How to upgrade your escape room business with VR (2019 Update)

This article was originally published at Nowescape. 

There are 3 big issues in the ER market: how to raise capacity, how to scale the business and how to be in tides with the market. I’ll tell about all three in detail before demonstrating how VR can solve them and benefit an escape room owner providing him the competitive advantage for the next decades.

After that, I’ll cover challenges an escape room owner has dealing with VR and common pitfalls on this way.

Escape room market issues

#1. How to raise capacity

Having a location-based entertainment means being attached to space. When you start an escape room business, you carefully choose a space taking into account the location and the rent.

Once you chose it you have to write the game script according to the limitations of it.

Then you run a room, and there are always groups bigger than the maximum number of players per room, so you wonder if you could place one more player. Because every player generates additional revenue. You define your maximum number of players very quickly, and from that point, your total capacity is a given.

You’re doing good, you have a lot of bookings. And eventually, you’re out of capacity with an event for the number of guests twice more than your maximum. You work it out splitting people into two groups. One group plays all the rooms after another. And then you have a request for the group even bigger. You think about adding a room, a floor or a location.

The bigger the capacity you have the better for the business. But you should ask yourself how much space do you need for bigger capacity and is it worth it, is the margin increasing together with the capacity?

Sometimes there are dozens or even hundreds of square meters, but only four players to play in a game. And that leads us to low revenue per sq.m and a low total capacity of your center. Sometimes there is big capacity, but the revenue per sq.m is still low because of the high rent or excessive space.

Your space must be efficient. So ask yourself:

What is your revenue per sq.m?

How many guests you can host in your center? Do you get a good profit from every square meter you pay rent for?

#2. How to scale the business

Once you made your center profitable, you start to think about expansion. Either you grow or you keep it as a lifestyle business.

In the escape room business, growth means opening a room. You may want to experiment with formats, raise your capacity, add new genres to the roster, open a new location, start a franchise. In all of these cases, you’ll need to build another room.

You want to evolve. You have creative ambitions. And there could be high competition in your city as well.

So you build a room with a talented actor, beautiful decorations, sophisticated puzzles, and intricate electronic devices. A piece of art actually, not just a game. But the margin maybe not as high as your artistic ambitions.

The escape room you see at this picture costs more than €140 000. Photo: Ilya Nodia

The race of arms can force you to spend a few years and a huge amount of money to build a room that may have negative ROI in the end.

On the other hand, you can optimize a room startup cost using know-how or copying a room if you’re building a franchise.

So ask yourself. What is the startup cost of your room?

Once you have a number add the depreciation costs.

The more popular your rooms are the more wear & tear issues you have to deal with. Everything broke. And you fix it on a monthly basis. Often you need a particular contractor to fix something because he’s the one made it in the first place.

And in the end, you’ll have to build a new room if a renovation isn’t worth it or it doesn’t go with the tides anymore or everyone has already played it.

So you need to ask yourself, what is the room lifetime?

A room cost = startup cost + (depreciation costs * room lifetime)

So you come to the realization of how much money you need to put in a room every X years. What does it cost to add a room to your chain or franchise?

And that’s is a big problem with the whole market. Startup costs are growing and it’s harder to scale the business.

#3 How to be in tides with the market

If you came up with the idea of how you can scale up the business, you think about the long-term future. What will your business look like in 5 years? 10 years?

Do you have a vision different than ‘making more revenue’ or ‘opening more rooms’ or ‘keeping it like it is right now’?

Thankfully, you can learn from the escape room market evolution in different countries. After escape rooms emerged in the US and in Japan, it was SCRAP building a market in Japan. They stuck to the idea of big events. They didn’t build rooms but they host events for hundreds of people at stadiums and other big facilities. The gameplay evolved accordingly to the concept.

Then it was Budapest in Europe known as the capital of escape rooms. Parapark as the pioneer and a lot of other companies made dozens of rooms with locks, keys and ultraviolet. I’d call them the first wave.

And then there was an escape room boom in Russia with Claustrophobia and hundreds of other companies. That was the time the second wave started. The rooms passed the locks and keys behind offering something more intricate like electromagnets, NFC systems, moving walls, custom-made mechanisms and complex electronic systems managing the whole room.

The second wave has already started in the US and some countries in Europe, but not all of them. There is a time to be prepared.

What does it mean to an escape room owner? When the second wave starts, the race of arms begins. There will be more and more expensive rooms. The competition will be harder and harder. A room cost will raise up to €50000 and more. At some point, the opening of a new room won’t be cost-effective at all.

After that, there will be rooms closed epidemically. A few companies will be left to keep things going.

So there are two questions: how will you survive this? And what will you offer people coming to your center in the next 10 years?

If you have thoughts about that, then you probably already considered adding some products to your roster.

There are formats allowing you to be more flexible. If you like to think of your center as an event agency (and that is a good thing to do), you may be interested in mobile escape rooms to host events on the client’s site and city-based games to host events for bigger groups with no limitations. With the last, however, it’s harder to make a story-based game and make something as exciting as an escape room fully prepared to be visited at your venue.

If you want to focus on families and kids you may consider a room for kids and other additional activities like a quiz party and so on. And probably it will be less expensive than your regular escape rooms.

If you stick to the location-based entertainment concept, you may consider adding a sports room, a rage room, a room with actors or a VR room to compete with other companies and cover some niche audiences.

Again, compare the costs and the impact on your business. What will cover the biggest audience? And at the same time, what will aim your business at the future? In other words, what will be your competitive advantage raising your profit in the next 5 or 10 years?

Can VR help you with these issues?

Yes, it can. But VR is not a magic pill. It’s not the only way to deal with these issues. And not every VR product will help with all three points. Some of the products won’t help you at all.

In order to learn this tool and use its full potential you need to carefully choose the product to work with.

And if you’ll start a research by yourself you will be overcome with information about different products.

So before we outline all the benefits and challenges of VR, let’s make an overview of the location-based VR market, so you’ll know what are we talking about.

LB VR landscape

Hyper-reality VR

Hyper-reality or mixed reality is about creating as much world around you as possible.

It is the merging of real and virtual worlds, where physical and digital objects co-exist and interact in real-time. Practically that means that when a player walks in VR he walks in the physical world when he picks a torch or a gun in VR, he does the same in the physical world, when he touches a wall, it is there.

For example, in The Void parks, to provide physical feedback, there are walls, special effects equipment such as fans, mist machines, and heat lamps, as well as props representing items such as guns and torches; all of these physical elements correspond with elements within the virtual world seen through the headset, increasing the illusion of immersion.

To build something like The Void you will need millions of dollars. The Void CEO Ken Bretschneider has invested $13 million of his own money to make it happen. The stage for such an experience is about 100 square meters.

And if you want to pick a franchise, The Void don’t offer them since it closed the deal with Disney.

Another hyper-reality project is Sandbox VR (ex-Glostation) which is way more space-efficient. However, they did a big deal too raising $68 million series from Andreessen Horowitz. Now if you’ll submit a request for a franchise, you’ll be added to the waiting list. But the franchise cost seems to be around $700.000.

If you have a strong team of developers, you can build the hyper-reality room by yourself like the escape room company named Tick Tock Unlock did. The development cost of the project isn’t public, but knowing the drill I can say it’s not less than $200k.

If you are looking for ready-made solutions, there is Entermission providing VR escape games with scent, wind and temperature effects for $90k in the US, Canada, Mexico and Australia.

Also, you can keep the costs really low and kick off the experiment implementing VR as an element of the game into one of your rooms. Before we started Avatarico we’ve been running a real-life escape company named Lostroom. Under the brand we made the first real-life escape room with VR (Russian). There was a moment in the game when a player put a VR headset on. He sees the same room but something is different. A light ball appears and goes to the wall. A player point the spot on the wall out to other players. And they find a panel to open. The cost of such room won’t differ a lot from the hi-tech real-life escape room with no VR. It will be something like $50k. Technically, it would be the same room as always so it won’t have a real impact on your business.

Free-roam VR

Free-roam is about transferring as much of a player to the game as possible. So the full-body tracking is the maximum expression of the idea. A player has a lot of trackers all over his body, so he can see his arms and legs in the game. Usually, holding a gun, walking and shooting is all he can do. The main effect is ability to step inside another world and be able to move freely.

In able to walk in different directions with no wires, there are VR backpacks or wireless adapters and a lot of space.

Products with higher space requirements are also named warehouse-scale VR.

Vast spaces allow players to walk freely with no obstacles and game operators to monitor the session easier.

The pioneer in the field is Zero Latency. It provides shooting games mostly, like Zombie Outbreak with 8 players in 200 sq.m.

An entry fee for warehouse-scale VR is around $600k.

Room-scale VR is much more space efficient and compatible for escape room centers. At the same time players tend to stumble upon walls, their teammates and other obstacles more frequently, so a game operator is more occupied with monitoring them.

Hologate is more about VR sports with its shooting games. The game can be played by 4 players maximum in 25 square meters. The cost will be probably around $95k.

Virtual room focuses on VR escape games for 4 players. The pricing seems to be around $40k. It’s interesting that the founders of the company are the owners of a branch of Escape Hunt franchise.

Avatarico will provide a VR escape game for 6 players in 35 sq.m with a startup cost of €22k. The company has a real-life escape room origin as well, its sibling named Aventurico (ex-Lostroom) has been running rooms in Barcelona and Madrid.

Exit VR, Ubisoft and others will deliver their VR escape games on a pay per play or revenue share basis. Their games can be played by a team of 4 players maximum in 35 sq.m space.

Comparing pay per play model with upfront payment model, one can say that one year of successful operations will return the upfront payment, and if you’re on a pay per play model, after one year you still have to pay every month.

And you can also consider VR arcade business model with hundreds of games accessible from Steam, SpringboardVR or other platform on pay per play basis. In that case you’ll have content with no exclusivity. As soon as VR arcade is the cheapest way to start a VR business, there is a lot of cybercafes using the same games popping out every day.

Seated VR

Seated VR is about getting customers entertained. If you go to an amusement park, you’ll see that there are people flying, riding and driving. And most often they sit while they’re screaming, yelling and laughing. It’s comfortable and thrilling at the same time. ‘Free-roam’ attractions like paintball and laser-tag are niche ones compared to roller coasters, bump cars and others.

If you want to have a passive VR experience, there are VR pods for watching 7D movies.

If you want something interactive there are different VR simulators like racing cars, flying simulators, mech simulators, spaceships simulators and swings that are really popular in Asia.

An average cost of a simulator or a pod is $8k and it’s dedicated to 1 or 2 players.

Seated VR escape games (also called free hands or hand tracking VR) are provided by Avatarico in Europe and Asia, and Entermission in the US, Canada, Mexico and Australia.

Seated VR escape games are the most space efficient ones in the market. The cost is about €22k for 6 players in 25 sq.m.

Free hands VR uses hand tracking technology allowing players to interact with everything with bare hands. There is no controllers in their hands. There are several additional values about that.

1. There is a wow moment when players see their hands for the first time and touch objects, when they fly or shoot fireballs using their hands.
2. Using your own hands is natural so the controls are very intuitive.
3. Players don’t consider the experience as a video game but rather as an attraction.

As a showcase there is an escape room company in Sydney, Australia adapting this model. Instead of adding a VR in their Escape Hunt franchisee location, they opened a new center called Virtual Reality Rooms with more than 20 seats. They used their best practices of operations to make 50 sessions a week.

Your own concept development

If you create your games by yourself, which is pretty typical for an escape room owner, you may be interested in VR development.

But since it’s quite expensive, you should do it only if you’re able to distribute the game across hundreds of locations. Selling it across your chain or franchisees will do the trick.

Having an USP is crucial to make it happen. So define how your product will be better than others. Will it differ in terms of a business model? A technology? A space efficiency? An audience appeal? A repeatability?

With the developer rate of €30 per hour, the total cost of the development is €250 000 —€450 000, and it will take 6-8 months. Think 20+ deals to be closed in order to return your investments (the actual number will depend on your pricing).

You will need to hire a game designer (or be the one), a concept artist, an environmental artist, a 3d-modeler, a coder and a Q&A specialist, the whole team like you do with real-life escape games.

Benefits of VR to choose

As we said before VR can help with the basic issues with the escape room market. At the same time VR products differ drastically. Let’s see what can be done with the right VR product in terms of upgrading real-life escape business.

Raising capacity with VR

You already know that there are free-roam VR solutions that require a lot of space. Placing 4-8 people in 200 square meters to play VR is similar to immersive experiences with actors some escape rooms use. In terms of space efficiency, both are a waste.

But if we’re talking about the space-efficient ones, there are VR products that require way less space than any escape room. It’s either VR arcade games of VR escape games.

Both Avatarico and Entermission have the most space-efficient product in the market which needs only 25 square meters for 6 players. Some other companies also offer solutions for 4 players in 35 square meters.

That leads to higher revenue per square meter.

* 21 sessions a week, €100 per team

Also, it means, you have a bigger capacity with VR escape games.

* Total space is 100 sq. m

And if you have just 1 room you still can have more than one game with VR. And the ability to choose the game affects traction.

Scaling the business with VR

Again, there are VR products that cost a lot. The Void costs so much it doesn’t offer a franchise. There are free-roam experiences with a lot of trackers, PC backpacks and space requirements, and their pricings are much bigger than escape rooms costs.

Still you can find a solution with a price comparable to the cost of hi-end escape rooms. And there’s more than that.

The startup costs are lower than a hi-end escape room. You don’t build custom-made electronics and mechanics, you don’t build a lot of decorations, you just buy the hardware and the licenses.

Of course, you can build a room even with a few thousand euros. It will be okay for the first wave, but won’t be able to compete with the second one. And if you’re into the race of arms already, then VR is cheaper.

Depreciation costs are lower. The only thing you’ll need to do is to repair PCs and replace the VR headsets from time to time. No unique contractors and custom-made electronics. All you need is accessible in stores. And you need just a system administrator to resolve regular computer problems.

Upgrade costs are decreasing. If you want to make your escape room cooler, the cost is higher every time you do. With VR it’s the opposite. VR headsets are getting cheaper every year.

The lifetime is longer and it’s almost forever. There is no need to rebuild a room. You can replace and/or add the game with a click of a button. You don’t need to invest in another construction work.

It’s easier to sell the business since you don’t have problems with moving all the stuff to another location.

It’s easy to scale the business. As long as a room cost is lower, and there is no need to wait for a room to be built, it’s easy to add a new location and sell it out, it’s easier for a franchise to launch and to add new games to the roster.

How to aim your business at the future

VR is here to stay thanks to investments in the AR/VR market by Facebook, Google and Apple. Mass adoption will take decades. But VR expertise has its value right now.

For example, one of Avatarico’s clients told me that he consulted people from Skydance Media, a company co-producing films with Paramount Pictures. In Skydance Interactive they create VR games themselves, but their cinematographic perspective differs a lot from what a location-based entertainment business owner knows about his audience and client experience management.

Right now is the best time to start a VR business, because VR just passed the thorough of disillusionment, it’s growing, your expertise will be priceless in the near future, and you can already make a profit from the VR products.

Also, VR is a place where the next generations will have fun together. Like Millennials did with the video games. And you can be part of it teaching kids so they could come back to your place when they will grow up.

And they will – no matter how big the mass adoption will be in the next few years. Unlike the arcades, location-based VR offers exclusive content and joint experiences you can’t have at home. The whole point is to go out with friends, and that will be in fashion for a long time.

Learning such a powerful tool like VR helps you create beautiful things with fewer limits for creativity, and there will be a space to use it in the near future. And adding a VR to the existing business could be a good start.

Challenges of VR in escape room center

Of course, VR is not a magic button you can push to make everything better. Purchasing the product is the easiest part. Then there are some challenges you should overcome to make it work.

Expectations

First of all, there are you own expectations. You’re a professional, you are an escape room creator. If you didn’t develop a VR game by yourself it’s even more difficult for you. You can think of VR game as too easy or as too difficult. But the hardest thing to accept is that it is not a real-life experience.

Still it’s social, it’s cooperative, it can be puzzle-based (if you stick to VR escape concept) and it’s extremely exciting evoking vivid emotions within your guests.

Once you get it, you need to work with the same expectation of your clients. People booking a session on your website usually don’t understand if the game is different in terms of format. If there some interactions between players and actors in the real-life escape game, you must warn players about them. The same is true for a VR escape game.

You can make a different section on your website, however the booking page should have all the experiences in one place, so anyway you should call people, send them emails and make a good debriefing before the game.

Sanitary rules

It’s the easiest but important thing to remember. Have the instructions for your staff to clean headsets, headphones, and other equipment between sessions.

Kinetosis

Mostly it’s a concern for standing and seated games. There will always be people who get so-called ‘motion sickness’. And it’s normal. Some people can’t go to the rollercoasters for the same reason. A percentage of the population isn’t able to enjoy 3D movies – this is represented in about .001% of people who have severe symptoms.

But there is something you can do about it.

Always keep the temperature in the room around 18-22 C°.

Once the clients booked a session, educate them that eating something unhealthy, or being extremely hungover may cause kinetosis.

Before the session, ask if someone is sensitive to kinetosis, and explain to them that the game could make them uncomfortable. Make sure they know they can tell you if they feel uncomfortable. Incentivize them to have as much fun as possible but not to push their bodies past their own limitations.

During the session, monitor the players condition. Give them chance to try it with no pressure in the beginning. If someone feels uncomfortable offer to close eyes for a few seconds, put the headset off for a minute or just skip the current sequence in the game for a particular player. If someone cannot continue treat him as a patient (bring a glass of cold water and ginger candy). Ask the team to make the decision together if whether to continue or not. Be kind to them.

VR marketing

It’s a typical situation for a real-life escape room facility to have lower results for a VR game than for a real-life one. At the same time, VR-only centers can show workload around 50 sessions weekly. The reason escape room centers are doing worse is that very often they don’t work with VR games as they do with real-life ones.

It’s a common mistake to think that VR itself is a selling point getting you traction.

The truth is that VR is a technology. And you don’t advertise your escape room with an electromagnet or NFC stuff. So why should you place a VR headset on the marketing image?

Customers want to have fun together. So you should show them experience and not the technology. VR game should have interesting theme people could relate to and a setting they will like to stay in.

What else should you pay attention to choosing a VR?

Escape format

For sure you can experiment with different VR formats and business model but an escape game remains the best fit for your center.

Either you make your own game or purchase a ready-made one, you should go through the checklist.

Cooperation. Could the players beat the game without each other? Is it possible to play it alone? If yes, then it’s not as cooperative as real-life escape games are.

Duration. 1 hour is a maximum of comfortable playing for a newcomer. 45 minutes of pure gameplay is the best duration so you could reset the room and fit the game in your booking table.

One goal. It’s important to have one clear goal in the game since it’s a team-based game with a lot of improvising and search.

Socialness. People should be able to talk to each other via voice chat. They should see their names in the game so they could recognize each other. Any other social features are the advantage. For example, in Avatarico games you can hi-five and smile to your teammate.

Game operator application. The game host should be able to give hints with a just hit of a button and to talk to the players as well as make photos and resolve any issues appeared during the game.

Audience

Escape rooms are the entertainment appealing to much broader audience than any arcade. The growth of the business depends on the ability to host family holidays and corporate parties with people of different ages and genders.

The games should be targeted not at geeks and gamers but at basically everyone.

It’s crucial to understand will a team of moms beat the game and have fun. What about a hen party? A kids birthday? An anniversary of an elderly couple?

Will they like the idea of the game? Is the theme something they can relate to?

Are the controls intuitive?

Experience

Is it worth to be in VR? If you develop a VR escape game don’t make a room/basement/cave as the only scene in your game. Why the hell should I use VR if it doesn’t offer something I can’t experience in real life?

Make players say wow. Ask yourself —What action will they perform and remember for a lifetime —and grant them these abilities. In Avatarico games, for example, it’s flying in outer space in zero gravity and shooting fireballs with bare hands. Virtual room provides time travel experience.

Company background

As I said purchasing the product is the easiest part. The number of games available, the services (live tech support, marketing support), success stories, games reviews and Net Promoter Score, years in the market will be the points you should check with a company to work with.