The impacts of karaoke rooms on hospitality venue profitability — Market Research Report

Karaoke rooms can be a great addition to your venue's offering, if you’re looking to increase your financial performance. A 2023 study from Aalto University shows a 12.23 % increase in ROA (Return on Assets) for companies with karaoke compared to a control group of companies with no karaoke.  

This is great news to hospitality venues considering adding karaoke to their offerings. This article explores "the karaoke room effect", through a pub's experience with karaoke, and delves even deeper into the methods and results of the study.

Overall, the results suggest that having karaoke installed at a venue increases its ROA.

Karaoke rooms attract new customer base at The Fox

A Shoreditch-based 'boozer' The Fox introduced a karaoke room at their 3-floor venue late in 2023. The Fox describes themselves as traditional East End corner pub restored with a modern twist, and their latest attraction, a private karaoke 'den', has been attracting new customer base according to Simon Yandell at The Fox.

'The karaoke room has been well-received, particularly by a new customer base. It has attracted a significant number of bookings from people who responded to marketing and outreach efforts. The majority of bookings, especially on weekends, are from individuals specifically searching for karaoke rooms for special occasions.' Yandell tells.

The karaoke room has been well-received, particularly by a new customer base.

The Fox tells that karaoke has been a positive addition to the business, providing an upsell opportunity to the existing customers and functions of the bar, in addition to the new customers it has been attracting. The karaoke room, which now hosts up to 20 singers, was founded to an underutilized room on the bar's 3rd floor, a room that previously generated minimal revenue.

'The investment, though initially costly, was seen as worthwhile, leading to the creation of a well-decorated, stunning karaoke room. The positive reception and traction gained from our karaoke room have even led to considerations of implementing karaoke rooms in other locations within the organization', Yandell tells.  

What’s behind the ‘karaoke room effect’?

Karaoke rooms have been popular in many countries for decades already, but are now spiking more interest in new territories too. For example in Sweden, karaoke rooms have been introduced in many new locations and venues during the past five years and it has become a more trendy alternative than before.

Karaoke rooms provide additional income with booking fees, and drinks and beverages sold during the booking. Hotels, bowling alleys, bars, and restaurants have hopped in to test the karaoke effect in practice.  

Karaoke rooms in the light of competitive socializing

According to Cushman & Wakefield research on competitive socializing, the competitive socializing concepts have grown 386% since the beginning of 2021. Continuing on Cushman & Wakefield’s report, it is stated that the 75% of the millennial generation chooses experiences over things, which provides a great landscape for competitive socializing at entertainment or hospitality venues.

Cushman & Wakefield report that while competitive socializing activities — such as billiards or throwing darts — is not a new thing in UK pubs, today’s competitive socializing is done with the new level of sophistication.

While Cushman & Wakefield report does not discuss karaoke, karaoke rooms are a matching example of the same phenomena as a form of competitive socializing at venues. The report also notes that Gen Z spends a significant time per day on social media, which makes it even more interesting for venues to provide unique, social and photogenic options for nightlife and leisure visitors.

For example in Sweden, Melody Club introduced singing with different accessories, whereas some venues rely on flashy interior, and the fact that karaoke singing often sparks some great Instagram-moments.

The research — karaoke's effect on ROA

This ‘Karaoke Room Effect’ was studied in the UK with 53 hospitality venues in a thesis report using the Difference-in-difference method. Also it is notable that the research data was conducted from the years 2019-2022 that included severe restrictions to the hospitality industry, bar entertainment, and karaoke singing due to the COVID19-pandemic.

In the conducted research, the research question was ‘Does having a karaoke room increase the financial performance of hospitality venues in the UK?’ and was conducted by comparing a treatment group with companies who introduced karaoke room between the years 2019-2022, to a control group of companies who did not have karaoke. The financial metric used in the research is Return on Assets. Return on Assets determines how efficiently a company uses its assets to generate a profit. (ROA = net income/total assets)

The data consists of 20 venues who have installed karaoke rooms between 2019-2022, and 33 venues who have not. The data is collected from Singa’s customer database and from business statistics data provider Endole.

The research holds an assumption that the average outcomes would have progressed similarly for the both groups, if the karaoke room had not been introduced to the treatment group, so that both groups would have parallel trends in their ROA, and the assumption is tested to confirm that the parallel trends hold.

Overall, the results suggest that having karaoke installed at a venue increases its ROA. The most robust estimate of the average treatment effect on the treated shows that karaoke-treated venues have 12.23 percentage points higher ROA compared to the without treatment scenario.

Want to learn more about karaoke rooms?  

If you want to learn more about the conducted study, karaoke as a business opportunity, or simply chat about competitive socializing, contact us sales@singa.com. We know a thing or a few about karaoke and competitive socializing.