January 12, 2010
Is Happy Hour More Or Less Profitable Than Other Nights For The Average Bar?
I’m curious about the economics–why do bars do happy hours? Do they make more money because they attract more patrons, or less because they are selling beer cheaply? If they make more money that way, why not have happy hour all the time? If they make less, then why do it at all–is it to promote the goodwill of customers? Or do a lot of patrons stay on afterwards and buy normal priced drinks?
Please only answer if you’ve owned or worked at a bar and actually know how it works.
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Comments on Is Happy Hour More Or Less Profitable Than Other Nights For The Average Bar?
In the nightclub business, your customers are the product. People go where everybody else is. If someone walks into your club and you are empty…they will leave as well.
Promotions like “Happy Hour” give people a reason to arrive early (even though the club is empty) so that the regular crowd will be pleased when they arrive later. So in this situation, Happy Hour is about getting people in the club so that you make more money later.
Unlike Nightclubs, businesses like sports bars and restaurants have Happy Hours because customers want to go out after work and relax. This crowd is very lucrative and expects Happy Hour pricing. Therefore, the businesses have to do what the market expects in order to attract business and establish themselves as the place to go during happy hour. For instance, by offering cheap draft beer, they are luring customers who bring along others that don’t drink draft beer. Therefore, they still make a good profit overall.
Like any promotion, Happy Hour is an attempt to offer temporarily lower prices to attract business. If you always offer lower prices, the promotion is no longer temporary, will lower profit margins, and will no longer have the “sale effect” that attracts customers.
Happy Hour ( actually happy hours ) are hours before the
peak or busy time. The bar offer cheaper drinks to so that
customers would come early.
If you just consider the cost of drinks served and salaries
of the bartender/servers, the bar still earns from sales
during the happy hours.
Happy Hour is a “come on” designed to lure customers to your establishment. You do not make any money but nor do you lose any, at least, not during the happy hours. The idea is to break even. Demographics, or clientel you may wish to target depends on what you offer during “Happy Hour”.