In the last 10 years we have seen arcades evolve from a primarily child focused business, to a truly multi-generational business. A large portion of the growth in recent years has been in industries like bowling, hospitality, go-karting facilities and restaurants all of which appeal to multiple age demographics. By combining arcades with quality food and beverage in facilities geared to multiple demographics, a new version of the redemption arcade has thrived. However, 10 years into this evolution, we are starting to see a lot of remarkably similar concepts proliferating the United States. In some markets, there is saturation, and that is putting pressure on sales and profits. The operators that are going to thrive over the next 10 years will need to evolve again. Here are some ways I believe the best operators will change in the coming years, many have already started to do the below:
Theming– Most successful facilities capitalize on mass market trends and holidays in their facilities. For example, we offer Super Bowl events, Christmas parties, and include popular licensed product especially near movie releases where studios are spending millions on advertising. These tried and true tactics will continue but will be taken to another level or two. We have already seen Hasbro announce a chain of FECs focused on their brands, starting with NERF. We have major licensing and branding companies reaching out to us looking for opportunities in out of home entertainment. However, theming does not have to include licensing. Facilities are increasing their design budgets to make sure they are creating an environment that is functional and themed to the audience they want to attract and to stand out from the competition.
Clusters of Virtual Reality (VR)- The discussion about virtual reality has already evolved from considering should an FEC include VR to what VR should the FEC include. Starting this year, the discussions will be about how much VR to include. Facilities will begin to offer multiple VR experiences as the technology improves, the prices come down, and we learn what really works and where.
Quality Food and Beverage- The quality of food and beverage at FECs has improved greatly over the last 10 years. Most facilities offer fast casual level food, at a minimum a decent pizza or burger. Gone are the days of a simple snack bar with popcorn, hot dogs, sodas, and packaged goods. The best FECs will continue to improve the level of food offered at their facility. However, quality does not necessarily mean complexity, many facilities will actually reduce the size and complexity of their menus.
Reinvestment- The best operators will make sure they are saving some profits to reinvest. Most of us know reinvesting in arcades and other amusements is essential to our business. This is much harder to do when sales are down because of competition, recession, or other pressures. Many of the new operators who started in this business in the last 8-10 years have not been through one of these cycles and if they can’t reinvest will struggle. Now is the time to save capital when profits are up.
The best operators have always succeeded through these evolutions by changing with them. Those who try to keep doing what they have always done, tend to struggle. The next 10 years will be an exciting time as our industry continues to evolve and thrive as a form of entertainment that appeals to nearly all demographics.