What You Need to Know About Bar Ownership in Today’s Economy
Bars have long been folded into the culture and nightlife of this country. They can take a myriad of forms, from wine bars, karaoke bars, taprooms, lounges, dive bars, to arcade bars. The characteristics tying all bars together? Cocktails, ambiance, & entertainment.
What is the economic outlook for the bar & nightlife industry?
The economic outlook for the bar & nightlife industry looks favorable. Alcohol consumption has historically, and continues to play an important part in social engagement and community gathering.
To improve your chances of owning a successful bar, consider buying an existing bar business. With lower initial operational costs, additional advantages to this approach are access to a customer base, established traditions, and the brick-and-mortar building itself. After the purchase, you can choose to keep things the way they are or try new business tactics.
Keeping up with changing consumer demands by altering the menu slightly, conducting thorough market research, and investing in the latest technology are all ways in which to give you and your bar an edge.
Disposable Income and Changing Preferences Influence Demand
According to IBISWorld, the bar and the nightlife industry in 2018 generated approximately $27 billion in revenue and included about 70,382 businesses. Consumers are diverse in age; everyone needs a cocktail every now and then. The two key drivers influencing demand in this industry are personal income and changes in alcohol preferences.
The Bureau of Labor Statistics reports disposable income has grown by 3.6% since 2008 and is expected to continue to grow 4.1% over the next decade. With increasing disposable income, people are spending more in bars and restaurants.
Alcohol preferences have changed in recent years. Traditional bars have become less popular, giving rise to specialized wine bars and craft breweries. More Americans are becoming health conscious and choosing to take better care of themselves. Alcohol retailers are keeping up with this movement by adding healthy drinks and snacks to their menu.
Demographics Play a Key Role in Local Nightlife
Interacting with the nightlife industry is a way for young people to enjoy themselves, adults to let off some stress after work, and others to have a way to meet friends and get out of the house. Different kinds of bars and clubs appeal to different demographics and depending on the location of your establishment you can market to your audience appropriately. Knowing your market, and tailoring your tactics accordingly is extremely important to running a successful bar business.
According to America’s Small Business Development Center (ASBDC), the top three consumer markets are segmented by age as such:
- 25-34 (19.5%)
- 45-54 (19.1%)
- 55-64% (18.2)
Be sure to understand the demographics of the area you’ve purchased your bar in, to better market and provide for them. There are many things you can do to appeal to a target audience if you’re in an over-saturated market.
For example, if your consumer’s priorities lie in eating health, try using fresh and local ingredients to prepare your food & drinks. Be creative when creating craft cocktails and advertise them appropriately. If you are located in a college town, have a variety of happy hours to draw in the crowd.
Where is the biggest market for this industry?
Geographically, the best markets for bars & clubs are in big cities, the ones that party-goers gravitate towards. As reported by U.S News & World News, the best nightlife can be found in the following cities: Las Vegas, Miami Beach, New Orleans, New York City, and Los Angeles.
But, there are bars in each region of this country, and the market for establishments in the nightlife industry depends heavily on the type of bar you end up purchasing. Some bars will perform better in bigger cities, and others in less populous regions.
- Neighborhood bars are defined by their warm atmosphere, comfortable booths and classic hits. Your customers will generally be regulars who live or work in the area. You will have the opportunity to develop a home away from home.
- Wine bars or taprooms are geared more towards more specific audiences. As a taproom owner, you can brew your own beer or serve local IPAs. Wine bars serve a variety of wines, from both local wineries and from more established ones.
- Nightclubs are often found in city centers or hip neighborhoods that often have other clubs. This kind of establishment has more initial costs, however, they also tend to generate more revenue.
- Cocktail bars serve handcrafted drinks and generally have higher price points than other kinds of bars. Because of this, they’re found in financial districts and in more expensive parts of a city.
How is modern-day alcohol consumption influenced the bar and nightlife industry?
Modern-day alcohol consumption trends have filtered towards the celebratory and social. The shift in preferences the industry is currently experiencing is due to millennials, the largest demographic of consumers that participate in this industry.
According to Nielsen, 67% of U.S millennials say they have visited a brewery more than they did the previous year, and 63% report they’ve visited a Tiki bar. This popularity with unique and specialized establishments can provide insight into how to make your bar successful.
It’s important to note that millennials are a very diverse group, and can even be separated into younger and older millennials- with behavior differences between the two. Younger millennials are more likely to buy alcohol at nightclubs and bars, whereas older millennials are more likely to buy alcohol at warehouse club stores.
Demographics of consumers have shifted slightly, and with it, so have prefered drinks. CNN Business reports alternative drink categories are becoming more popular, such as spiked seltzer. Other alternatives include: pre-made cocktails, rosé, and private label products.
Owning a bar or nightclub in today’s economy has many opportunities for growth. The economy is strong, disposable income is on an uptick and many new and exciting trends are attracting today’s consumers.
Sources:
“The 10 Best Nightlife Cities in the U.S.” U.S. News & World Report, U.S. News & World Report, 2018, travel.usnews.com/rankings/best-bar-club-scenes-in-the-usa/.
“Assessing the Reduced Growth of the U.S. Adult Beverage Market.” Nielsen, 24 Apr. 2018, www.nielsen.com/us/en/insights/article/2018/assessing-the-reduced-growth-of-the-us-adult-beverage-market/.
“Industry Market Research, Reports, and Statistics.” IBISWorld, Dec. 2018, www.ibisworld.com/industry-trends/market-research-reports/accommodation-food-services/bars-nightclubs.html.
“Market Overview.” American Nightlife Association, 2018, www.nightlifeassociation.org/market-overview/.
SBDCNet. “Bar Business.” SBDCNet, 5 Oct. 2019, www.sbdcnet.org/small-business-research-reports/bar-business.
Small Business Blog. “How to Open a Bar: Everything You Need to Know (and Then Some).” Stories on Bond Street, 20 Feb. 2017, .