Virtual reality is staging a comeback at your local mall as COVID restrictions lift

Steve Zhao’s business was promising until last year. His company, Sandbox VR, had taken over a number of retail spaces, and people would visit so they could run around shooting zombies, crossing swords with treasure-chasing pirates or exploring distant planets as members of a Star Trek crew. They’d do all this by gathering in groups of up to six people, in 600-square-foot rooms. There, they’d don virtual reality headsets, attached backpacks and arrays of sensors on their hands and feet.

The coronavirus changed all that of course, effectively shutting down his business as his customers quarantined. “We thought, ‘Oh boy, this is it, we’re done,'” Zhao said. More than a year later, as world economies slowly reopen with every vaccine jab into people’s arms, Zhao’s business is once again growing.

Since reopening in the spring as states began to lift restrictions, his 11 stores in the US, Canada and Asia have seen ticket sales and foot traffic rise above pre-pandemic levels, Zhao said. And now his company is on track to turn a profit next year.

“I believe that this platform is something that people want — immersive, social, full-body experiences,” said Zhao, 38, who started building games in college. “We’re trying to create experiences where you build meaningful relationships with your friends.”

Zhao’s business bump is the latest in a series of anecdotal signs that the video game industry, and particularly VR, may show promise in the newly reopening economy. Over the past year and a half, many of those in lockdown mode have flocked to video games as a means of escape and entertainment. As of May, people were still playing, and spending about 40% more money on smartphone and tablet games than before the pandemic, according to surveys by market researcher IDC. And in a separate survey, only about 25% of gamers reported that they expect to cut back on their gaming habits as the COVID-19 pandemic recedes.

People seem to be seeking out other entertainment in addition to games. High-octane action flick Fast and the Furious 9 raced past $70 million in ticket sales its opening weekend, the highest for a single movie since December 2019 (though the overall box office take is still down from before the pandemic). The larger economy is showing positive signs as well, with jobs rebounding and retail sales jumping.

Though many small and medium-size businesses shuttered in the past year, including Zhao’s competitor The Void, Sandbox VR is planning to expand past the locations it has now in places including Chicago, Los Angeles, San Francisco and Hong Kong. By late July, it’ll add Shanghai and Las Vegas, bringing its total number of corporate-owned and franchise venues to 13. The company charges as much as $51 per person per ticket for the up to 1.5 hour experiences, which include training and setup.

Lewis Ward, an analyst at IDC, said he’d been skeptical about many of the location-based VR companies he’d heard about before the pandemic, primarily because it appeared hard to make money from what seemed to be a little gimmicky. But he also said the social element that companies like Sandbox focus on could make a difference.

“The idea of a social outing with your friends that’s akin to paintball or some other thing, it can be exciting,” Ward said. But what will make the difference in the long run is repeat customers. “It needs to be distinctive enough to keep bringing people back.”

Los Angeles-based KTLA television reporter Rich DeMuro recently tried out Sandbox VR’s Deadwood Mansion, which pits your group against a zombie horde. “You quickly forget you’re inside a room at the mall,” he said in a report published July 4.  Holding his VR headset in his hand after 25 minutes facing down the digital undead, he said the experience was “very intense.”

Surviving VR

Sandbox VR applied for more than $754,000 in pandemic-era US paycheck protection program loans last year to mostly pay staff salaries as world economies shut down. The company also began contract work coding for other game makers to help pay bills. Zhao said he worked with landlords as well, and began experimenting with franchising out his business. Still, he ultimately had to file for bankruptcy, lay off about 80% of his roughly 100-person staff at one point and cut salaries for those who were left. The company applied for another $241,000 in PPP loans this March, again to cover payroll.

To help customers feel comfortable with the idea of wearing a headset someone else had worn in the middle of a pandemic, Sandbox VR employees wear masks and gloves, and the company said it disinfects and sanitizes using government recommended disinfectants. The firm also says customers must wear masks if they haven’t been vaccinated; employees wear masks regardless. 

Sandbox VR also initially spaced out customer appointments further to reduce the chance of contact between groups, and it added sanitization stations for use before and after each experience.

“We wanted the guests to feel like this is a safe space,” Zhao said.

He’s also hoping to expand the types of experiences Sandbox VR offers. Currently, it has five, ranging from a horror survival game to a futuristic one-on-one sword fighting game. But he’s also interested in creating games where customers could be a wizard using magic, or experience what it’s like to be a monster with multiple arms. The development required, he said, “takes some time.”

In the meantime, he hopes people will continue to seek out new types of entertainment as they get used to returning to life outside quarantine. And he thinks offering experiences like his, in small groups, will be key.

“We don’t advertise ourselves as VR,” Zhao said. “We’re bringing people inside different worlds.”