- August 13, 2009
No Silverspot Cinema movie theater is exactly the same.
That, in essence, is the secret to the Venezuelan chain's success. The family owned company has always built its theaters to suit the tastes of its South American clientele, which can vary widely from one neighborhood to another according to socio-economic status.
So it's no surprise that the 65-year-old chain's first U.S. movie theater in Naples is unlike the typical movie experience in this country. This is no me-too multiplex.
For starters, there are no long lines for the ticket kiosk. In its place is a row of nine computer screens that let patrons buy a ticket, select a specific seat and pay with a credit card. Because guests reserve a seat, there's no rush to hurry into one of 11 theaters to claim the best spot. Instead, patrons can linger in the lobby and buy sushi at the concession stand, relax in leather chairs in the lounge or have a casual meal in theater's 65-seat white-tablecloth restaurant.
The theater's upscale touches are so Naples and that's exactly how cousins and co-chief executive officers Gonzalo Ulivi, 43, and Ilio Ulivi, 40, planned it. The demographics of Naples skew to an older, sophisticated and wealthy clientele. The Ulivis are betting patrons will pay 50% more for a ticket to enjoy the movies in a more upscale environment.
“In the U.S., most of the big chains are cookie cutter,” says Dougall McCorkle, senior vice president of commercial real estate with The Lutgert Companies. “They don't do the VIP kind of theaters.”
McCorkle was introduced to the Ulivis five years ago through a Miami-based commercial real estate broker when he was searching for a movie theater to anchor Mercato, a mixed-used development Lutgert was developing at U.S. 41 and Vanderbilt Beach Road in Naples.
Rather than bet on one of the struggling U.S. chains, McCorkle flew to Venezuela to tour the Silverspot theaters and see their operation for himself. In the retail world in recent years, McCorkle says many of the hottest concepts have come from overseas.
“The good thing about this operation is they take some of the objections of going to the movies in the 40-plus age group,” McCorkle says.
Screen the audience
In the theaters it operates in Venezuela, Argentina and Chile, Silverspot tailors the facilities according to a neighborhood's demographics.
For example, theaters are larger in less affluent areas because the company can't charge as much as it does in wealthier neighborhoods. In neighborhoods with lower incomes, Silverspot theaters may have 2,500 seats compared with 900 more-luxurious seats in upscale areas.
Theaters in more affluent areas have fancier restrooms, more space between rows, fancier concessions and plusher leather seats. They also show different kinds of films. Action, horror and comedies play better in less affluent areas; romantic, drama and foreign films do better in more upscale neighborhoods.
“They are equally profitable,” says Gonzalo Ulivi, who spent a few years in his teens at Eaglebrook boarding school in Massachusetts. He declines to discuss the company's finances, but the chain has been in business for 65 years. Gonzalo and Ilio Ulivi are the third generation to run the business.
Eliminate the hassles
The Ulivis took the same approach when they analyzed the Naples market nearly five years ago. They looked at the population, the number of movie tickets sold, the competition and the seasonal nature of residents.
Understanding who their clients are helped the Ulivis come up with ways to take objections out of the experience, something they hope will lead to higher sales in Naples. “How can we eliminate the hassles of going to the movies?” they asked themselves.
Standing in line was one of the greatest irritants, they've found. “Our objective was to eliminate lines completely,” Ulivi says.
The row of nine computer screens with credit-card scanners outside the lobby of the theater ensures a speedy ticket-buying process. Reservations for a specific seat in each theater means there's no need to rush to get the best spot, leaving more opportunity to buy concessions. Every plush leather seat in each of the 100-seat theaters in Naples has a large, visible number on it.
The Ulivis also strive to keep the lines short at the concession stand by having six points of sale. That's one point of sale in the concession stand for every 183 seats, a much higher ratio than the one-to-400 seats in other theaters.
Concessions are an important part of the business. Although 30% of a theater's revenues come from the concessions, the profit margins there are higher.
To eliminate another trip to a restaurant, the Ulivis built their own 65-seat restaurant inside the lobby of the theater. Gonzalo Ulivi, who started on the concession side of the business, says the restaurant is designed to be profitable as a stand-alone business. It also saves people who combine dinner with a movie a second car trip.
Even the concession stand offers food, such as sandwich wraps and sushi. Popcorn and soda will remain the most popular concession items, Ulivi says. “We don't want to get super exotic,” he says.
The Ulivis are betting people will pay $15 for an adult ticket, more than 50% higher than the average $9.50 people pay at most theaters. “What they get is a good experience,” Ulivi says. And maybe fewer loitering teenagers, too.
There's a lot riding on the project. Silverspot invested $6 million in the Naples theater and Gonzalo Ulivi anticipates it will break even in about five years.
Meanwhile, it has plans for another theater in Miami, though those are not yet firm. There is no specific timetable to open more theaters. “It's going to be more opportunity driven,” Ulivi says. “We have to find the right location and the right demographic,” says Ulivi, who would prefer to build more VIP-style theaters like the one in Naples along the East Coast of the U.S.
Silverspot attracted an undisclosed sum of private equity from a U.S. investment-banking firm in 1998, which helped it grow into Argentina and Chile. Ulivi says future growth in the U.S. would likely require another round of funding, and would fit with the company's plan to diversify its operations geographically.
But clearly, with development and financing widely on hold during this recession, Ulivi seems in no rush to expand quickly. When he signed the deal with Mercato, it was more than four years ago and a different era. Still, the economy will rebound and Ulivi plans to be there when it does. “You need to start mapping and finding your niche,” he says.