With just two single strip clubs now the only reminder of the Kings Cross of old, nightclubs are now facing extinction as pubs take centre stage.
With just two single strip clubs now the only reminder of the Kings Cross of old, nightclubs are now facing extinction as pubs take centre stage.

Death of the nightclub: How pubs are taking over

For decades they have served as the integral threads of Sydney's colourful night-time fabric.

But the modern-day nightclub, dozens of which have shuttered in the past 12 months, look poised to face permanent extinction as Sydney's hospitality giants shift their interests into social-distancing-friendly pubs and hotels.

In the past eight months alone more than $265 million worth of pubs have changed hands in Sydney with big guns Merivale, Laundy Hotels and Sam Arnaout's Iris Capital accounting for a huge boom in hotel sales.

The most recent, Arnaout's purchase of Manly's Ivanhoe Hotel, clocked in at an impressive $60 million on Thursday while Stu Laundy hit the headlines on Monday with his purchase of The Lennox Hotel in Northern NSW, which he snapped up for $40 million.

It comes as nightclub owners and operators continue to offload in droves with just two small strip clubs currently operating along Kings Cross's once heaving 'Golden Mile'.

In their place, wine bars and restaurants are the business model of choice for those remaining in the area, which is to be buoyed somewhat on March 8 when the state lockout restrictions ease.

Recently opening a 'boutique beer bar' 12 Taps in the space once inhabited by the famed The Bank nightclub on William St, bar owner Marco Vargas says the strip has changed irrevocably with the 'no dancing' COVID restrictions.

"And I don't see it ever going back to the way it was," says Vargas, who has built a business model around 'sitting and talking' and observing social distancing.

"I think young people will always want to go out and have fun and find ways to do that but now in the Cross it's now only bars and restaurants. The nightclubs can't survive."

Nightclubs are losing popularity while pubs are taking over.
Nightclubs are losing popularity while pubs are taking over.

Indicative of the times, the precinct's former 'King' John Ibrahim, who at one point operated no less than 20 venues in and around Kings Cross, is now all but retired from nightclub operations having offloaded his venues in favour of a career as a TV writer and producer.

Another once-high profile operator Andrew Lazarus - who ran the popular Soho club in its heyday - has also taken a hit with his company Bondi Asset Management going into voluntary administration last week.

‘King of the Cross’ John Ibrahim has moved away from the nightclub business. Picture: Tim Hunter
‘King of the Cross’ John Ibrahim has moved away from the nightclub business. Picture: Tim Hunter

Wobbly on their feet due to the state's lockout laws introduced in 2016, nightclubs have been delivered a final" knockout punch" by COVID according to long-time restaurateur Barry McDonald whose restaurant Cafe Giorgio overlooks the iconic Kings Cross waterfall.

"Nightclubs can't come back. I just don't see it happening," says McDonald.

"Nightclubs aren't like pubs which are propped up by food and gaming revenue.

"A nightclub's only revenue stream is alcohol and when you are only allowed 25 per cent capacity. well you're stuffed."

By contrast, pub and hotel revenue has surged on the back of a spike in poker machine profits during COVID, with gamblers losing $2.7 billion from June last year to November 2020 - a seven per cent increase on the same period the previous year.

The closure of smaller, late-night venues has also led to the boom in pubs and hotels, as patrons run out of any alternative options.

"This is why guys like Justin (Hemmes) and Stu (Laundy) are bumping up against each other to spend insane amounts of money on pubs … because people will not be going to nightclubs in any kind of foreseeable future so and pubs is just where it's at," says one broker close to recent hotel sales.

"They predicted pokie revenue would drop off during COVID … that hasn't happened at all.

"And pub prices will continue to go through the roof because they're just such a fail-safe asset."

Originally published as Death of the nightclub: How pubs are taking over


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