Posted onMay 29, 2025|Comments Off on I LOVE THE MOVIES!!!
The smell of buttered popcorn, the cool sensation of frosty Pepsi in my mouth, and an afternoon of escape into a new and exciting world, this is what the movies meant to me. As a kid, I spent endless hours on these magical, plush red seats.
For years, cinemas were our first and most affordable choice for entertainment. Movies were the anchor for some of the best retail in the United States, aping the days when we went downtown for all our entertainment, be it a shopping trip, a movie, a delicious dinner at our favorite restaurant or maybe even a play. While many of us are not old enough to remember those days, they are certainly the model for modern entertainment districts.
Not surprisingly, the Pandemic, streaming, and other technology that allows entertainment and games in the palm of our hands have significantly affected the cinema industry. The North American Box Office Gross (NABOG) in 2023 and 2024 was between $8.5-$9.0 Billion, a drop from the Pre-Pandemic era of $11-$12 billion or approximately 70%. But even before the pandemic, NABOG was not growing, but hovering, as shown below:
Source: BoxOfficeMojo.com by IMDbPro and JB Research Company
In the last 40 years, 1984-2024, compound annual growth rate of cinema revenue has been 2.8%, while the population of the U. S. has increased only 1.0% on the same basis. As a reference, the North American Amusement and Theme Park gross revenue increased at a rate of 5.0% per annum in the past 26 years. Remember, inflation has been 2.6% in the past 26 years, so the real rate of growth is 2.4% for Amusement and Theme Parks. Adjusted for inflation (2.6% for the past 40 yrs.), cinemas revenue has been fairly stagnant in the period. This is a somewhat disappointing point of view.
What are a few of the reasons for stagnation, even prior to the Pandemic:
Technology, including television even before streaming became available to all.
Shifts in consumer behavior and preferences
Shifting Demographics, including the aging of the U. S. population
The availability of quality film product and again, preferences of the moving going public
Over screening
With all of this disappointing news, there are some bright spots on the horizon. First, theaters are seeking to change the business model. While almost half of cinema revenue still comes from ticket sales, other revenue streams are growing. Some new points of differentiation include:
The availability of premium large format screens
Enhanced seating
Enhanced Food and Beverage, including the highly profitable sale of alcoholic beverages
Adoption of theaters as public assembly facilities offering opportunities for live events, gaming, sports, opera, kids movies and other programming.
I grew up going to the movies as a special treat. In my heart, I hope that theaters can evolve with the times and remain as sparkling, special places where one can lose oneself in a special environment for a few hours. Lord knows we need these safe escapes in our very chaotic world!
Posted onJanuary 12, 2025|Comments Off on Reviving Community – New Trends in Location Based Entertainment
Now more than ever, we need places for people to congregate and connect. With every lifestyle, regional, and community center showing big empty spaces from tenants that have gone dark (due to Covid-related loss) or just bad management and strategy, innovation is the key to rebranding and renewed Covid has been catastrophic for business with major shutdowns and the explosion of e-commerce.
But some things can’t be replaced, and I believe will never be replaced, such as the need for connection and communal gathering places. The isolation and emancipation screens bring for young and old elicits a more urgent need for human contact. As good designers, developers and owners, we can provide interesting, exciting and innovative experiences, and we can bring visitors back to our shopping centers.
The genres of new concepts are as old as the shopping centers themselves and as new as technology will allow. Here are some of the notable Location Based Entertainment (LBE’s) we think are reinventing the genres.
Eataly
Eataly is the delicious Italian gourmet food market/food court on steroids, with 10 locationsin the United States, including New York and Los Angeles.
Eataly is a global operator in Italian food, offering a concept combining high-end Italian food restaurant with retail.
Eataly’s business model was built around the “eat-shop-learn” concept, offering consumers globally a selection of high-quality Italian restaurants and retail experiences with an overwhelming variety of the finest Italian local “specialties” often impossible to buy abroad.
Eataly operates 27 directly operated flagship stores (14 in Italy, 10 in North America and 3 in Europe) and 26 franchised stores located in the Asia Pacific countries and Middle Eastern region, generating revenues of over €800 million globally (including franchise store sales). This indicates average store sales of £15 million per location.
Eatertainment and Sports
I hate the word Eatertainment, but it has become common in our lexicon. The concept involves combining eating and drinking with fun, sports and games. Anything from baseball to golf to bowling to curling (yes, curling!) are tapped to be themes for these venues, which fit nicely into a retail or mixed-use project.
The first class includes many new restaurants which offer simulators for popular sports such as golf and Formula 1 car racing. Top Golf is the most popular sports themed venue with the highest number of units and top grossing sales per unit of the new sports/food/beverage concepts. This concept combines golf simulators and games with food and beverage. The company offers more than 100 plus units with total sales of almost $1.8 billion, average sales per unit of $17-$18 million on newer units sized at approximately 65,000 square feet. Gross margins are known to be about 40%, indicating an EBDITA of $6.8 million. With an industry standard payback of four years, this indicates a warranted investment of more than $27 million, or $415 per square foot. This is the most proven and mature business model of the sports/food & beverage models.
Other models include:
F1 Arcade is based on iconic Formula One racetracks and is offered in Boston, Washington DC, Las Vegas and London. Featuring craft cocktails and seafood, Kobe beef, and bar fare with an upscale theme, the venue allows entrance to customers from 7 years of age and older. The Boston unit is approximately 16,000 square feet. Kindred Concepts, the parent company, recently raised $130 million in financing for expansion.
Camp Pickle is scheduled to debut in Denver and Tulsa in 2025. This new attraction will be like an old-time summer camp, the kind your grandparents attended. Of course, Pickle Ball is the theme, and food beverage and other activities are offered.
Spin is a concept created by Susan Sarandon in New York in 2009, themed on competitive ping pong. With locations in New York, Boston, Chicago, San Francisco, Toronto, Philadelphia, Seattle and Washington DC, the menu provides farm to table, locally sourced food. Units range in size from 4,000-12,000 square feet, fitting nicely into a shopping center configuration.
SixesSocial Cricket offers competition in a sport that many Americans know nothing about… Cricket, with karaoke offered as backup! The food is said to be excellent, featuring typical bar-fare. Bookings include an adjoining table for food and beverage. The first U.S. unit is in Dallas at the Colony.
Goodsurf is an 8,000 square foot sports restaurant based on surf simulator technology that allows waves to be created by machines, taking much less space than a typical wave pool. Food offerings include burgers, fries, vegetarian options, and ice cream for the kids. The first location is in Dallas.
Flight Club is a high-tech dart simulation game with seven units located in the United States in Las Vegas, Denver, Atlanta, New York, Los Angeles, Houston, Boston, and Chicago. The food offerings are gourmet versions of flat breads, tacos, salads and fries. The newest unit is in Denver at 10,000 square feet, close to Coors Field and the Ball Arena.
Culture
My favorite in this category is Meow Wolf, which began in 2008 as a collective of anarchic artists in Santa Fe (NM). It offers interactive installations, each with a different theme. The attraction offers six locations including Santa Fe, Las Vegas, Houston, Washington, and Denver. Each location has a different immersive art theme with hundreds of storytellers from throughout the world and local artists’ features.
The newest and largest store is located in Denver and features more than 70 immersive attractions in 90,000 square feet. (The Houston location is only 32,000 square feet.) Convergence Station, as it is called, is a multiversal travel experience between four alien worlds, inspired by the location near two freeway overpasses.
The newest store is scheduled to open in 2026 and is in final lease negotiations that will bring a Meow Wolf exhibition to West Los Angeles. The location is a vacant movie theater complex. The theme will be cinema. Meow Wolf’s move into its largest market yet is intended as a statement piece, a declaration that weirdness and art-focused ventures still have a place in an immersive economy that’s been racked by closures and layoffs, Meow Wolf included.
In April, Meow Wolf announced it would cut 165 employees. Exhibitions in Denver and Las Vegas were heavily affected.
General admission is $40 for adults and $35 for children and passes are available. The business model is based on buying/leasing low value properties in subsidy rich locales.
Destruction LBE’s
Can we talk about Las Vegas, the lab for all new location-based entertainment? How about Dig This, with an admission price of almost $205? This is a wrecking lot with real earth-moving machines, caterpillar D5Ks, bulldozers, and mini excavators. With instructions being the first step, a neon yellow vest and a hard hat are provided with in-cab training. Then, you get turned loose to wreck real things like a car! This is about the most male-oriented attraction of those researched!
Adventure and Technology Driven Formats
Location based virtual reality is a whole world unto itself with a following that includes mostly young boys and men. But the industry is making a Location Based-Social interaction with games to engage the consumer in a community experience. Some of the themes include war, exploration, and adventure. Research shows that female consumers are loving some of these group games, those that don’t require you to keep a body count!
(Now maybe I’m old-fashioned, but explain this to me. A whole bunch of your friends put things over their eyes where they can’t see each other nor speak to each other, nor touch each other. These are group games that seem to me to be a totally weird way to connect. Just this consultant’s opinion, but I think we have lost our way in terms of entertainment value and the sense of connection that is required to be human!)
Still, one concept is killing it!
Sandbox VR is a location-based concept out of the UK and Ireland, with two locations in the UK (one in London, one in Birmingham), and 31in the United States. Of these, seven are in California, one in Chandler (AZ) and another in Mall of America (MN). The average spend is £37 in the UK and $55 in the United States. The UK locations earn between $1.9-$2.6 million, with an EBITDA of 35%. Capital expenditure on the equipment ranges from $500,000-$750,000. Buildout of the average 5,000-6,000 sqft location ranges from $1.5-$3.0 million, cost of which is borne by the lease and/or can be negotiated with the landlord. The games are story driven and can change constantly. Collaborations with Netflix and Paramount are planned to provide content.
At the writing of this blog, Sandbox VR launched a game based on Netflix’s Zack Snyder’s “Rebel Moon.” This experience has players “gear up with their fellow rebels for battle against the ruthless forces of the Motherworld’s military,” per the game’s description. “Inspired by the vision of legendary director Zack Snyder, players become members of the resistance and are transported to the planet of Daggus, descending through skyscrapers, streets, and a subterranean mine while they defeat enemy soldiers and spacecraft.”
With the development of operating economics reported, this is one of the first VR experiences to complete a “proof of concept” and earn economic industry-standard return.
Intellectual Properties
My favorite location-based entertainment center based on an IP is the Crayola Experience. This format is based on (what else) the iconic Crayola Brand, with the flagship attraction in Easton (PA), where the factory and headquarters are located. At 65,000 square feet, and with lots of colorful activities to do, the attraction boasts an adult/child entry fee of $26.99. Other locations include Chandler (AZ), Bloomington (MN), Orlando (FL), and Plano (TX). Activities offered are very creative such as the Activities Studio, The Cartoon Creator, and the Adventure Lab.
In 2022, the brand began a licensing concept. The growth strategy presented in 2022 includes extending the location-based entertainment footprint domestically and internationally. “We are now looking to develop licensing partnerships that bring new capital and expertise to accelerate our LBE expansion, particularly internationally where local market access and expertise are important,” said Victoria Lozano, Executive Vice President Digital Strategy, GM Attractions & Retail for Crayola.
The first Crayola Experience opened 25 years ago as The Crayola Factory in Easton (PA). Crayola saw an opportunity in LBE and in 2013 reimagined the downtown attraction as Crayola Experience. The company also owns and operates Crayola Experiences in Orlando (FL), at the Mall of America in Bloomington (MN), in Plano (TX), and in Chandler (AZ). With venues ranging from 20,000-60,000 square feet, Crayola Experience engages more than 1.5 million kids and adults annually in activities inspired by/and incorporating proprietary Crayola products and technologies.
Crayola is continuing to develop creative concepts that will help scale its events and exhibitions LBE business. Early this year, Crayola debuted IdeaWorks at Philadelphia’s Franklin Institute, a traveling exhibition encouraging families to explore innovation, invention and design thinking. The company also collaborated with OceanX, a global ocean exploration nonprofit, on a national takeover tour of the Crayola Experience venues that began this summer and runs through summer 2022.
Other notable concepts of IP-based LBE’s include the LEGO Discovery Centers, branded popup retail locations with characters such as Barbie and Peppa Pig. Today, studios and other IP owners are monetizing their brands by creating places where their properties can be owned or licensed out to the LBE owner. One great example is MONOPOLY LIFESIZED, created by Habro (self-explanatory), and Sony has opened a division to license its intellectual properties for developers.
Other retail pop-ups with a brand LBE include Hello Kitty pop-up cafes, the Rolling Stones pop-ups, and the Barbie branded sales areas at Selfridges in London.
Conclusion
Most of the examples presented must continue proof of concept and financial goals. We hope many will stand the test of time and blossom to enrich our industry!
What are your favorites? Let us know, we always love your input and experiences!
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Posted onMay 2, 2024|Comments Off on Museums Are Telling Stories That Need to be Told
We need a new word for “museum” which calls to mind blank white walls with paintings created by old white men depicting gorgeous scenes of beautiful ladies sitting waterside with flowers and picnics. Don’t get me wrong, these are pleasing images and I love looking at them. But it turns out their interest and subjects leave out about 90% of the population in the world.
The world has changed. The arts are a reflection of our society and our cultural mores. And baby, “the times they are a changin”. In response, museums are listening to the outcry. The modern audience is new, fresh, young, black, brown, yellow, LBGTQ, female, elder, street-wise, colorful! They want to hear about music, history, life-experience, and feeling they understand, both within (or without) the walls of our institutions.
While museums are normally thought of as staid and conservative, our most progressive institutions, those that have realized they must change or perish, are singing a new song. They are changing the location, experience, design, subject, and setting. They are ENGAGING new audiences.
Last week’s New York Times offered two sections on Museums. “More to see, do and feel -Museums are striving to expand the experiences of their visitors.” Rock on, I say. Some examples:
Christopher Wool decided that because galleries are so staid and expected, he would show his famous and very expensive sculptures in a raw industrial space within an office building in Manhattan. He says in an interview that “Imperfection is the goal. You get tension with imperfection and small amounts of chaos in these pieces, which is strengthened by how unfinished and raw the space is.”
All over the United States from San Francisco, Charleston, Oklahoma City, Little Rock, and Philadelphia, new museums are exploring outdoor spaces as an integral part of the experience. They are creating welcoming, collaborative spaces, where guests feel inspired and also engulfed by beauty. Landscaping and sculptures, street furniture, water, wind are melded together to form an alchemy of stories in these outdoor spaces, which are not gardens, by any stretch of the imagination.
In North Miami, the story of Haiti’s troubled history and a personal story of Manuel Mathleu, the exhibition’s creator, is told through paintings and ceramics, many of which depict violence and tumult.
At the Carnegie Museum of Art in Pittsburgh, industrial history is the subject of a huge exhibition, as part of the Forum Series. The exhibition, a collaboration with Maria Watt and The Poetry Collection utilizes glass, steel and blankets as the materials of her creations
In this tumultuous time of political, racial and ethnic polarization and violence, college protests have become a real campus issue. In the spirit of encouraging calm and empathetic behavior, ten college museums are collaborating on one simple activity voting. Sculptures at the University of Oregon in Eugene provide a deep dive into the false depiction of society in a Norman Rockwell painting.
Mental illness s the subject of a new exhibition at the Mississippi of Art through a display of “What Became of Dr. Smith, a 122-foot long painting of Noal Saterstrom exploring is great-grandfather’s 40-year travails in the Mississippi State Insane Hospital. Among other things, he explores his own battles with depression and depersonalization.
This fresh and sometimes disturbing new museum content and form expand human understanding and connection through art, in a time when the world is anything but peaceful. Perhaps this should be the mission of all museums, in hopes that someday soon, it will no longer be so desperately needed.
As I wrote these words, I discovered that these types of new and thoughtful attractions have always formed the basis of my practice. Our body of work includes museums of motion pictures, television arts and sciences, Native American stories, Negro League Baseball, young female empowerment and carousels, to name just a few. I just never thought about it in that way. JB Research Company has always worked on projects for the 90%!
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Yesterday was the experience of a lifetime. I was privileged to attend one of several days of pre-opening of the Academy Museum of Motion Pictures (AMMP).
But as they say in the movies, here is the backstory.
In 2005, I received a call from the museum coordinator, the only paid employee at the time, to provide a proposal for a feasibility study for a new museum. I had been involved with the feasibility/concept development for the Dolby (Academy) Theater at Hollywood and Highland several years before, so luckily I was on the radar.
When the Academy decided to finally move ahead with the century long museum planning, I got a call. “Can you help us out with the market research and financial feasibility testing of our museum? We don’t know what it is, where it is, or size, but still, can you help us? All we know is that we want it to be the boldest statement ever made on the history and effect of film!” It was the luckiest call of my life!
The director at the time was a brilliant woman, an entertainment business expert and a published fiction writer. She made the job that much more stimulating and creative! We worked with her on many teams hired (many then fired) to provide concept development, site location analysis, market research, and financial feasibility testing.
In all, we did 15 different analyses of multiple sites, configurations, sizes, square footages, models, retail, dining, and ancillary spaces within the museum. First question, “Should it be in Hollywood?” YES of course. You don’t need an expensive consultant to tell you that!
Please note, the museum is not located in Hollywood, because of about a thousand different reasons.
We first looked at the surrounding area of the Academy Library just north of Sunset and Vine, proximate to the Cinerama Dome Theater (closed for now, went out of business). In terms of the macro considerations, and what the world thinks they understand about Hollywood, that is one of the top 5 locations. And for the first five years of this process, that was the site we tested, studied, analyzed, and then amassed the real estate around the site to provide sufficient space for the new museum. This process was ongoing, before we even knew requisite square footage based on market capture, annual attendance, design day attendance and parking needed.
Remember, this is Southern California. No one is going anywhere without their car. It may be changing a bit now because of environmental concerns and traffic, but Angelenos are still in love with their vehicles.
That was the first of many sites studied because of careful planning, management by committee, and economic circumstances, (which included booms and busts, the Bernie Madoff catastrophe with lots of Hollywood money lost), and change in leadership. All in all, the museum cost over $500 million including all the planning efforts, development and hard/soft costs. Not the most expensive museum in the United States, but one of them.
Some of the planning sessions and meetings were lifechanging. I got into an argument with Jon Landis over projected attendance. I got tongue tied in a meeting with Tom Hanks.
One of the earliest concepts, which I believe I came up with in concert with the gentleman who was head of the Hollywood/Highland project, was the “Red Carpet “ or “Oscar” experience, a chance for everyday folks to experience what it is like to walk the red carpet and then win an Oscar. I came from a show business family. I was enamored with the process from the first ceremony I remember watching. It was always an event at my house, with canapés and a hush over the living room when the awards were presented! I always dreamed of going to the Academy Awards.
Posted onJuly 24, 2020|Comments Off on Nimble, Responsive, Proactive, Creative, Woke!
I am not in any way discounting the dangerous and dire straights we are in these days with the global pandemic and how it is affecting our health and economy. But it occurred to me when I was not doing anything this weekend (which happens a lot these days) that we are a nation of innovators, and that most of the tech innovations and discovers came from the U. S. If ever there was a time to “think outside the box” (why do we use that expression? Why don’t we think outside the parallelogram or the rhombus?) it is now.
Businesses are closing down by the hundreds. How to fix this? What can we do? And just as I was musing/obsessing about this, we drove by a billboard on the 101 in San Francisco for Salesforces’ new product “Work.com”. Full disclosure, my son works for Salesforce, so I am not completely objective, but my thought was “that’s brilliant” Work.com, is described as “providing all the latest thinking, models, advice and all new work.com solutions.” Some of the things you can do with the new system are quoted as follows:
Get products to support your return to the workplace
Find thought leadership content from renowned experts
Access all the latest COVID-19 data
Learn through inspiring stories
Extend with guidance from our ecosystem
Brilliant! A solution, instead of a worry or obsession. I began to look for other exciting new solutions to our current state and I found another. The whole movie industry has been turned on its head, with the closure of cinemas. New releases and summer blockbusters, so important to viewership at theaters, are being scheduled for first run on television private services. One proactive solution, the reemergence of drive-in theaters! Anyone over 30 remembers going to the drive in first with your parents when you were a kid, and then with your friends as you got older and were able to drive. I remember getting in the trunk at the drive-in gate, with some of my friends, so we didn’t have to pay as much. Morning Consult provides an amazing array of data on topics important to all of us. Their entertainment sector report this morning presented data from another completely nimble solution, the return of the drive-in movie theater.
This gorgeous picture is an aerial drone view of a temporary drive-in movie theater at the Rose Bowl stadium, known for its spectacular Fourth of July fireworks which were canceled this year to reduce large public gatherings due to COVID-19 concerns. The latest polling of 2000 adults over 18 in the United States shows the following fascinating results:
Results indicate that the majority of Americans (55%) are interested in returning to the theater in a safe fashion. The bravest is Gen Z, (aged 10 to 25 years of age) including 66 percent of Gen Z adults. Adding to the potential draw of the drive-in is that audiences are 12 percentage points more likely to be comfortable with watching a film outdoors than inside, according to separate Morning Consult polling.
Drive-in or picnic style movies are simple to set-up and earn revenue on food and beverage. Some drive-ins have even tried offering upscale sandwiches, picnic baskets, small-batch microbrewery beers, and designer wine brands curated by a sommelier.
For commercial real estate owners, business is not good right now. But what if we thought new: Let’s host art shows, turn our parking lots into drive-ins (Walmart is doing this!), offer our locations for COVID testing! Let’s have a “can do” attitude and turn around our dire situation right now! Maybe we can even give our clients and customers something to smile about!
Let me know what you’re doing creatively in your spare time. We always love to hear from you and right now, nothing is more important than sharing ideas and innovations!
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Posted onMay 11, 2020|Comments Off on Musings From a Bored Feasibility Consultant
My practice lives and dies with innovation and optimism. With most clients and friends scared to death about what this crisis will bring when it is over, or whether it will ever be over, my normally optimistic client base is taking a nap. They are shut down and not practicing good old American ingenuity.
I have lived through many downturns and booms, a litany of business cycles. My space in the entertainment development world falls between the idea and execution. Is this idea crazy? Does it have legs? Can I afford to develop it? Where will I get development funds? Am I nuts to be thinking this right now? These are some of the questions my practice is hired to consider.
In all cases, I provide one of the following answers:
Brilliant idea. Let’s do some preliminary testing.
Hmmmm, I think that’s been done before, but maybe we can improve on the existing model.
I like it, but I really think the idea needs more development on your part, or if you like, we can help you move it along.
That is the dumbest idea I have ever heard. Save your money, don’t hire me, or if you’ve already hired me, you should fire me!
A couple examples of the ill-though-out ideas:
A large INDOOR entertainment center on the beachfront of a major East coast resort. The branding strategy: It’s a beautiful beach day, let’s all head inside!
A 100,000 square foot museum at a major Indian casino in the U.S. with the theme “The slaughter of the tribe by the White man.” (Footnote: The gamblers at the resort are 95% White.)
A major entertainment company’s decision to disallow wine at a park in France.
The decision to build two competing 20,000-seat amphitheaters across the highway from each other in a major Orange Co. California city.
But happily, more of my practice involves ideas that have you smacking your forehead and saying, “Why didn’t I think of that?”! Some examples:
American Girl Place (built and wildly successful),
Academy of Motion Pictures Museum (to open year’s end 2020),
Hollywood and Highland (the initial plan didn’t follow our advice);
Sony Metreon (also, didn’t follow our advice);
A new hospitality/retail/dining/entertainment/ development in Mecca, the Hajj (they didn’t hire us: I wouldn’t have either!);
A mixed-use sports and entertainment-infused $1.0 billion development in downtown Edmonton (The Oilers got 60% of their Phase One development funds from our numbers, the first time ever a sports venue received public funding in the province):
Maybe soon we will have a few new brilliant ideas to report to you. Until that time, stay safe, well, healthy and hopefully, not too bored!
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Posted onJanuary 19, 2017|Comments Off on ROGERS PLACE – EDMONTON, ALBERTA CA
The Edmonton Oilers are in the process of creating a two billion dollar (C) arena-led mixed-use entertainment project in downtown Edmonton, on a 20-acre site where an old casino once stood. We were fortunate enough to conduct all the market and financial feasibility studies for the project, which include a practice arena, retail/dining/entertainment, several hotels, office, casino, convention center, meeting spaces, housing, university, and cultural uses. In September 2016, the first phase of the project opened, presenting the arena and a glass-enclosed winter garden plaza.
One of the most contentious issues was who would pay for which part of the project since Alberta (and most of Canada) had no precedent for municipal participation in funding an expensive, state-of-the-art, mixed-use, sports-entertainment district. Negotiation on these points went on from 2009 to 2013, when the City and the Katz organization came to a mutually agreed upon solution.
Besides testing the market and financial feasibility, we also completed a warranted investment analysis that quantified the shortfall in revenue to attain an industry-standard rate of return on the investment. The exercise was extremely complicated with the many uses being tested, the multiple ownership formats suggested, the non-profit elements blended together with the commercial elements, and the fact that there were no Tax Increment Financing instruments in place in the province.
Fast forward seven years to 2016, and the new “Rogers Place” opened in September 2016 to great fanfare carrying a total construction cost of C$604,500,000. The specifics of the deal are precedent-setting in terms of public support for a private sports enterprise. Sources of funds are as follows:
City-Issued Debt: C$541,810,000 (90%)
Government Funds (Non-City): C$39,000,000 ( 6%)
Oilers Contribution: C$23,690,000 (4%)
Phase One terms are summarized as follows:
Owner: City of Edmonton
Lessee: Edmonton Oilers
Operator: Edmonton Oilers
Lease Term: 35 years (with three 10-year lease options)
Oilers – Manage arena operations, receive all arena revenues & pay for arena operations/maintenance
Oilers operating revenues include naming rights and parking revenues
The Oilers received the right to levy a Ticket Surcharge (with a portion going towards debt service and capital reserve). Other Key Terms are as follows:
Team will pay annual lease payment of approximately C$6.7 Million
Approximately C$6.1 Million per year in Ticket Surcharge fees will go towards debt service
City will pay the Oilers C$2 Million annually for 10 years to help market/promote the City
Total project also includes City amenities (winter garden, community ice rink, etc.)
City will have up to 28 days a year of free arena access for community events
The Annual Debt Service Payment of almost $32 million will be generated from the following sources:
City – Downtown Tax Increment: C$13,122,554
City – Other Public Sources: C$5,275,399
Oilers Lease Payments: C$6,697,157
Ticket Surcharge Revenue: C$6,074,629
With the attendance and revenue generated since opening, these targets are very likely to be reached.
Voila, a new model for building and financing a $600 million arena is born!
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If you are like most Americans, you feel better this year, but there is still a nagging doubt in the back of your mind, “is this as good as it gets?” True, the economy has picked up, spending is up, the recession is no more, but we are still feeling the pinch. How shall we shop for Christmas this year?
We did some digging to find out how much has changed and how much has stayed the same.
The following figures provide some context for the economic growth since before the recession until after, with per capita GDP not yet recovered to pre-2008 levels:
The gross domestic product increased from $13.3 trillion in 2007 to $15.1 trillion in 2012.
GAFO retail sales seem to be slowly recovering from the recession, and consumers are spending again. Consumer confidence is back up to about 73 percent of what it was in 2006, but spending at shopping centers is ACTUALLY DOWN in real constant dollars (adjusted for inflation):
GAFO retail sales in the nation increased from $968 billion in 2002 to $1,032 billion in 2010, for a compound average growth rate of 1.1 percent. However, from 2007 to 2010, compound average growth was -.03 percent nationally.
As everyone knows, brick-and-mortar stores are in competition with internet retailers for market share. With the ease of shopping online in the comfort of your home or office, and the ability to compare sale prices amongst retailers, the brick-and-mortar stores have to come up with creative ways to appeal to the consumer as the better way to shop drawing them to their retail store locations. Some retailers are offering free shipping, extended hours along with other special promotional items available only in stores.
Electronic shopping and mail order retailers suffered only a mild set back during the recession and bounded back with sales for the twelve months through February 2012 accounting for $308 billion. The overall sales market rose 30 percent since the peak in 2008 as reported in an article, “Retail Sales Recover, Mostly, From Recession”, written in The New York Times, by Floyd Norris.
One of the biggest impacts of the recession on the retail market is the change in the behavior of shoppers. People are bargain shopping and looking for the biggest bang for their buck. They are more interested in products or items that are reliable and have lasting value rather than purchasing the latest gadgets.
Consumers are looking to save money where possible, which has increased on-line shopping as well as sales at discount and dollar stores such as Wal-Mart, 99 Cent stores and Target. Not only are shoppers finding better bargains, they are saving time and money especially when factoring savings of not having to drive with high gas prices.
The recession has also caused a spike in sales at thrift shops/resale stores, as the number of resale shops opened within the last year increased approximately seven percent.
According to comScore.Inc, holiday retail spending over the four-day Thanksgiving weekend was estimated at $59.1 billion dollars nationally, up nearly 13 percent over last year. Black Friday online sales exceeded $1 billion, rising 26 percent to $1.04 billion.
How do you feel this year? Let us know if your pocketbook feels lighter or if you are back to normal. Have we stabilized at the new normal? We are anxious to hear from you!
Many of my readers do not know that a large part of my practice is devoted to consulting to museums, performing arts centers and other cultural and nonprofit venues. There is sometimes a disconnect between developers and nonprofits. After all, if you are in the business of making money, why would you include a non-money making business in your project?
I once had a client who hired me to do a museum business plan for his very successful consumer product. When the report was finished and initial schematics presented, he asked, “Why should we build a museum when it won’t return 20% on our investment?”
The arts make good business. They lead many educated and affluent consumers to our projects and they contribute mightily to the programming and animation of public spaces. Nonprofits are good citizens. In a world where developers may be seen as unpopular, including nonprofit spaces in a commercial project is a strong inducement to securing needed entitlements. Still, many commercial developers do not understand that nonprofits face the same planning and marketing issues as commercial entities. Until about 50 years ago, nonprofits figured they didn’t have to do business plans because they were just going to lose money anyway. So why have a plan?
Nonprofits must have a well-articulated carefully planned strategy for capital, operating and future funding or they will not receive ANY funding in the first place – not from friends, government, dispassionate individuals nor foundations! Nonprofits are businesses, just like any other. And the last thing you want as a developer is to have a failing tenant in your center.
So here are 10 steps to look for when evaluating a proposal from a nonprofit. Also, for nonprofits, these are the steps you should take before presenting to a developer or planning an expansion or new facility:
Have a realistic and defensible business plan.
Determine the annual operating deficit.
Project attendance and per capita revenue/expense within normal ranges.
Study national comparable museums, including your favorite models. Know attendance, operating budget, per capitas, other important metrics.
Know your market, including the all-important market area demographics and psychographics. There are now reputable services that provide these trade area metrics for very little money.
Study 990s. These are your best friends. They are the income tax returns that nonprofits must file and they provide you with all financial information for your competitors and comparables. They are public record!
Take time to study comparables in the local market. Most important for these comparable studies are annual attendance, budget, and resident trade areas.
Make sure to include changing gallery space in your design. Return visitation is key to your nonprofit and residents will comprise the majority of your attendance.
Interview executives at the models you envy. They normally will assist if you are outside their market and they can be a wealth of knowledge.
Finally, get professional help because you are not objective! A good consultant can save you thousands in mistakes!
Posted onDecember 7, 2009|Comments Off on 10 Ways to Avoid Chapter 11 in the Attractions Business
A whole long while ago, I wrote an article with my mentor and favorite octogenarian, Buzz Price, about the many failures of certain themed restaurants and attractions. I looked it over and was very surprised to see that it still has relevance today for development of new attractions, something that will be happening soon enough. Thus, here are 10 pitfalls to avoid when planning an attraction.
When planning, balance revenue generation in major categories: attractions, food service and merchandise.
Spend time computing capacity. Indoor attractions are hard to justify because of constrained capacity.
Attractions are driven by opportune locations, preferably in the path of major attendance generators. Stadium crowds at sporting events may not provide the required flow.
High front-end R&D costs incurred in anticipation of a fast rollout are a plague.
Study the market and understand the nuances of its preferences. Pick your niches carefully and stick to them throughout planning and operation. Don’t try to change consumer behavior. The devil is in the details.
Keeps your eyes wide open and try to be objective about your pet project. You may think you have invented the next internet, but your market may not. On the other hand, be passionate about the project and its greatest cheerleader. Keep a balance between your passion and market-driven objectivity.
Narrowly concepted attractions won’t find a broad-based market. Along those lines, clear and concise branding is key. Make sure your brand measure is clear to your customer.
Assure that you have a critical mass of attractions to generate visitor interest for the required length of stay. Create enough capacity for your maximum design day on-site crowd.
Use realistic assumptions when looking to the future. Respect comparative and competitive performance. If you do better than projected, you can fix the problem (in most, but not all cases).
The attraction must start up fully formed. Phase I needs to be a complete show. Undercapitalized projects have a high failure rate. Create realistic models for development cost, revenue and expense.
Comments Off on 10 Ways to Avoid Chapter 11 in the Attractions Business
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