I simply tell them that we have a 'wish list', and to get a gig at our club they first have to get themselves on to that wish list. To qualify for the wish list, at least one of our regulars has to suggest they should be booked.

I conveniently avoid mentioning that I can put anyone I like on the wish list!!

This satisfies the 'diplomatically honest' criterion without risking a potentially confrontational situation.

I should point out that our regulars are quite discerning, and are festival goers... nett result, our wish list reads like a 'who's who' of folk!