Wednesday, October 29, 2008

NYC Poised for Growth in the Nightlife Industry

By Gamal Hennessy

Despite the gloom in the economic press there good things that can come out of the recession for nightlife natives. In spite of the bottle service decline and the community board moratoriums there is opportunity for a revitalized club scene. If
recent history is any indicator, an infusion of new thinking can be the bright spot in an otherwise dark period.

From Problem to Playground
To understand the potential for growth, it makes sense to look at a previous crisis. In the late 1970’s America’s dependency on foreign oil spiked and the price of a barrel of oil jumped from $5 to $17 (which doesn’t seem that bared when compared to the price of crude today). That
oil crisis contributed to economic malaise of the early 1980’s.

It was during this period that megaclubs opened and flourished. Between 1977 and 1985 legendary venues like
Studio 54, Limelight and the Palladium defined nightlife culture. Entrepreneurs from other sectors understood that people need release and escape during periods of economic struggle. The result was a playground for the excessive 80’s that was imitated all over the world.

Fast forward
Today it is housing and credit that is causing the headaches instead of oil. AIG, Merrill Lynch and other investment banks are being torn down and sold for scrap creating a pool of finance, insurance and real estate (FIRE) workers looking for a new start. The
fall of bottle service is a direct effect of this situation. The closing or repositioning of clubs that relied on this trend is the indirect effect.

But it is in these ashes that a new era in clubs can rise. The credit crunch has had a
direct impact on real estate expansion in the city. Many people in the field see an inevitable drop in prices per square foot. As property prices fall and people look to take money out of the stock markets and put them into other investments, you also have a potential pool of talent coming out of the FIRE industries who can translate their skills into the hospitality industry. Rounding out the equation, you still have patrons who have the need for temporary escape from their daily lives. Some experts think that this combination will lead to a new period of growth in the nightlife industry.

Of course, the next Studio 54 isn’t going to just magically appear. Every new spot that opens is still going to have to find a way to get credit, deal with the community boards and police, overcome the jaded malaise of many veteran nightlife natives, compete with all the other clubs in the city and find a way to make money. There are sure to be a lot of failures but there is room for success. It will take creative thinking, personality and financial skill to make the next great spots work, but we have been in this situation before.

In the last few months, promoters have approached me asking my opinion on looking for the best club to buy and different ways invest. The advice I gave them isn’t original but I believe it to be sound. First, find someone who has experience over the long term that you can work with. Second, contribute your expertise and bring your people into the venue. Third and most important, learn how the whole business works. Those steps, a lot of work and some luck can revitalize nightlife in New York.

Have fun.

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