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Virtual reality arcades looked like they were doomed with the onset of the pandemic. People had to social distance, and coming together at places like Sandbox VR‘s location-based virtual reality experiences just wasn’t going to happen. But the company has reemerged from bankruptcy proceedings and it is reopening all of its locations, including a high-profile place in Las Vegas.
Hong Kong-based Sandbox VR expects to open a new entertainment center in the Grand Canal Shoppes in the Venetian Resort in Las Vegas by the early summer. It’s the first time Sandbox has targeted Vegas, and it is taking over the spot that was formerly occupied by The Void, another pioneer in social VR entertainment at retail locations, said Steve Zhao, CEO of Sandbox VR, in an interview with me.
I went through Sandbox VR’s location in San Francisco before the pandemic. It was a socially immersive experience that provided players with a unique combination of full-body motion capture that make you feel like you’re in another world. It contained more than home VR headsets, as we strapped sensors onto our wrists and shoes for better tracking, and we wore backpacks with powerful laptops connected to the VR headset. And then our team of five people battled Klingons in the Star Trek: Discovery — Away Mission experience.
That feeling of having fun with your friends is back again, said Zhao, as locations like Chicago and Austin have demonstrated. The company has seen increased demand of 30% from before the pandemic at their current locations outside of Chicago and in Austin since they were able to open again with government-mandated restrictions. Over 90% of customers book ahead online. With the vaccine rollout accelerating and COVID-19 cases falling across the country, Sandbox VR has started ramping production back up in anticipation of the influx of interest at the end of the pandemic. I talked to Zhao about this death and rebirth experience, and what he learned along the way. Let’s hope that the recovery proceeds as expected and all of location-based VR entertainment regains its lost opportunities.
Here’s the edited transcript of our interview.
GamesBeat: What’s open now for you guys? How are the reopenings going?
Steve Zhao: Back in March we knew things were turning around. There was a lot of hope. Now it’s pretty much backed by data. All the stores have reopened. We have 11 locations worldwide and seven across the United States. They’re all profitable now. We’re actually making more money now compared to when we peaked before the pandemic. The market’s becoming more mature. There’s pent-up demand to go out.
In the last year or so we’ve done quite a bit. We’ve improved our experiences. We’ve made it a lot more immersive. The experiences are much more intense, more horror-based. We’ve amped up the fantasy narrative of things like the pirate experience. Even Star Trek has improved. We made a platform that allows people to share easier. There’s a lot of optimization that goes on inside the machine. The pandemic allowed us to push that forward.
GamesBeat: It looks like you could have 15 by the end of the year?
Zhao: Yes, we’re still on track. We might beat that by one store. We’re opening in Vegas next month. Shanghai is also opening next month. We have a new store in Austin, Texas opening next month as well. We’ve been really busy.
GamesBeat: The one in Vegas, is that the one where the Void was?
Zhao: Yep, exactly.
GamesBeat: I did the Star Trek game before the pandemic. How did you improve that particular experience in the meantime?
Zhao: Our biggest learning is inside our platform. There’s a level of action-based intensity, and also things that — it’s not as narrative-driven. It’s not exciting to just listen to a narrator talking and not do much yourself. We’ve redone the whole cadence and made it a lot more about things you do, a lot more reasons for you to talk to your friends.
We made the Klingons much more up close and personal. It gets a much more visceral reaction if they’re in a closer space than far off. We’ve also made them more intelligent in the way they fight. It feels like you’re fighting real enemies, or at least that’s what we’re trying to do. We try to script it so they change up their strategy, going from a frontal attack to flanking. Little things here and there. All of this in combination increases the immersion of the whole experience.
GamesBeat: How many people go through that experience at once? Is it six people?
Zhao: Yes, six people. That’s standard across all of our games.
GamesBeat: Are people still making appointments, or just dropping in?
Zhao: They are, yes. About 90% of people pre-book online. We haven’t seen a lot of foot traffic yet. We’re still predominantly booked online. Because it’s so packed these days, we just can’t accommodate that many foot traffic customers.
GamesBeat: Has the pricing changed at all now?
Zhao: It’s higher now, yes, between $40 and $50 per person. It reflects the demand that we’ve been getting. We have weekends booked a week or two in advance now.
GamesBeat: Real estate got cheaper for a while, so that’s probably helped out in terms of operating expenses and enabling sites to become more profitable.
Zhao: Oh, yeah. Rent was one of our biggest buckets of expense. Apart from that, we’re talking to more than two dozen landlords right now trying to get deals done. There’s a lot of synergy, because they look at us sort of like — we provide premium experiences, but we can also prove that we track with a younger audience. Millennials come to our locations.
GamesBeat: Did you prioritize any particular regions for your expansion?
Zhao: We’re looking a lot in Texas and Chicago. Chicago is doing well. In Chicago we see foot traffic increasing 25% every month since February. But other than that, no. We’re just working nationwide right now, seeing who’s interested.
GamesBeat: What about outside of the United States?
Zhao: Hong Kong is doing amazingly well right now. It’s beaten pre-pandemic by a lot. Singapore and Vancouver had some very strong months, but they also dealt with COVID spikes this year. When there’s no government regulation asking them to close, they have very strong numbers.
GamesBeat: Does it feel like it’s back to a kind of race now as everyone tries to reopen? Is there more competition for you, or less?
Zhao: It’s definitely different now because the Void is gone. I don’t know what Dreamscape is doing, but I know they’re working more on education now, so I don’t know if retail is a big part of their plan. Even before the pandemic, a lot of VR startups were already gone. What we do, highly immersive full-body experiences, I don’t know about anyone else who really pushed through. The big thing is that we’re operating profitably now as a company.
GamesBeat: It feels like the headsets are getting better. There’s the new HTC model that’s out for enterprise. Varjo just made an announcement today. Do you think that the improvement in the overall quality of VR is moving ahead?
Zhao: Absolutely. In new stores we’ll be outfitting them with the HP Reverb G2s, combined with the new backpacks. The fidelity of the overall experience is much better. You can see the world a lot more clearly. The immersion is deeper. A lot of good things have come through that. We’ve always been agnostic when it comes to hardware. Whatever comes out, if we think it will improve the user experience and we can integrate it effectively, we’ll do it.
GamesBeat: Are there some things you think about as the biggest lessons from the pandemic?
Zhao: Thinking about a startup, knowing what to focus on is critical. Before the pandemic there was so much stuff you could do that wasn’t necessarily critical. Once you have to survive, though, you have to be very careful in how you make decisions. We only focused on a few core things and tried to do them really well. That was our biggest takeaway, that insane focus.
GamesBeat: You had that death and rebirth experience.
Zhao: That might be the best way you can put it, yeah. We came into the pandemic feeling like, “Oh man, there’s a good chance that we just won’t survive.” We lost 100% of our revenue, literally, in March. We had no idea how long it was going to last. We were just counting the days.
GamesBeat: Going into the reopening, how early were you able to start making some decisions about getting things open again? Was it a few months ago now?
Zhao: We looked at each store reopening based on regional jurisdictions. We looked at each state to see what their rules were, and when it seemed like the rules were coming up, we’d work backward and plan for it. That’s why our stores in Chicago and Austin were pretty much open off and on during the pandemic, but the stores in California, we had to wait until April to have them open again. They were the last bastion that had to be shut down.
GamesBeat: What kind of locations do you seek out now? Where are you more likely to open given the different real estate environment today?
Zhao: We do a lot of pre-booked traffic, so we don’t necessarily need a premium location, a top site. We definitely want places like malls or downtown neighborhoods that are convenient to access, places where millennials who might try Sandbox would already go out for food or drinks. That’s why we’re working with lifestyle shopping centers across the nation to be part of that.
GamesBeat: What are you working on for the future in terms of new experiences?
Zhao: In the immediate future we’ll be doing a sequel for Deadwood Mansion. That’s still by far the most popular experience. That’s in the works right now. You’ll be shooting bats. People probably want to do that. Although it’s still a zombie experience. Outside of that, we’re going to continue to build on other immersive worlds people want to see. Who do they want to be? It’s never about the number of pieces of content. It’s about the diversity of content. What can we do with fantasy? What kind of IP makes sense for an immersive world? We’ll go from there.
GamesBeat: Do you see people coming back, repeat customers returning regularly? How many people will go through every available experience?
Zhao: It’s been pretty hard to track with the pandemic. We’d open and close and open and close. Sometimes when we were open we had very limited spots, so it was very irregular. Now things have reopened, but it’s been very recent. People often have to book much further in advance, which sometimes turns them off. We don’t have much concrete data about a steady state. It’s a little too early to tell. When we have stores that are able to run longer, we’ll see.
We have anecdotes. Staff at our stores would say, “We’ve seen this guy come in five times, eight times.” People come back with more folks with them. For Deadwood sometimes people try to chase a high score. We’ve heard stories like that. That’s another reason why we think episodic experiences will work. People will come back to follow that story.
GamesBeat: How many employees do you have now?
Zhao: We have about 20 people in corporate, but we have more than 100 working at retail.
GamesBeat: It seems like location-based entertainment has survived. That was a big question not too long ago.
Zhao: It’s definitely been hard. There’s no online component. It’s all about generating revenue with time inside the location. We’ve been fortunate. We got some great investors. They kept up the flow, and we did everything we could to stretch every dollar. The timing has been great. If the pandemic lasted much longer, I don’t know where we would have been. Our best-performing stores are making around $200,000 a month in gross revenue now. They’ve rebounded in a big way for us.
I don’t know about everyone else working in the space, but our vision has always been to create the holodeck and bring the holodeck to your neighborhood. We have a lot more work to do.
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