Tag Archives: bar

The OTH Question

Posted on December 20, 2009 by wpadmin

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.

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Bar Managers, are they a dying breed?

Posted on November 23, 2009 by wpadmin

Over my 18 years of running bars in the Philippines I have heard on numerous occasions how bar managers are a “dying breed” and I have come to learn this statement is true both in the literal and metaphorical sense. In physical terms the lifestyle of a bar manager is hardly conducive to longevity since it normally involves copious amounts of alcohol consumption, smoke inhalation, a sedentary lifestyle and believe it or not, an inordinate amount of stressful situations.

Referring to managers as a “dying breed” has always been a rather worrying statement for me in that it is too close to home. As a result, when it was said to me just the other night by a bar owner from Thailand, I paused for a moment of reflection and decided this subject would make an interesting column for AE.

Normally when someone says to me ‘you bar managers are a dying breed’ I pretend to brush it off as a flippant comment that I have heard a thousand times, however, given what has happened to the Blue Nile Group management team, (which until recently I was part of), the Thailand bar owners statement hit home and made me ponder the statement on a much deeper level than I normally would.

To fully understand the role of a professional bar manager it is necessary to look at how the position evolved. In the mid eighties in M. H. Pillar, Ermita, Manila the bar scene suddenly started to take off with an influx of money invested and an influx of customers availing of services the bars were offering. As the bar scene expanded it evolved from the owners acting as owner /managers to a fully blown industry incorporating individuals whose only job was to manage the bar on a day to day or should I say, night to night, basis. Back in those days it was common for the manager to drink copious amounts of alcohol, give away even greater amounts of alcohol and generally create a party atmosphere in conjunction with the girls and the customers. This in turn would encourage the customers to spend more and the end result was revenue for the bar.

A bar manager and customer both sculling shooters with no hands. In days gone by this sort of behavior was considered par for the course.

The concept of a ‘girlie bar’ manager creating a party atmosphere is in many ways unique to the Philippines. For example you will not find many professional girlie bar managers in Thailand or other parts of Asia and when you do he will normally be an owner wearing both his owner hat and manager’s hat. This situation occurs partly because in other countries the emphasis is on directly selling alcohol and sexual services rather than creating a party atmosphere.

So are bar managers a dying breed, is the position of professional bar manager soon to be a thing of the past? In my opinion the answer to this is both yes and no depending upon the sort of bar and the owners marketing approach. In many of the bigger more commercial bars (Doll House, Atlantis, Tropix, Crystal Palace, Blue Nile, Neros and Blue Nile Executive) it would seem there is a definite trend to utilize cheaper Filipino management as opposed to the more costly foreign management. There are numerous reasons why this has occurred some of which I will now examine in this article.

Firstly there is the question of cost. By not employing foreign managers the bar will cut down on OTH (on the house) drinks and the bars salary bill will be significantly less. Whilst this line of thinking may be true on paper it is in reality a falsehood because by cutting down on OTH you may minimize expenses but at the same time you also minimize sales.

The same argument can also be applied when you address the question of Filipino managers versus foreigner managers. The simple fact is the Fields Avenue -Perimeter Road bars are mainly patronized by foreigners and these same foreigners will often choose which bar to visit based on the fact they are friends with a particular bars manager. Caucasian customers naturally tend to patronize bars which are run by Caucasian managers just as Filipino customers often feel more comfortable patronizing a bar run by Filipino managers.

Secondly there is the question of the owner’s market perception. The owners who see their main market as being the Asian customers really have no need of a highly paid foreign manager. In most cases the Asian customers are handled by the mamasans and contact between the foreigner managers and Asian customers is traditionally minimal. Conversely, owners who employ foreign managers expect the managers to attract foreigner customers to their bar.

Thirdly there is the question of a bars ambiance. On the whole I think it is safe to generalize and say the owners who choose to employ Filipino managers over foreigners place little emphasis on a bars ambiance. In my opinion a good foreigner manager will influence a bars ambiance by his presence, his appearance, his personality, his implementation of the rules, his relationship with the girls, his choice of music or his approach towards the customers. To this day I have only seen one Filipino manager who considers the ambience of the bar an important factor which influences the bars sales.

This man is renowned for his outlandish apparel and unique ability to generate the party ambiance.

Fourthly there is the question of the interaction between the manager and customer. Generally speaking the owners who employ foreign managers view customer relations, (or PR as it is often referred to), as an important part of the job and those who employ locals place only a minimal emphasis on customer relations. For the owners who employ Filipino managers they place an emphasis on the girls and the mamasans relating to the customer rather than the manager. In this situation the manager job becomes more of a supervisory role.

Prince Charles a happy customer indeed as he parties with the girls in Lollipop bar.

Fifthly it is a well known fact that the political climate which effects the bars is changing rather quickly and as such no one is absolutely certain what direction things will take. In uncertain times such as these there is a prevailing logic which states who better to deal with the Filipino powers that be than a Filipino citizen. In this scenario the manager actually assumes the duties of official representative for the bars.

When discussing the value of a bar manager the most important aspect to consider is return on investment. Basically if the owners view the manager as an investment then they must look at their return on investment. In most instances the very least a bar manager should be able to produce in sales is his salary plus ten percent. By doing this he is covering the cost of employing him and his OTH expenditure. Obviously most owners will expect a lot more from the manager than just covering what he costs and as a general guideline I have found a productive manager on any single night will be directly responsible for producing sales equaling his salary plus 60%. Of course this figure will vary from night to night but over a period of one month it tends to average out to roughly this amount.

Speaking as someone who makes his living from managing a bar I feel worried by the trends I am observing in the rapidly changing Angeles bar scene. With several of the bigger bars choosing to utilize Filipino management the employment options for foreign bar managers are becoming more and more limited. Most of the bigger bars with the potential to gainfully employ a foreign manager have either decided to cut costs and go with the lower paid Filipino managers and the other big bars that like foreign managers have already employed one and are happy with his performance. As a result the only other options are medium sized bars and the smaller Perimeter Road bars. In the case of the medium sized bars they are normally operating on a tighter budget than the bigger bars so as a result, traditionally speaking, they pay their managers less than the big bars.

The next option is the Perimeter Road bars but here again the budget comes into play. Basically the Perimeter road bars operate on a very tight budget and this is why you will often find a sort of owner/manager situation in these bars. By the owner assuming the duties of manager he manages to save paying out a regular wage. In most Perimeter Road bars the main group of customers will be local expatriates and long term visitors who frequent that bar because they know the manager/owner and enjoy drinking with him. This of course places a special importance on the manager’s role yet the irony is in most cases the bars do not generate enough income to justify employing a full time professional manager.

Last but not least there is a seeming lack of new blood coming into the industry. Many have gone on record as saying bar management is a young man’s game and yet there are very few young men working as, or seeking the position as, bar manager. Currently in Angeles I can think of only four managers under 30 years of age who are employed in the bars, what’s more, in the last 18 years I have seen only a few younger men apply for the job. As the future of the business will ultimately rely on the younger generation the lack of younger men working in the industry or seeking to work in the industry, does not bode well for the positions future.

To summarize I do believe the statement “bar managers are a dying breed” has a certain element of truth in it. Basically many of the big bars in Manila as well as Angeles are turning towards utilizing the Filipino labor force in the position of bar managers. In Makati there are approximately 40 bars yet there is only one full time manager that I know of and even he is looking at leaving. In Pasay there is basically only the Firehouse Complex at EDSA which to the best of my knowledge does not employ foreign managers but rather the owners tend to act as owner managers and the emphasis of customer entertainment is placed on the mamasan. In Subic the bars do employ managers but normally this is considered a part time job or just something to do to keep busy and the majority of bars are small affairs where the owner acts as owner and manager. As the bar scene in Subic grows there will no doubt be more available positions offering a decent salary but when this will actually happen is impossible to accurately predict.

Currently the only place for a professional bar manager to effectively ply his trade is Angeles. As long as the bar owners have the opinion that a good manager will bring in substantially more revenue than what he costs then the position is to some extent secure and has a future. On the other hand if what I call the cost minimization mentality prevails and the perceived value of a bar manager declines then the statement ‘bar managers are a dying breed’ may well prove to be prophetic in the near future.

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