By Robin Leach (contact)
Wednesday, March 4, 2015 | 2 a.m.
“Bar Rescue” reality-TV star Jon Taffer perhaps more than anybody else knows the nightclub and bar business inside out. For 30 years, he’s helmed the annual industry convention Nightclub & Bar Show and presided over its booming business, massive expansion and staggering growth.
In Las Vegas, it’s been more incredible than any other city on Earth, with revenue increasing into the billions.
But the man who leads a team of experts in saving failing bars has never had his own venue on the Strip, which sits at the center of the universe when it comes to the fabulous fun fueled by champagne wishes. That’s about to change, however, because Jon will soon announce the arrival of what he plans will be the “ultimate bar” and send the industry soaring even higher.
As he finalized plans for the 30th annual Nightclub & Bar Show in Las Vegas from March 30-April 1, Jon took time out for a lengthy conversation about what he believes are the big changes ahead.
As one of the founders of the Nightclub & Bar Show, he’s promising that it will be the biggest industry event Las Vegas has ever seen. Attendees will represent more than 200,000 locations from the United States and 56 countries, with total annual beverage sales of nearly $20 billion.
I started our conversation with a look at the Las Vegas nightclub business that has helped the entire industry break through a record-setting, magical billion-dollar mark.
Jon, this has been a remarkable year for the nightclub business since we last spoke. Across America, it has risen into the billions.
Unbelievable. This year we had two in the Nightclub & Bar Top 100 that broke records each passing $100 million. Robin, I’m not sure I would have ever expected to see that in my lifetime. I bet you agree.
Completely. The numbers are almost too astronomical to hold that big in my opinion.
What’s interesting is I look at them and they submit the numbers to us and we do audits in house. We verify the numbers they report. They’re going to pump them a little and they’re going to play a little, but I’ll take a look at square footage and I’ll break out revenue per foot and I’ll do certain things to try to see if what they’re reporting is outrageous or unbelievable.
What’s fascinating is that XS beat Hakkasan, but yet Hakkasan is about 20,000 square feet bigger, so you say, “Wait a minute, how can that be?” Well, when you pick it apart, here’s what’s interesting: Hakkasan has about 69 VIP tables that are in the sight line of the DJ booth. The others are cut up in different areas of the facilities, in the lounge areas and things like that. XS has 89 VIP tables facing the sightline of the DJ booth, and the VIP tables at XS tend to be larger. So when you look at the VIP potential of both venues, XS is about 30 percent larger and has about 30 percent more VIP potential than Hakkasan.
It’s fascinating, Robin, when I started to dissect it and pick it apart and make logic out of it. So at the end of the day, XS achieved about $2,700 a foot in sales, which is pretty incredible, whereas Hakkasan achieved about $1,700 a foot in sales. The other element, you’ll appreciate this, you know the dining areas of Hakkasan and the way it’s cut up creates food revenue, but it doesn’t create the volume of drink sales per foot in those lower-energy areas of the venue.
Whereas all of XS has that high-energy element. It isn’t cut up in the way that Hakkasan is. The concepts play a part in it, the seating styles play a part in it, the VIP tables play a part in it. It’s fascinating to take it apart.
Why is it that Las Vegas has “it” and other cities don’t?
There are a couple of things. One, a captive audience. The people are upstairs literally. Take the locals nights out of the calculation. The fact is this city delivers give or take about a million visitors a week. Those million visitors a week are here to party and drink, so the consumption of alcohol per day per person when they come to Las Vegas is far higher than home; we know that.
They’re here to drink and party. We’re fantasyland, and nobody provides the density that we do. Think about this: The old Pure is spending about $120 million remodeling to become Omnia. Robin, no city could spend that kind of money on a venue and survive.
Visitors who come here really consume more alcohol than they do back in their hometowns?
While they’re here, yes, because they’re in drinking mode. They’re in party mode. Every night is Friday night here, right?
Where does this business go from these record-breaking numbers?
I’m not sure. Is the sky the limit? I don’t know. Can a venue achieve $4,000 a foot in sales? I don’t think so. Bottles can’t start to cost $7,500; that’s going to start to get ridiculous. I believe that at some point the exclusivity element is going to start to shift to more inclusivity rather than exclusivity.
How many times can you see Tiesto, Robin? How many times can you see Calvin Harris? At some point, the cycle is going to go through itself. You and I have been around a long time, my friend. We’ve seen that pendulum go back and forth between live music and DJs and dance floors and the best dance floors and bigger venues and smaller venues.
That pendulum has to move back from the $300,000 DJ at some point. Now the question — is it two years, five years, seven years? I don’t know, but I can’t believe 10 years from now we’re going to be seeing DJs making $100,000 a night in $2 million venues.
I don’t believe that will ever happen. I think there are some big changes ahead. I think technology is a part of it, of course, but I wonder how many of these mega venues can exist.
For example, we all know about the Hakkasan acquisition of Light. So now Hakkasan is now building the new Pure venue, which is going to be absolutely fantastic, but even they know that they’re going to cannibalize Hakkasan. These operators are building venues that they know are going to cannibalize themselves. That starts to get a little insane when you start to look at that business model.
So why do they do it?
I think everybody thinks they can have the next $100 million venue. I think there is a bit of arrogance in that. To think that you’re going to come and build a $120 million venue and empty XS or empty Marquee or empty Hakkasan; I don’t know, but that’s a pretty arrogant posture to take. A new venue in this town can do quite well, but the only way you’re going to get attention in this town now is by spending $100 million.
Nobody ever guessed those numbers would get so high; it’s unprecedented.
It’s unheard of in any other city. The numbers just don’t work, Robin; it’s ridiculous. I have to tell you, take casino marketing gaming credits, the casino aspect out of it, the public market out of it, the stock aspect out of it, which creates capital budgets sometimes; this model doesn’t work any place else economically.
What does it swing back to when the change comes? What do you think we’ll see? Quieter? Smaller?
I think that we’ve seen the large venues go to the small venues back to the large venues. I think venues are going to get smaller, is my guess. They’re going to downsize a little bit. I think they’re going to get a little more intimate, and I think there is going start to be a separation between luxury venues and non-luxury venues.
That’s an interesting view that I’ve never heard anybody else take before. I think what’s going to happen is certain venues like XS are going to be high-end venues with higher prices, and there are going to be alternatives. Some of these other nightclubs are going to come in with a comparable experience at more value pricing. I think that we’re going to see a Holiday Inn and then a luxury Holiday Inn model, if you will.
So Hakkasan plus and Hakkasan minus?
Yes, but not all the brand of Hakkasan, per se, but yes I think these operators are going to say, “Look, we all can’t walk in the exclusive $1,000-a-bottle space.” So I’m going to come in and take the middle market, somebody else has the high end of the market, somebody else has the lower end of the market like the Excalibur, Luxor or Mandalay Bay model, so to speak.
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Check back to Vegas DeLuxe for Part 2 of our fascinating chat on Thursday and the final Part 3 on Friday.
Robin Leach has been a journalist for more than 50 years and has spent the past 15 years giving readers the inside scoop on Las Vegas, the world’s premier platinum playground.
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