Cinemas provide boost to the leisure sector

Robust expansion is expected in the cinema sector with over 60 cinema developments scheduled to open between 2014 and 2017.

26 March 2014, Words by Savills Research

 

Cinemas are still seen as the holy grail by the leisure sector; unquestionably as essential anchors to any new development and in recent years as saviours of secondary shopping centres where retail demand has stalled. With over 60 cinema developments scheduled to open between 2014 and 2017, and a further 50+ in the early phases of planning proposals, the cinema operators’ relentless drive for growth is propelling the leisure sector forward. This is being driven both by solid returns and pressure to increase market share by the operators’ private equity backers.

We do question how long the space race can continue, with only small gains of 5% in admissions between 2005 and 2011, yet a 22% increase in multiplex screens over the same period. With ‘over-screening’ becoming a real threat, we predict some consolidation occurring, with older first generation cinemas beginning to come under threat.

While this growth continues to be dominated by the big three; Vue, Cineworld and Odeon (65% of total UK cinema screens), the smaller boutique operators such as Everyman and Curzon are also gaining market share and credibility with landlords and restaurant operators. As a result, smaller format cinemas are themselves acting as anchors to cinema developments in smaller towns/ catchments, such as Curzon cinema in Harrogate. Even in larger towns and cities, where another multiplex is unviable, 2/3 screen boutique cinemas can offer a point of differentiation, for example at Trinity Leeds (Everyman).

Despite positive news stories in terms of cinema pipeline, 2013 was a disappointing year for box office revenues; with cinemas taking £1.15bn in 2013, down 1% on the previous year, representing the biggest dip in returns since 1991 (Rentrak). Arguably this is largely due to the lack of box office hits such as Skyfall in 2012, with takings of £100m. 2013's biggest movies were animated sequel Despicable Me 2 (£47.2m), Les Misérables (£40.8m), Iron Man 3 (£37.2m), The Hobbit (£34m) and The Hunger Games (£32.5m).

Further press comment this year has revealed that Guy Hands has pulled a planned £1.25bn float of the Odeon cinema chain amid weak trading in its Spanish business. The private equity veteran, who controls Odeon & UCI Cinemas Group has decided to maintain control of the business until trading improves. It is the second time in three years Terra Firma has pulled a proposed sale of the Odeon business, having ended a process in May 2011 after a £475m refinancing.

 
 

Key Contacts

Mat Oakley

Mat Oakley

Director
Commercial Research

Savills Margaret Street

+44 (0) 20 7409 8781

 

James Hurst

James Hurst

Director
Retail Warehouse & Leisure Investment

Savills Margaret Street

+44 (0) 20 7409 9927

 

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