Australia’s nightclub industry has faced a tough couple of years, with no recovery in sight as revenue dissipates and establishments are forced to close.
Industry revenue is expected to decline by a further 2.9 per cent in 2015-16, following sluggish growth of 0.3 per cent in 2014-15, according to a recent IBISWorld report.
This is in contrast to the strong industry growth seen in the years 2010-11 through 2013-14.
So what is behind the rapid demise?
Weaker growth has largely been due to increased industry regulation and violence which have severely affected the ability for nightclubs to operation, combined with decreasing levels of alcohol consumption among the younger demographics.
The incoming decline of Australia’s nightclub industry clearly coincides with the implementation of Sydney’s strict ‘lockout’ laws which were introduced in 2014.
The new rules – introduced in response to the increasing level of alcohol-related violence in the King’s Cross district in particular – state that establishments can’t allow entry after 1.30am and can’t serve alcohol after 3am in parts of Sydney’s CBD and the King’s Cross district.
The rules also include a NSW-wide ban on takeaway alcohol sales after 10pm.
Implementation of the restrictive new rules have resulted in the closure of several iconic nightclubs across the city.
Those which have been able to survive in the declining industry and still remain in business have reported huge falls in revenue and profitability.
Meanwhile, the falling alcohol consumption among younger consumers has also negatively affected nightclub demand, dampening industry revenue further.
Instead, Melbourne and Sydney have seen a diversion towards a strong bar culture, and consumer demand for these services has grown.
“Favourable licensing laws and changes in consumer tastes have also increased competition from bar and pub operators,” said IBISWorld senior industry analyst Spencer Little.
This trend has further diverted spending away from nightclubs in the industry over the past five years, contributing to the industry’s weaker performance in 2015-16, he explained.