A boom in luxury movie-theatre expansion has taken hold at what seems the least likely time. When people are doing everything they can to cut expenses during the economic downturn, it seems counterintuitive that they would pay as much as $29 per person to see a movie. But several theatre chains think the recession might actually fuel demand for upscale cinemas. Will they turn out to be right?
If recent box-office trends are any indication, the answer is yes. Last year, ticket sales in Canada and the United States broke the US$10-billion mark for the first time in history. According to the National Association of Theater Owners, this reflects a trend seen in most downturns – box-office sales in the U.S. have gone up in six out of the past eight recessions.
Association spokesperson Patrick Corcoran explains that people across all income levels shift their spending during a recession – luxury cinemas are aimed at those who might otherwise seek more expensive entertainment, such as going on a trip or to a sporting event.
This time out, several chains are trying to tap into the market. Their high-end amenities include intimate screening rooms, comfortable seating, and service from on-site bars and restaurants.
Australian company Village Roadshow successfully tapped into this niche market Down Under with its upscale Gold Class Cinemas. Launched in 1997, it boasts 2.5 million members. Now the company has joined up with partners Act III, Lambert Entertainment and the Retirement Systems of Alabama pension fund to import their luxury-cinema concept to the United States. The partners are bankrolling a plan to build 50 theatres across the country over the next five years at a cost of US$200 million. In December, Gold Class opened its fourth location in Pasadena, Calif., where, so far, the response has been positive – eight of the 11 opening nights sold out, and more than 20,000 members have joined.
According to Corcoran, Gold Class’s success in the U.S. will depend on whether people think they are getting their money’s worth. The US$29 ticket price includes valet parking and reserved seating in a screening room that holds a maximum of 40 people. Guests then have the option of ordering one of 14 draft beers, or bottles of wine ranging from $33 to $695. The restaurant serves dishes such as mini crab cakes for $17 or a New York strip steak sandwich for $19.
Gold Class is not the only chain to jump on the luxury theatre trend. Competitors that have upgraded their offerings include Regal Entertainment, Cinemark and AMC. Currently AMC is testing a more casual upscale in-theatre dining concept called AMC Cinema Suites. The first theatre opened in October 2008 in a suburb of Kansas City, Mo. The cinemas feature plush recliners with swivel tables and eight-to-nine-foot spaces between rows. Tickets at the Cinema Suites are $25 and include a $15 food voucher. According to AMC spokesperson Andy DiOrio, guests are always seeking a differentiated experience, regardless of the economic climate, and “when times are tight, they look for entertainment closer to home.” These views are echoed by Mark Mulcahy, vice-president of marketing at Gold Class Cinemas, who says that “the need for an affordable escape” is driving movie theatre attendance.
But if box-office sales go up when the economy is in bad shape, doesn’t the reverse also hold true? According to Corcoran, this is not the case. He claims the advantage of a recession “is people reacquaint themselves with the movie-going experience – there’s an opportunity for movie theatres to put their best foot forward.”