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APU Business Original

A Spotlight on Las Vegas Hospitality Club Management (Part II)

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By Dr. Gary L. Deel, Ph.D., J.D.
Faculty Director, School of Business

This is the second article in a six-part series on the particulars of club hospitality management.

(Note: For the purposes of this series, the word “club” should also be interpreted to include both “nightclubs” and “day clubs” (venues typically in and around a pool area and often referred to as “beach clubs”), both of which typically entail many of the same management particulars. Where differences exist, they will be distinguished for the reader.)

In the first part of this series, we talked, among other things, about the importance of limiting club capacity based on facility limits governed by fire codes and other regulations. But beyond the extent to which a club can service a certain number of guests, another important hospitality question becomes whether it should service all of those guests.

Patrons Will Expect a Degree of Exclusivity if the Club Charges a Premium Price

If a club charges a premium price for admission and beverages, patrons will expect a degree of exclusivity for their experience. Indeed, much of the club’s attraction lies in its image of exclusivity, and it would lose most if not all of its value were it accessible to everyone.

Recalling our automobile analogy from Part I, how many people who might love to have a Lamborghini in their garage would feel the same way if everyone in the neighborhood had a Lamborghini? Psychology and sociology tell us that most people would then find ownership of a Lamborghini less appealing.

The same is true with resort clubs. The now-defunct Playboy Clubs operated on the same principle; the relatively high cost of membership limited their numbers.

As such, club marketers need to consider not only what the law will allow, but also what their market(s) will tolerate before they decide how to position themselves. In the club industry, it is possible to serve so many people that you destroy the quality of the product.

Although it is worthy of note that the recent trend in “raves” and electronic music festivals has brought with it an increased acceptance of — if not an actual desire for — extremely crowded dance floors and social environments with little or no “personal space” whatsoever. This obviously bodes well for the profits of the industry, but it’s also no wonder they have shut down during the COVID-19 pandemic.

Customers Who Want Exclusivity Would Likely Not to Be the Only Patrons in the Club

On the other side of this coin, clubs must remember that “a crowd draws a crowd.” Those same customers who want exclusivity also likely would prefer not to be the only patrons in the club.

After all, what is exclusivity, vanity and opulence worth if no one is around to bear witness? Therefore, there is a balance that must be respected by operators, and that balance will inherently be different for each concept based on its unique circumstances.

Once a club determines its occupancy goals, it must then determine how best to meet them. Again, this is dependent on the club’s market position. Budget clubs may wish to advertise low (or no) cover charge, free drinks, or other value-based incentives like free souvenir drink glasses to promote their gate.

Luxury clubs, on the other hand, would likely make no mention of cost. Conveniently, they are able to appeal to their target market through the old adage, “If you have to ask about the cost, you can’t afford it.” Instead, these clubs focus on other aspects including quality entertainment and atmosphere, again promoting an exclusive experience of unmatched excitement and allure.

Club Marketing Is Conducted Using Many Universally Employed Media Channels

Club marketing is conducted using many universally employed media channels, including print, web, radio, television, and others. However, in the short distances between clubs on the Las Vegas Strip, marketers have found personal solicitation to be an extremely effective tool. This essentially means hiring an army of club “promoters” who station themselves throughout the most heavily trafficked areas of the Strip and solicit passersby to visit their club.

Diverting tourists from their would-be evening plans to a specific establishment usually requires incentives, like wristbands that entitle the wearers to free cover or free drinks, for example. If unique to each promoter, these wristbands can be used by management to measure their employees’ performance. These employees are paid on a commission basis, so their pay will be determined by how many wristbands show up at the club.

Remembering the point about “a crowd drawing a crowd,” club operators also use this tool outside their clubs. Most club exteriors are designed to create lines of waiting customers in public view in order to create the impression of the club’s great popularity and engender a curiosity to know why.

As such, club marketers want to make sure that their club always appears to be busy and in high demand. Therefore, clubs will intentionally maintain a queue at all times by staggering admissions throughout the evening. It is important that customers are seen enjoying themselves so that we recognize their brand position and value proposition.

A Third Club Market Is the Guests Who Visit Nightclubs for Entertainment Headliners

One final aspect in the club marketing area is entertainment. As previously discussed, some budget-conscious guests look for value in the clubs they patronize. They can be just as happy being entertained by lounge entertainers, would-be stars or once briefly famous names. Others who desire a higher level of exclusivity may look for luxury and opulence without respect to price.

However, a third club market component exists, and that is the cohort of guests who visit nightclubs for entertainment headliners. Liberace and Wayne Newton became Vegas legends this way.

Today’s top Las Vegas clubs regularly host the biggest entertainers in the world. They advertise these appearances heavily because they know celebrity entertainers have a following of fans who would attend any club where they were performing. Some clubs have gone so far as to sign the most popular names as “resident” entertainers, or DJs and artists who perform on a set schedule.

Entertainment brings an entirely different market segment that is not necessarily loyal to any club or even to a class of clubs, but rather to the entertainers themselves. Using our automobile analogy, Ford markets some of its Mustang models with the Carroll Shelby brand name and logos, and many people buy the classic “Shelby Cobras” because of their admiration and respect for the legend of Carroll Shelby in the annals of car racing.

In the next part of this series, we’ll look at the operations side of club management and how venue managers can run smooth and successful businesses.

Dr. Gary Deel is a Faculty Director with the School of Business at American Public University. He holds a J.D. in Law and a Ph.D. in Hospitality/Business Management. Gary teaches human resources and employment law classes for American Public University, the University of Central Florida, Colorado State University and others.

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