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Marquee: Reinventing the Business of Nightlife

August 8, 2017

 

Opened since 2003, Marquee NYC has been one of the city’s oldest nightclub operating over a decade. “The typical lifespan of nightclubs in Manhattan was thought to be about 18 months,” Prof. Anita Elberse’s study says. There are many reasons that explain the ups and downs of the “old” Marquee. To begin with, it entered the market with a bottle-serviced concept to its customers to maximize revenue per table. By doing so, it attracted higher income customers such as celebrities, models, professionals and young entrepreneurs. “The key to having a successful run of a nightclub is having a good mix people and styles, …” said by Marquee’s doorman, Wass Stevens. In addition, it had a high commission based promoters’ policy which incentivize promoters to bring customers to Marquee on any given day. A combination of iconic events, top celebrities and great press contributed to the overall success of the “old” Marquee in its early years. Unfortunately, for the reasons that made the “old” Marquee successful also accelerated the doom of the once glamorous nightclub. High promoters’ cost, overpaid entertainers, the ever increasing rent and advertising costs quickly pushed the club into the red. Newcomers like the TAO’s properties really hammered the “old” Marquee especially during the financial crisis back in 2008. 

 

In December 2010, the second Marquee opened in Las Vegas and became the highest-grossing club in North America the next year. Marquee Las Vegas’ success was built on its uniqueness and the unprecedented size of the club. It opened along with a brand new hotel on the strip with massive prior promotion. On top of the superb venue, it features electronic dance music and the top DJs around the world which draws crowd from every part of the country. It also combines a nice outdoor atmosphere with an ample space as a day club. The control of men/women ratio is also a genius policy which ensure everyone (men or women) has a great experience inside. However, keep up with a large number of attendance is always a challenge year round. New competitors are constantly challenging its status quo in the market and the rising fee of star DJs also increased its operation cost. As Rotella said: “Lots of people jump into the business of hosting events driving up the fees which ruin the market.” Some DJs even started to demand a share of ticket sales or bar revenues. 

 

The Market for DJs in the world is very much similar to the entertainment business. A combination of good marketing, packaging and supporting group is vital to the success of a great DJ. Superstars in this business is often supported by his or her fans all over the world like a celebrity. Therefore, the more popular they are the more expensive to bring them in house. “DJs with clout often drove a hard bargain in their negotiations with nightlife impresarios.” One way to control its rising fee is to spot the rising stars by signing longer term contract with them to become a regular guest in the club. 

 

Las Vegas Marquees’ success provided their venue in New York a chance to be alive. Temporary closing for renovation in 2012, the new Marquee reopened with the model of focusing on electronic dance music and star DJs. Mentioned by Elberse’s study: “It is converted from selling high-priced alcohol to selling tickets to heavily marketed events featuring A-list and up-and-coming DJs.” The club was devoted 2 to give customers a unique nightclub experience. It made themselves as a one-stop party shop which not only tied to electronic dance music, but also could had different types of content, such as live music, performance art, and concert. 

 

I believe the idea of exporting Marquee Las Vegas’ success to New York is brilliant. First of all, since TAO Group currently has 3 other properties under management in New York, by adding the new Marquee to its portfolio, the group will further dominate the entertainment industry in the city. Secondly, although it cost a fortune to renovate, the new Marquee extended its legendary brand lifespan successfully and brought a whole new experience to their customers. Marquee serves an upscale clubbing clienteles who are looking for a venue that set itself apart from other nightclubs in town. They should have done it sooner when the group first set its footprint in New York. Lastly, it thrived to create a prestige workplace for DJs by designing a throne-like DJ booth and set up a centralized booking system offering multiple engagements for DJs across all its locations in the U.S. As Kaskade said: “The marketing that the venue puts behind the show is important, too.” The ambition to expand and integrate its brand was obvious. Since top DJs would prefer to choose a famous place to collaborate with, Marquee leveraged this advantage to its fullest. 

 

 

 

The current business model of creating add-on or cross-selling business have proved to be tough in today’s environment. Options like increasing the frequency of operation is a nature choice for Marquee in order to stay profitable.

 

 

 

 

 

The current openings of only 3 days a week fall short of industry average. A balance of staying attractive while increasing the frequency of operation is a must in order to stay on the competitive edge. And also, producing products such as T-Shirt, Mugs or Hats are also commonly used tools as examples of cross-selling. However, the real success for the club’s future may very well lie on what the alternative business models that the owners were able to implement.

 

An affiliated business model of working with UBER to chauffeur high-spending customers to and from the club may seem to be a great idea given UBER’s popularity these days. It is a “Milk and Bread” strategy which pretty much every customer would appreciate it especially in a big city like New York. It is a win-win alliance for both the club and UBER to increase revenue and at the same time providing safe travels for the club’s customers.

 

Like the airlines industry, a customer loyalty program is an effective tool commonly used as an alternative business model. It enables its loyal customers to accumulate “points” earned in the club towards next visit or invite his or her friends in the coming events. They would get priority seating, no queue at the door...etc. It is a “milk and bread” strategy which at the end of the day, would draw more repeat customers.

 

Another alternative business model such as providing franchise opportunities could leverage Marquee’s brand name. It could also generate immediate cash for the funding needed at its own locations where the operating costs are on the rise. It potentially yields higher risk and uncertainty which makes it as a “consulting” way. The quality and management culture would be hard to preserve. The failure of a franchised Marquee nightclub might have an impact on the original stores due to negative publicity since today’s social media is extremely active.

 

The last alternative business model which I categorized it as a “swing for the fences” approach is to charge a “Flat Rate” for everyone. This will definitely see an immediate jump in attendance number; but at the same time, you will immediately lose loyal high-spending customers and celebrities who usually don’t like to share the floor with others. This model would create more customer volume at least couple of months with large sum of cash coming in to service the club’s debt, if any, before it feels the pain of losing valuable customers.

 

With the above analysis and discussions being said, we should ask ourselves the followings: Do we really need another Vegas style mega club in the heart of Manhattan? Will club like this pose any safety concerns as we have seen tragedies happened to night clubs in other parts of the world? Will this be, again, a short-lived club that would probably leave the city with huge unpaid public utility bills and destruction of the neighborhood? Will the crime rate further hikes in the city as it becomes the harvesting spot for the drug lords?

 

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