Senior Industry Analyst
I’m fascinated with room escape puzzles. If you’re an acquaintance of mine, at some point I have probably suggested or told you we should do Escape The Room. I discovered these escape puzzles in 2013 and have gone so many times that my friends think I’m sarcastic when I suggest we do it as a group (for the nth time).
But I’m serious every time, and I think the success of Escape The Room actually signals a more macro trend happening in what I call “Group Offline Experiences” (it wouldn’t be a post if I didn’t come up with a term right?). The idea is essentially a new era of recreational activity which focuses on groups achieving some shared goal.
This is the convergence of several trends/points I believe:
1) There has been little variety in the number of activities for groups (movies, going to a bar, etc.) — people like novel experiences that are a departure from the norm, they want variety.
2) For most people, default group activities generally revolve around drinking. However, as most trends suggest, we are moving to a more health-conscious society, but there are few non-drinking alternatives available, which leaves room for new activities (especially ones related to fitness).
3) Overcoming a shared obstacle/situation brings solidarity to the people that go through it. That’s why activities like this are great ways to strengthen existing bonds and form new ones quickly. Anecdotally, I love these experiences because they let you quickly meet with people you may not know well by immediately giving you a mutual shared experience and a scenario you need to work together. Quickly breaks the ice without the need to resort to repetitive small talk templates.
4) There’s a shift in expenditures moving away from buying actual products, and instead spending on experience (78% of millennials would rather spend on an experience vs. a product — higher percentages of budgets now dedicated to activities)
5) In the age of social media, people use experiences as a means of showing others what they’re up to (it’s the modern symbol of status). Because of this not only do they LOOK for these experiences, but they also enjoy sharing their experiences (which creates a great, inexpensive word-of-mouth marketing system).
This makes offline group experiences attractive to two groups of people. The first is the average consumer, which might be a group of young people who are looking for another avenue to hang out with their friends, a family night out, or a bunch of different combinations. The second, and possibly more lucrative, are corporate clients who can use these events as means of team-bonding activities (especially since it puts people in lower-pressure problem solving scenarios). Another possible revenue stream are corporate sponsorships and advertising (ie. having room themes based on upcoming movies — native advertising at it’s finest).
I think this presents an interesting opportunity for private market investors. These companies have the ability to scale rapidly, with some Escape the Room franchises sporting numbers that any investor would be interested in:
With an investment to cover the fixed costs, the relatively low variable cost means that these businesses have the ability to scale and also reinvest into the business itself. Marketing for these companies is great/inexpensive because, as we said before, these are businesses prone to virality and referrals via social media from happy participants. Plus, once a brand is built they can actually scale using a franchise model (instead of absorbing the costs themselves).
There are already quite a few businesses that operate in or around this area that I think are interesting.
And there are still so many opportunities to pursue. I have a few ideas I’m tossing around myself, but if this is an area you’re interested in too, reach out to me on twitter @nikillinit.
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