Thanks to rising COVID-19 vaccination rates, consumer confidence and the return of large-scale events, Milwaukee-based Marcus Corp. returned to profitability in the third quarter of fiscal 2021.
The hotel, movie theater and restaurant operator on Wednesday reported net earnings of $1.8 million, or 6 cents per diluted common share. Q3 marks the first period of positive net earnings since the start of the COVID-19 pandemic, which devastated the hospitality and entertainment industries.
During the company’s earnings conference call, president and CEO Greg Marcus recognized the milestone as another step in the recovery journey, which “may not always be a straight line and we are clearly not back to pre-pandemic levels in either business.” However, it’s a far cry from the company’s financial standing a year ago, which saw a net loss of $39.4 million for the third quarter.
“The combination of our diversified business model, comparatively lower debt than our peers, and the fact that we own most of our underlying real estate provides value to our shareholders and has allowed us to successfully navigate the pandemic and return to profitability faster than anticipated,” said Marcus.
Revenues for Q3 totaled $145.9 million, up 36% over last quarter and 76% over the same period last year.
The company has been gradually recovering since late last year, but it has yet to reach pre-pandemic levels. For comparison, net earnings for the third quarter of fiscal 2019 were $14.3 million, or 46 cents per diluted common share, and total revenues were a record $211.5 million.
Marcus Hotels & Resorts has helped accelerate the company’s overall recovery, reporting positive adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) for the second straight quarter. Total revenues in Q3 were about 88% of what was reported for the same period in 2019. Marcus hotels’ average occupancy rate for the third quarter was about 66%, up from 50% last quarter.
All eight company-owned properties benefitted from continued “drive-to-leisure” demand. The resurgence of large-scale events — particularly in the Milwaukee area with Summerfest, the Milwaukee Bucks championship run, the Ryder Cup and the Brewers playoff appearance — significantly drove demand and price in Q3. Average daily rate surpassed Q3 of 2019 by approximately 10 percent, and several properties experienced multiple periods where they were at or near sellout capacity, said Michael Evans, president of Marcus Hotels & Resorts, in a news release.
While business travel has not returned as initially expected due to the threat of the COVID delta variant, Marcus is anticipating activity will pick up this winter as vaccinations increase and remaining travel restrictions ease.
“We’ve always believed that in order for the business travel to return to pre-pandemic levels, it all begins with employees returning to offices,” said Greg Marcus.
He noted that recent data suggests office occupancies are increasing, which bodes well for the comeback of business travel. That will provide a necessary boost in the coming months as leisure travel shifts largely to weekends.
A continued surge in high-performing films as well as increased demand for in-person entertainment helped Marcus Theatres return to positive adjusted EBITDA in Q3 for the first time since the pandemic.
Theater concessions revenues jumped 55% over last quarter, and average concession and food and beverage revenue per person increased by 24% compared to the first three quarters of 2019. Both August and September produced admission revenues that were 60% or more compared to 2019.
In October, the division experienced its best month at the box office since the pandemic, with films such as ‘Venom: Let There Be Carnage,’ ‘The Addams Family 2,’ ‘No Time to Die,’ ‘Halloween Kills,’ and ‘Dune’ contributing to early fourth quarter results.
“As more consumers return to seeing movies the way they are meant to be seen, we are encouraged by the growing number of studios who have publicly recognized the importance of the exclusive theatrical window to the success of their films,” said Rolando Rodriguez, chairman, president and chief executive officer of Marcus Theatres.
Even as movie streaming services seem to dominate the entertainment sector, Greg Marcus expressed unwavering confidence in movie theaters as a critical component of the financial model of a film and its distribution.
“Theatrical exhibitions spurs millions of people to collectively seek a shared experience on any given weekend; gives a film gravitas that can’t be achieved with tile on a TV screen; creates franchises like nothing else can; makes piracy more difficult; and most importantly makes money for the studios,” said Marcus.
