Another Year Flies By
A Look Back at 2016 and Ahead at 2017
By George McAuliffe, Chief FEC Strategist, Redemption Plus
Years ago, the manufacturers in our industry –– then mostly video game makers since video was 90% of the equipment mix –– struggled for creativity to keep up the unbelievable streak of great games released. They couldn’t. Eventually, creativity gave way to imitation. In one conversation, as a manufacturer was showing me their new game, I think it was Crash, I noted that, aside from some color changes, it was identical to another hit of the time: Head On. I said something to the effect that “it’s just a knockoff of Head On.” “Well,” he said, “it may be remarkably similar.”
Dedicated RePlay readers may have noticed that another columnist has a last name “remarkably similar” to mine. That’s Howard McAuliffe, my son and business partner, who writes the Now Trending column in these pages. In the February, 2017 RePlay his headline was “How Long Will This Last?” Subtitle: “Looking at the Booming FEC Market’s Potential and Threats.”
It’s an interesting subject. The question arises as the family entertainment center industry is enjoying great dynamics. Growth is at hand as family entertainment attractions –– especially games –– are successfully introduced to complement other established businesses: bowling centers, family restaurants (especially pizza), cinemas and hotels as examples. There is no shortage of great games being released and the playing public loves them. Debit card systems allow us to regulate the cost of the experience and obtain pricing that allows profitability.
Redemption is ascendant, games have long lives, merchandise practices are staying ahead of the curve. So, it’s pretty much all good.
As Howard points out, though, as arcades expand into all of these different venues, two things generally happen: the novelty can wear thin, and there can be less urgency to play since they can be found in more places (maybe that’s the same thing!). He also touches on the macro economic environment: from politics to gas prices, our businesses are affected by events out of our control.
Howard concluded his article by sharing an “Aha!” moment he experienced when a friend explained how his business was thriving at the depths of the great recession. He realized that opportunities are there for those who find them at all stages of a business cycle. That has been my experience as well. Another observation is that the great operators –– those who are “operationally excellent” –– build their strength in good times. If downturns come, they survive on that strength. If they don’t come they are maximizing their business anyway!
Our consulting practice puts us in game rooms all over the country (and world) pretty much every week of the year. We are constantly talking to business owners with game rooms, our clients and others, about operations. We provide and teach a system of organizing all of the details in order to efficiently manage the guest experience, maximize sales, and control costs. As you might imagine, some of our clients buy in and follow the system, others don’t.
One of my “Aha!” moments in the business came when I realized the central economic truth of the game room: The last dollar you collect is the most profitable dollar you collect. (That’s why the best operators drive the nicest cars!) This means that attention to detail more than pays for itself.
This was recently brought home by our work with a long-time client whose general manager, who was well versed in the central bowling business, had no inclination to truly manage the arcade. Over time, our system fell by the wayside and (surprise, surprise!) arcade sales gradually declined. The owner finally had enough and called for help.
We analyzed the owner’s Embed reports in advance and diagnosed some problems. A site visit confirmed our suspicions and yielded many more opportunities for improvement. Essentially the entire system of operational management we had installed had fallen into disuse and disrepair. They had stopped paying attention to the detail of their player/guest experience.
With a little elbow grease and revisit to the operational manual (and a new general manager), order was restored. The result? Arcade sales gradually increased, peaking at a 71% increase six months after the system reset. Not that we needed to prove it to ourselves, we’ve seen similar turnarounds many times over the years, but it certainly shows how attention to detail pays.
While none of us can predict the future, we can control the present. Barring a politically induced shock to the economy, I happen to think we’re in good shape for continued growth. But let’s not be complacent. There is no downside in fine tuning our operations, maintaining best practices, and striving to delight our players, even in the best of times!
George McAuliffe has created and operated family entertainment centers from 2,000 to 150,000 square feet as a corporate executive, entrepreneur and consultant. He’s President of Pinnacle Entertainment Group and leads the company’s strategic advisory team. George, recently moved back “home” to the Jersey Shore with his wife Julie, has a passion for passing along what he’s learned in the fun business to the new generation of operators and suppliers.