Tuesday, April 7, 2009
The Right Side of the Bottle
By Gamal Hennessy
There has been a lot written about how the practice of bottle service has become a scourge on nightlife culture. I know this is true because I’ve written quite a few of those articles myself. The recession has exposed a weakness in the business model that might put some operators out of business. But bottles are still flowing and some venues are thriving from it. So what is it that makes bottle service work for some venues and not work for others? A recent study suggests that it’s the patrons that hold the key to long term success.
Anita Elberse, Ryan Barlow and Sheldon Wong are students at Harvard Business School. They recently published a study called Marquee: The Business of Nightlife where they document the financial success of this long running venue and what goes on behind the scenes to make the venue work. One of the many interesting aspects of the study was the breakdown of Marquee’s bottle service clients. While this group is relatively small (40% of the patrons on any given night) they accounted for 80% of the revenue. And while any one could theoretically purchase bottle service, there were three main groups that Marquee provided this service to. There are celebrities who are so famous that they only have one name (think Diddy, Bono, and Paris). There are Upper East Side socialites who inspired the characters in The Devil Wears Prada, and Gossip Girl. Then there are the professionals who recently acquired wealth and were looking for a place to spend it. The last group has dwindled significantly, but between these three groups Marquee made more than two million dollars in their third year of operation.
The other point of interest in this dynamic is the time it took to cultivate the relationships that made bottle service work. The owners of Marquee, Noah Tepperberg and Jason Strauss claim to have spent half their lives developing relationships in the nightlife industry, interacting with potential clients in New York, Miami, Los Angeles and Las Vegas, and using Marquee as a national concierge service for established bottle service clientele. Their main focus was on the client who could consistently frequent the venue over several years, not the stock broker who would spend $100,000 in six months and then burn out. Based on the Harvard study, Marquee’s success is based on a decade and a half of work, not a flashy gimmick.
Marquee connects with people who have money to spend over an extended period of time. Among other things that they do, that practice has kept them running much longer than the average New York venue. Places that try to force bottle service on patrons who don’t have black Amex cards probably won’t last as long in this economy. And patrons who don’t have a name like Bono might want to think twice before trying to live this lifestyle. A prominent promoter I talked to last week explained it very well. ‘I don’t tell my customers what they should do with their money, but maybe the guys coming in from Newark who make $40,000 a year shouldn’t be spending $600 on a bottle of vodka. I think they can have just as much fun running a tab at the bar.’