TheCMJ festival began this week, which gave me a chance to see one of my favorite local bands down at Fat Baby. The downtown rock sound of Tigers & Monkeys was an enjoyable diversion to everything going on with the markets and the election but it didn’t take long for economics to find its way into the underground performance space.
A: A lot of those projects came from new developers who were trying to cash in on the peaking boutique hotel market. Banks are trying to get out of those deals now by putting the developers into default. They’re afraid these new developers won’t be able to turn a profit. At the same time they don’t want to hold such a high volume of property and write down so many bad deals because it will beat down confidence on Wall Street even more. So the developers and the banks are in a stalemate. Neither side wants to blink.
Q: How do you see this shaking out?
A: The banks are going to use the bailout to start over. Once the bailout takes affect, the government will buy a lot of the bad deals. After that, third parties will come in and buy those projects from the government at a discount. The new developers that don’t have experience will be pushed out and flagship property owners like Marriott and Hilton will come in and use their systems and buying power to keep costs down and get those places open.
Q: How do you see all this affecting the clubs?
A: It will hit the bigger places harder. Bottle service spots are going to take it on the chin because finance guys can’t afford it anymore. The smaller spots like this one will do better, because they know how to make money without bottles.
Now I can’t confirm Jay’s credentials and even if he knew what he was talking about he might have been too drunk to make an accurate assessment. But his answers didn’t sound that farfetched.Steven Lewis predicted the recession would create a similar dynamic in nightlife. Clubs run by inexperienced owners who rely on bottles will fold and owners who can keep people coming and keep costs down can ride things out and take over poorly run spots. While Jay’s perspective on bottle service doesn’t take into account all the bottles that the street pharmacists still buy his answers were good enough for an out of work broker.
After a few more minutes of banter, the next band started playing, the girl was gone and my friends came back from their smoking break. Having done all I could at Fat Baby, I followed my friends in search of late night eats. We found a diner built in the shadow of a construction site on East Houston. If Jay was right, that site was might stay empty for a long time.