Cinemas, The Hot New Anchor for Shopping Centers

Cinemas are fast becoming a popular anchor for retail shopping centers. They drive longer stay times of two to four hours and evening traffic, and they fulfill demand for an experiential retail environment. As a result, cinemas are expanding and developers are including cinema footprints in new development projects. We sat down with Mitra Esfandiari, senior principal at Retail Design Collaborative, for an exclusive interview to talk about the growth of cinema and how it is impacting new development.

GlobeSt.com: Why have cinema operators seen so much growth?

Mitra Esfandiari: Cinema operators have seen extraordinary growth in the last decade in large part to a driving consumer demand for “experience.” A unique experience in cinemas can be defined in these major ways: enhanced seating options, healthy and more artisanal food and beverage offerings, reservation-based ticketing, technology enhancement and unique architectural experiences.

Data shows that by replacing standard theater chairs to more comfortable recliner seats decreases capacity by 50%, yet ultimately increases the purchase of total ticket sales. This correlation comes back to the consumer demand for a higher quality experience. Ultimately, luxury and comfort will bring more customers with willingness to pay a premium.

GlobeSt.com: How have cinemas changed as a result of this growth?

Esfandiari: One of the biggest areas of growth has been in the concession program for theater operators. Consumer demand has shifted the concession offering from standard popcorn, candy and soda offerings, to a more complete, robust and healthy menu of freshly prepared food. This demand has yielded a greater amount of non-ticket sales revenue for operators. From a consumer point of view the option to now have a one-stop-shop effectively to dine in and see a film is paramount.

A trend that is helping operators to grow their business is the consumer desire for control over their seating options. The shift over the last decade to reservation-based seating has given consumers what they want while allowing operators to have a greater understanding of revenue projections. At the end of the day, cinema operators can grow more effectively if they have better forecasting for their needs.

Technology is also playing a huge role in how guests experience a film, so much so that it has widened the gap between in-cinema versus at home. From audio and video quality to the advent of augmented 4D technologies, cinemas are reinventing themselves. We are also seeing the emergence of virtual reality (VR) into theaters including the use of VR stations such as creating life-size avatars that act and react in real-time with the movement of your body. These new technologies are advancing the world of cinema and creating a unique experience for moviegoers across the globe.

As part of the consumer demand for more unique experiences, we as architects have been afforded the opportunity to create more distinctive, vibrant cinemas, from unique architectural design to lighting, design, signage, furniture and fixtures. The drive to offer a more hospitality-focused interior has allowed for tremendous growth. While most operators have robust prototype designs, it’s our responsibility as architects to offer suggestions on how to add value in our design, to create more customer dwell time.

GlobeSt.com: How is this demand helping to drive new retail development?

Esfandiari: Within a mixed-use development, it’s all about extending the programming to achieve as much of an 18-hour-day destination as possible. To a retail center, the average stay times are relatively short and typically during the daytime. Cinema integration into retail allows for an evening component, along with up to a 2-4 hour stay time. Cinemas are key anchors for large retail and mixed-use developments. Since cinemas are typically built near retail, these nearby locations thrive off the high demand of moviegoers.

Theaters naturally push for customers to stay at retail centers longer, whether they are waiting for their movie or are grabbing a meal before or after the movie. Some movie operators are actually incorporating food and beverage components into the theaters that spill out into adjacent plazas, creating an activated indoor/outdoor environment. These trends are causing retailers to want to be located in closer proximity to theaters to ensure their sales are high and their customer demand is steadily increasing.

GlobeSt.com: What is your outlook for activity in the cinema space?

Esfandiari: Interestingly enough, while the number of movie ticket sales in North America has been on a steady decline over the last decade, the box office revenue has increased from 2008 to 2017 by 13%. This supports the notion that cinemas within the U.S. are still in growth mode as they evolve to a more customer-focused experience.

Data also shows that cinema development outside of the U.S. is moving much quicker than inside of the U.S. Over the last decade, global box office revenue has doubled. Cinemas are by no means dying; they are evolving and yielding tremendous destinations to the people who want that experience time and time again.