s now takes place in the home, before they head to pubs and clubs. A quarter of clubbers arrive after midnight.
The impact of all this on some is clear. Only last month cash flow problems forced Atmosphere Bars & Clubs into administration.
But predictions of the collapse of the club sector would be mistaken. As the Mintel report points out, clubbing has not gone out of fashion. People are still going out, even if they’re hitting clubs less frequently and later in the evening than they were. And there is still a hard core of regular clubbers whose habits have hardly changed.
The task for operators is to build on that and develop a more consistent trade among a fickle periphery. Between 2011 and 2012 alone the number of infrequent club-goers fell from 30% of the population to 25%, and the proportion visiting a club at least once a year dropped from 39% to 34%.
“Outside of club stalwarts, more drinkers than before now appear to favour pubs and hybrid bars, most of which have performed solidly compared with club venues in recent years,” says the report.
“The broad appeal of live music has seen an increasing number of clubs introduce such acts, as performances tend to attract a wider demographic than clubs’ traditional crowd.”
For Mintel, the target has to be 25 to 34-year-olds “who are likely to be occasional clubbers, appear to enjoy special events and activities that are different to the norm. The traditional emphasis on dancing to a DJ’s set generally satisfies the needs of students and 18-24s, whereas older customers seek out a variety of activities”.
Among those who have visited a club in the past year, while 41% go to have a dance, 53% want to socialise with friends.
“As loud music and busy dance floors make conversation difficult, private rooms, booths and bar areas may appease clubbers who want to talk before they dance,” concludes Mintel.
Indeed, if the offer’s right research suggests that as many as 40% of ex-clubbers and non-clubbers could be enticed through the doors. They are looking for the right type of music, quieter spaces to talk to friends and an atmosphere where there’s less pressure to get up and dance.
Mintel also suggests that operators could sharpen up their marketing. When they hit town some 22% of clubbers have yet to plan their evening, and clubs could benefit from mobile-friendly websites and text alerts triggered by revellers’ proximity to the venue.
But long-term success for many will depend on the ability to restructure their business and adapt to a new situation. Thanks to the hard-core clubbers some will survive, as Mintel’s senior leisure analyst Paul Davies says, by sticking to “a late night ‘drink and dance’ focus”.
“Those that retain a clear club identity will attract a loyal base of customers who value an authentic experience, but admissions and spend per head could well decline as a culture of pre-loading continues to hurt the sector.”
Or they could “opt to twist and expand into the daytime market by adding food to the menu”, or diversify their offer into live music and comedy, and special events, or join the ‘hybrid’ bar-to-club sector by creating more relaxed spaces to socialise.
There is, indeed, no shortage of options, and despite the experience of Atmosphere, companies such as Luminar, which is adding extra rooms, and Intertain, which is renewing its Walkabout brand, are demonstrating in practice that clubs have a future.
But whether a club chooses to focus on the traditional market or reach out to a broader customer base, it requires commitment and investment, and a confidence that the price is worth paying.
