When PingPod acquired the assets of Sharks Pool Club in Q2 2023, the investment thesis was that it could dramatically improve Sharks profit margins by moving Sharks private pool reservations onto PodPlay’s venue management software (for more on the origin and strategic rationale for the acquisition, see Adding a Second Experience Vertical). We believed the move would shift the Sharks cost structure away from labor towards technology and marketing, resulting in increased revenues without associated increased costs. With 9 months of operating history post acquisition, we now have sufficient data to evaluate Sharks Pool Club before and after implementation of PodPlay.
At the time of acquisition, Sharks Pool Club had a 4% operating profit margin. Nine months later, Sharks is running at a 37% operating margin, which is considered best-in-class for a four wall business. Revenue is up 76%, while expenses are up only 20%, with large shifts in the composition of expenses from labor to technology and marketing.
In the sections that follow, we will go deeper on how PodPlay impacted the underlying drivers of this transformation.
The basic revenue equation for Sharks Pool Club (and all businesses that sell time-bound inventory) is:
Available Hours x Utilization x Average Revenue per Hour = Revenue
The first two variables determine volume, the third variable measures price. Moving to PodPlay impacted each of these variables for Sharks.
Available Hours: At the time of the acquisition, Sharks Pool Club was operating an autonomous-lite model, with a significant amount of human-in-the-loop. Published hours were noon to midnight, offering 12 hours of capacity per day per table. After the acquisition, we installed PodPlay’s autonomous infrastructure with remote door access integrated to the Sharks app, security cameras in each location, and 24/7 remote security monitoring by our security team. As a consequence, Sharks was able to extend its opening hours to 8 am to 2 am on weekdays and 8 am to 3 am on weekends, increasing available capacity by more than 50%.
Utilization: Increased capacity will have no impact on revenue unless it gets utilized, but Sharks has been able to increase capacity by 50% while maintaining close to 30% utilization. This pencils out to a move from roughly 9,000 hours played annually to north of 16,000 hours played. The expanded late night hours, in particular, have been a significant driver of increased revenue, with late night weekend utilization regularly above 50%.
The second key driver of increased hours played has been adding digital marketing. Prior to the acquisition, Sharks spent $0 on advertising. After the acquisition, savings from decreased labor costs have been channeled to digital marketing with great success. With relatively modest spending Sharks has been able to massively increase awareness and win many new customers. Since the acquisition, Sharks has seen a 56% increase in total customer accounts.
Revenue per Hour: Sharks yield per hour has increased 18% from $45 to $53. The table below shows baseline pricing for Sharks Pool Club reservations.
Based on reservations alone, it would be impossible for Sharks Pool Club to yield more than $50 per hour. The PodPlay tech stack increased the amount of revenue generated per hour beyond standard pool reservations.
Factors that can increase average revenue per hour above baseline reservation pricing include: private events, group classes, coaching, replays, and larger groups. Moving to PodPlay has meaningfully impacted each of the last three drivers for Sharks:
PodPlay’s Coach Connect feature facilitated the discovery and coordination of a greater number of private pool coaching lessons. Approved coaches input their availability and customers can easily find when a table and coach are available and book both seamlessly through the app.
Adding Replay Mode has been a popular new feature at Sharks Pool Club, with 45% of all pool reservations in January 2024 using the replay button. Each replay drives incremental revenue per hour. Replays are also likely contributing to increased utilization by improving the customer experience and giving customers a way to capture authentic moments they can then share with their friends (who may in turn become customers). The following instagram post shows the replay function in action at Sharks:
But perhaps the single biggest driver of increased revenue per hour has been enabling customers to self organize larger groups. A core use case for Sharks Pool Club is the “living room on demand”: a private pool room very few in a big city can afford in their apartment, perfect to gather a group of friends for multiple hours to shoot some pool and catch up. Regular Sharks reservations allow for 4 people. Customers who want to gather a larger party can add additional people for $10 per person per hour, up to a maximum of 15 people. Groups larger than 15 are considered private events and have to book with the Sharks event department.
In January 2024, 15% of Sharks Pool Club reservations were larger groups (>4), with those reservations accounting for 23% of total revenue. The yield pick up for these larger groups is >50%. Using PodPlay to easily allow customers to self organize larger groups drives increased revenue while simultaneously freeing event staff to focus on only the largest parties.
The major expense buckets for a venue operator include rent, labor, technology, and marketing. Prior to the acquisition, Sharks spent very little on technology and nothing on marketing. Moving to PodPlay has reduced labor as a percentage of total expenses, freeing up resources to spend on marketing that has driven a large increase in new customers and revenue.
The increase in spending on technology to license PodPlay is a labor substitute, and the benefits will only accelerate with greater scale. Relative to many four wall businesses, Sharks was already running a labor-light model, so the potential savings for more traditional labor-heavy venues are even greater.
Technology can positively impact venue operations in three ways:
As demonstrated in the Sharks Pool Club case study, PodPlay is the rare technology that does all three, powering a digital transformation of both the Sharks customer experience and bottom line.
PodPlay gives venue operators all the tools they need to digitally manage a physical space - integrating video replays, digital scoreboards, and autonomous functionality with a reservation engine, event management, coach connect, membership module, and payments.
Originally built to power PingPod, the network of futuristic autonomous ping pong clubs, PodPlay is now used to manage venues across pickleball, padel, ping pong, and pool, with more experience verticals to come in the future.
If you’re interested in learning more about how PodPlay can power your club's profitability, head over to our website and request a demo.
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