I'd say, keep playing what you know and are passionate about. The authenticity will definitely help the performance shine. Plus, I know a lot of younger people - myself included - love older music as much as they do the new stuff, sometimes maybe even more
I've been at bars/pubs where a there is a cover band playing. It doesn't matter if the entire place is packed with 20-somethings - if that band plays Don't Stop Believing, the whole place sings along.
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Deryk just gave the answer.
I work with, co-write with, and mentor a lot of really talented young songwriters and performers, many from the age of 8 to 10 up, and they play to mixed crowds of young and old.
Some are virtuosos at bluegrass songs that are 100 years old at least and play Merle Fest and the International Bluegrass Festival here. Others who who great songwriters and performers mention as idols: Pink Floyd, Led Zeppelin, the Beatles, Fleetwood Mac, Peter Gabriel, and on and on and on. I do not think there has been one mention of a newer artist and no covers of Katy Perry I can think of.
So, I think for me the moral of the story of if you are out playing your typical gig and you are not genre-focused, but are more of a singer-songwriter type with a band, just pick the very best songs you can from any era and try and do excellent versions of them, and also throw in some of your own.
I have seen absolutely no indication that the younger set needs to hear songs written by the current generation, or what's on the radio in order to be interested.
In my experience, they just like good music, the same as it always been been--so just play them good music and you will be fine.