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Is there an 'industry average' for occupany percentages in first-run theatres? I know there exists no same demogrpahics or theatres but it is hard to believe a # is not floating around there somewhere...any thoughts?

Obyagain,

This is a topic guaranteed to make you depressed. I've heard average #'s from 2% to 8%. In reality, I can tell you the following:

Our five screen theatre has 925 seats. As a general rule we have 4 racks of shows per day 365 days per year. I say as a general rule because occasionally, like holidays, if a movie is short enough we'll do five shows a day and if a movie is too long its only 3 shows a day. Also we close early 3 days a year, Christmas Eve - matinees only, New Year's Eve - no 9:00 rack, and one random Monday in Dec, no 9:00 rack so that we can have a staff Christmas/Holiday party.

At 4 shows per day, 365 days per year and 925 seats, we theortically have 1,350,500 seats to sell in a year. Our total tickets sold last year was around 190,000, so based on our general rule, our % of capacity was 14%.

A couple of facts are worth noting. We are an art house, so we aren't showing Lord of the Rings, Harry Potter or anything else that brings in the hordes. However, right now we do have the only print of In the Bedroom in our 400,000 population county and of the 5 theatres playing Gosford Park, we are kicking everyone else's butt. So for certain films, we are where people go because we are generally the only guys playing it. I have absolutely no idea if our % of capacity holds true in other markets, types of theatres etc. The previous year we only sold 143,000 tickets so our % of capacity would have been 10.6%.

Hope this helps. Good luck!

With four or five showtimes of a feature per day, it's not surprising that some shows have only a handful of people. Are those weekday matinees really worth running, when the vast majority of business is evenings and weekends? Maybe run just one matinee per day for those who work evenings?

Or do the distributors demand a certain number of showings per week?

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John P. Pytlak, Senior Technical Specialist
Worldwide Technical Services
Entertainment Imaging
Research Labs, Building 69, Room 7525A
Eastman Kodak Company
Rochester, NY 14650-1922
Telephone: 716-477-5325 Cell: 716-781-4036 Fax: 716-722-7243
E-Mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it
Website: http://www.kodak.com/go/motion

John,

We are in a competative zone, which means that since the competition is showing matinees, me must or we risk losing pictures to them when they tell the distributors that we are running short.

Then next thing to note is that our busiest show rack is around 7:00 PM but our second busiest rack is around 1:00 PM our third busiest rack is around 4:00 PM and our fourth busiest rack is around 9:00 PM. But once again, we can't dump the 9:00 PM rack because the competition has it as well. Also I think the people who come to the 9:00 PM rack do so precisely because it isn't that busy.

If I were in a non-competative zone I might try 2:00 PM rack, then have a break for dinner and run a 7:00 PM to 8:00 PM rack.

Large: Thanks for the information. I thought it was driven by the distributors. Surprised the daytime racks outperform the late show, especially for a theatre showing foreign/art films. Do you have lots of retirees or people out of school/work in the afternoon?

---

John P. Pytlak, Senior Technical Specialist
Worldwide Technical Services
Entertainment Imaging
Research Labs, Building 69, Room 7525A
Eastman Kodak Company
Rochester, NY 14650-1922
Telephone: 716-477-5325 Cell: 716-781-4036 Fax: 716-722-7243
E-Mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it
Website: http://www.kodak.com/go/motion

There must be a reason we sell 60% of our tickets at the Senior/Discount rate and 40% at the full adult price.

Getting back to the original question on occupancy. I guesstimated mine for last year. I know how many people came in, but not how many total shows I ran - 7%.

Now I was wondering what use could be made of this number short of depressing all of us. We don't use it in our current business at all. We schedule shows based on whether we think they will do well or whether we have a distributor specified number of shows per day. I have never had a sell out yet. So we have never been 100% occupied. That just means that I have always been able to sell a seat to anyone who wanted one. The bottom line-profitability-is more about maximizing # of visitors and keeping costs in line than occupany rates per se.

The right movies at the right time drive people in the door. On opening day we have no idea how many people might come in. We can only prepare for the maximum number and check the books to get a reasonable estimate of similar past movies on similar days and times and seasons of the year.Maybe that is what I like about the business - it is unpredictable even when everyone thinks that the movie will be a blockbuster - will it? We had much better luck with Monsters, Inc than we did with Lord of the Rings. Why? While I have my own theories neither I nor anyone else could know for sure.

If you are contemplating a future business where you get to build the building. You might think occupancy rates would be useful, but I doubt it. I suspect that most of us on this site have at least toyed with building a building with more screens than what you have. Occupancy rates don't come into my calculations. I am more interested in what I can afford, how many screens, minimum size of auditoriums needed to serve customer base, etc. You can have lots of excessive capacity and still do well or be at 100% of capacity and not be able to make your bills.

So what would you use occupancy rates for?

Thanks for all the great feedback to my original ?. I am in the business and know that there are many different rules of thumb and formulas for guesstimating potential grosses. Occupany is one of those commonly used and am surprised the last post deems it insignificant. I think your info is great on the unpredicability of this business. However, when you spec out building new theaters you need to know what the potential is. You are not going to get financing with an attitude of build it and we will see what happens. Any other formulas people use for estimating grosses would be appreciated.

PS-I am new to this forum and must say it is a fantastic place! Thanks for all the feedback and I look forward to contributing over time

All the years that I've been in the theatre business and I have never figured occupancy percentages. I just never saw a need for it. However you spiked my interest and therefore I had to sit down and figure it out to find out how I compare.

I have one screen with 557 seats. A normal week concists of eleven shows. Fri & Sat-7:00 & 9;15, Sun 2:00 & 7:00, Mon thru Thurs eve - 7:00, plus a Wed matinee at 1:00. I also run a Saturday matinee at 1:00 from Christmas until Easter (or until the nice weather starts). Additional matinees are run on every Monday holiday and for the entire Christmas and Easter holiday periods. It comes out to almost exactly 600 shows per year. I sold 53,000 tickets last year for a weekly average of 1,019. Take my 557 seats times 600 shows = 334,200 available seats, then divide that by my 53,000 admissions and I get 15.8%.

I still get some sellouts every year... we just had one on Monday for the matinee of Monsters, Inc. I consider a sellout when we hit 500 seats as it's difficult to find two seats together after that point. And with Harry and LOTR still to come I expect to have several more before Easter.

From what I see here, I guess I should be happy with 15.8%, but then again 2nd run almost always does better on a percentage basis as we deal with larger numbers of people due to the lower prices. I still fondly remember the eighties when I averaged about 2,700 people per week with a $1.00 admission price, and sold out the Saturday 7:00 pm show 75% of the time. Those days are gone... I wonder where all those patrons went?

I happen to be studying another (actually several) business opportunity which had a 6.8% occupancy rate last year. But I only just calculated that for purposes of this post. But what can I do with that number now? This building happens to already exist, so I can't change the structure. Can you tell me whether I can make a profit? How much should I pay in rent?

If I were going to the bank I would be providing them with the number of customers who would be coming in my door. Because that number will drive most of the rest of the numbers on my business plan. Bankers have no idea what occupancy numbers will work in this industry. They are more interested in whether YOU know what you are doing and whether the numbers that you are giving them can work. I happen to be an ex-bank officer so I will also say that if banks knew what they were doing they would never have permitted the major chains to build their megaplexes unchecked by commonsense.

I have watched Regal do it to themselves. They overbuilt themselves thus making their own theaters unprofitable. I am sure they gave the banks boilerplate that they believed was reasonable at the time, but was just garbage when you looked at the real situation. When I do a deal I will be personally responsible for it - that means if I make a mistake I go bankrupt. Regal executives have not personally suffered for their mistakes.

[This message has been edited by BECKWITH1 (edited January 26, 2002).]

Hey Beck-I could not agree with you more-how Regal built on others money was sad. I understand that you have no use for occupany #s,so, what do you use to forecast potential grosses. Obviously, it is important to look at all the factors as you mentioned but Im not sure I understand how you actually estimate your potential gross.

First of all there are no easy formulas. If there were we wouldn't be undergoing all this pain in our industry. The evaluation methods that I use are many and can lead to different answers depending on the person doing the analysis. I tend to be more conservative in the risk I am willing to take then some companies.

I need to know how many screens I will have to work with, how many seats are available to sell in which theaters, what standard of service I will be providing, what type and age of films I will be selling (and at what price), how many shows I plan on providing, and how audiences will respond to this mixture. What is the competition, how many people are going to be willing to drive to my theater? Is my format needed in this area?

If I am lucky and can get numbers from anyone else operating in the community then I am ahead of the game. I could also call my booker and ask questions about how other similar type theaters in the area are faring. I would need to adjust these numbers based on my own project but they will help a lot. The goal is to find our how many customers are likely to come into my theater per year. I will never know that exact answer until I am actually open, but I can get close enough to know whether this is probably gonna work.

Here is an example of stupidity that we local operators could all see coming - but Regal could not. This theater is still open, but not making it. Regal decided that a town of 20,000 people needed a 16 plex with modern stadium seating. This theater was 7 miles away from their own 8 plex in a bigger town. By my calculations this project cost at least 6 million dollars. I figure that the rent is somewhere around 50,000 per month. I have been told by someone reasonably close that it is $45,000(this doesn't include CAM) so I know that I am not too far off. I know enough about their operation to know that they average around $5.50 per ticket and $2.16 or so on concession, that totals $7.66 per person coming through the door. It takes them 6,527 people per month just to pay the rent. If I assume that their rent is 15% of their gross- which is a wise industry standard for calculating rent- they would have to have $333,333 in monthly grosses to support the theater. (Since I don't know enough about their other costs I have to use this as my basis). That requires 43,516 people per month (522,192 annually) to pass through the doors. Hmmm. Can a population of 20,000 support a theater that requires them all (man woman and child )to go to the movies twice per month? I think that the entire population of the entire county is significantly less (half?)than the 522,192 visits needed annually. They also built this theater in the wrong place - a disastrously traffic snarled part of the city not easily navigated by people who have other theater choices which are cheaper and easier to get to. Not to mention that by building this colossal mess they drove a 2 screen theater that had been there for many years out of business.

In their favor is the fact that 16 screens allows them to have every film released and 4 copies of something like Monsters or Harry Potter so that they can run shows every 20 minutes or so. That means that they are more convenient than their competition who have fewer screens. They can also get art film that others can't get because of their clout with the movie companies and screens to put the film on. Movies are pretty well dead by the time they are finished with them. In effect these megaplexes try to dominate the region and drive everyone else out of business so that people have no choice but to come to them. In this case they ended up driving the twin in town out of business and succeeded in seriously wounding their profitable 8 plex in the next town (which was closed on the day they filed bankruptcy). The rest of us are still in business because we have our little niches.

I have never bothered to figure out their occupancy rate. It would be really awful because they run at least 5 shows a day 7 days per week. Yes, this means that there are probably 30-40 people inside the building on most afternoons. Are any auditoriums ever full? Yes. The hot shows are full at least at 7:00, but everything else is typically empty. That means that a few of those 16 screens are carrying the occupancy costs of the entire building. Say that they decided to close up in the afternoon and not open until the last matinee. Figure 2 shows per weekday = 32 X 5 days = 160 shows per week that they could cut. That would be a 28% cut in total shows! Chances are that they could still get most of those people who would have come for the 2 early matinees in on the last matinee. They could improve their occupancy rate quite a bit, but they still might not be any more or less profitable. It depends upon their cost of being open those extra hours - staffing, heat, electricity, etc. They have their reasons for being open those extra shows and that is their business. I can tell you that when we have a snow day and all the schools are closed they can really clean up. The rest of us can't effectively tap this spontaneous market because we can't get the word out that we will be open. People know that they will be open.

Their competitors knew that this project would not work and that a more appropriate sized theater would have worked, but Regal and their bankers went ahead.

If I had been looking at this I would have put a 5 to 8 plex depending on how much I could have afforded. It would have worked. Regal could have put in another 8 plex and coordinated movies between the two sister theaters in the two towns and gotten the same dominant effect that they sought. Further analysis on the business plan for my proposed 5 - 8 in this town is way too complex to analyze further here. It would take me days or weeks to put together. I would then have a business plan.

This market was truly underserved, but I consider it amoral to come into a town that is currently served by another theater and put them out of business. Given the way movies are distributed there is no option to share a small town market. I am sure that this enters into Regal's calculations that they don't want done to them what they are doing to others and this leads to overbuilding the market. In my opinion if you build or operate a theater you must look at it as no more than a 5 year investment so that you have covered your facility costs in that short of a time. If someone then comes in and builds against you then you can exit without huge losses. Also hope that no one comes in your market in those first 5 years.

I have tried to help explain how I would approach this problem, but you can see that I have really only touched on it. It is not easy and I guess that was my gut feeling about using occupancy %. It is too simplistic and you can see how it can be manipulated without really changing the profitability of the theater in question.

[This message has been edited by BECKWITH1 (edited January 28, 2002).]

Waahhh. If I figured mine correctly it is only 6%. But I am bearing my soul here so that REGAL doesn't even think about putting in an 18 plex next door.

Chiming back in here on the occupancy debate. I must say that in planning a business, its not a number I use. This is because its very intangible. It's much easier to get my mind around the concept of an average # of patrons per day. Yes, this is a concept that has little basis in reality as it makes all days equal, but it does give you a tangible target to shoot for, calculate with and measure against.

The real problem in trying to effectively budget revenue for a business plan for a theatre is that so many things are in flux. Attendance varies from week to week based on the mix of films. The make-up of the audience (kids, adults, seniors) varies based on the films as does the times they attend. Some films sell more popcorn than others.

We especially notice this in the art film biz...subtitles rarely are big popcorn sellers...people seem to have an aversion to watching, reading and eating simultaneously. Watching and eating they can do. Watching and reading they can do, but the number who seem to be able to do all three simultaneously is few. But I'm getting off topic here.

Bottom line, if you are trying to budget a theatre for revenue projections, set either a baseline day or week. Then figure out which are the big weeks/months and which aren't. I did it by months so that every year = 12 12ths. But some months counted at 2 12ths while others only counted at 1 24th. You get the idea.

Besides, to my way of thinking, butts in seats is what its all about and butts in seats is something that investors and bankers can get their minds around. 500 people per day sounds a lot better than 12% of capacity.