Recently there has been a lot of talk about OTH. For the uninitiated OTH or on the house drinks are basically drinks paid for by the bar and given to customers on behalf of the management for absolutely free, hence the term on the house.
Within the Philippine bar scene at the current moment there is a debate ensuing regarding bar managers and bar managers practices such as giving away OTH. Basically there are two schools of thought regarding OTH. One school which I describe as the anti OTH school and the other being the pro OTH school. In the anti OTH school on the house drinks are seen as a waste and a cost which should be minimized wherever possible. In the pro OTH school they are viewed as an investment which when utilized properly, will generate a profitable return.
In this article I will analyze the relevant points of both schools of thought and in so doing hopefully give readers a better perspective of the OTH debate so as they can make up their own mind.
Amongst Philippine bar owners there seems to be a growing opinion that if the bars in Thailand can operate without OTH then so too can the bars in the Philippines. The bar owners who compare the Thailand bar scene OTH and that of the Philippines will at worst see OTH as a waste and at best as a necessary evil to be minimized wherever possible.
The anti OTH arguments states that by buying a customer a drink you are not only wasting the bars money but in fact costing the bar money. The argument states that the customer has his own money so he will normally buy his own drink. By buying him a drink you are stopping him from buying it himself and at the same time incurring the cost of a drink, as a cost to the bar. This argument concludes that the end effect of OTH is that it takes away from the bars profit. Some people even go so far as to say by buying some customers a drink you draw unwanted attention to them and it may even be a reason for that person not to come back to the bar.
Another extension of this argument states that most customers can only consume limited amounts of alcohol so they will often not appreciate another drink even if it is free.
Some bar owners claim that OTH is too easily abused by managers and customers so it is better not to have it all. In regards to the managers this argument states the OTH actually makes things too easy for them, because they do not have to pay for it they tend to forget about the cost of giving it away. As an extension to this line of thought they argue that being oblivious to the costs will encourage the managers to give away drinks randomly without any thought as to the objectives they are trying to achieve through OTH in the first place. This argument does have some validity however amongst the vast majority of bar managers I have found them to know exactly how and when to give away a free drink and will keep in mind the objectives they are trying to achieve by doing so.
In regards to managers another argument states that since alcohol for them is free, managers will often get drunk and abuse the OTH either through personal consumption or through giving it away to their friends. Whilst this may be true in some cases it is also true to say that managers who have been doing the job for an extended period of time are in fact quite weary of alcohol and the problems it can cause when over indulged in plus they are also well aware of customers whom buy back and the others who just seem to take but never buy back.
Lastly the OTH is open to abuse from the staff that work in the bar and indeed in my experience it is common for the staff to place a small amount of drinks on the managers or mamasans OTH check list. This can be a minor problem but will not escalate if the proper checks and balances are put in place right from the word go.
In regards to the customers some bar owners have claimed that some customers actually come to rely on OTH and expect it. Indeed during my time of managing bars I have on several occasions been approached by customers asking where is their OTH drink and when I reply “I am not buying one today” they actually seem upset, almost as if they regard it as their right to receive it.
There are many arguments in favor of OTH but in the interests of ease of reading I will just try to briefly highlight the main ones.
Firstly and perhaps most importantly there is the costing factor. Opponents who argue against OTH will often view it as a percentage of the total sales and it will be charged at customer prices. For example rum and coke will be charged at anywhere between 45 piso through to 95 piso when in fact it only costs about 5 piso for the bar to supply it. The same argument can be used for San Miguel beer which is purchased at approximately 20 piso but charged on the OTH from anywhere between 45 piso to 95 piso.
There are numerous advantages to buying an OTH drink for a customer and following are just some of them that I have been able to categorize over my years of working in the bar.
Firstly there is the rent a customer argument which states that people go where people are, in other words few people will walk into a quiet bar as they automatically think ‘what is wrong with this bar’, ‘why is no one here’. On the other hand if they walk into a bar and there are some people sitting around enjoying a drink then they are more likely to stay. In short by buying people a drink you are keeping customers in the bar which in turn attracts other customers.
There is always a strong social element in the Philippine bar business and a key element of this is OTH drinks. When the manager buys an OTH drink for a customer this serves a number of purposes. If the customer is new then the drink acts as a social icebreaker and if the customer is known to the manager the drink serves as a sign of greeting or respect. In each case the fact is the drink is keeping people in the bar, it is establishing friendly communication between the customer and manager, it is creating an opportunity for the customer to spend money either by buying a drink for the manager, another drink for himself, or possibly a ladies drink or even the taking a girl out of the bar. The point here is that if the manager didn’t purchase the OTH drink in the first place none of these scenarios would even have a chance of eventuating.
The OTH drinks have a tremendous word of mouth value. For example as a great English poet once said “no man is an island” and when you buy a customer a drink he will no doubt tell his friends and encourage them to come in and enjoy a drink in your bar. Few men are loners and the customer you buy a drink for will invariably know other customers and so on and so on.
Perhaps the most obvious advantage of OTH drinks is their profitability. The cost to the bar for buying a shooter or normal drink will normally be a fraction of what the customer is charged and in fact the markup for the bars is often 150% or more. As a result when the customer buys a drink back it is obviously a very profitable proposition for the bar but the most profitable scenario for the bar is when the shooters are involved. For example the shooters even if they are composed of imported liquor are cheap to make, small volume, quickly and easily consumed, they normally come in rounds and best of all there is an implicit understanding on behalf of the customer and the bar manager that a round will be bought back.
Last but by no means least it is a well known fact amongst the bar manager fraternity that the more drunk your customers are the more likely they are to spend money. Buying OTH drinks certainly helps facilitate this situation as well as helping to create an atmosphere more conducive to spending
As a bar manager I am very much in favor of OTH and in my experience when used properly it is an effective money spinner within the bar environment. Yes I concede that it can be misused and needs to be kept in check but for me the advantages far outweigh the disadvantages. Replacing my bar manager hat with my customer hat I once again am very much in favor of OTH drinks and am certainly grateful when I receive one from a bar manager.
The bar scene is changing and evolving so it will be interesting to see what happens to bar managers as well as to the concept of OTH drinks. Personally I see both of them as something unique and an essential part of the Philippine bar business which hopefully will be around for many years to come.