SOUTH Australia has more liquor licences per head than any other capital city — and one of the lowest rates of population growth.

According to Australian Hotels Association (AHA) boss Ian Horne, that’s becoming something of a problem for the City of Churches.

He says there are now so many licensed outlets that pubs and small bars operating in the CBD will face a tough year in 2016 as supply outweighs demand.

Currently, 68 hotels, 30 entertainment venues and 61 small license venues operate in the CBD.

Mr Horne, who is General Manager at the AHA, says the outlook for some hoteliers and venue owners in the city is grim.

“2015 was by far the toughest trading conditions for nearly a decade — 2016 and beyond gives no sense of optimism,” Mr Horne said.

“Supply is greatly outstripping demand — that’s a reality. Add the impact of 5000 person ‘pop ups’ (Royal Croquet Club, Fringe Garden) and other temporary offerings during what used to be the sectors largest trading months of the year — February and March — and it is becoming a challenge to remain profitable and in some cases viable whether you operate a micro, small, medium or large hospitality venture.”

Broken dreams

One person who understands this more than most is 33 year-old George Lagos.

In 2014 Mr Lagos and his mate Simon Hill opened the doors to Austin & Austin, a small bar off North Tce with a video game flavour.

Just one year later, those doors closed forever.

“It was my dream,” Mr Lagos said.

“It’s the hardest thing I’ve had to do. I’ve been in hospitality since I was 13 and it was always something that I wanted to do. It’s so heartbreaking when you get to the point where you’re trying to make it work and there’s only so much money you can put into your business before you go ‘let’s just cut our losses and close our doors’.”

Mr Lagos says he has taken over a great deal of the debt to try and get back on track after working 80-100 hours a week towards the tail-end of the business timeline.

That was major reason for the boutique bar to close its doors.

“The biggest challenge is wages,” he said

“The initial outlay and build was expensive which we knew was going to happen but getting heads through the doors and bums on seats was also a challenge. There’s only so much we could spend on marketing and advertising.

“You really have to work your ass off to try and break even.”

Mr Lagos said it is only a matter of time before more small venues suffer the same fate as Austin & Austin.

“It’s all well and good in Adelaide where they’re making these laws so licenses are easier to get and open up small bars and restaurants and I'm all for it — but we don’t have the population to service them all,” he said.

“I can almost guarantee that in the next year, 80 to 90 per cent of the venues that have opened in the last year and a half will probably close because we don’t have the population to service it. Sydney or Melbourne have that population but we don’t.”

Mr Horne agreed that small bars are beginning to reach a saturation point.

“In January 2016 there are now 61 licenced small venues with a further 13 in the application process,” he said.

“However there is a fine balance and with the massive increase in supply i.e. more and more liquor outlets of all types including massive ‘pop ups’ means many small venues will no doubt be looking to their own cost structures as revenue growth becomes more difficult. Certainly that’s the harsh reality for more established operators within the CBD.”

Mr Horne said that if councils attempt to replicate the small bar boom in the Adelaide CBD throughout the suburbs of Adelaide — saturation could turn to flooding in our own backyards.

“There will be pressure applied to allow small venues to operate in the suburbs with Local Councils ambitious to replicate what they see as the success in the CBD,” Mr Horne explained.

“Of course that will simply add to the dilemma of further increasing supply — more outlets — with no growth in demand — more customers.”

Keeping positive

Dominique Lentz of popular small bar La Buvette, says that conditions for small bars will be tough in 2016 yet remains optimistic saying that you have to work harder and smarter to keep patrons coming through the doors.

“The fact that more and more bars keep opening — I think it’s going to be tougher for them just starting,” he said.

“I think for people who are already established things will be less tough. You have to have a point of difference..... You have to keep people interested.

“I think if you have a bar that someone else has already done — good luck — because you have to be the best.”

Michael West who recently opened his doors to the Gresham St watering hole with a southern twang, Mississippi Moon, agrees.

“We’re optimistic for the year ahead and have had really good feedback so far,” he said

“We’re reaching our KPIs and planning some changes to our menu and what not and even looking at activating the street a bit more but I think if you’ve got a good point of difference and good price points compared to nearby bars you will do well. ”