Yes, VR Arcades Can Be Highly Profitable Businesses
As a passionate gamer and gaming industry analyst, I have closely followed the exponential growth of virtual reality (VR) technology and its applications in location-based entertainment. In my expert opinion, VR arcades absolutely can be profitable businesses, especially as the broader VR/AR market is projected to grow to over $450 billion by 2030.
Rapidly Growing VR/AR Market Presents Big Opportunities
- The global VR market reached $21.83 billion in 2021 and is forecasted to grow at 15% annually through 2030
- Another report predicts VR could become an $184 billion industry as soon as 2026
- Location-based VR entertainment revenue alone is expected to reach $8 billion by 2022
This rapid market expansion demonstrates the soaring popularity of virtual reality experiences among consumers. As more people look to experience immersive VR gaming without investing in home setups, VR arcades are primed to capitalize on this surging demand with instantly accessible and affordable premium VR stations.
Market Size and Growth Projections
Virtual reality arcades fall into the booming "location based entertainment" sector of VR along with theme parks, zoos, museums and more. This sector is exploding:
- Location-based VR entertainment grew from $800 million to $1.2 billion between 2017-2018
- Industry reports project this figure to reach over $8 billion by 2022
- That represents staggering 566% revenue growth in just four years for VR entertainment centers
Additionally, leading financial firms like Goldman Sachs forecast substantial growth in overall VR/AR revenues in coming years:
| Year | Projected VR/AR Revenue |
|---|---|
| 2022 | $15.7 billion |
| 2024 | $71 billion |
| 2026 | $184 billion |
As seen above, both location-based VR venues and the VR/AR industry as a whole offer tremendous growth opportunities for startups and investors alike.
Critical Success Factors for Profitable VR Arcades
While the market demand is certainly there, operators still need to execute well to actually turn a profit on VR arcades. Here are some of the most important factors:
Game Selection and Upgrades
Your VR game library will make or break the experience. Include popular titles gamers know along with exclusive and regularly updated games they can’t play at home. Rotate new games in every few months to stay fresh and encourage repeat business.
Example: Hologate rotates its holographic 4D games on a seasonal basis to generate buzz and role out must-play cutting edge titles
Aim for at least 10 multiplayer VR stations at opening, with room to add-on more as business grows. Popular systems like HTC VIVE Pro for room-scale games are smart choices.
Location and Visibility
For heavy foot traffic, situating your VR arcade in a shopping mall, downtown retail corridor or tourist district is ideal over standalone buildings. Neon signage and storefront displays showing the VR gear will help grab eyeballs and walk-in customers.
Marketing is crucial too – run social media promotions and ads across platforms like Instagram highlighting specials or new games. Encourage customers to generate user-generated content of their VR experiences to gain organic visibility.
Competitive Pricing Strategy
Balancing profit margins while keeping VR experiences affordable for families is key. One effective pricing model used is:
- $15 for a 10 minute VR game
- $50 for 1 hour unlimited access
This ensures healthy per-customer revenue while giving options for longer stays. Special discounted "happy hour" rates can boost slower periods too.
Memberships and Events
Rolling out membership packages encourages loyal repeat customers while locking in recurring revenue, for example:
- $60 per month for 2 hours unlimited daily access
- $175 per month for 4 hours unlimited daily access
- Discounted birthday parties and bulk tickets as incentives
Similarly hosting private events like kid birthday parties or corporate team building VR rotations makes for easy add-on sale opportunities.
Financial Model and Profitability Projections
Most VR arcades realize profitability within 13-20 months. Expected startup costs range from:
- Low End Estimate: $65,000
- High End Estimate: $130,000
Diving into projected revenues:
- Typical weekly gross revenue per VR "bay" ranges from $200 to $485
- With 10 VR bays generating on the higher end, that equates to $4,850 weekly or about $40k+ monthly for the arcade.
- Subtract out rental overhead, staffing and operating expenses and net profits hover in the 15-25% range pre-tax.
In summary, each VR station or pod can drive over $10k+ in annual revenues. With margins increasing over time, profitability can be achieved relatively quickly under 2 years, faster at higher volumes.
Real World Examples Show Strong Returns
Talking abstract figures is one thing, but how profitable have VR arcades actually been for entrepreneurs who have taken the plunge? Extremely – when executed correctly.
Case Study 1: VR Junkies Arcade Turned 5 Figures Per Month
California VR arcade and shop VR Junkies founder Ian Logan shares:
"We‘ve been open for two months and we‘re turning five figures in monthly gross revenue from this one 600-square foot location."
He expects to recoup his full ~$70k initial investment by month 8 or 9. Profit drivers he notes are birthday parties and corporate events delivering big add-on sales.
Case Study 2: Mass Exodus Escape Room Breaks $1M Revenue
New York escape room company Mass Exodus created an elaborate post-apocalyptic VR escape room experience in NYC. Within their first FULL year of opening, this one location grossed over $1 million USD in revenue.
Demand was so high that customers lined up outside to book tickets weeks in advance because sessions were completely sold out. Their combination of premium VR gear, production values on par with video games and movie sets along with networked gameplay made for a viral smash hit.
Market Outlook and Growth Predictions
With both market reports and real world case studies demonstrating the revenue generating potential of VR arcades, this sector should absolutely be on the radars of entrepreneurs and investors alike.
As VR hardware, graphics and processing power matures and 5G proliferation enables next-gen cloud gaming, the possibilities are truly endless for location based VR in coming years.
We are nearing the stage where free roam multiplayer VR experiences can rival what is currently only possible in one‘s imagination. The companies bringing these immersive virtual worlds to consumers stand to be extremely successful in my view.
The time to start building the foundation of those companies with your own VR arcade is now while industry growth trends are surging upwards steeper than ever before in history. Those who jump on this wave early will be best positioned to ride it into the future.
