Drilling Down
A Look at Other Recent RePlay Columns
By George McAuliffe, Chief FEC Strategist, Redemption Plus
George McAuliffe
The October RePlay featured two articles that were particularly thought provoking. The first, “The Changing FEC Landscape” by Randy White, confused me at first. On my first quick read, I took it as doom and gloom for the FEC industry, with population trends, age demographics, income, activity and spending patterns all working against us over the last 30+ years, especially recently.
My confusion stems from my observations of the FEC marketplace. I just returned from the AAMA annual meeting where the mood was upbeat. More than one manufacturer and distributor boasted of a record year. In our own business and those of our clients –– suppliers and operators –– we are seeing the best numbers ever. For example, one of our game rooms blew away our all-time high sales per game per week. It stood at $800 since 1988, and $250 is great performance today. Yet we cracked $1,000 in two different locations in the last six months!
Through our Pinnacle Insider program, we monitor actual weekly sales data for many locations. These real-time numbers are consistently healthy, including those that have been open for ten years or more. Investment levels are at record highs for the U.S. FEC industry, serious financial players in private equity are now interested in FEC, banks increasingly “get” the business, and more than a few serious operators are opening their second, third, or twentieth FEC location.
Randy’s a smart guy who has been in the industry for many years. I’ve always respected him and his data-backed research. So how do I square my own experience with what his numbers say?
Once I read the column a second time, I realized that it wasn’t all negative. Randy looked at several data points and concluded (correctly I believe) that the pace of technology and change is such that consumer demand for quality experiences is rising faster than our industry has traditionally responded to meet them. Seems like a solid argument. We’ve long said that the vaunted “WOW” factor in FEC is overstated –– the “wow” wears off after three visits or so. I learned this in our first FEC (1989). We invested some ungodly amount in dancing fountains at the entrance. We got a lot of “wows” in the beginning. Six months after opening, it was no big deal. Our repeat guests stopped at the fountain less and less, many bypassing it without a glance. We still needed to wow them, but, long term, that was in how we crafted the experience –– our games and attractions, how they performed, the entertainment menu, time-money balance, and how our staff contributed to their fun.
The other data examined in Randy’s article addressed demographic trends. The charts show the percentage of the U.S. population attending “arts and entertainment (other than sports)” is declining with A&E spending shifting from the middle class to upper incomes. I have a theory on what this means to the FEC sector:
“Arts and Entertainment (other than sports)” is a broad category. It includes movies, concerts, and plays; health, swimming, tennis and country club memberships; other social, recreational, and fraternal organizations; recreational lessons or instruction; rental of movies, and recreation expenses on trips. So, while Randy’s conclusion is true, consumers today spend a lot of time on digital screen media, and the out-of-home leisure venue market has shrunk. But, it doesn’t necessarily apply to the current FEC marketplace. In our consulting practice, much growth is taking place as arcades and FEC attractions are added to venues like restaurants and hotels and resorts, which are measured in other categories. Additionally, take the biggest venue for growth: bowling centers. The continuing decline in the number of traditional bowling centers masks significant growth in the Bowling Entertainment Center sector.
The second thought provoking article in last month’s RePlay was Howard McAuliffe’s article “Attractions and Experiences Are Great…But Cultivating the Social Experience is Essential…” Howard identified a counter trend emerging in “opposition to trends such as technology proliferation.” As evidence, he pointed to Trendhunter.com’s 2017 report identifying several trends supporting consumers desire for respite from the digital world: “nostalgia, local businesses as community hubs, and suspended adulthood.”
Howard concluded that FECs are well placed to capitalize on these trends. Randy’s column correctly concluded that the old traditional FEC model is at risk and that “(getting) the consumer out of their homes and away from their screens and to beat out the competition now requires a high quality/premium…. experience.”
For these reasons, contemporary FEC models, with comfortable atmospheres and attractions as well as quality food and beverage, are succeeding against the macro trends. A key reason is their appeal to a wide age range and to both genders. The result is that properly designed and planned centers now attract the widest audience in the history of the FEC. That allows centers to trade in many more day parts than in the past, supporting the economic health of the FEC business model.
In our view the data in both Randy’s and Howard’s arguments supports the critical need for continuous improvement in the guest experience. We believe our audience assesses the value of their visit by calculating Fun+Memories+Takeaway Items+Time against their expenditure (of both time and money). Focusing on that equation will help operators continue to weather whatever competing trends they encounter.
George McAuliffe has helped hundreds of business large and small develop and execute arcades and FECs. He has personally operated family entertainment centers from 2,000 to 150,000 square feet as a corporate executive, entrepreneur and consultant. With his partner and son Howard, he recently launched The Pinnacle Insider to help a wider audience execute FEC operations at a higher level. Readers can become an Insider at ThePinnaceInsider.com.
George lives on the Jersey Shore with his wife, Julie, and has a passion for passing along what he’s learned in the fun business to the new generation of operators and suppliers.
Visit grouppinnacle.com for more information or contact George at georgemc@group
pinnacle.com; phone: 314-422-7197.
