Resort Area Movie Houses Are Their Ticket

Brad Krevoy thinks your favorite vacation spot is missing something: a bustling new mega-plex.

Krevoy, a Santa Monica-based film producer perhaps best known for “Dumb and Dumber,” is one of the partners behind Resort Theaters of America, a new circuit that aims to corner the movie market in resort areas.

Formed last year, the company has already shelled out more than $40 million for 90 screens--some still being built--in Aspen, Colo., and the Palm Springs area. And executives hope to invade other regions and bring the total to 325 screens over the next five years, partly through acquisitions of existing chains.

The firm last month purchased for $20 million eight desert sites belonging to Los Angeles-based Metropolitan Theatres, including the Palm Springs Courtyard 10 and a 16-screen multiplex under construction in Rancho Mirage. It’s spending the same amount to refurbish the theaters with stadium-style seating and other amenities. And its Isis Theatre--the oldest movie house in Aspen--is undergoing a $5-million renovation from a single screen to a five-plex.

Resort Theaters, which is privately held, raised the money partly by selling a stake in the business to Crown Capital Group, a New York- based investment banking firm. Other backers include Swedish media giant Svensk Filmindustri and Chicago-based Richland Gordon & Co.

Why resorts? Krevoy explains that he travels a lot and noticed that theaters in such places were often shabby and obsolete.

“Generally, in these resort areas, you’re in a dungeon with bad sound, uncomfortable seats, bad sight lines,” he says. “The areas I like to go to didn’t have the proper kinds of screens.”

Ron Leslie, a former executive with exhibition giant AMC Entertainment Inc. and one of Krevoy’s partners, points out that resort communities have frequently been ignored by the large theater circuits, which lately have spent millions building mega-plexes in metropolitan areas.

At the moment, the company is operating somewhat on the fly. Krevoy, 41, whose title is chairman, works out of his movie production office in Santa Monica. Leslie, president and chief executive, lives and works in Kansas. A third partner, Richard Lawrence, runs a busy Santa Monica real estate law practice. The three were interviewed at the offices of Metropolitan, whose staff will assist them with film buying and other operations. Bruce and David Corwin, the father-and-son team who run Metropolitan, will take a stake of less than 10% in the enterprise.

There are skeptics of the business strategy in the film exhibition industry.

For starters, Krevoy and company won’t exactly enjoy a free ride. Take Aspen, a town of about 8,000 permanent residents. Carmike Cinemas, one of the largest exhibitors in the U.S., already runs a three-plex there that shows first-run movies.

“You have to be prepared not only to upgrade and build; you have to be willing to protect your business,” warns Bob Cheren, senior vice president of domestic distribution at Fox Searchlight Pictures, which has released such films as “The Full Monty” and “20 Dates.”

Nor is it clear that resort-goers are clamoring for more movies. While travelers spent a total of $408 billion in 1997--up 6.5% from the previous year--only 16% of them saw a movie while on a trip, according to a survey by the Travel Industry Assn. of America. Eating in restaurants (48%), shopping (45%) and visiting museums (26%) were far more popular ways of emptying the family wallet.

And many exhibitors are suffering now after building a huge number of mega-plexes recently. In 1998 there were 34,186 screens in the U.S., nearly twice as many as in 1980, according to the Motion Picture Assn. of America. While attendance has been rising--to 1.48 billion admissions last year, up 6.7% from a year earlier--there simply aren’t enough moviegoers to put in all those seats.

“It’s a simple case of oversupply,” says Arthur Rockwell, a Los Angeles-based entertainment analyst, adding that Resort Theaters could face “a tough go.” Larger circuits also enjoy a competitive advantage because of economies of scale and longtime relationships with the major studios, he says.

But Resort Theaters’ executives are confident of their strategy.

Conceding that overbuilding is a problem, Leslie says, “We’re going to try to stay away from that with these limited markets we’re in.”

The partners are also counting on high real estate prices and development-wary city councils to keep competitors at bay.

“Development approvals [in resort areas] are much harder to obtain” than in many large cities, Lawrence points out.

Nor are they overly concerned about the seasonality of the resort business. The peak times at vacation spots “mirror the patterns of distribution in the film exhibition business, in that the bigger films come out at Christmas and summer, when the resorts are stronger,” Krevoy says.

Krevoy’s definition of “resort” may be elastic. The company recently made an unsuccessful bid for Mann Theaters, a chain that operates cinemas in many non-resort locales, including Los Angeles.

The venture was born of old business ties. Leslie and Peter Fornstam, another partner who is affiliated with Svensk, ran First International Theaters, a 116-screen circuit they sold to Carmike in 1997. Krevoy brought aboard Lawrence, whom he met through his investment in an Orange County real estate project.

Perhaps the most important link was to Crown Capital, a 2-year-old firm that specializes in raising money for mid-tier companies involved in everything from aviation to chemicals. Krevoy got to know the principals there after his production company, Motion Picture Corp. of America, was sold to Metromedia and then folded into Orion Pictures.

“We like their strategy,” Jeffrey Deutschman, who runs Crown with partner Jason Ackerman, says of Resort Theaters. “The long-term trend for growth [in resort areas] is good, obviously, as the population ages.” Ackerman and Deutschman both have seats on Resort Theaters’ seven-member board.

Krevoy, meanwhile, has become one of the few executives in Hollywood with decision-making power in both production and exhibition. He bought back from Orion the Motion Picture Corp. of America, where he and ex-partner Steve Stabler made such films as “Dumb and Dumber” and “Kingpin.”