350+ free-roam venues with happy operators!
350+ free-roam venues with happy operators!
We were promised the roaring 20s. After the pandemic ended we needed something to look forward to. The entire location-based entertainment industry was shuttered, and when lockdowns ended business boomed. For a while.
Now revenue is down, and operators are nervous. Costs have skyrocketed for labor, food, and new construction. It feels like a recession but the government insists it’s not. And the presidential election has everyone scared that the other side is going to destroy the country.
Randy White from White Hutchinson recently published some interesting stats on consumer trends. You should sign up for his newsletter. He publishes monthly and it’s always packed with insights I don’t see anywhere else.
Randy challenges operators to be honest with themselves regarding their revenue growth. From February 2020 to 2024, the overall consumer price index increased 21%, while the price for eating out increased 27% and movie and concert ticket prices went up 19%.
We’ve all experienced it at the grocery store and restaurants. Kylie and I went to our favorite taco stand in San Clemente this spring. We each had 3 tacos and one adult beverage. $65. WTF?
If revenue and profit hasn’t increased at least 21% since 2020, the business is in decline. And even if the top and bottom lines have increased, it might not be by as much as it seems.
Operating costs aren’t the only thing increasing. The cost of commercial construction is up 36% since 2020. This has caused operators to rethink expansion plans. And it’s thrown into question the feasibility study process, which are typically based on comparison businesses that cost 40% less to build.
Joe Pine, co-author of the bestselling book The Experience Economy, writes “THE key distinction between services and experiences is all about time. Services are (merely) time well saved. Experiences are about time well spent.”
Lately he’s been talking about the idea of transformational experiences, and how they represent “time well invested.” Time is our most precious asset. We can’t make more of it (though technology might lead to life extension, but that’s a post for another time.) With so many entertainment options, asking people to spend an hour or two in our business being entertained is a serious consideration. I am not sure we take it seriously enough.
The second year drop off in revenue for new entertainment venues is well documented. When you’re the new kid in town it’s easy to get people excited enough to put on pants. But what about years 2, 3, 4…
Building a business based on repeat visitation is like finding the holy grail. IAAPA research shows the average family entertainment center generates about 2.3 visits per year from a customer (if anyone has more recent data on this please let me know.)
When consumers have an endless supply of new things to check out, getting them to come back to bowl another line can be challenging. The rise of touring events, festivals, and popups makes it harder. Randy researched how many unique events or festivals were taking place in his hometown of Kansas City in 2024. He found 122 and confessed to not finding them all. Here is the list:
Investing millions of dollars into the same attractions we’ve been offering for decades locks a business into a corner. When consumer preferences shift or new competitors emerge, the only way out is to spend additional millions of dollars, or discount. And when times are tough, most people do the latter.
Turns out the Rolling Stones had it wrong (I really am getting old.) Using the American Time Use Study from the US Department of Labor, Randy shows that people spent 33% less time at leisure and art venues in 2023 than in the pre-pandemic period. That’s 1/3 business for location-based entertainment.
Millennials and GenX had the biggest drops 65% and 58% respectively.
People are spending over an hour less each day away from home.
So, it should be no surprise that location-based entertainment centers are challenged. In 2024 and beyond, getting people to put on pants, leave their cocoon, and spend what’s left of their hard-earned paychecks might require more than laser tag, bowling, and an arcade filled with the same games I played when I was 12 on the boardwalk at Rockaway Beach. Don’t get me wrong, I love Skee-Ball as much as the next guy.
It’s not just my opinion (though I’ve been saying it longer than anyone). Randy writes:
“To succeed in today’s highly competitive leisure/entertainment landscape requires new strategies. Offering one or a combination of entertainment attractions and counting on consumers’ desires to repeat the experience, whether it is bowling, go-karts, laser tag, or whatever, and no matter how good the quality of the attraction might be, is no longer a sustainable business formula for success. The concept that an attraction can drive repeat visits for multiple years no longer works.
The first new rule is that the experience needs to constantly change, and/or there needs to be new and unique ones to get people to return.
In the last month I read about 10 new family entertainment center openings. Every single one is featuring the same attractions: Mini golf, bowling, laser tag, redemption arcade. It’s like Groundhog Day for our industry, but we are stuck in 1994.
I talk to operators about using VR, and you know what their reactions are?
And they’re right. It should be easier, cheaper and more reliable. But I remember when laser tag was unreliable. And when we had to call an attendant to reset the pins on our bowling lane 5 times every game. (I remember the old Hale Bowl in Brooklyn that has kids behind the lanes manually resetting the pins. Old.)
VR attractions keep getting easier. And cheaper, and more reliable. And since the consumer market for VR seems to have stalled, we still have time to offer people experiences that are worth putting pants on for.
