Looking Ahead to the Coming Year
By George McAuliffe, President, Pinnacle Entertainment Group
If time flies when you’re having fun, we sure must be having a lot of it! Before we look at the prospects for 2024, a little context is in order. Regular readers know that Pinnacle interacts with a pretty substantial cross section of current and former clients across the FEC landscape, with about 100 of them contributing their sales to our database. The trends we discuss here are informed by that data.
Existing FEC Sales
Our industry’s last measurably bad Covid quarter was Q1 2021, so we are soon to be three years from the depths of Covid. Yes, 2021 was still a recovery year in total, but it gradually improved in Quarters 2 to 4. Part of the dynamic was walk-in business, which recovered sooner, and group sales which took longer (taking until 2022 before it was close to pre-Covid levels). There were geographic variations as well.
It all came together in 2022, which was a record year for many of our clients, often to the tune of double-digit percentage increases over pre-Covid 2019. That continued in 2023, at least for the first half of the year. As we moved into the third quarter, we began to see more client locations turn into low single-digit increases and a significant number with year-over-year declines. In September about half of those locations ran negative, some with double-digit declines. You do have to be careful with single month year-over-year measurement; there was one less Sunday in September this year, for example.
We don’t have a crystal ball to predict the future. Professional economists predicted doom throughout 2022 and 2023 and it just didn’t happen. The stock market is strong, unemployment is at historic lows and consumer spending is holding up. High interest rates are the one clear negative and, yes, we believe that is contributing to the slowing of sales year over year that we described above. We’d have to expect 2024 to be a somewhat flat year. However, at these levels of business that means our industry should be just fine. Our FEC world always has the upside potential of new technology or a new attraction emerging to drive sales.
Industry Trends
Here are the highlights of the trends that we see in the marketplace and that we work with in our consulting practice:
Venues
• String bowling, in general, and duckpin social, in particular, are driving new locations anchored by bowling, often bar-restaurants.
• Bowling Entertainment Center upgrades: Now that we are 15 to 20 years into the earliest adoption of the BEC model, many centers are upgrading and otherwise taking their business to new levels.
• Cinemas continue to add new-model FECs, often with bowling or other major FEC attractions and upgraded bar-restaurant.
• Hotel resorts increasingly use FECs to “keep guests on the property.”
• Social gaming, as seen in facilities like Putt Shack and Chicken and Pickle with attractions like escape rooms, golf/sports simulators and mini-golf, continues to develop and may well morph into new versions we’ve yet to experience.
Attractions
• Automation in general: We see new technologies in card systems (see Intercard’s iTeller XL), increasing online scheduling and sales, POS systems like Brunswick’s Sync with heavy automation options, and even robots performing staff functions.
• Redemption: This remains strong and is supported by a steady flow of good product, good merchandise options and upgraded displays. Redemption stores (vs. counters) seem to be the new normal.
• VR and esports: Two different things, for sure, although public-space esports may be moving into the VR space. VR attractions have established their place in today’s arcades and FECs. We see that continuing to evolve and develop in 2024.
• Park rides: Pinnacle has experienced an uptick in interest for amusement park rides in recent months. Think Big Wheels, coasters, launch and drop rides. While it’s probably too soon to label it a trend, it’s still interesting.
Consolidation and Operations Focus
• Consolidators like Bowlmor, Triple Shift Entertainment, Five Star Parks and Family Entertainment Group, to name a few major players, have been very active in 2023 and we see that continuing in 2024.
• Operating Focus: Let’s end where we began this month’s column, with existing FECs of all stripes. If 2024 proves to be a flat or even more challenging year, the smart operators will take the opportunity to review their operations for improvements. FECs are part of the attractions industry. Business success for attractions always includes managing guest length of stay and repeat visitation.
Keeping the customers you have, and leveraging that audience for additional visits, is often the low-hanging fruit when attempting to drive sales. In recent months, we’ve seen more clients engaging us to help them improve their existing business than ever before.
Let’s hope this year is as much fun as the last two. We wish you a healthy, happy and prosperous 2024!
George McAuliffe has helped hundreds of businesses 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. He is the owner, with his partner and son Howard, of Pinnacle Entertainment Group.
George lives on the Jersey Shore with his wife, Julie. They have three sons, two daughters-in-law and a grandson.
Readers can learn more about Pinnacle at grouppinnacle.com or contact George at georgemc@grouppinnacle.com; phone: 314-422-7197.