Market predictions

04_ We should expect further distress in the nightclub sector, as youth unemployment continues to erode the target market 05_ We could see a further increase in the outdoor leisure/health and fitness sector

01_ Across all parts of the leisure sector, value for money will be crucial as the period of austerity continues 02_ Health and fitness club operators may engage in more estate management activity, bringing more lower-end clubs to the market 03_ Budget offerings will again be to the fore


Operators throughout the leisure arena saw the patterns of 2010 being replicated through 2011, with budget health and fitness, cinemas and spas performing well, but with the late-night sector remaining under significant pressure. To assume that 2011 was merely a repeat tells just half the story, however. Nightclubs count the cost Recessionary pressures, though a key driver for levels of performance, were not the sole causation of a difficult year for operators in the nightclub arena. It was true that the impact of youth unemployment – now topping one million – meant that nightclubs’ traditional audience was under pressure. It was also the case that the so-called ‘bank of mum and dad’ had its own lending restrictions during the year, while continuing doubts about the affordability of university fees meant that disposable income was at a premium. Yet nightclubs also had additional concerns to weigh up – notably licensing reforms, which saw nightclub operators struggle to compete with late-night operators in the high street. A further dark cloud on the horizon comes in the form of proposed changes in the way music

than the self-limiting 10pm-4am usage. Venues the size of most nightclubs could potentially be utilised for complementary daytime uses and it will be up to club owners and managers to think outside the box more than ever before. Operators like Eclectic, under its Po Na Na brand, and Odysian’s Cruise concept are already reaping the benefits of using smaller space better, with trading performance and profitability improving as a result. The health and fitness industry has seen steady growth over the last few years, particularly with the increase in local authority and other public health clubs. It remains a fragmented sector, however, with the top seven players accounting for just one- fifth of all health clubs, and a large proportion of independent single-site operators. Although largely resisting the effects of the economic downturn, the health and fitness sector witnessed a further consumer and operator migration to the budget sector in 2011, as the shift in consumer confidence and pressures on disposable income hit non-essential (things other than membership fees) health club spend. Mid-market clubs Budget still rising in health and fitness

royalties are paid. Royalties collection firm PPL’s plan to increase fees for Special Featured Entertainment (SFE) up to 4,000 per cent will seriously impact club venues that host DJs and discos. The plan was revealed late in 2011 and major operators like Intertain are already warning of dire consequences for the nightclub sector if it is implemented and were also quick to galvanise organised objection. Even without this, there have been a number of operators signalling distress or falling into administration. The most high profile of these was Luminar Leisure, owner of 75 nightclubs operating under the Oceana, Liquid and Lava & Ignite brands. The company was acquired out of administration in December for £45 million by former company executive Peter Marks, together with Alex Geffert and Joe Heanen. As well as providing valuation and strategic disposal advice to Luminar and its backers, Christie + Co also completed the sale of three additional Nexum Leisure nightclubs in Derby, Leicester and Newport. For experienced operators however, nightclubs still remain a valid business proposition. If clubs are to survive and thrive in 2012 and beyond, operators will need to demonstrate adaptability and change or enhance their offering. This may mean relocating to smaller or city centre premises, or making better daytime use of space rather



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