VIP bottle service will help nightclubs compete in 2019

Driven by an increase in disposable income, a heightened social imperative to be seen by others and a flourishing tourism industry, the demand for luxury products and services in Australia is growing rapidly.  The above is no less true in the nightlife industry where the generational demand for luxury has surged the number of venues offering exclusive bottle service packages at a premium price.

This is occurring in an industry where nightclubs are closing at a rapid rate due to low profit margins, residential noise complaints and tighter regulatory obligations. Mintel reports that revenue from nightclubs in the UK will fall 16% between 2016 and 2020 (1). In the USA too, margins have fallen sharply, in some cases club owners taking home less than their staff. IBIS World predicts a decline in industry growth in Australia (2) where recent media (3) has focussed on lock out laws and the uncertain future of festivals and nightlife under new prohibitive policies.

Over the last 6 months we have witnessed a marked increase in the number of venues now advertising VIP bottle service packages, the number doubling in East Coast cities. We believe that bottle service is one way nightclubs will maintain a competitive edge and here’s why:

Social dating is changing the ‘job’ that nightclubs perform for their patrons

In the last 5 years, the emergence of social dating platforms have vastly changed the job that nightclubs perform for us.  Nightclubs once provided an ideal environment for dating: music and liquor bringing people together to dance and chat in close proximity.  Now, apps allow daters to select and screen potential partners from the safety and comfort of their homes, eventually meeting at restaurants and cafes. The nightclub’s fundamental job has pivoted, emphasising experiences, rather than socialising, and featuring special events, such as DJ’s and performers, or catering to birthdays and functions. Although the frequency of a night out is lower, the need for an event to be notable drives up propensity to spend big. The intimacy of a private booth with personal service alongside a public dance floor is the perfect way to facilitate such a need.

Social media is driving a need to show off consumption of luxury products and services

Never has a generation of partygoers been more pressured to be seen in a positive way: every moment is carefully planned and filtered to scream success, opulence and social prestige. As they compete harder for their peers’ approval and validation luxury fashion items, destinations and experiences have become commonplace. VIP packages providing expedited entry, venue real estate and larger-than-life bottles of liquor provide a perfect platform for influencers to make their statements and draw followers to your venue.

Growing numbers of tourists expect it

Growth in tourism continues to be a significant contributor to Australia’s nightlife industry. Local and Federal government investment in precinct development is encouraging the development of unique and culturally diverse nightlife experiences to reflect the styles and customs of its residents and visitors. Bottle service is deeply rooted in Asian and popular-American cultures, it is widely observed throughout Europe. In 2016, tourists from China, the USA, Japan and Singapore represented 34% of Australian visitors (4) and spend in Australia by tourism is expected to grow by 50% between now and 2026 (5).

Venues will need to adapt

IBIS World (2)(6) emphasises the importance of developing customer loyalty, design of new products and building a strong market profile as ways to compete in an industry that is facing into shrinking margins. We believe that clubs should be considering bottle service as both a point of differentiation and a way to meet the expectations of affluent party-goers today.  If these imperatives aren’t enough, generous mark-ups on bottle prices, minimum spends and a captive customer base should help sweeten the deal.

About the author: Andrew Nunn is the Founder of Queue Bar Pty Ltd, a nightclub consultancy which leverages digital systems to improve profitability and customer service.