Former club executive, Ryan Carlson, explains how overcharging broke the adult nightclub business model and outlines the steps to fix it.
(Note: This story was written by Ryan Carlson and appears in the January issue of ED Magazine.)
One of my favorite novels opens with, “It was the best of times, it was the worst of times.” Any Dickens reader will recall the stark contrast of duality in his masterpiece, “A Tale of Two Cities,” which I recently reread as I sat poolside in the desert. As I dissected his words while desperately trying to avoid sunburn, I couldn’t help but liken the novel’s stark contrast between 18th-century London and Paris to a pair of modern cities shaping our industry today.
My family has owned adult businesses across the country for years, and in recent months, I’ve heard from many friends in the industry that the sky has fallen, and sales are terrible. Major cities are dying. Take Las Vegas, for example. Roads are barren, casinos are empty and it’s never been easier to get dinner reservations.
While reading Dickens, however, I wasn’t in the Las Vegas desert, but the Laughlin desert, where the scene is the polar opposite. Reserving two nights at a B-grade hotel was a struggle, both the pool and the gambling floor were packed and we were lucky to get into an Outback Steakhouse for dinner!
“While Vegas has increased prices by more than 30% over the last 5 years, adding hidden fees and ‘gotcha’ charges, Laughlin has lowered prices and maintained both free parking and fun giveaways.”
— Ryan Carlson
Unless you’ve been living under a rock, you’ve likely heard that Las Vegas is in bad shape, with dangerously low visitation levels and occupancy rates sometimes falling under 40%. On the other hand, Laughlin has been nearly fully booked as of late. Just 90 minutes south of Sin City and regarded as the “blue collar Las Vegas,” it’s obvious why people are opting for this nearby alternative.
While Vegas has increased prices by more than 30% over the last 5 years, adding hidden fees and “gotcha” charges, Laughlin has lowered prices and maintained both free parking and fun giveaways. The dummy casino executives brag about how “per person spend” in Vegas is at its highest, but they ignore the fact that they have lost customer volume and the “everyman” experience. Meanwhile, value-oriented destinations like Laughlin have gobbled up their former customer base. In short, the Laughlin model strives to be Walmart, while the Las Vegas model strives to be a Gucci store. The problem, of course, is that long-term, sustainable businesses are not built solely on a handful of rich customers.
As an industry, we all face this problem. When I started my career, covers were $5, beers were $3 and dances were $10 or $15. Champagne rooms didn’t exist at most clubs, so there were limited opportunities for entertainers to overcharge and run off our guests. The dancer culture was also drastically different, as entertainers at the time valued repeat business more than they do now.
Over time, that model was eroded by the advent of overpriced champagne rooms and higher dance costs, a destruction further exacerbated by COVID and inflation. To justify maintaining margins, many adult club operators raised prices in line with restaurants and other hospitality businesses, allowing dancers to do the same. Then they added surcharges and credit card fees, and before they knew it, many clubs priced themselves out of the market, leaving operators wondering where all their guests had gone. Much like Las Vegas casino executives, these clubs lost touch with their customer base, and their high price points cost the clubs (and the overall industry) once-loyal customers. Combined, these circumstances have led us to the current predicament where so many clubs are struggling to get guests through the door.
“Not only do you have to rip the band-aid off and permanently lower your pricing scheme substantially, but you have to be willing to sustain losses for at least six months while volume rebuilds.”
— Ryan Carlson
This doesn’t have to be the case, though. A major-market club we recently acquired offers a great example of a business model that works with today’s customer base. Ironically, it’s the same club I started my career at as a teenager many years ago. The club offers a “common” seating area and a “VIP” seating area, both of which have stage views and table dances. The common area was brightly lit with relatively uncomfortable seating, but dances were only $10. The VIP area was dimmer with much nicer seating, but dances were $25. Since there was no charge to sit in either space, I used to wonder why there would often be a line out the door for the common area, while nobody showed interest in sitting in the nicer VIP area. Today, the appeal of those $10 dances is all too obvious. People have always craved value, and they’re willing to stand in line for it. Have other club operators forgotten this, or have some just become blinded by greed?
The good news is that while the expense epidemic is going full blast for short-sighted operators, some clubs haven’t changed, maintaining a focus on delivering guest value, fair pricing and a culture that values repeat business. These clubs are as busy as ever, while others (including some we’ve recently acquired) are proving that sinking ships can be righted with a suitable captain at the helm. But the process is long, and the pain in doing so is real. Not only do you have to rip the band-aid off and permanently lower your pricing scheme substantially, but you have to be willing to sustain losses for at least six months while volume rebuilds.
Additionally, club owners usually have to eliminate the greedy staff members and entertainers who tanked the business in the first place while training a whole new team to deliver a consistent guest experience. In many cases, we’ve had to be willing to give the boot to virtually everybody on staff and open with only three dancers on a Friday night. It’s basically starting over, but three dancers who treat your guests well are better than thirty dancers who rob them under the supervision of a complicit manager. We’ve also aggressively lowered prices at many of our existing locations, resulting in substantially more foot traffic and 3-10% sales increases. Alternatively, of course, you could just bury your head in the sand and foolishly gloat when a whale comes in every other month.
Economics dictates that there is an inverse relationship between price and demand. Logic then dictates that delivering value is the formula for rebuilding volume. You get to dictate the answer to the million-dollar question: Do you want to be dead like Las Vegas or busy like Laughlin?
Ryan Carlson is the retired CEO of Deja Vu.
