By Dmitry Alenushkin

Face control dramas, $1,500 parking fees and top international DJs playing every weekend - Moscow's young bourgeoisie believed the glitz of their city's night life would never fade. Today, however, it all seems like history. Nightclubs are suffering falling revenues and dwindling visitor numbers, as club owners try to maintain appearances and keep the party going with a smile.

Making money from clubbing was one of the most rewarding business activities of the oil-boom epoch. Every season the city had at least five new club openings, with dressed-to-kill crowds burning easy money at loud parties with famous guests. Foreign DJs loved working here - apart from Moscow, the same high fees were only to be found in the United Arab Emirates.

With rare exceptions, Moscow clubs had little in the way of serious investments - often they were just big tents on premises rented for one season, with cheap décor but ultra-modern lightning and sound equipment. At night, all construction bugs were hidden and guests were distracted by giant props, hot go-go dancers or big plasma screens.

This would all be a great financial fairy tale, but the crisis has killed hopes of living happily ever after. The first real blow came at the end of last year, with the decline in corporate parties.

"It was the first field that suffered," said Dmitry Shalya, editor of Ne Spat, a 12-year-old magazine about Moscow night life. "In one month [December] this sector dropped 90 per cent."

The situation worsened that month, when average affluent clubbers did not get their bonus or were fired. Guests cut their spending and switched to cheaper drinks.

Next came the cancellation of lucrative sponsorship from alcohol and tobacco companies, who began to show a preference for in-store promotion campaigns or advertising in print publications with a greater audience reach than a club's maximum capacity of 900-1,600 guests. Those companies who have remained loyal to clubs avoid direct advertising and concentrate mostly on their own brand-name events.

 "Our sponsors from Pernod Ricard sense the trend and decided to push Absolut vodka instead of Chivas Regal whisky as originally planned," said Sergei Fomichev, PR director of the new upmarket club Pacha, a franchise from Spain.

Shalya sees the situation as critical.

"All owners feel the crisis but everybody pretends things are still OK," he said.

"Instead of 1.5 - 2 million roubles per night, average club turnover has dropped to 700,000 - 800,000 roubles." 

It is hard for upmarket club owners to confess that their business is dying down. It is believed that once a club lowers its prices for table bookings or drinks, it loses its "premium" positioning. Most club representatives interviewed said they had seen no decline in visitors but their revenue had dropped.

"The club is packed every weekend but the margin is shrinking," said Vsevolod Scherbakov, owner of the Famous by Grey Goose club that opened in December.

"Average spending per dance floor guest was 100 euros according to our business plan. Now we have something around 60 euros [per guest]. We have discounts on tables or private boxes. Now the minimum booking fee is 2,000 euros instead of 3,000 euros. We cannot discount drinks as we purchase them in hard currency."

The core number of Moscow clubbers who potentially can afford such spending is estimated to be about 5,000 people.

"There is huge competition between clubs for these people," said Pavel Vdovin, PR director of Historia club, which is scheduled to open in September. "Every Friday they get seven to 10 text messages with invitations from clubs that offer the same entertainment. Frankly, it's rarely something new in music or performance."

Shalya seemed to agree. "When the DJs plays something creative, the bartender runs screaming, ‘People are leaving, play Moscow Never Sleeps again'," he said.

The new economic reality suggests that the industry should look for new forms, with lower costs and more creative approaches.

"Otherwise home parties will come back," said Shalya. "People will sit in the kitchens with a bottle instead of going out. The first clubs that significantly decrease prices for drinks or food and improve their music profile will be the winner."

The financial woes of club owners are echoed in the social situation on the dance floor.

"Now there is much more demand for men among girls," said bartender Sergei, who withheld his surname and asked not to name his club. "Many who were on someone's tab are now on their own. Either they were fired, or had their salary reduced, or sugar daddy cut their funding and returned to his wife for cheap and regular sex. There are loads of young girls looking for a new sponsor." n

What's at stake

The upmarket clubs associated with massive pre-crisis profits were not making their money on cover charges.

Guests would buy overpriced drinks - whisky cola 600-700 roubles, water 250-400 roubles - and rarely expected any change from the bartender. Dyagilev club charged its guests $1,500 to park a car in front of its entrance.

However, the clubs' main income has been from bookings on tables or private boxes. In upmarket clubs, the average booking price starts from 30,000 roubles a table and can reach 350,000 roubles or more. This fee is a pre-paid deposit on drinks or food - but not much, though, when a club is charging 8,000-15,000 roubles for a bottle of average whisky, and 12,000 roubles for a fruit plate.

A pre-paid deposit also means guaranteed entrance without face control or dress code hassles.

"If we sell 50 per cent of all our private boxes we reach break-even point," said Sergei Fomichev, PR director of Pacha.

Sponsorship has been another source of solid income for the club industry. Tobacco and alcohol companies pay the most, since their advertisements are banned from outdoors, television and radio. Industry experts say a fee up to $800,000 is feasible for using a certain brand in the name of the club or selling only one type of liquor or cigarettes.

"Sponsorships are great opportunities," said Pavel Vdovin, PR director of Historia club, which is to open later this year. "If you are lucky, they pay most of your construction bills so overall investment is much less."

Premium clubs continue to open, despite the economic downturn, but such openings are unrelated to the current economic situation.

"All business plans were approved at least a year ago when investors were inspired by mass consumption," said independent economic analyst Alexander Utochkin. "Now our oligarchs and stock market have lost at least 60 per cent of their value. Not the best time for clubbing,"

- Dmitry Alenushkin