Sun setting on the nightclub market

A decade ago, if you wanted to drink after 11pm and didn't belong to a members club, there was only one option: the nightclub. As a result, 18 to 30-year olds everywhere abandoned the pubs after time had been called and swarmed into the local "big box" nightclub. However, in recent years, the rise of the late bar or pub, both with and without dancing, has provided a challenge to the clubs' domination of the post-11pm drinking market. Trevor Watson, director of Davis Coffer Lyons, asks: "What is a nightclub? When I was young it was about getting a drink after 11pm. The mass-market nightclubs were never about the kind of music they played. They were only really about drinking and somewhere to go after the pubs closed." Relieved of this role by the bars, clubs have begun to suffer. "Broadly speaking, across the board most nightclubs are showing 5% and 10% like-for-like sales declines over the last 12 months," Watson adds. Dominic Walton, director of leisure at CB Richard Ellis, agrees: "The sort of places which everyone piles out the bars and goes into are probably doomed in the short and medium term," he says. "The nightclub has been replaced by a bar with a later licence. That bar could well open at 11am and serve coffee and everything else, and then mutate throughout the evening." This is in contrast to a typical "big box" club. The out-of-town sector is even more depressed, mainly as a result of the goverment's policy of trying to promote round-the-clock city-centre leisure opportunities. The emergence of a city-centre "strip" of late-night bars in which everyone wants to be seen has stripped the out-of-town clubs of their function. The recent collapse of leisure group Springwood, which ran the Zanzibar club chain, has emphasised the increasing difficulty the whole sector is facing. It is not just the unpopularity of the conventional nightclub. The sheer number of late bars on the typical high street is set to increase even further when the Licensing Bill is finally enacted and 24-hour drinking, subject to strict regulations, becomes possible throughout the UK. However, some operators remain defiant - such as Steve Dennis, executive director of Luminar. "We welcome the new Licensing Bill and look forward to the release of the guidance notes which will govern its implementation and operation," he says. The need to dance "To suggest that a bar which offers limited opportunities in sound and space is a direct competitor to a nightclub is the equivalent of comparing a wheelbarrow to a sports car. A very large number of persons want to dance in premises devised for that purpose. Taking into account the facilities required to offer both the space to express yourself and the health and safety considerations, Luminar believes an offer of entertainment for dancing is as specialist an area as the sale of alcohol in a pub, or food in a restaurant. "New concepts are arriving, such as nightclub dancing space, and these are designed to offer enhanced customer choices," he says. Other commentators are convinced that the sector is changing rather than dying. Many bars are new arrivals and have relatively recent fit-outs. This is a period in which clubs are being forced to play concept catch-up. Luminar is responsible in part for the development of the "feeder bar", where both a café-bar and club - such its own Life/Liquid combination - occupy roughly the same location, allowing revellers to progress from one to the other. Luminar has also developed the Oceana brand, a "chameleon bar" which comprises several rooms of varying character - from stylish restaurant to '70s-themed club - all branded around fashionable world cities. This may be a response to the success of the Tiger Tiger brand, the pioneer of the concept, in which rooms, bars and restaurant combine the experience of laid back lunches, early evening drinking and late nights. The advantage here is that the operator can expect week-long, round-the-clock custom rather than a sudden rush during a few hours on Friday and Saturday nights. Nevertheless, most of the bigger operators seem to be at a stage where they are pulling out of acquisitions, disposing of some venues and rebranding others. Luminar, for example, is concentrating on its core brands and is in the process of selling off its non-core outlets, totalling 17 so far, most notably London's Camden Palace, which netted £4m at the beginning of this month. John Patrick of Christie and Co, says: "I think in the short-term it will be interesting to see which of the companies face more financial hardship this year. We'll certainly see if there will be more financial failures. "But there are a breed of burgeoning quality regional operators that are expanding. Their trading profiles are improving and are continuing to be successful. They are the ones that are growing organically." Patrick gives Brook Group, Ultimate Leisure and Bakersfield as examples. Whatever happens to the market, the consensus seems to be that some clubs will be forced to close, whatever the big chains' financial fortunes may be. The rents some operators are paying for prime sites are rumoured to be huge and there is very little latitude if takings begin to decline. The obvious alternative use is a casino, given the government's proposals for a liberalisation of gaming laws which could be enacted towards the end of next year. Casino operators are said to be prepared to pay up to £20 per sq ft in comparison to the £10 per sq ft which is typical for nightclub brands. However, some are sceptical. Jason Grant, head of leisure at Jones Lang LaSalle, says: "It is the most obvious change, but my experience of casino requirements is that they're looking for space over 40,000 sq ft. Only the really large ones will work. "The casino operators are also fussy about how the space is configured. Even within a 40,000 sq ft operation, they would want a 25,000 sq ft gambling floor. "Resort casinos" "Having said that, a lot of the foreign casino operators are looking for ‘resort casinos' of 100,000 sq ft plus," he adds. Clubs anchoring leisure schemes could be problematic as they have been custom-designed for dancing. Agents find it hard to foresee who might replace the current operators. It is also important to note that casinos are diversifying and could potentially feature dancing in the near future. Whatever happens, nightclubs will never completely die. The "specialist" market geared towards those who enter to listen to or dance to drum'n'bass, indie, house or jazz remains strong, although it accounts for a small percentage of the market. The question for the mainstream sector is whether it can evolve quickly enough to compete with the bars cutting into its customer base on the one side, and the casinos beginning to cut into it on the other.