image image

Hong Kong economy

Cinema operator UA wants to ride on upbeat consumer sentiment to open more screens

The cinema operator is opening screens in three residential areas, and has more locations in the pipeline

PUBLISHED : Wednesday, 27 December, 2017, 10:03am
UPDATED : Wednesday, 27 December, 2017, 10:03am

When UA Cinemas announced last month its plan to open three more theatres across Hong Kong next year, many in the industry raised their eyebrows.

But to its managing director Ivan Wong Chi-fai, UA – which already has eight cinemas – was responding to the recent uptick in local consumer spending and Hongkongers’ continued penchant for going out.

UA will open screens in residential areas of Sham Shui Po, Tai Po and Tsing Yi. The first two locations have not had a cinema in at least two decades while the current one in Tsing Yi will close down and be replaced by UA’s screens.

It’s many happy returns of the festive season for Hong Kong retailers, but can the good times last?

Wong acknowledged that the city’s box office takings across all cinemas had weakened – decreasing by 4.2 per cent for the first half of this year compared with the same period last year.

Also, the rise of online streaming giants such as Netflix gave film buffs a cheaper option to be entertained, from the comfort of their own home.

But Hongkongers are still going to the movies, Wong maintained, adding that while box office takings were shaky recently, the overall industry had grown.

“Figures don’t lie. If you look further back at 2010, box office earnings that year only stood at HK$1.34 billion. It has since been steadily on the rise, and last year it reached HK$1.95 billion,” he said.

Cinemas shine bright in city’s fast-changing property leasing market

In line with other retailers who are working on new and varied experiences to woo customers, Wong said he intended to have surprise meet-and-greet sessions with the casts of movies screened at UA cinemas, in addition to upgraded seats, better audio and visual effects and customised snack menus.

Yet like the rest of the sector, Wong remained concerned about rental costs, which despite a recent slight downward correction, were one of the highest in the world.

Mong Kok’s Cinema City Langham Place, the top-grossing cinema in town, last year lost HK$25.6 million from its operations.

Wong explained that cinemas usually entered into a long contract of between eight and 12 years with landlords, who were usually mall operators. This was a huge upfront commitment, and sometimes inexperienced cinema operators would end up offering to pay rates that turned out to be unprofitable.

New technologies redefine the shopping experience

Wong would not reveal how much UA paid for the new lease of its Megabox cinema in Kowloon Bay, only saying it went up by a “substantial increment” compared with its last contract in 2007.

While retail shops could downsize or even move to less expensive spots in malls, cinemas did not have such an option. Smaller screens would drive away customers, Wong said.

“There are [also added considerations such as the] many structural requirements to house a cinema – is the ceiling high enough? Can the fire safety regulations be met? These are also a headache for us,” he added.

Why cinemas in large areas of China are virtually empty

Even so, Wong said he believed the outlook was buoyant for cinema operators. Mall owners were also keen on having cinemas as anchor tenants, as they realised movie-goers could be a lucrative source of foot traffic.

For UA, this meant that it would set up screens at “another three to five” locations in the near future, though Wong refused to say where these would be.