The Ancillary Dangers of an 18 Plus Club

 

In a previous post, I explained the vital importance of ancillary income for your club or venue.  This income stream covers everything non-ticketed such as VIP, lawn chairs, bottle service, merchandise, food, and beverages. You can only sell your customer one ticket but multiple ancillary units. This makes the latter a key component of your venue’s profitability.

 

That is unless you unknowingly fix them.

 

Let’s take a hypothetical club that holds 1,000 people and assume that each person pays $20 to get into the facility. This leads to $20,000 in income.  Let’s also assume that the venue only sells the ancillary value stream of alcohol. Now let’s look at two scenarios.

 

Scenario One – 21 plus only club:

In this scenario, you only allow persons 21 and older into the venue. For simplicity, let’s say 80% of those patrons drink and the average drink costs $10. This leads to an additional $8,000 in income for your venue. If you have one show per week, this leads to an additional $416,000 per year.

 

Scenario Two – 18 plus club: 

In this scenario, you have a mix of 50% persons aged 18-20 and 50% persons aged 21 and older. Using the same assumptions above, we now have 80% from only 500 fans buying drinks. This has cut our ancillary income in half to $4,000 per night or only $208,000 per year.

You just “fixed” your ancillary sales and unknowingly cut your additional profitability in half. If you continue this trend, you do so further reducing your daily, weekly, monthly, and yearly profit. A 75% underage to 25% drinking age mix leads to only $2,000 per night of ancillary income, which is just $104,000 per year. You are leaving $312,000 on the table.

 

Hopefully, these numbers demonstrate the importance of understanding how your ancillary revenue stream relates to your customer mix. With this understanding, you can now look for ways to adjust these variables in favor of profitability. Here are a few options for the scenario above.

 

Adjust the Customer Mix: This starts with understanding your market demand and business objectives. If alcohol is a main ancillary driver and your market has a healthy collection of 21 plus patrons to pull from, simply making your club 21 and older might be the best option. Otherwise, you will have to put in place ticketing and operational procedures that limit the non-drinking age patrons to an established percentage or adjust one of the other variables to make up the difference.

 

Add Additional Revenue Streams: Introduce non-restrictive ancillary options such as VIP, food, and merchandise options that appeal to your underage clients.

 

Pricing Strategy: Charge the 18-20 year-olds a higher entrance fee to counteract the loss you will incur from their lack of ancillary purchases. The best way to do this is to look at your historic bar sales to establish a baseline for the number of drinks purchased per each patron. If you find this to be two drinks per person, then you need to tack on a premium of $20 per ticket (based on the assumptions above) for each underage patron.

 

The key is to remember that you are in business to maximize your shareholder wealth and that venue profit potential is fixed by its capacity. For every underage patron you let in, you cannot let in a legal drinking age fan who would (most likely) contribute to additional income for your business. As a manager, it is your responsibility to find ways to maximize the profit potential by controlling your customer mix, your products offered, and your pricing strategies.

 

The Power of Queueing Theory for The Concert Venue

Photo by Krizjohn Rosales from Pexels

 

In a recent post, I stated: “5,000 plus people trying to enter through less than four security lines is a safety concern in my opinion.” I want to use this post to help explain that statement and why I believe it.

 

I am fascinated by the science of management and even though the business of rock and roll may seem anything but. Venue operations math can help us develop ways to enhance the concert experience for fans, artists, and venue owners. One of these concepts is through the use of queuing theory.

 

Queuing theory is the mathematical study of waiting lines or queues. The formula may appear complex. However, there are a number of calculators online that will help you get the answers you need without understanding some pretty heady math that looks something like this from Portland State University.

 

 

Let’s move past these formulas and focus on how this can apply to your concert venue operations.

 

Part of the concert customer’s experience is entering the venue. This includes driving to the property, finding parking, and then going through security to gain entrance to the facility. This last element (security screening and entering the facility) present a unique challenge in that the operations team must weigh the customer experience of waiting in line against the demands of the security team to properly vet each patron. Part of establishing that balance is pinpointing how many security lanes you need per: (1) the venue capacity; (2) the arrival rate of guests; (3) the average security screen time; and (4) the cost of “x” amount of lanes, which can include equipment, such as screeners, and personnel.

 

You could achieve these results by speculating but guessing wrong could impact your operations in a few ways. For instance, your fans would likely end up waiting in line too long if you are underequipped. This could lead to lost consumer confidence and ultimately dipping revenues as word spreads about this negative aspect of the fan experience you provide. On the other hand, over equipping can lead to increased overhead and less profitability for the venue. Another unsustainable outcome. Luckily, there is a baseline to be found for virtually any venue and it is attained through a queuing theory calculation.

 

Let’s say that your venue’s capacity is 5,000. You open doors two hours before the show and a VIP lane an hour before that. You also know that a good chunk of your fans do not make it in on time due to traffic, family emergencies, etc. Taken together, you can estimate it would take four hours for the bulk of your customers to get through the gates. Your security team ensures that they can vet the average patron in 45 seconds or less and your observations say they are correct. Let’s place this information into our online queuing theory calculator.

 

We start by selecting the M/M/C model for a single queue with “C” amount of servers. Next, we need to average the number of people coming in per hour. To keep things simple, we will stick with a discrete probability. This means that we just divide 5,000 people by four hours, which is 1,250 patrons coming through the gates per hour. That is highly unlikely, but at this point, we are just looking for a baseline. We can adjust per our observations at a later time.

 

Place 1,250 under Arrivals/ Hour, which is Lambda in the calculator. Since your security team estimated they can vet each person in 45 seconds, that equates to 80 patrons per hour. Place 80 under Services/Hour, which is Mu.

 

Now let’s pick security lanes. Place four under the Number of Servers (C) and click Calculate. You will receive the following warning. “The queues will tend to infinity as Lambda is greater or equal than 4 times Mu.” This is telling us that you do not have enough servers to operate efficiently. It is NOT telling you it can’t be done. Rather, it is saying that there will be a back-up of the line. Remember, we are looking for a balance between customer experience, safety, and cost from which to start our ops planning. Further trial and error by selecting servers reveal that the optimal number of lanes is 16 based on these variables. At this level, your customer would walk directly into one of those lanes and spend (on average) 1.782 minutes waiting in line and another 45 seconds being screened. For a total service time just shy of three minutes. That is where you find the best customer experience at the lowest operations cost for a safe entrance into your venue.

 

Remember, this is your starting point. It is not saying anything less than 16 lanes for this size venue will fail. Rather, it is telling us that any number of security screeners below that will lead to a back-up of your line. I used a more advanced Excel calculator to find the average time your customer would wait if you only had four open lanes and found it to be between 27 and 30 minutes. This gives us a window. At four lanes, your customer could wait a half hour to get in while 16 lanes could lead to a zero wait time for the majority of your guests.

 

It is now up to you and your team to determine the balance between how long you want those customers to wait against the cost and logistics of adding more lanes. To do this you must take into account the price of additional screening stations (equipment and manpower) and if you have enough entrance points to accommodate their use. You could then analyze your open doors’ timeframe and how the line flows. Do more people come in at a certain time? Do you find that a large percentage of your clientele do not make it before the show? Finally, you could survey your customers about their experience. Did they have an issue waiting in line longer than 10, 15, 20, or 30 minutes? With this additional data, you are now more equipped to strike a balance between cost, customer experience, and the safety of your guests.

 

It all starts with queuing theory.

Don’t Overwhelm Venue Security with a Mismanaged Queue

 

Let’s face it.  We live in a radically different world where large groups have become targets for people with nefarious intent. As someone who not only works in live entertainment but spends his free time attending countless shows, I keep my head on a swivel around any crowd.  I watch for people demonstrating behaviors “outside the norm” such as loaners in places they shouldn’t be, excessive alpha-male behavior, and individuals who look extremely nervous or agitated. Once inside any venue, I seek out escape routes and tell my friends, where to meet, should we get separated if something happens.

 

One of the things that scare the hell out of me is when I watch ill-prepared operations teams mismanage patrons entering a venue. Here are a few examples I have witnessed in the past twelve months.

 

  • At one venue, patrons were let through security but the doors were not open yet. This led to a bottleneck between the security screening station and the doors. The team continued to push guests into this bottleneck, which led to the scanners misfiring. Rather than pausing the line, security screeners allowed patrons to enter without adequate checks in place.
  • At another concert, I walked through the metal detector. It went off and the person just looked at me and waved me through with no additional measures.
  • At a third show, I put all of my belongings inside my hat and placed the package in one of the plastic bins. A security guard simply looked down and slid my items through checkout without further analysis.

 

All of these situations shared a commonality – the entrance team was ill-prepared for the mass of people coming into the venue. Each team lacked one or more of the following elements: (1) not enough entrance lanes; (2) no senior team members directing employees on how to handle the influx; (3) employees capable of communicating to large masses of people; (4) improper queue set-up and direction. Let’s dive into each element.

 

Not enough entrance points: 5,000 plus people trying to enter through less than four security lines is a safety concern in my opinion. Even if your queues are properly set-up, your patrons informed of the security protocols ahead of time via email and social media, and your security team well trained. Employees get overwhelmed in these situations. I have yet to meet anyone who is 100% comfortable dealing with 5,000 people. Much less that many in the one to two hours before a show. When people get overwhelmed, they stop thinking rationally and the brain looks to reduce that pressure. This can lead to a bad decision to speed-up the vetting process and put everyone at risk.

 

No senior team members directing employees on how to handle the influx: The concert experience is best looked at in three phases – ingress, show, egress. Leadership must learn to allocate the proper amount of people for each phase. To do this, managers must be available to assess and allocate resources “on-the-fly.”

 

Employees who are capable of communicating to large masses of people: I see it time and time again. There are just one or two employees at the entrance of a show. They act reserved and operate from a “responsive” position waiting for customers to ask them questions. These individuals need to work from a mass-communication standpoint by proactively vocalizing to the crowd where the lanes start. Where the VIP entrance is. To have their tickets ready on their mobile devices, etc. When asked questions from confused guests, these employees need to be trained to answer quickly and efficiently so they can return to repeating the rules to the mass entering the facility.

 

Improper queue set-up and direction: If possible, queues should be set up as straight as possible. Try creating distance between the end of the queue and the screening area. You can do this by leaving space between the stanchions and the screener’s table or by adding a second table to create more space. This will craft a barrier between the queue and the screening personnel, help them feel less overwhelmed by the crowd, and mitigate scanner misfires. Signs for lane entrances should be placed overhead (about seven-plus feet) so guests can see where to go from a distance. Finally, your queue team should be proactive in directing people into open lanes to create efficient traffic flow.

 

Talk to your team after the show to understand what they felt what went right… what went wrong… and what could be done better for the next time. Take the extra time to speak with your security team. Find out if they felt overwhelmed and if they had adequate time to vet patrons entering the facility. Finally, survey your customers about their experience. You want both your employees and guests to feel safe and secure, so they can rock out with you for years to come.

Promoter and Buyers Explained

 

I am a talent buyer in the casino industry.  Yet, some people tend to call me a promoter and while both share similar responsibilities. There are some differences between the two as well as one very important concept both share.  Watch the video to learn more about talent buyers and promoters from entertainment consultant Jeremy Larochelle.