Start Time: 11:00 End Time: 11:57 March 1, 0000 ET
Q2 2024 Earnings Conference Call
August 01, 2024, 11:00 PM ET
Company Participants
Greg Marcus – Chairman, President and CEO
Chad Paris – CFO and Treasurer
Conference Call Participants
Jim Goss – Barrington Research
Mike Hickey – The Benchmark Company
Eric Wold – B. Riley Securities
Operator
Good morning, everyone, and welcome to The Marcus Corporation Second Quarter Earnings Conference Call. My name is Lydia, and I will be your operator today. At this time, all participants are in listen-only mode and we will conduct a question-and-answer session towards the end of the conference. [Operator Instructions]. As a reminder, this conference is being recorded.
Joining us today are Greg Marcus, Chairman, President and Chief Executive Officer; and Chad Paris, Chief Financial Officer and Treasurer of The Marcus Corporation.
At this time, I’d like to turn the program over to Mr. Paris for his opening remarks. Please go ahead, sir.
Chad Paris
Thank you. Good morning, and welcome to our fiscal 2024 second quarter conference call. I need to begin by stating that we plan to make a number of forward-looking statements on our call today, all of which we intend to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act. Our forward-looking statements may generally be identified by our use of words such as we believe, anticipate, expect or words of similar import. Our forward-looking statements are subject to certain risks and uncertainties, which may cause our actual results to differ materially from those expected. Listeners are cautioned not to place undue reliance on our forward-looking statements. The risks and uncertainties which could impact our ability to achieve our expectations identified in our forward-looking statements are included under the heading Forward-looking Statements in the press release we issued this morning announcing our fiscal 2024 second quarter results and in the Risk Factors section of our fiscal 2023 Annual Report on Form 10-K, which you can access on the SEC’s website.
We will also post all Regulation G disclosures when applicable on our website at marcuscorp.com. The forward-looking statements made during this conference call are only made as of the date of this conference call, and we disclaim any obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances. In addition, we routinely post news releases and other information regarding developments at our company that impact our investors, customers, vendors and other stakeholders. You should look to our website, marcuscorp.com, as an important source of information regarding our company. We also refer you to the disclosures we provided in today’s earnings press release regarding the use of adjusted EBITDA, a non-GAAP measure used in evaluating our performance and its limitation. A reconciliation of adjusted EBITDA to the nearest GAAP measure is provided in today’s release.
Okay. With that behind us, let’s begin. This morning, I’ll start by spending a few minutes sharing the results from our second quarter and discuss our balance sheet, liquidity and recent financing transactions. I’ll then turn the call over to Greg, who will focus his prepared remarks on where our businesses are today and what we are seeing ahead in the second half of the year. We’ll then open up the call for questions.
This morning, we reported a quarter that, as we expected, got off to a slow start, but picked up momentum and significantly improved as we move further into the summer season. In theaters, the lingering effects of content supply challenges from the Hollywood strikes created a slower than normal start to the summer movie season in April and May. We then turned a corner in June with better content supply and we saw audiences return for the big screen theatrical experience in big numbers. In hotels, we once again continued our trend of gains in group business and delivered a quarter with solid growth in revenue, occupancy, RevPAR and earnings.
I’ll start with a few highlights from our consolidated results for the second quarter of fiscal 2024. We generated consolidated revenues of 176 million, a decrease of 31 million or 15% compared to the prior year quarter. With revenue growth in our Hotels & Resorts division offset by decrease in our theater division. We delivered 2.2 million of consolidated operating income and 22 million of adjusted EBITDA.
Operating income was negatively impacted by a non-cash impairment charge of approximately $500,000 related to a lease theater location that we closed during the quarter and which is excluded from adjusted EBITDA. Below operating income, we incurred 13.9 million of debt conversion expense associated with the previously announced repurchase of 86.4 million of our convertible senior notes.
I’ll discuss our balance sheet and recent financing transactions further in a few minutes, but I’ll briefly explain the non-recurring debt conversion expense now. The required accounting for the repurchase transaction results in this charge to earnings for the premium paid above the principal value of the repurchase convertible notes.
Conversely, the benefit for the cash value we received from the related proportionate unwind of our cap call transaction, which economically offset the vast majority of the premium we paid to repurchase the convertible notes, is accounted for as a $12.9 million increase in equity that does not run through earnings from an accounting perspective.
In other words, in terms of the economics of the transaction that was recognized in the second quarter, the net cash premium to repurchase the convertible notes was really $1 million. In addition to that unfavorable accounting treatment, our income tax expense for the quarter was negatively impacted by 1.1 million for the related non-cash tax impacts of the cap call unwind.
In total, our net loss for the second quarter was negatively impacted by 15 million or $0.47 per share from the convertible debt repurchases and related transactions. As we have reported in the release, on the overall convertible debt repurchases and cap call unwind transactions, from a cash perspective, we were able to retire 86.4 million of convertible notes for only 87.9 million. Excluding the impacts of the convertible debt repurchases, our net loss for the second quarter of fiscal 2024 was 5.2 million or $0.17 per share.
Turning to our segment results, I’ll start this morning with our Hotels & Resorts division. Revenues were 74.5 million for the second quarter of fiscal 2024, an increase of 6.3% compared to the prior year. Total revenue before cost reimbursements increased over 3.4 million or 5.6% over the second quarter of last year.
RevPAR for our comparable owned hotels grew 6.5% during the second quarter compared to the prior year, growing at five of our seven owned hotels. The RevPAR increase resulted from an overall occupancy rate increase of 4.5 percentage points, with an average daily rate or ADR that was down just slightly, negative two-tenths of a percent over the prior year. Our average occupancy rate for our owned hotels was 72.7% during the second quarter of fiscal 2024.
Our properties continue to perform well against both the competition in our markets and the industry as a whole. According to data received from Smith Travel Research, comparable competitive hotels in our markets experienced RevPAR growth of 4.6% for the second quarter of 2024 compared to the second quarter of fiscal ’23, indicating that our hotels outperformed their competitive set by 1.9 percentage points.
When comparing our RevPAR results to comparable upper upscale hotels throughout the United States, the upper upscale segment experienced an increase in RevPAR of 3% during our second quarter compared to the second quarter of fiscal ’23, indicating that our hotels outperformed the industry by 3.5 percentage points.
The trend of strong group business continued in the second quarter with group rooms increasing to 44.6% of our total room mix during the second quarter of 2024 compared to 40.1% in the prior year quarter. The slight decrease in ADR resulted from an increase in our group rooms as a percentage of our overall room revenue mix, with growth in midweek group rooms sold, which generally increases occupancy at lower rates.
We also continued to benefit from improvements to our revenue management strategy at certain properties to drive higher midweek occupancy at lower daily rate offerings to optimize overall room revenue and RevPAR. Our success in growing group business and better revenue management drove our outperformance over our peers in the quarter.
With the continued growth in group business and events, our banquet and catering operations grew with food and beverage revenues up 3.8% in the second quarter of fiscal 2024 compared to the prior year. Finally, hotels adjusted EBITDA grew to 11.4 million during the second quarter on the higher revenues.
Turning to theaters. Our second quarter fiscal 2024 total revenue of 101.5 million decreased 25.9% compared to the prior year second quarter. Comparable theater admission revenue decreased 28.8% over the second quarter of ’23, with comparable theater attendance decreasing 26.3%.
According to data received from Comscore and compiled by us to evaluate our fiscal 2024 second quarter results using our comparable fiscal weeks. United States box office receipts decreased 26.8% during our fiscal 2024 second quarter compared to U.S. box office receipts during our fiscal 2023 second quarter, indicating our performance was approximately 2 percentage points below the industry.
Looking by month, we underperformed in April and May and then significantly outperformed the nation in June. We believe that our lower box office performance during the second quarter was primarily attributable to an unfavorable film mix compared with the second quarter of fiscal 2023, which included 12 weeks of the Super Mario Bros. movie, a film where we significantly outperformed our average market share in the prior year.
While the second quarter this year also included the opening of a great blockbuster family film where we are also enjoying high market share Inside Out 2, with only two weeks of the films run falling in our second quarter, much of this outperformance will benefit our third quarter. In addition to the improvement in film mix in June, we believe several changes that we made to promotions during the quarter positively impacted our improvement performance in June, which Greg will discuss further.
Our average admission price decreased by 3.1% during the second quarter of fiscal 2024 compared to last year. The decrease in our admission per caps was primarily due to the introduction of several promotions we introduced early in the summer to encourage movie-going and drive attendance. These changes include our new $7 everyday Mate promotion for seniors and children and changes to our value Tuesday promotion that reintroduced a free complementary size popcorn for MMR loyalty members, resulting in higher attendance on Tuesdays at a lower ticket price as compared to other days of the week.
In addition, average admission price was negatively impacted by a decrease in the percentage of 3D and PLF ticket sales during the second quarter of 2024 compared to the second quarter last year, which was favorably impacted by high 3D ticket sales from Super Mario Bros and more films that played on PLF screens at higher attendance levels. Our average concession food and beverage revenues per person increased by 2.3% during the second quarter of fiscal 2024 compared to last year’s second quarter. The increase was primarily due to pricing changes implemented during 2023 and by an increase in the number of concession items purchased per customer.
Our top 10 films in the quarter represented approximately 73% of the box office in the second quarter of fiscal 2024 compared to 80% for the top 10 films in the second quarter last year. The less concentrated film slate resulted in an approximately 2 percentage point decrease in overall film cost as a percentage of admission revenues. On the lower revenues, Theater division adjusted EBITDA during the second quarter of fiscal 2024 was 15.1 million compared to 31.3 million in the prior year quarter.
Shifting to cash flow and the balance sheet. Our cash flow from operations was 36 million in the second quarter of fiscal ’24 compared to 55 million in the prior year quarter, with the decrease in cash flow from operations, primarily due to the lower EBITDA. Total capital expenditures during the second quarter of fiscal ’24 were 19.8 million compared to 7 million in the second quarter of fiscal ‘23.
A large portion of our capital expenditures during the second quarter were invested in the hotel business with guestroom renovations at The Pfister Hotel and meeting space and ballroom renovations at Grand Geneva Resort & Spa. The remaining balance of capital expenditures during the quarter were for maintenance projects in both businesses.
Our capital investments and renovations projects have progressed as planned, and we continue to expect capital expenditures for fiscal 2024 of 60 million to 75 million, recognizing the timing of several of our planned projects are subject to change as we are still finalizing the scope and timing of various projects and the actual timing of these projects will impact our final capital expenditure number for the year.
We will continue to update our capital expenditure estimates as the year progresses. We recently announced the completion of several refinancing transactions. First, as I mentioned earlier in the call, we entered into agreements to repurchase an aggregate 86.4 million of our convertible senior notes for cash consideration of 87.9 million, which is net of the cash we received from the proportionate unwind of the cap call transactions. We effected the repurchase over two tranches, the first $40 million tranche closed in the second quarter and the second $46.4 million tranche closed in July during our third quarter.
We believe the repurchase transactions significantly simplify our capital structure and eliminated potential future dilution at an attractive repurchase price. Following the repurchases, the remaining 13.5 million of convertible notes are a much smaller piece of our overall capital structure and we expect to settle them with cash at or prior to their maturity in September 2025.
Second, in July, we completed a private placement offering of 100 million of senior notes in two tranches, 60 million of 6.89% notes with final maturity in 2031 and 40 million of 7.02% notes with final maturity in 2034. The proceeds of this offering were used to fund the convertible notes repurchases and for general corporate purposes. This was our first return to the private placement debt market since the pandemic, and we were thrilled by the strong demand from new and existing debt investors for this oversubscribed debt offering.
Through the completion of these financing transactions, we extended our weighted average debt maturity from 1.6 years to just over four years. We believe the successful execution of this financing, once again underscores the importance of our core philosophies of maintaining a strong balance sheet with manageable leverage, ample liquidity, and owning our real estate. Our balance sheet remains strong, and we ended the second quarter with 33 million in cash and over 208 million in total liquidity with a debt to capitalization ratio of 28% and net leverage of 1.9x net debt to adjusted EBITDA.
With that, I will now turn the call over to Greg.
Greg Marcus
Thanks, Chad. Good morning, everyone. Over the last few quarterly earnings calls, we’ve talked about our outlook for the year in terms of two storylines that we expected to play out over the short term. First, we expected two different trends in our divisions with hotels continuing to grow with steady occupancy growth and events in our markets that we would benefit from.
While we expect the theaters to be impacted by product supply challenges following last year’s Hollywood strikes. Second, in theaters, we expected the year to be a tale of two halves, with the most significant impact of the product supply shortages felt in the first half of the year with stronger product returning in the second half of the year, building momentum heading into 2025.
This has played out as expected. But when you peel back the onion, there are surprises, both positive and negative in the quarter. While the second quarter started out very slowly in our theater division in April and May, we really started to see an inflection point in June with films that drew large audiences and even broke box office records. And hotels have got off to a strong start that carried through to deliver a great quarter, which we expect to be followed by an even better third quarter given the events we have going on in our markets.
While the quarterly comparisons to last year have been tough, they were not a surprise. We see improvement coming in the second half of the year and our long-term outlook for both businesses remains positive. I’ll start today with our Hotels and Resorts division. You’ve seen the segment numbers, and Chad shared some additional detail on the performance metrics, including our outperformance to the concepts and upper upscale hotels nationally.
Overall, the quarter was solid with several highlights. First, we continue to win group business that is filling in midweek occupancy and it helped grow our overall occupancy to nearly 73%. This is our highest occupancy level in the second quarter since the pandemic.
And while it isn’t quite all the way back to the typical second quarter pre-pandemic average of around 77%, we continue to get closer. Our average daily rates were effectively flat in the second quarter compared to the second quarter last year, and we held ADR despite the increase in group business, which is typically at lower rates. In addition, we continue to benefit from optimizing our revenue management strategy at select properties. We’ve been aggressive on daily rates during low demand periods to drive occupancy and maximize revenue with our available room night capacity.
The net result has been successful in growing our occupancy and overall RevPAR. Finally, we did continue to see some modest rate softening among leisure customers in the quarter at some of our properties, which was offset by rate growth in other segments.
Our banquet and catering business continues to benefit the strength in our group business with food and beverage revenues growing 3.8% in the second quarter of 2024 compared to the second quarter last year. As we look ahead, group bookings remained strong with our group room revenue bookings for the remainder of fiscal 2024, our group pace in the year for the year, running approximately 11% ahead of where we were at this time last year, excluding the impact of the Republican National Convention in Milwaukee.
Looking further ahead, our group pace for fiscal 2025 is running over 36% ahead of where we were at this time last year. Banquet and catering pace for the remainder of fiscal 2024 and 2025 is similarly ahead of where we were at this time last year. Our newly renovated meeting space is in ballrooms at Grand Geneva Resort & Spa and at The Pfister have contributed to our success in winning groups and event bookings.
The guest room renovation of the historic building at The Pfister Hotel was completed on schedule with all rooms back in service and time for the RNC. We plan to complete the last phase of the hotel renovation with a refresh of the lobby and public space later this year. The investments we have made in our properties put us in a great position to win in our markets.
As we all saw a few weeks ago, Milwaukee recently hosted the Republican National Convention and our 3 downtown hotels, The Pfister, Saint Kate, and Hilton Milwaukee City Center, all played a big role in welcoming an estimated 50,000 visitors to the city. During the five nights of the event, we hosted convention attendees and many VIPs in the complete sellout of our over 1,250 rooms at these 3 hotels with 19 convention events in our ballrooms and meeting spaces.
In terms of financial impact to our third quarter, the RNC generated over 3 million in incremental revenue for the division over our volumes during the same week last year. This was a milestone event for the city with national media coverage that highlighted our great hospitality and all the things that make this city great.
While the event certainly will be a net positive to our third quarter results, more importantly, we believe the event showcased the city’s ability to successfully host large-scale conventions and events, with venues including Baird Center, the expanded convention center that opened earlier this summer and Fiserv Forum. We are optimistic the success of the RNC will have a long-term positive impact on event bookings and hospitality demand in the market in future years.
Turning to theatres. As I mentioned in my opening comments, we saw a significant difference in the performance of the division in April and May compared to June, both in terms of the overall box office in each month and in terms of our performance relative to the nation. The National Box Office had its biggest monthly decline of the year in April of approximately 38% and then sequentially improved each month as we had more and better films to play. And Marcus Theaters box office comparisons, followed that national trend.
Chad went through our results for the quarter, including our circuit underperformance, underperforming the change in the National Box Office by 2 percentage points in the second quarter compared to last year. However, as Chad mentioned, while we started the quarter slowly, we finished strong. Looking by month, we underperformed in April and May and then significantly outperformed the nation in June by over 9 points for the month.
There are several changes that occurred that we believe drove this positive trend that has now continued into July. First, I’ll start with the changes that we made on our last call. I noted with the softer film slate, we were refocusing on driving attendance to keep customers coming to the movies and making sure we had a compelling offering for everyone, particularly our value-oriented customers.
In May, we rolled out our everyday matinee promotion, which offers a $7 ticket for kids and seniors for any shows starting before 4:00 PM on a standard screen seven days a week. In addition, we continue to evolve our value Tuesday promotion, and we didn’t make any further changes to emission prices on Tuesday.
In May, we reintroduced a free complementary size popcorn for all MMR members replacing the prior Tuesday promotion of a 20% discount on all food and non-alcoholic drink for MMR members. These changes are designed to drive attendance and appeal to value-oriented customers on making sure that movie going remains the most affordable out-of-home entertainment option.
Based on the first two months of results, the changes appear to be contributing to our improved performance. Second, the mix of films shifted to genres that played well in our markets in May and June, including Inside Out 2, IF, and Bad Boys: Ride or Die, all of which outperformed our normal market share. We expected that the increase in promotions would create a headwind to our admission per caps, which were down 3.1% in the second quarter and were also impacted by a challenging comparison with high 3D ticket sales for the Super Mario Bros movie last year.
In terms of the quantity of wide release films in the second quarter, we had a similar number of titles with 28 wide releases in the second quarter of fiscal 2024 compared to 29 in the second quarter last year. However, similar to what we saw in the first quarter, the second quarter slate this year was weaker overall, with lesser performances and fewer blockbusters with an average opening weekend U.S. box office gross per wide release film that was 28% lower than the same average in the second quarter last year. Only Inside Out two opened to over 100 million in the second quarter this year compared to three films within opening over 100 million in the fourth fill, The Little Mermaid coming very close with a $95 million opening during the second quarter last year.
In June, we saw that once again, when quality product supply is there, audiences still want to come out to see films on the big street. Inside Out 2 delivered the second highest grossing opening weekend animated film of all time and has gone on to become the highest gross of animated film of all time, overtaking other Pixar blockbusters, including Incredibles 2 and Frozen II, with the domestic box office that now stands at over $600 million during its 6-week run.
The momentum continued into July with the releases of Despicable Me 4, Twisters, and Deadpool & Wolverine, with last weekend’s highest outrated opening of all time. Deadpool & Wolverine broke several records from Marcus leaders as well, becoming our highest ever grossing weekend summer film opening between May and August and our highest ever PLF grossing opening weekend summer film.
As we look ahead to the rest of the year, we see a stronger second half. This fall, we are excited about Beetlejuice Beetlejuice, Joker, Folie a Deux, and Venom: The Last Dance, among others. For the holidays, we look forward to films such as Gladiator II, Moana 2, Wicked, the Lord of the Rings: The War of the Rohirrim, Kraven the Hunter, Mufasa, and Sonic the Hedgehog 3.
As we look further ahead to next year, the slate for 2025 is stacked with several very strong franchises, including Superman: Legacy, Captain America, Mission Impossible, Jurassic World, Karate Kid, The Fantastic Four, Snow White, Wicked 2, and Avatar 3, just to name a few. As we look at the product supply ramping back to and potentially exceeding 2023 levels in 2025 and further growth beyond. We remain very positive and optimistic about the long-term future for the industry and our theatre business.
Finally, I’d like to briefly talk about growth in features. While over the last few years, we have closed several underperforming theatre locations as we optimize our footprint, we continue to look at opportunities to grow this business in attractive locations and with a financial model that makes sense. We recently announced the addition of a new theatre to our circuit, the shops at West End in St. Louis Park, a suburb of Minneapolis, Minnesota. This is our eighth location in Minnesota and our closest in Minneapolis. So that’s a great example of what we think is possible and we work closely with landlords to reposition theatre, in this case, an attractive lifestyle center in a good market that we know.
We reopened a theatre as the Marcus West End Cinema in early July, bringing all of our great offerings and programs to customers on day 1, including our Magical Movie Rewards loyalty program, Marcus passport, value Tuesday and everyday matinee. We look forward to making further improvements to the theatre with the landlord in the months to come. Finally, I would like to briefly comment on the financing transactions that Chad covered earlier. As you can tell, we’ve been busy the last several months developing and executing the financing plan to extend and simplify our capital structure.
And I would be remiss if I didn’t congratulate Chad, I’m leading a complex refinancing that we believe will be a huge positive for our shareholders in the long term. We often get questions on capital allocation, our priorities and how we think about the mix of paying a dividend and share repurchases. One of the ways we’ve viewed repurchasing a substantial portion of our convertible debt was that we were indirectly buying back our equity by eliminating potential future dilution. We are continually evaluating where we can best deploy capital with each investment decision, whether for growth, maintaining our assets, returning capital to shareholders through dividends or through our current share repurchase authorization of 2.4 million shares.
In this regard, we are optimistic and opportunistic and will deploy capital where we see the best returns. I’d like to once again express my appreciation for our dedicated associates in the Marcus Corporation. Their outstanding work and commitment to serving our customers is responsible for our success, and we appreciate all they do every day. As we say so often, they are our most important assets. So on behalf of our Board of Directors and our entire executive team, thank you to all of our associates.
And with that, at this time, Chad and I would be happy to open the call up for any questions you may have.
Question-and-Answer Session
Operator
Thank you. [Operator Instructions]. We’ll go first to James Goss with Barrington Research. Please go ahead, your line is open.
Jim Goss
All right. Thank you. One question or set of questions about the hotel sector. You talked about the benefits from the RNC. I’m wondering was there any displacement impact from that event with demand pushed rather summer timeframe that you might benefit from later on. And did this event help tighten the profile of Saint Kate, the Arts Hotel and provide potential justification for additional expansion of their concept?
Greg Marcus
It’s a yes and no Jim, it’s complex what happened with the RNC. Yes, it did move some business later in the summer. So like the Northwestern Mutual Annual conference was moved to accommodate it. So that was probably the biggest move. And so yes I’m sure displacement business and I’m sure some people look at TV and said, “Wow, Milwaukee’s cool, I should go there because it’s true. But the other side of that is that there was — and by the way this is all a net positive, but there was a little displacement on the front end because the convention center was pretty much out of business for a few weeks before the RNC came above because just the setup was such an extensive setup. So there were positives and negatives to it, but overall we’re really pleased with how it all turned out. As for Saint Kate, yes, you have to look at — you read my mind, I’d like to have more of them, but we’ve got to get this one in a place — and it’s so hard to judge when you get a one-timer like the RNC. Again, we think the net positive it continues to build and that concept continues to grow every year and we’re pleased with how it’s coming along. So we do think about exactly what you’re talking about.
Jim Goss
Okay. Thanks. And then the Cinema side, I’m wondering at this stage is film flow importantly in numbers game or is it dependent primarily on the quality and/or demographic appeal of the film mix being released. Probably wondering about your read on consumer attitudes towards theatrical attendance at this stage. You’re always pretty bullish on it to that.
Greg Marcus
I think you know my theory is that at the end of the day it is the number of films released. However, I mean, it has to be what I would call a normal slate. If you release 110 films and not one of them is a tent pole that’s not what I would call a normal slate. And so I think as we’re thinking about the earlier part of the year where the number of films released seemed to be at a higher cadence. What they were releasing I’m glad they were putting movies out there and — but not tent pole. We talked about — what is a tent pole, what’s holding the tent pole? Why lots of things can be inside of it? If you just had tent poles, well, you’re not stocking your tent full. Or if you don’t have tent poles, well, the ceiling is going to be a little lower so to speak.
And so at the end of the day assuming the proportion of number of tent pole and then smaller films and sort of a varied slate of different kind of films then I feel that the box office is still relatively predictable. But it needs to be — because look at people who want to go to the movies. Look at what we are seeing right now. You could just think back a few years, no one is going to a family movie anymore. All of a sudden, we have the highest animated film of all time.
You know, Marvel’s done. Stick a fork in Marvel, and then we get Deadpool. I saw last night. It was so good. You got to take enough swings and you got to get people back in the habit. Oh, right now comedy’s dead. Nobody’s going to comedy, although everybody went to Deadpool which I promise you is a comedy. I don’t know it seems to be more fun to laugh in a roomful of people than the laugh by yourself on the sofa. That’s great. But you want a room full of people around you. And so I think they got to get back to that and build the audience. People have to get back in the habit of going.
Jim Goss
Okay. One last one alternative content gained a little more traction when there’s less content available. And I’m wondering if in the aftermath as alternative content begins to subside from lack of need, what elements do you feel will have a more lasting impact? And will it be confined to certain days of the week or anything else of that nature?
Greg Marcus
I think that alternative content will continue to be important to what we do. I’ve always said I don’t think that it’s going to become the biggest part of our business, but those last customers are very profitable. Those are high-margin customers and I think that that will be — we’ll need to be strategic and figure out it. The key is for us to know the audiences, to know who that is and to effectively be able to market to them. Because that’s ultimately the challenge of alternative content is to be able to market to an audience, you’re not releasing something nationally and playing 500,000 runs or something which is what a national run is of something over a month. You can’t throw as much marketing in it. So you have to be very efficient. And so our loyalty program which continues to grow and not just ours because it needs all the industries. I think all the industries loyalty programs continue to grow as we get better at marketing and finding those audiences.
For example, I’ll give you an example, our Indian film Bollywood content we’re getting better at it and it’s growing. Our St. Louis market has been very strong, Wehrenberg, when we bought them had a very good — they invested the time and built that audience. And we’re growing that. Now it’s not huge dollar amounts, but over time, it grows and it can be meaningful and whether it’s that or concert films or whatever we might be doing. It’s something we have to pay attention to because as I said those last dollars are the most profitable.
Jim Goss
Okay. Understood. Thanks for your thoughts. Appreciate it.
Operator
Next question today comes from Mike Hickey with The Benchmark Company. Please go ahead. Your line is open.
Mike Hickey
Hi, Greg, Chad. Good morning, guys, and great job, congratulations on your financing transaction. It’s awesome to see that converting [ph]. I guess the first topic on the hotel side really strong growth, at least versus expectations maybe for the first half here. And I get the group data looks good, but sort of your confidence here that you can continue to sort of grow the hotel the second half of ’24 and ’25. And I guess the backdrop here somewhat Greg is that I think prior quarter you expressed maybe a little softness in leasers. So sort of curious update there and then your confidence for growth?
Chad Paris
Yes, Mike, I’ll start. As we mentioned in the prepared remarks we did see some continued softness in leisure. I wouldn’t say that it was meaningfully accelerating or different than what we mentioned in the first quarter. But as you know, that’s been a really hot segment of the business coming out of the pandemic. And so it’s normalizing which I think generally we thought and the industry thought was going to happen. What is happening, though is offsetting it is we’re seeing other segments of the business that have more than offset it. And that’s primarily happening in occupancy. This quarter it even managed to offset the softness at leisure rates to hold rate flat. And so we like the fact that our mix of business gives us the ability and opportunities to win in other segments to offset softness in certain sectors or parts of the business when it happens. And we were able to do that this quarter. And as we go into the second half of the year, we talked about the bookings and what the forward book looks like for group business which looks strong for the balance of the year, good growth both this year and next year that we think will continue to help us offset any softness that we see in leisure, but I would say it’s more sort of a continuation of what we saw, but we’re managing it.
Mike Hickey
All right. And then you called out a history, you put some 20 million in capital on that. Just sort of curious maybe the renovations that you did there and how you think that will impact RevPAR or utilization ADR I guess specifically if you want or how that asset should grow after the money you put in?
Greg Marcus
I don’t think we look at specific. We don’t talk about specific assets like that. It’s a mixture of stuff. When you do something like that part of it is just you have to do it because if you think in the business and keep your assets up. But it is so beautiful and it’s — and the F&B market is still competitive in the banquets market. So now people come in to see how great the asset is, I think there’s obviously going to be a benefit to it. It’s a little tough to quantify but that is the cost of being in business over time.
Chad Paris
Yes. I mean where we see it, Mike, is really in the bookings on the group side of the business and particularly renovated ballrooms, we’re seeing that now not just at The Pfister but at Grand Geneva as well. Event planners like fresh space. And that’s where after you make an investment like this, you’ll start to win some of that over other alternative venues. And I do think that’s related to what we’re seeing in some of the group bookings. The other piece that Greg said is maintenance capital in nature but also preserving — in the case of the Pfister, premium positioning in the market in a premium rate and maintaining the asset. So a little bit of defense there on maintaining a leadership position in the market.
Mike Hickey
Thank you. I guess, topic two with the theatre, it’s nice to see you guys be opportunistic with the show place transaction. Curious what sort of opportunity you guys see in the market for similar deals as you look to expand your network now?
Chad Paris
I wish I could tell you they were lining up and there were a bunch of deals that we were able to do. But we keep looking. My theory is that when things sort of stabilize out more stuff will break free. And this is the example that — this is how the company was built originally. And we’re about to be 90, 80 years ago, my grandfather built the company by finding landlords the needed help. That said, we can work together to do something. My grandfather bought the skill of running the operation to the landlord that had the real estate and they became partners. And that’s the kind of deals we would like to do. And we’re out talking to people, as you can see because this deal got done. So we are out talking to people about trying to do these things. And I know our team is out looking and talking to people but I can’t tell you. There’s a long list of them right this second. But we’ll just keep working at it.
Mike Hickey
Would you guys start to think now you sort of completed the financing piece obviously, that took a lot of time? But now that’s sort of cleaned up for you, would you start to consider more traditional M&A in the theatre space is sort of more important on the list of capital allocation opportunities?
Chad Paris
Mike, I think it’s changed — the M&A model in the theatre business is fundamentally different than it was pre-pandemic in that buying a circuit of theatres generally can be difficult because in the portfolio of locations, many of them are not cash flow positive. And so you really need to think about paying cash for a circuit and what you’re getting and you have to look location by location. What we’re seeing in terms of opportunities are more individual deals. And so it’s a lot of hard work to do individual locations but that’s where the financial returns are going to make sense. And it’s singles and doubles, not purchases of 20 locations in a circuit at a time. And that’s I think where we’re at until stabilization somewhere quite a bit north of where we are today kind of resets and helps everybody understand what the rent levels need to look like in a lease circuit.
Mike Hickey
Good. I guess, last question, gentlemen staying on the theatre side within the promotional piece it looks like, Greg you’re having success there. Do you think that is sort of any indication of consumer that’s, I hate to say trading down but sort of seeking value here, Greg? Or do you think that is maybe a factor of just not the best slate and they just need some extra motivation to get into the theatre. And then I guess the follow-on would be now that the slate is looking great for the foreseeable future and sort of like the build-out of that promotional sort of be contra productive I guess versus getting people in prime times with full ticket prices.
Greg Marcus
No. Look, there’s a few things that are going on. I think the dynamics are such that and let’s break it like in a couple of different parts like so one of the idea of the return to free popcorn. I mean do I think that’s indicative of a weaker consumer? No. I think that free is a powerful word. It was very interesting. We did a substitution. We’ve made the change. And by the way, we tested this. We didn’t just do this radically but without trying to test it. Obviously, our test and sort of manage will ultimately happen. But the idea of moving to — when you give free popcorn, if you don’t want popcorn then what value are we giving to someone on a value Tuesday. And so we suppose what we give you 20% across the concession stand that’s going to be a value potentially to more people. That was the theory. And as we tested it seemed to play out okay. But then when we rolled it out and it didn’t match our expectations. And so we went back to free popcorn and we change what the offer was. It really seemed to be — it’s hard to quantify which piece of all that is but it’s something that we thought, okay, well, you make a mistake and you go back and you’re changing and that seems to be a more powerful driver for Tuesdays.
Now when I say Tuesdays, let me bring up to your next point, which is, we worry about things being counterproductive. And the answer to that is no because one of the things we think about and this is maybe the overlap of hotels overlapping with theatrical and that is the right price for the right customer at the right time. Not like we just cut a discount across the board all day and all night. Let’s call it our 7, 7, 7 matinee, seven days a week for seniors and kids that ends at 4 o’clock. Might you displace a little bit of business, yes but in the aggregate the idea of keeping it affordable for families, which again is, we know the consumer is weakening a little bit. Again, so how do we appeal to that family that maybe, how do we keep this affordable entertainment? Well, let’s face it. The studios have gone and they’ve put out a lot of product into that fire hose at what the consumer perceives as virtually free in their streaming programs. And so how does that not impact us? That has to impact upstream. And they have to know that. And so we have to be able to be competitive so the family can make the decision to get off the sofa and invest their time and go to a theater, which we know in the studios and we all know is a much better financial result for everyone. And not just financial across the life of their content. We all want people to be invested in the content.
We want people to go — the reason to go to theatrical is, I’ve talked about before, you sit on your sofa, it’s very passive. You flick your remote, and you can stop it and start it, and not watch it if you didn’t like it in the first few minutes. You have no investment. But when you go to a movie theater, you’ve made an investment of your time. And you will like something more. You will tell more people about it. You’ll want to watch it again when it comes out in the ancillary markets. That’s window selling to the same person over and over again. But you got to have a price where you can make all those sales and that’s where we are. I’ve talked about this before. I’ve told people this, I’ve probably talked about it on these calls. 20 years from now, the number of kids who will say to someone I remember my parents took me to my first movie. They took me in the living room and we turned on the TV and I watched Inside Out 2. That number will be zero, I promise you. But there will be so many kids who say, I remember my parents took me to my first movie. We went to the movie theater, my dad held my hand, he bought me popcorn and I thought the characters were real, Inside Out 2 was my first movie. And they’ll talk about it for the rest of their lives. And they’ll be excited to go to Disney theme parks and experience the characters there and all of the floaty benefits that you don’t get just sitting on the couch. That doesn’t mean sitting on the couch is bad. It just means it’s not the same. Maybe more than you wanted in an answer, but you asked.
Operator
Thank you. And our next question comes from Eric Wold with B. Riley Securities. Your line is open.
Eric Wold
Thanks, guys, for getting me in. So a couple of follow-ups on some ones that have been out there. On the pricing question. So I guess on the midweek value pricing and discount Tuesday. I get your rationale, Greg. They just went through why you guys made those changes. Should we make the assumption that those changes are viewed as more permanent changes to the pricing model and kind of promotional model or something that’s more of a short term move with the slate and kind of where wallets are right now?
Greg Marcus
Well, we’ve announced that it’s for the summer. But obviously we’d be considering it to bring it back on a more proper basis. I think the most interesting thing, though, is actually how it looks like. The pricing, what we charge is less — the $6 or $7 depending on if you’re in the car rewards program or not, versus $5 seems to be less impactful than free popcorn, which is really very interesting. But again, at $5 for 10 years, I define anyone to tell me they don’t want to raise for 10 years, especially in an inflationary environment. I think that was very understandable. It’s still $6 is an incredible value for that.
Eric Wold
Got it. And then on the acquisition question around the theaters space. Yes, how far outside of the mid opportunity that comes along? And how do you view the benefits of clustering in the region? I know you talked about that, obviously the — Chad mentioned the acquisition kind of environment, a lot different than was — you’re kind of looking at one of these and two of these and these to come up. So I mean, if there’s a single theater in a faraway place, does that make sense? Or you really need to think with your customer base and loyalty, you really want to — and maybe kind management have more of a clustering or can you make it work with one?
Greg Marcus
Look, you could absolutely make it work with one. I mean it’s not as good as having a bunch of them because you can get your — it’s not like the old days. The old days, when you had to have an Ad in the newspaper, I mean we’re talking real old days here, you wanted to have a bunch of them in the market because you’re — just, because your ad looked so much larger. When you ran all of them on one. And now you get people to your website and it’s different in that regard. But still, I do think that there’s some marketing benefits to being able to have multiple feeders in the market, whether you — more for, the ad hoc campaign. $7 Matinee, seniors seven days a week for seniors and kids. Being able to market that so much more efficiently is certainly helpful. Again, not the same as the days of old. And the more times people know your name and hear about you and get your programs are out there, the better off you are. But overall, we can really manage them anywhere.
Chad Paris
The only thing I’d add to that Eric, is we certainly the bulk of our locations and the things that really move the needle in terms of customer preferences, those locations are in the Midwest. But we do have single locations in certain markets as far west as Aurora, Colorado, as far east as Philadelphia, where we have a few of them in that market, but a couple of them in that market. But we have done it before. We certainly can do single locations in a given market, particularly if it’s a great theater.
Greg Marcus
Yes, and I mean certainly people have seen my tax all over the country.
Eric Wold
So I imagine then that’s not limiting your inbounds from a landlord maybe somewhere in a different state because of where you are. You’re still getting those calls.
Chad Paris
Yes, absolutely.
Eric Wold
And then last question on the hotel side, you spoke about the strong group pace that you’re seeing in 2025. Is there any way to kind of note, I guess, or kind of think about how much of that may be driven by the convention center expansion versus just normal group business improvements that you may just be experiencing your hotel? I guess what I’m trying to get a sense of, is that just an improvement of the baseline? I don’t say just, but is that improvement of the baseline to your hotel business prior to the tailwinds of the convention center expansion really kicking in?
Greg Marcus
Well, it is a little of both. I mean look, it’s the business coming back, it’s the convention center getting stronger. There’s certain probably a bunch of people who say, well, I’m not booking your convention center until I see it done. But a bunch of people were excited about it. And I give credit to Peggy Williams, our local convention visitors bureau. They’ve been out marketing hard. And the business flow is better.
Chad Paris
Yes, I guess I add Eric is 25, a little bit of both. They are starting to book in, some events further out on the calendar of 2027 that I think they would, quickly say Milwaukee would not have gotten, were not for the expanded convention center, but next year, even near in as Greg said, because they want, some of this is they want, event planners want to see it, next year. It’s just a, a little bit of both.
Eric Wold
Perfect. Thank you both.
Operator
Thank you. We have no further questions at this time. So I’d like to turn the call back to Mr. Paris for any additional or closing comments.
Chad Paris
Great. Thank you. Well, we’d like to thank everybody for joining us today. We look forward to talking to you once again in early November when we release the third quarter results. Until then, thank you, and have a great day.
Operator
This completes today’s call. Thank you for joining. You may now disconnect your lines.
