Around 100 people - many wearing Labour Party red - turned up to the Grand from 7pm after the polls closed, with former Labour Party MP Liz Tennant among Mr McDouall's supporters.
There was a relaxed and confident air in the room early but it gradually became more subdued as the night went on.
Joan Rosier-Jones, one of Mr McDouall's campaign workers, said at the start of the evening: "I think Hamish has a good chance of winning.
"But whatever happens, I know that we have done our absolute best."
Mr McDouall arrived at the Grand around 8.15pm, and conceded defeat at 9.15pm. In a gracious speech to his supporters, he said the campaign had been "so much fun".
"It's not always about the end point, it's about the process. We played a fantastic game, and the results don't reflect how well we played."
Mr McDouall reminded his supporters that they were there "to fight inequality".
"Wanganui is in a unique position - we see inequality every single day, in our own streets."
He told the Chronicle he was particularly disappointed in Labour's low party vote.
"People don't seem to be listening to Labour's excellent policies. There were a lot of side issues in this campaign, and I think we were starved of oxygen," he said.
While he will continue as deputy mayor of Wanganui District Council, Mr McDouall was not making any commitment at this stage to standing in any future election.
"My family and I need to pause and decide what our next step will be."