Earnings Call
Marcus Corp (MCS)
Earnings Call Transcript - MCS Q2 2024
Operator, 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. 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, CFO
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 during 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 that 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 limitations. 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 moved 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 large 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 a 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 leased 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 repurchased 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, regarding 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, slightly down, 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 film's 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 improved 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 matinee promotion for seniors and children and changes to our value Tuesday promotion that reintroduced a free complimentary size popcorn for MMR loyalty members, resulting in higher attendance on Tuesdays at a lower ticket price 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 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 was for maintenance projects in both businesses. Our capital investments and renovation projects have progressed as planned, and we continue to expect capital expenditures for fiscal 2024 of $60 million to $75 million, recognizing that 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 affected 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 philosophy 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, CEO
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. Hotels 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 from 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 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 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 three 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 three 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 compared to 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 that 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 theaters, 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. The 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, which 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 admission prices on Tuesday. In May, we reintroduced a free complimentary size popcorn for all MMR members, replacing the prior Tuesday promotion of a 20% discount on all food and non-alcoholic drinks for MMR members. These changes are designed to drive attendance and appeal to value-oriented customers, ensuring 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 and 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 2 opened to over $100 million in the second quarter this year compared to three films within opening over $100 million in the second quarter last year, with 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 screen. Inside Out 2 delivered the second highest grossing opening weekend animated film of all time and has gone on to become the highest grossing 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 six-week run. The momentum continued into July with the releases of Despicable Me 4, Twisters, and Deadpool & Wolverine, with last weekend's highest-rated 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, Joker: Folie à 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 theater business. Finally, I'd like to briefly talk about growth in features. While over the last few years, we have closed several underperforming theater 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 theater 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 the theater, in this case, an attractive lifestyle center in a good market that we know. We reopened a theater as the Marcus West End Cinema in early July, bringing all of our great offerings and programs to customers on day one, including our Magical Movie Rewards loyalty program, Marcus Passport, Value Tuesday, and everyday matinee. We look forward to making further improvements to the theater 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. I would be remiss if I didn't congratulate Chad for 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 in 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.
Operator, Operator
Thank you. We'll go first to James Goss with Barrington Research. Please go ahead, your line is open.
Jim Goss, Analyst
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 to the 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, CEO
It's a complex situation regarding the RNC. It did push some business into the summer, with the Northwestern Mutual Annual conference being a notable example of that shift. While there may have been some businesses displaced, which could lead to an increase in interest for the area, there were also some challenges in the weeks leading up to the event due to extensive setup requirements that temporarily took the convention center out of operation. Overall, the outcome has been positive, and we're happy with how everything has developed. As for Saint Kate, I would like to see more locations, but we need to ensure this one is established well first. It's difficult to gauge the impact of a unique event like the RNC, but we believe that the long-term benefits are continuing to grow, and we're optimistic about its future progress. We're considering the points you raised.
Jim Goss, Analyst
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, CEO
I believe that ultimately it comes down to the number of films released. However, it needs to be a balanced mix. If you release 110 films but none are major blockbusters, then that doesn’t constitute a balanced mix. As we reflect on the beginning of the year, the number of films released was higher, but they weren’t major hits. It's important to clarify what constitutes a major hit. If you're only releasing blockbusters, you're not filling your lineup sufficiently. Conversely, if you don't include major hits, then the overall appeal may diminish. As long as there is a reasonable ratio of blockbusters to smaller films and a diverse array of genres, I believe the box office can remain quite stable. There is still demand for movie attendance. Just look at how things have shifted recently; not long ago, family films were struggling, yet now we have the highest-grossing animated film ever. Although there were doubts about the Marvel franchise, we see a successful return with Deadpool. It’s important to keep experimenting to reinvigorate audiences. Currently, comedy seems to be struggling, with few people attending those films, yet Deadpool, which is comedic, drew in crowds. There’s something special about sharing laughter in a theater with others rather than at home alone. We need to foster that communal experience again and encourage audiences to return to theaters regularly.
Jim Goss, Analyst
Okay. One last one. Alternative content gained a little more traction when there's less content available. 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? Is it confined to certain days of the week or anything else of that nature?
Greg Marcus, CEO
I think that alternative content will continue to be important to what we do. I've always said I don't think it's going to become the biggest part of our business, but those last customers are very profitable. We'll need to be strategic and figure that out. The key is for us to know the audiences, to know who they are, and to effectively 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, which is what a national run is of something over a month. You can't throw as much marketing into it. So you have to be very efficient. Our loyalty program, which continues to grow, and not just ours, needs all the industries. I think all industries' loyalty programs continue to grow as we get better at marketing and finding those audiences. For example, our Indian film Bollywood content is growing. Our St. Louis market has been very strong; when we bought Wehrenberg, they had invested the time and built that audience. We're growing that. Now it's not huge dollar amounts, but over time, it grows and it can be meaningful, whether it's that or concert films or whatever we might be doing. It's something we have to pay attention to because those last dollars are the most profitable.
Jim Goss, Analyst
Okay. Understood. Thanks for your thoughts. Appreciate it.
Operator, Operator
Next question today comes from Mike Hickey with The Benchmark Company. Please go ahead. Your line is open.
Mike Hickey, Analyst
Hi, Greg, Chad. Good morning, guys, and great job, congratulations on your financing transaction. It's awesome to see that converting. 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 in 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 leisure. So I'm sort of curious about the update there and then your confidence for growth.
Chad Paris, CFO
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. We were able to do that this quarter. 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, Analyst
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, CEO
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 you're thinking in the business and keep your assets up. It’s beautiful, and the F&B market is still competitive in the banquets market. People need 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, CFO
We see strong bookings on the group side of the business, especially with our renovated ballrooms. This trend is noticeable not only at The Pfister but also at Grand Geneva. Event planners appreciate fresh spaces, and after making such investments, we start to attract business away from alternative venues. This relates to our group bookings. Additionally, maintenance capital is important, particularly for The Pfister, as it helps us preserve our premium market position and maintain asset quality. We're being proactive in maintaining our leadership position in the market.
Mike Hickey, Analyst
Thank you. I guess, topic two with the theater, 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, CFO
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. This is how the company was built originally. And we're about to be 90 years old; my grandfather built the company by finding landlords that 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. That's the kind of deals we would like to do. We're out talking to people, as you can see because this deal got done. 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, Analyst
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 theater space as sort of more important on the list of capital allocation opportunities?
Chad Paris, CFO
Mike, the M&A model in the theater business has fundamentally changed since the pandemic. Acquiring a circuit of theaters is generally challenging because many locations are not generating positive cash flow. You need to carefully consider paying cash for a circuit and evaluate each location individually. The opportunities we're seeing are more focused on individual deals. It requires significant effort to manage these individual locations, but that's where the financial returns will be worthwhile. We're looking at smaller deals rather than acquiring multiple locations at once. This is the current situation until we reach a stabilization point that will clarify appropriate rent levels in lease agreements.
Mike Hickey, Analyst
Good. I guess, last question, gentlemen. Staying on the theater 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 theater? And then I guess the follow-on would be now that the slate is looking great for the foreseeable future. Sort of like the build-out of that promotional side could be counterproductive versus getting people in prime times with full ticket prices.
Greg Marcus, CEO
No. Look, there's a few things that are going on. I think the dynamics are such that let’s break it down into a couple of different parts. One of the ideas 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 without trying to test it. Our test and sort of manage will ultimately happen. The idea of moving to free popcorn feels more powerful than a percentage off. 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. It’s still $6 and that’s an incredible value for that. When I mention Tuesdays, I want to address our concern about potentially counterproductive strategies. The answer is that we don't believe they are counterproductive because we focus on offering the right price to the right customer at the right time, rather than applying a blanket discount. For example, we offer our $7 matinee for seniors and kids every day of the week until 4 o'clock. While this may slightly displace some business, overall, our goal is to make it affordable for families, especially as consumer spending appears to be tightening. We need to provide affordable entertainment in light of the vast amount of content offered by studios through streaming, which consumers often perceive as nearly free. This environment does affect us, and studios understand that too. It is important for us to remain competitive so that families choose to leave their homes and spend time in theaters, which ultimately leads to better financial outcomes for all involved. We're striving to ensure that people feel invested in the content. Going to a theater is an active decision; unlike watching from home where you can stop and start a film with minimal commitment, attending a movie involves a tangible investment of your time. This investment enhances the viewing experience, leading to stronger word-of-mouth and interest in future releases. To make this work, we need to find the right pricing strategy. I've mentioned this before and believe that in twenty years, kids won’t recall watching their first movie at home on a TV. Instead, many will remember going to the theater, holding a parent's hand, enjoying popcorn, and feeling like the characters were real. Those experiences create lasting memories that excite children about going to theme parks and engaging with characters outside of the living room. While watching at home is not negative, it simply lacks the same impact. Apologies if that was more information than you were seeking, but you asked.
Operator, Operator
Thank you. And our next question comes from Eric Wold with B. Riley Securities. Your line is open.
Eric Wold, Analyst
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. 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, CEO
We recently announced that it will be available in the summer, but we are open to the possibility of offering it again in a more structured way. The most noteworthy aspect is actually its appearance. The pricing we have set, whether it's $6 or $7 depending on participation in the car rewards program, seems to have less impact compared to the free popcorn offer, which is quite interesting. Moreover, at $5 for a decade, it’s hard to argue against a price freeze for that long, especially given the current inflationary climate. This makes it easy to understand. It still stands at $6 and offers tremendous value.
Eric Wold, Analyst
Got it. Regarding the acquisition question about the theater space, how far beyond the mid opportunity do you see this extending? What are your thoughts on the advantages of clustering in the area? You've mentioned this before. Clearly, the acquisition landscape has changed significantly; it’s not just about considering one or two theaters. So, if there’s a single theater located at a distance, does that still make sense? Or do you really need to focus on your customer base and loyalty? Would it be better to pursue clustering, or can a single location be viable?
Greg Marcus, CEO
You can definitely make it work with a single theater. While it’s not as effective as having multiple locations, which allows for greater visibility, things have changed from the past when having several ads in newspapers made you stand out more. Now, attracting people to your website changes that dynamic. However, I still believe there are advantages to having several theaters in the same market. You can succeed with one, but increased exposure and recognition can significantly benefit your brand.
Chad Paris, CFO
The only thing I'd add is that while the majority of our locations that significantly influence customer preferences are in the Midwest, we do have individual locations in specific markets, including as far west as Aurora, Colorado, and as far east as Philadelphia, where we also have a few locations. We've successfully operated single locations in the past and can certainly do so again, especially if it's a great theater.
Eric Wold, Analyst
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, CFO
Yes, absolutely.
Eric Wold, Analyst
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, CEO
Well, it is a little of both. I mean, look, it's the business coming back; it's the convention center getting stronger. There are 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 are excited about it. 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, CFO
Yes, I would say that for 2025, it's a combination of factors. They are starting to secure some events scheduled as far out as 2027, which I believe they would agree would not have been possible without the expanded convention center. However, next year is particularly important, as Greg mentioned, because they want event planners to experience it firsthand. It's really a mix of both.
Operator, 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, CFO
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, Operator
This completes today's call. Thank you for joining. You may now disconnect your lines.