View From Within: Chronicles of Nightlife Operators

In Soviet times the city promoted the so-called Houses of Culture, known by their commonly used abbreviation DK (Dom Kultury, pronounced is “dehkah”). In the wake of transition to a market economy many DKs were redesigned as nightclubs which soon became quite popular with city dwellers. Today, the competition in the field is quite tense, as nightlife entertainment venues are mushrooming across the capital.

The word “nightclub” itself should not be understood in a literal sense. Nightclubs fall into many categories – dining clubs, caf? clubs and many other establishments. Thanks to their owners the Russian language has adopted such concepts as pre-party and after-party.

Brief Survival Guide

When people run out of energy after a long and busy day, many seek an energy boost. For most that means “to sit down, have a drink and listen to the music”. It is absolutely unnecessary to postpone that till Friday evening. All sorts of disco bars and caf?-clubs open their doors for visitors every night. Those establishments are often used as venues for the gatherings, which are now widely referred to as “pre-party”.

But people err to think that entering such an establishment is always easy. Most of them are open only to club members. Patrons have membership cards issued in their name; other clubs request prior reservation of tables by phone. But not all clubs are that popular. Besides, attendance depends on the time of the week and the year. Market operators admit that the colder is the weather the higher is attendance.

Of course any nightlife establishment seeks to win over patrons. Attendance is crucial for its survival. To that end nightclubs hire professional promoters and consultants who develop business development strategies. Owners of clubs, cafes, restaurants and other entertainment facilities have launched a real hunt for professional consultants, an employee of one such agency told Vedomosti.

Leonid Sablin, owner of the consultancy Concept108, has reported that the size of initial investment depends on the owner’s ambitions. It is possible to put up approximately $200,000 for creating aninexpensive establishments such as for example Bar30/7.

However, there have been precedents where million of dollars were poured into nightclubs. The examples are Stone, Most and Billionaire. But those ambitious projects – albeit expensively designed and worth over $1 million – failed. For example, Most, Sablin says, has been under construction for at least three years now and the date of its launch is still unknown. But the owners have already spent much more than $1 million on the project. Most was designed by Alexei Khaas.

Sablin advises investors to exercise caution when hiring contractors and choosing the concept of the future establishment. Where the concept and philosophy of the club are defined already after building works begin that may result in much higher costs, just as where designers or contractors are replaced in the course of implementation of the project. The most profitable conceptual clubs operating in Moscow are Shambala, Zima, Leto, Sorry, babushka, Dyagilev and First, Sablin says.

Nightclub sound and illumination systems are the most expensive part of the project, but having acquired and installed the equipment once, afterwards the investor will have to spend money only on regular maintenance and to upgrade the hardware.

Mikhail Lokayev, managing director at the club First, says that just as any in other sector of real estate location is the key to success of a project. Even if huge funds are poured into the development and promotion of the venue it will fail if it is built in a ‘dead zone’, he says. There are plenty of examples of projects that have never paid back namely because of their poor location.

The property that houses First, on Sofiiskaya Naberezhnaya, is rented by the club on a long-term basis. When acquiring a property the buyer should remember that such businesses as ours are short-lived, Lokayev notes. In a couple of years, a would-be owner will be seeking for a tenant for his property and racking his brains thinking how vacated spaces may be utilized.

Sinisha Lazarevich, art director at Dyagilev, also says that his club, situated in the garden Hermitage, also occupies a rented property. The company sees no sense in spending huge funds on acquisition of freehold title to the property, as all such projects are quite short-term. Other market operators, too, have reported that they rent their spaces.

Illiodor Marach, co-owner of Sorry, babushka and Prado Caf?, also says all those properties are rented. Although, the reason is different – the building occupied by those outlets on Slavyanskaya Square is simply not available for sale.

Tee, Coffee, Dancing

To lure guests all means are justified – expensive design, services, all sorts of bonuses, club membership cards, theme parties, etc. Viktor Voitenko, creative director at Concept108, consulted the project “Sorry, babushka”. The concept of the establishment is the “territory of eternal youth”.

The club plays the 1980s-1990s music. The opening ceremony featured Black Sabbath’s performance. Even the name of the club has a hidden meaning – for those who understand. In the late 20th century in Moscow the expression “Sorry, babushka” meant that it was absolutely impossible to explain anything to a person addressed. He or she just would not understand.

An average bill at Sorry is $30 to $40 per person. Women are offered a 50% discount on membership cards. Viktor Voitenko positions the establishment as “a hand-made model” adding that he has a propensity to create unique products.

Incidentally, the club did not spend much on promotion. Nobody installed advertising banners on city roads. The company came up with an original solution and opted for viral marketing – hired experienced agents who passed the word on to everyone and everywhere about the new club. The results were fantastic, Voitenko says. His bureau is still consulting the project. Entering Sorry,babushka is quite difficult in the evening, especially on weekends when the venue is used for theme parties.

“I cannot say that some particular type of service is more popular than other forms of entertainment. People come here not only to drink and dine,” says Illiodor Mrach says. However, alcohol sales make up 60 to 65% of total sales. The other 35% are provided by the kitchen.

Sorry, babushka’s co-founders own several other projects in the city. One of those, Prado Caf?, is situated one floor below Babushka. The building occupied by both earlier housed the Soviet Ministry for Ferrous Metallurgy. Babushka was launched on the premises of the former House of Metallurgist.

The club Fabrique employs prominent chefs Maxim Kalmykov and Valery Oparin. Yekaterina Belyakova, art director at Fabrique, says that their restaurant is very popular. The club also features a catwalk run used as a venue for fashion shows, a chill out room and a smoking room. The establishment employs staff disc jockeys and often invites foreign DJs as well.

The club targets people who love to dance and are versed in music culture. That is why there are no presenters here and no karaoke. But then, the establishment provides an open-air verandah, hidden in a quiet courtyard with a branchy lime-tree in the center and a large TV screen for soccer fans. In winter the space is redesigned as a skating rink, skates may be rented. The territory of the club is divided into several zones providing a dance floor, a restaurant, etc. Bar prices range from 100 to 340 rubles per drink. An average bill at the restaurant is $40 to $50 per person including a glass of wine.

The club Dyagilev stakes on food and alcohol. Meals are cooked by Vesna Restaurant – a project by [famous Moscow restaurateur] Arkady Novikov; close attention is being paid to quality of food. But the highest demand is for beverages. That spot is anything but cheap. The average bill is $55, but Sinisha Lazarevich could not name the average amount a guest may spend at Dyagilev during the night. “Everything depends on imagination and size of purse of our guests,” he says. The club targets high-income audience.

First, on its part, is a highly versatile bar. Incidentally, Mikhail Lokayev had worked for a long time with Arkady Novikov in restaurant business. He says his project is aimed at providing First’s guests with a venue for expensive and top quality leisure. It is no secret that prices are high here, Lokayev says. But the quality of services offered by First is exceptional.

“The main thing is that all our guests should understand that “service” does not imply, say, sale of illicit drugs. Our services include beautiful shows, best Russian and international DJs, high quality of sound, professional lighting, etc. A modest guest who spends most of his time on the dance floor and drinks inexpensive whisky can make do with 3,000 rubles,” he says.

Cost of Creation

The first thing an entrepreneur needs to launch a club is a property that meets certain requirements, experts say. For example, it should measure at least 1,000sqm, with the minimum ceiling height of at least 4.5 to 5m, for proper installation of sound and lighting systems. Most importantly, the property must be comfortable. Low ceilings, small rooms and poor ventilation will force a guest to leave and never to return.

Dmitry Mingalev, head of engineering at Tandem Group, believes that if a property is in normal condition requiring only a redecoration and has already been redesigned (as a restaurant for example), the maximum cost of the project for a 1,000sqm property would amount to $500,000. Otherwise, the property will have to be refurbished, redesigned and redecorated for the purpose, which may cost up to $1 to 1.5 million, Mingalev says. Although today a great variety of inexpensive materials of good quality are available on the market. Thus, redecoration of 1sqm of space may cost $100 to $500.

The cost of design and installation works is estimated at $100 to 200 per 1sqm. That is the price set for installation of engineering systems on a turnkey basis. Those include fire alarm and safety systems, heating, ventilation and air conditioning, water supply, sewage disposal and power supply. Two key problems designers encounter is external power supply and heating. “Special attention should be paid to ventilation,” Mingalev says. Otherwise, sanitary authorities will never commission the project. Air conditioning systems are designed proceeding from the future club’s seating capacity.

In theory, calculations are based on legal acts in effect. But in truth norms set thereby are often exceeded at least 4 times. As an example Mingalev cites a club in Moscow countryside that, although intended to cater to 100 visitors per day has up to 400 guests on weekdays and up to 500 on weekends. Therefore, the designers had increased the ventilation air conditioning capacity which is three times above the standard set by law. In line with the building rules and regulations in effect a property is to provide 60 cubic meters of air per hour. But in practice the minimum requirement for a nightclub is 100 cu.m. per hour per person.

The cost of the design stage of the project is at least $2 per 1sqm. Such is the cost of works on a turnkey basis, including obtaining of all necessary permissions from the government bodies. The upper limit of the price depends solely on the client’s imagination and complexity of the project. The most expensive part of design and installation works is the installation of ventilation and air conditioning systems, whose cost makes up 40% of the total cost of project, the cost of installing heating systems is 20%, power supply 30% and 10% for sewage and water supply.

Difficult Repairs

Illiodor Marach says that his company’s move to combine an upscale establishment – Prado Caf? – with the moderately-priced club Sorry, babushka is based not only on business strategy. The property itself has offered such a solution. Prado Caf? occupies the first floor of the building with large windows and a beautiful view. The space simply had to house an expensive restaurant, he says. Sorry, babushka is situated in the basement and offers no convenient entry driveways.

When repair works were launched the owners were horrified to see how rundown the building was. The 1912-built property was the first reinforced concrete construction in town, built on the Moscow River bank on floating ground with foundation fixed on oak piles. The basement floor housed a big canteen where ministry officials took their meals, and auxiliary facilities. Illiodor Marach recalls that when he and his colleagues first inspected the site floors were in terrible condition. Ceilings had to be covered with gypsum cardboard, floors repaired and several partitions dismantled in order to widen the space. Communication lines were re-routed.

Price to Pay for Pleasure

Experts polled by Vedomosti agree that the amount of investment necessary to launch a nightlife establishment depends solely on preferences of their owners. The same is true for attendance rates. Attendance at large establishments is estimated at 1,000 to 2,500 per day, medium-size clubs are visited by 700 to 1,500 people daily.

A club such as Dyagilev requires spending millions of dollars, Sinisha Lazarevich says. The most expensive part of the project is acquisition and installation of sound and lighting systems. For the most part, all such establishments have to be built from scratch, he says. That is why utmost importance is attached to professionalism of architects and designers. The cost of the Dyagilev project is kept secret. Other market operators estimate it to be worth at least $1.5 to 2 million, whereas the club’s monthly takings are estimated at $1 million.

Illiodor Marach advises those planning a club to invite a partner versed in the field. “A novice will make mistakes and pay expensively for his errors,” Marach says. Lokayev says that the amount of investment may be debated for hours. But what is needed is the clear understanding on one’s targets. “Moscow has seen several landmark projects worth over $5 million but unfortunately they bring no income,” he says refusing to elaborate, though, saying he is reluctant to hurt people whom he knows personally.

Yekaterina Belyakova failed to name the yearly sales at Fabrique and the market value of the project. “Fabrique is an internationally famous brand, it is not for sale,” she says. However, if the company could launch a new big establishment it would require at least $7 to 10 million. Everything depends on what you want.