When you think of the Potts Point Hotel, you likely think of an institution in Sydney’s bustling nightlife scene. But behind every pint poured and cocktail served is a master of profit—Joel McDermott.

As the General Manager and Licensee, Joel’s expertise in managing waste, optimising profitability, and navigating the complex world of promotions makes him a standout figure in the hospitality industry.

I sat down with Joel to discuss the strategies that keep Potts Point Hotel thriving in an industry where margins are slim and competition is fierce. From reducing waste to understanding customer behaviour, Joel’s insights were as candid as they were valuable.

Waste Not, Want Not: The Impact of Changing Pourers

One of the biggest issues Joel tackled head-on was waste. Running a high-volume venue means every drop counts. Joel explained that by switching to better pourers, they saw a dramatic reduction in wastage.

“The small changes can make a huge difference. When you’re pouring hundreds of drinks a day, even a millimetre or two of over-pour can really add up,” he said. And add up it did—on a typical month, a one-millimetre over-pour on vodka alone could lead to a loss of six bottles of stock, worth around $250 wholesale. Over the course of a year, that’s a massive $16,000 lost on vodka alone—not including cocktails. It’s a quiet killer to your bottom line, and Joel recognised that.

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Joel breaks down the impact of the meniscus with a more detailed look at his venue’s numbers:

“The meniscus—the curve at the top of a pour—can easily add an extra 2-3 millilitres per drink. Now, let’s say we’re serving 500 drinks a day, and each one has that extra 3ml due to the meniscus. 

Over the course of a month, that’s 3ml x 500 drinks x 30 days = 45,000ml (or 45 litres) of lost product. In a year, that’s a massive 540,000ml or 540 litres.

Now, if each bottle is 700ml and costs about $80 wholesale, we can calculate the total loss:

• 540 litres ÷ 0.7 litres (per bottle) = 771 bottles of liquor.
• 771 bottles x $80 = $61,680 in lost stock every year.

That’s just from the extra 3ml in each pour, which may seem small, but it adds up fast and eats into the bottom line.”

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Calculate the retail value of this lost product

• Each drink is sold for $15.
• Retail value of lost product = 18,000 servings x $15 per drink = $270,000 per year.

This example highlights how tiny inefficiencies, like the meniscus, can lead to substantial losses over time. Joel’s focus on optimising every pour is about preventing these seemingly insignificant losses from becoming a major drain on profits.

With better pourers, the difference was clear. Reduced waste meant more money in the till and less product lost to inefficiencies. When you’re pouring spirits by the bottle, precision isn’t just a nice-to-have—it’s essential for profitability.

The Dance of Discounting and Promotions

Every bar faces the temptation to discount to drive traffic. But Joel approaches discounting strategically, with a keen eye on customer behaviour.

“The first question I ask is: Why are we discounting? If it’s not for a reason, then it’s just giving away margin,” he explained. Too often, bars discount just for the sake of it, without understanding the true impact on their margins. Joel doesn’t just slash prices to fill seats; instead, he uses discounts to drive specific business goals, like drawing in customers during quiet hours or gathering data for future marketing.

He prefers to add value instead of offering direct discounts. For example, the Potts Point Hotel has a membership programme that rewards customers with cashback, which can only be spent in the venue. This tactic not only keeps the revenue within the business but also builds loyalty without diminishing the perceived value of the products.

“I’d rather give stock away for free if I can. People love a freebie, and it doesn’t devalue the product the way discounts do,” Joel said. This method allows them to stay generous with offers without eroding their pricing strategy.

Training for Success: Staff as the Profit Drivers

Training is everything in hospitality. Joel doesn’t just rely on staff to serve drinks; he sees them as profit drivers. When it comes to upselling and suggestive selling, Joel makes sure his team is armed with product knowledge and the tools to deliver an excellent customer experience.

“By training your staff, you’re increasing the value they bring to the customer, and the better their experience, the more likely they are to spend,” he noted. Joel doesn’t just want his team to be good at pouring drinks—he wants them to sell experiences. This, in turn, increases the average spend per customer, adding directly to the bar’s profitability.

Training, however, isn’t just about product knowledge—it’s about creating a consistent, high-quality experience. With that, Joel combines efficiency and proficiency: making sure the venue is run smoothly and profitably while keeping the customer experience front and centre.

Looking Beyond Stocktake: Managing Profitability Day to Day

While stocktake is a crucial tool, Joel emphasises that it’s not the only way to manage profitability. He encourages keeping a close eye on margins, particularly when it comes to big-ticket items like champagne.

“For me, it’s about the dollars, not just the percentage margin. I can make the same profit off a bottle of Dom Perignon with a lower margin, and that’s still a win,” he explained. In essence, Joel isn’t obsessed with gross margin percentages—he’s more focused on real-world dollar profits. A bottle that sells for a higher price point can bring in a better return even if it doesn’t meet the traditional margin targets.

This mindset is vital when managing a venue. Profitability isn’t just about slapping a markup on everything; it’s about knowing where your money is going. Joel is always watching the numbers and adjusting where necessary, making sure to maintain cash flow and minimise waste at all times.

Navigating the Rising Tide of Costs

Running a bar isn’t just about managing stock and margins—it’s also about managing expectations in a time of rising costs. Joel highlighted that rising rents, insurance premiums, and excise taxes put pressure on venues, but it’s important to be transparent with customers.

“You have to educate your customers on why prices go up. It’s not just about us gouging them—it’s about market factors like inflation and excise tax increases,” Joel pointed out. By building strong relationships with suppliers and negotiating fixed pricing agreements for longer terms, Joel manages to reduce the impact of rising costs on his customers.

At the same time, he ensures that value is added in other ways, whether it’s through premium products, outstanding service, or simply providing a space where customers feel valued. This helps to shift the focus from price to experience.

Joel’s Golden Rules for Success

If there’s one thing Joel knows, it’s that success in hospitality comes from being resourceful, knowledgeable, and engaged.

1. Don’t operate under-resourced—ensure you have a safety net during slow trade periods.
2. Know your local market—engage with your community, build relationships, and encourage word-of-mouth marketing.
3. Stay across the details—understand your margins, expenses, and where waste occurs. Managing these details ensures long-term success.

Joel’s approach to managing Potts Point Hotel isn’t just about selling food and drinks—it’s about creating a profitable, sustainable business while keeping customers happy. Whether it’s reducing waste, managing promotions, or training staff to maximise sales, Joel’s strategies are a testament to how thoughtful, well-executed operations lead to a strong bottom line.

In a world where margins are tight and competition fierce, Joel McDermott is proving that good business is as much about the details as it is about the big picture.