Disco floored

Nightclubs and disco bars have taken an enormous hit due to the new licensing regulations.

Extended drinking hours have given highstreet pubs a substantial trading boost and clubland has felt the draught in a big way.

Drinkers are staying longer in town and city pubs and many are giving clubs and discos a wide berth. Those who still patronise these late-night venues are arriving later and spending less.

As a result, a number of smaller club operators are already throwing in the towel and putting their businesses on the market citing declining sales and profitability.

Pubs set to gain afresh

The new Licensing Act, now approaching its first anniversary, has divided the town and city late-night landscape into two distinct camps. On the one hand rejuvenated highstreet pubs are revelling in their new-found popularity and conjuring up new ways of persuading customers to stay on their premises into the early hours. Across the divide, clubs, whose traditional attraction has historically been the ability to offer late opening, have so far failed to find an effective answer to this new challenge.

Next summer further upheaval is threatened by the smoking ban, which may spell more problems for the club and disco

industry.

Few nightclubs are able to develop outside areas into smoking stations or patios. A good many pubs, on the other hand, have exterior space and this ability to attract smoking customers may just be a further ace up their sleeves.

Property agents agree that the new licensing scenario has dealt the club industry a poor hand and only the big players, such as Luminar and those in niche markets, currently have the ability to compete.

Extra overheads hit clubs

Tim Martin, associate at licensed property specialists Fleurets, believes clubs have it

all to do if they want to retain their market share.

"The new Act and the impending smoking ban, will have a continuing impact on trade, particularly in town and city venues.

"One of the other real down sides has been the increase in running costs associated with extra hours."

These costs - including greater staff wages and heightened heating and lighting fees - have hit nightclub finances hard and in few cases has the extra trade balanced out or exceeded these new overheads.

"In most cases the key will always be the ability of the operator to maximise the potential of a venue while controlling expenditure to cope with the changes in the landscape," he explained.

Stuart Parsons from Fleurets' Bristol office says recent months have seen a rising number of mid-market bars and smaller nightclubs come onto the market with the suggestion that the reason has been dipping sales and declining profits.

"The nightclub market has always had the reputation of being fickle, with the smaller individual operations being particularly affected by the opening of new competition and refurbishment of outlets," he says.

"Extended trading hours has not resulted in customers spending more money in clubs and bars.

"Similar sums are being spent, but the

pattern has changed - with town-centre

customers coming out later, but instead of needing to visit a club for a late drink, they now have far more choice.

"Pubs and bars have maintained sales but smaller clubs have experienced declining sales and profitability.

"Logic dictates this must result in a decline in property values but only time will tell."

wellstead: Further Market consolidation still to come

Christie+Co national public houses and restaurants director Colin Wellstead agrees that the new licensing regulations have affected trade in the nightclub sector.

But he argues that this was already starting to happen through the 1990s with the opening of new-style chameleon bars which had the ability to change their

trading format according to the time of day or night.

As more and more outlets acquired drinking extensions to midnight and

then 1am, clubgoers felt no pressure to exit these outlets at 11pm simply to obtain late drinking at traditional "black box" nightclubs.

Consolidation in the high street, evident through the late 1990s, will continue, he predicts, as the effects of longer drinking hours and the smoking ban drives a change in drinking and leisure patterns.

"We have seen the demise of a number of operators over the past few years with the major players now being Laurel, which sold its mainstream pubs to Greene King, and acquired Yates's and the majority of the

SFI units," said Wellstead.

"It is reported to have a number of properties on the market although the majority of these appear to be over-rented and under-trading.

"There are a significant number of units of this nature on the market from a variety of sources and they are proving very difficult for most agents to sell and some are literally unsaleable."

Niche product operators however have survived, with firms such as Inventive Leisure and its Revolution Vodka Bars selectively expanding.

Another niche player on the regional stage is Apres Bars, which trade around the West Midlands. Wellstead believes this is a company to watch for in the future.

"Town and city bars have obviously benefited from the changes in the licensing laws, but now have to face the potential from the impact of the smoking ban," he added.

"Some have already devised a smoking solution but those who do not address the issue could see trade damaged."