The Marcus - Earnings Call - Q2 2025

Executive Summary

• Q2 FY2025 delivered broad-based improvement: total revenues $206.0M (+17.0% YoY), operating income $13.0M (vs. $2.2M), net earnings $7.3M and diluted EPS $0.23, with Adjusted EBITDA $32.3M (+46.9% YoY).
• Versus S&P Global consensus, MCS posted an EPS beat ($0.23 vs. $0.19), a slight EBITDA beat ($30.33M vs. $30.11M), but missed revenue on the “before cost reimbursements” basis ($195.7M actual vs. $203.3M)*; company-reported total revenues were $206.0M.
• Theatres led with revenue +29.8% YoY and segment Adjusted EBITDA +76% YoY; Hotels & Resorts were resilient despite Hilton Milwaukee renovation, with RevPAR -2.9% and ADR +5%, occupancy 67.3%.
• Management raised the quarterly dividend to $0.08 (+14%) post-quarter and reiterated FY2025 capex of $70–$85M, liquidity >$214M, and net leverage ~1.6x, supporting capital returns and selective investment.

What Went Well and What Went Wrong

What Went Well

• Theatres: revenue $131.7M (+29.8% YoY) and Adjusted EBITDA $26.5M (+76.2% YoY), driven by stronger film quality/quantity and attendance; top films included A Minecraft Movie, Lilo & Stitch, Sinners, How To Train Your Dragon, Thunderbolts*.
• Ticket and concessions metrics improved: average ticket price +2.0% (PLF mix), concession per person +3.1%, attendance +26.7% YoY; record Memorial Day weekend cited.
• Hotels: ADR +5% and group/catering strength offset room displacement; all 554 Hilton Milwaukee rooms returned to service end of June, positioning portfolio for summer/convention season.
• Quote: “It was a strong quarter…significant growth in revenue, operating income, net earnings and Adjusted EBITDA” — Greg Marcus (CEO).
• Quote: “Momentum continued…with strong performances from Jurassic World Rebirth and Superman” — Mark Gramz (President, Marcus Theatres).

What Went Wrong

• Theatres admissions trailed national box office growth by ~7ppts due to value-focused pricing (less blockbuster surcharges) and weaker film performance in Midwest vs. coasts.
• Hotels RevPAR -2.9% YoY, occupancy -5.4ppts, with Hilton Milwaukee renovation causing displacement during peak periods; hotels underperformed competitive set by 5.8ppts before adjusting for renovation impact.
• Cash from operations was $31.6M vs. $36.0M YoY (-$4.3M) due to timing of payables and annual payments.
• Analyst concern: need to implement blockbuster surcharges and normalize matinee pricing to lift ATP; management began surcharges late in Q2 and moved Everyday Matinee from $7 to $7.50/$8.50.

Transcript

Speaker 3

Good morning, everyone, and welcome to The Marcus Corporation's second quarter earnings conference call. My name is Bailey, and I will be your operator for today. At this time, all participants are in listen-only mode. We will conduct a question-and-answer session towards the end of this conference. If at any time during the call you require assistance, please press star zero, and an operator will be happy to assist you. As a reminder, this conference is being recorded. Joining us today are Gregory S. 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.

Speaker 5

Good morning, and welcome to our fiscal 2025 second quarter conference call. I need to begin by stating that we plan to make a number of forward-looking statements on our call today, which may be identified by our use of words such as believe, anticipate, expect, or other similar words. Our forward-looking statements are subject to certain risks and uncertainties, which may cause our actual results to differ materially from those expected or projected in our forward-looking statements. These statements 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.

The risks and uncertainties which 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 2025 second quarter results, and in the risk factors section of our fiscal 2024 annual report on Form 10-K, which you can access on the SEC's website. Additionally, we refer you to the disclosures and reconciliations we provided in today's earnings press release regarding the use of adjusted EBITDA, a non-GAAP financial measure in evaluating our performance, and its limitations, a copy of which is available on the investor relations page of our website at investors.marcuscorp.com. All right, with that behind us, let's begin. I'll start this morning by spending a few minutes sharing the results from our second quarter and discuss our balance sheet and liquidity.

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. We'll then open up the call for questions. As we shared on our last call, the second quarter began with strong performances from several blockbuster films that exceeded expectations in April. This strong momentum in our theater division continued into the summer, with a significantly improved film slate bringing a string of great box office performances that delivered year-over-year growth for the second quarter. In our hotel division, we executed on strong group bookings that drove overall revenue growth, even with the disruptions from hotel renovations. I'll start with a few highlights from our consolidated results for the second quarter of 2025.

Consolidated revenues of $206 million were up 17% compared to the prior year quarter, with revenue before cost reimbursements growing in both divisions. Operating income for the quarter was $13 million, an increase of $10.8 million compared to the prior year quarter. Consolidated adjusted EBITDA for the second quarter was $32.3 million, a nearly 47% increase over the second quarter of fiscal 2024. Net earnings for the quarter were $7.3 million or $0.23 per share, compared to a net loss of $5.2 million or $0.17 per share, excluding the impacts of our convertible debt repurchases in the second quarter last year. The change in our fiscal year and quarters did not impact our second quarter results, with a comparable number of operating days during the quarter in both fiscal 2025 and fiscal 2024. Turning to our segment results, I'll begin this morning with our theater division.

Second quarter fiscal 2025 total revenue of $131.7 million increased nearly 30% compared to the prior year's second quarter. Comparable theater admission revenue for the second quarter increased 29.3%, and comparable theater attendance increased 26.7% compared with our fiscal second quarter 2024. When using our comparable fiscal days, according to data received from ComScore and compiled by us to evaluate our second quarter results, U.S. box office receipts increased 36.5% during our fiscal 2025 second quarter compared to U.S. box office receipts during the second quarter last year, indicating our admissions revenue performance trailed the industry by approximately seven percentage points. We believe that our lower box office performance during the second quarter was primarily attributable to two factors.

First, while the other major exhibitors implemented blockbuster surcharges on many films during the quarter, our pricing strategies during the quarter continue to focus on driving attendance and the ancillary revenue that goes with it. We continue to optimize pricing with a variety of promotions for different types of customers while capturing a premium for peak days of the week, showtimes, and holiday periods. Second, several films, including F1, Mission: Impossible - The Final Reckoning, Ballerina, and Karate Kid, did not perform as well in our Midwestern markets as in other parts of the country. The total box office in our top markets underperformed the overall increase in the national box office. We believe this is partially attributable to the stronger relative performance of these films in markets where we do not have a presence, particularly on the coasts.

Average admission price increased 2% during the second quarter of fiscal 2025 compared to last year, which was impacted by a favorable mix of films that attracted audiences to PLF screens and by headwinds from our strategies to drive attendance through various value-oriented programs and promotions that are designed to encourage repeat moviegoing. Our Everyday Matinee program was introduced at the end of May 2024 and will no longer be a headwind to our admission per cap growth beginning in the third quarter this year. This program recently moved from the initial $7 pricing to $7.50 and on some films, $8.50. In addition, we began implementing pricing surcharges on select high-demand summer blockbuster films at the end of the second quarter, which we expect will benefit our admission per cap growth going forward.

Our average concession, food, and beverage revenues per person at our comparable theaters increased by 3.1% during the second quarter of fiscal 2025 compared to last year's second quarter, which was driven by an increase in merchandise sales and pricing. Merchandise sales, which are included in our concession, food, and beverage revenues, are typically at lower margins than our traditional concessions offerings due to the higher cost of product. While merchandise sales are diluted to concessions margins, they have resulted in incremental revenue and earnings. Our top 10 films for the quarter represented approximately 76% of the box office in the second quarter of fiscal 2025 compared to 73% for the top 10 films in the second quarter last year.

The more concentrated film slate, featuring more blockbuster films compared to a weaker slate in the second quarter last year, resulted in an approximately two percentage point increase in overall film cost as a percentage of admission revenues. Finally, theater division adjusted EBITDA during the second quarter of fiscal 2025 was $26.5 million, a 76% increase over the prior year quarter. Turning to our hotels and resorts division, total revenues before cost reimbursements were $64.6 million for the second quarter of fiscal 2025, a 1.2% increase compared to the prior year. RevPAR for our comparable owned hotels decreased 2.9% during the second quarter compared to the prior year, which resulted from an overall occupancy rate decrease of 5.4 percentage points, partially offset by a 5% increase in our average daily rate or ADR. Our average occupancy rate for our owned hotels was 67.3% during the second quarter of 2025.

Our occupancy rate decrease was impacted by the Hilton Milwaukee renovation while guest rooms were out of service. As the summer travel and convention season ramped up, generating higher demand for rooms throughout the week, as expected, the impact of having rooms out of service and turning business away to competitors in the market during the renovation was more pronounced. While we were able to shift business to our two other hotels, the Pfister and St. Kate, to mitigate the impact of the renovation on the overall portfolio, there was occupancy displacement from business turned away due to the reduced available rooms. As we recently announced, the guest room renovation portion of the project was completed at the end of June, with all rooms returned to service.

While the renovation of the meeting and common space will continue over the next several months, we expect a more limited impact to room sales beginning in the third quarter. According to data received from Smith Travel Research, comparable competitive hotels in our markets experienced RevPAR growth of 2.9% for the second quarter of 2025 compared to the second quarter last year, indicating that our hotels underperformed the competitive set by 5.8 percentage points. Our lower performance relative to the competitive sets results primarily from displacement at the Hilton Milwaukee while under renovation, which we believe unfavorably impacted our RevPAR growth by nearly 4 percentage points, while favorably impacting competing hotels' RevPAR growth by approximately 1 percentage point.

After adjusting for the impact of the Hilton Milwaukee renovation, we believe our hotels' RevPAR growth was within less than 1 percentage point of the competitive set and attribute this slightly lower performance to new hotel room supply within one of our markets. When comparing our RevPAR results to comparable upper upscale hotels throughout the United States, the upper upscale segment experienced effectively flat RevPAR growth during our second quarter compared to the second quarter last year, indicating that our hotels underperformed the industry by 2.9 percentage points, but outperformed the industry by approximately 1 percentage point when adjusting for the estimated impact of the Hilton Milwaukee renovation. With the strong growth in group business and events, our banquet and catering operations continued to grow, with food and beverage revenues up 10.5% in the second quarter of fiscal 2025 compared to the prior year.

Finally, hotels' adjusted EBITDA decreased $200,000 in the second quarter of fiscal 2025 compared to the prior year quarter and was impacted by changes in our revenue mix with a decrease in higher margin rooms revenue due to the impact of the Hilton Milwaukee renovation, offsetting the increase in comparatively lower margin food and beverage revenue. Shifting to cash flow on the balance sheet, our cash flow from operations was $31.6 million in the second quarter of fiscal 2025 compared to cash flow from operations of $36 million in the prior year quarter, with a decrease in cash flow primarily attributed to timing of accounts payable and certain annual payments. Total capital expenditures during the second quarter of fiscal 2025 were $16.9 million compared to $19.8 million in the second quarter of fiscal 2024.

A large portion of our capital expenditures during the second quarter was invested in the Hilton Milwaukee renovation, with the balance going to maintenance projects in both businesses. Our capital investments and renovations projects have progressed as planned, and we continue to expect capital expenditures for fiscal 2025 of $70 to $85 million. The timing of several projects will impact our final capital expenditure number for the year, and we will update our estimates as the year progresses. We ended the second quarter with approximately $15 million in cash and over $214 million in total liquidity, with a debt-to-capitalization ratio of 29% and net leverage of 1.6 times. With that, I will now turn the call over to Greg.

Speaker 4

Thanks, Chad, and good morning, everyone. When we spoke at this time last year, we were reporting a quarter that was impacted by the lingering effects of content supply challenges created by the Hollywood strikes in our theater business. What a difference a year makes. Today, we are thrilled to report second quarter results with significant growth that was driven by a high-quality and diverse film slate, coupled with strong consumer demand to experience these blockbuster films on the big screen. This was a quarter that showcased the enduring appeal of the theatrical experience and the remarkable resilience of our industry. In hotels, while the second quarter got off to a slower start, it picked up momentum and delivered results that were in line with our expectations overall.

We completed major milestones on schedule in our renovation and construction projects while minimizing the impact on operations and still delivering exceptional experiences for our guests. Overall, we are pleased with the results for the quarter, and we entered the third quarter with solid momentum. I'll start with our theater division. The most encouraging aspect of this quarter's success was the sheer diversity of the films that drove our performance. This wasn't a story about a single genre or franchise carrying the market. It was about multiple films from different studios with different target audiences, all succeeding at the same time. As we shared on our last call, the second quarter got off to an incredible start with the record-breaking Minecraft movie creating a cultural phenomenon that became a must-see film in theaters.

With a total domestic gross of over $423 million, this film proved its ability to mobilize a massive, passionate, and youthful fan base, creating an electric atmosphere in our auditoriums that simply could never happen at home in living rooms. Lilo and Stitch captured the hearts of families and grossed over $420 million domestically, while Sinners delivered a triumph of originality. In an era often dominated by sequels and established IP, Sinners proved that a bold, original R-rated film can become both a critical and commercial success. This historical horror film earned both critical and audience acclaim, driving incredible word of mouth to become the highest-grossing original horror film in North American history, while demonstrating a strong market appetite for fresh stories aimed at an adult audience.

This trio of our top films in the quarter was supported by the steady, reliable performance of beloved franchises, Mission: Impossible - The Final Reckoning, and the live-action adaptation of How to Train Your Dragon delivered the blockbuster action and adventure that audiences expect from summer tentpoles, rounding out a truly robust and varied slate. The film slate was stronger both in terms of the quantity of wide-release films, which grew from 28 in the second quarter last year to 32 this year, and also in terms of a steady cadence of quality releases with a diverse slate of films that brought audiences back to our theaters. Chad Paris discussed the factors we believe are impacting our box office performance relative to the nation, and I'd like to expand on this a bit.

As we shared the last few quarters, our strategy has been focused on driving long-term attendance, total revenue, and overall profitability. Box office growth relative to the nation is one of several measures we look at to evaluate our performance, but we're really focused on optimizing total revenue growth, including ancillary revenue, and the ultimate contribution that each incremental customer brings to the bottom line. While our pricing strategies and promotional programs over the last year created a short-term headwind to our admission per cap, we believe they are important drivers of long-term future attendance. Over the last year since introducing these programs, we've seen attendance growth rates that have outperformed other major exhibitors in three out of the last four quarters, and we believe these attendance gains help build our base of regular moviegoing customers.

As we pass the one-year mark for these changes, we expect improved admission per cap growth in the second half of this year. The competitive pricing environment in our industry continues to change, with several exhibitors experimenting with different strategies. We continue to optimize our regular ticket prices in our markets to ensure we remain competitive and offer attractive value to all types of customers while capturing a premium during our peak demand periods. Last quarter, I shared that we were working on several investment projects focused on increasing per capita revenues. I'm pleased to provide an update that in June, we completed projects to add concession stands to two of our formerly dine-in-only Movie Tavern locations in New York and Pennsylvania, with a third location in Kentucky completed in July.

These locations previously only offered customers concessions, food, and beverage ordering through our mobile app or at the bar for delivery to your seat. By adding walk-up concession stands where customers can order all food and concession items, as well as pick up for mobile concessions orders and self-serve soda, we expect to capture higher per capita concession sales while streamlining labor from our service delivery model at these locations. Looking ahead to the third quarter, the summer movie season continued in July with solid performances from Jurassic World Rebirth, Superman, and last weekend's opening of The Fantastic Four. The remainder of the summer includes The Naked Gun, Bad Boys 2, Freakier Friday, The Conjuring: Last Rites, and Downton Abbey: The Grand Finale.

We're looking forward to an exciting fall and holiday film slate with Tron: Aries, Wicked for Good, Zootopia 2, and Avatar: Fire and Ash, just to name a few. There are many more great films coming noted in today's earnings release. Looking even further ahead, the 2026 film slate also looks strong with major franchises including Spider-Man: Brand New Day, Super Mario Bros. Movie 2, Moana, Jumanji 3, Toy Story 5, Mega Minions, The Mandalorian, and Grogu in The Avengers: Doomsday, just to name a few. In summary, we continue to see improvements in content supply, and this quarter of growth was another significant step forward. Moving to our hotel and resorts division, you've seen the segment numbers and Chad Paris shared some additional detail on the performance metrics, including our strong average daily rate growth. I'll start with an update on the Hilton Milwaukee renovation.

As we planned this project, we intentionally scheduled as much of the estuary renovation work as possible during our seasonally slower winter months in our fourth quarter last year and first quarter this year to minimize disruption. As we expected and planned for, some of the work trailed into the spring and resulted in room displacement while rooms were out of service during the second quarter. I'm pleased to share that our team executed the largest renovation project in our company's history on schedule, and all of the guest rooms went back in service at the end of June. As planned, the meeting space, ballrooms, and common area renovations will continue for the next several months, but the most significant work and disruptions are behind us.

I want to thank our outstanding project management team and the team at Hilton Milwaukee for successfully completing the most operationally difficult phase of the project. I would also like to thank our teams at The Pfister and St. Kate hotels in Milwaukee for accommodating customers and delivering exceptional services as we shifted business between the hotels during the project. There were several other notable items in the quarter that I'd like to highlight. We continue to drive rate growth, with average daily rate growth at five of our seven hotels. In addition to our focus on optimizing revenue management, our rate growth has benefited from our ability to command higher rates at our hotels with newly renovated room product, including The Pfister, Grand Geneva Resort and Spa, and the newly renovated rooms at Hilton Milwaukee.

Group business during the quarter was stable, and we continue to win in the market. Once again, helped by our newly renovated meeting space and ballrooms at several properties, the bookings continue to look solid, with our group room revenue bookings for fiscal 2025 or group pace in the year for the year running slightly ahead of where we were at this time last year, even when including the RNC group business in the third quarter last year. Even more encouraging, group room pace for 2026 continues to run 20% ahead of where we were at this time last year for the next year out, with banquet and catering revenues similarly running ahead of last year's pace. While some industry surveys have seen a pullback in consumer spending on travel nationally and some markets have seen more significant leisure softening, our own portfolio has generally performed well.

We believe our upper upscale positioning and drive-to-market locations and a broad segmentation lessening our exposure to any one type of customer will see less volatility if further economic softening occurs. The current state of our hotel business remains stable and consistent with our view last quarter. While we've not yet seen any meaningful change in transient demand or significant cancellations of group business at our portfolio hotels, there remains an increased level of economic uncertainty compared to where we were a year ago. If we begin to see softness, we are prepared to react and adjust quickly. Finally, I'd like to briefly comment on capital allocation. Chad Paris reiterated our capital expenditure guidance earlier in the call.

While we still have a lot of work remaining on our capital projects this year, as we start to think about 2026, we do see a meaningful step down in capital expenditures as we get past the heavy part of the reinvestment cycle that we are in this year with our current hotel portfolio. We continue to look for opportunities to deploy capital to grow both of our businesses with value-accretive investments. We have confidence in our businesses and a strong balance sheet that allows us to move quickly when we see good opportunities, and we have a history of executing when they arise. To the extent that we don't see attractive investments that are actionable, we expect to return excess capital to shareholders through share repurchases or dividends.

Before we open up the call for questions, I want to once again thank all the people that work so hard every single day in making our ordinary days extraordinary for our guests. We talk a lot about the investments that we make in our businesses, but we can never lose sight of the fact that our people are our most important asset, and they proved that once again this quarter. With that, at this time, Chad and I would be happy to open up the call for any questions you may have.

Speaker 3

Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason you would like to remove that question, please press star followed by two. Again, to ask a question, please press star followed by one. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking your question, and please do ensure that you are unmuted locally. We'll go first to Eric Rold with Texas Capital Securities. Please go ahead, your line is now open.

Thank you. Good morning, both of you. One question on each of the two segments. I guess first on the hotel segment, as you dig into the 20% gain that you're seeing in group pace looking out into 2026, is there any way you can separate the group pace between the Milwaukee area and outside of Milwaukee? Just trying to get a sense of kind of maybe what impact you're seeing from the convention center expansion and maybe what that may be driving in terms of group pace versus maybe kind of just the overall kind of business environment outside of Milwaukee. On the theater side, you noted that you're now starting to take kind of that blockbuster kind of surcharge after the end of the second quarter.

How large of a surcharge are you starting to implement and any way to gauge kind of what percentage of your tickets that may impact kind of on an ongoing forward basis?

Speaker 5

Sure, Eric. I'll start with the question on hotels, and then I'll let Greg comment on what we're seeing with the convention center. I think it's an important perspective. We have seven hotels, five of them in Wisconsin, three of them in Milwaukee. Our group pace gains have in part been because we've got renovated meeting space, and we've got it at three of the Wisconsin properties, two of them in Milwaukee, and then Grand Geneva Resort and Spa. We're winning in the market for group events with meeting planners because of the quality of the assets and the positioning. I think as we look out to 2026, there's certainly some positive benefits of the convention center in the market. I don't have specific splits between how much is Milwaukee versus the rest of our portfolio.

Maybe Greg can add some commentary anecdotally on what we're seeing with the convention center.

Speaker 4

It is very anecdotal. It's just that it's going, I think everyone's pleased with the trajectory. I mean, we're definitely seeing increased activity because of the center now that it's open and people are coming to see it. I don't have the specific numbers on where we are right this second.

Speaker 5

I'll take the second question on theaters with the pricing. A couple of things. I mentioned the changes to the Everyday Matinee program and the magnitude on those. Those will start to come through in Q3. That's moving that program from $7 to $7.50 and on certain films, $8.50. That $1 delta on certain films is what we're doing generally with blockbuster surcharges across a number of different films. We're still going to be thoughtful about what types of films and what audiences we're going to put blockbuster surcharges on. As you know, our approach on this has been pretty cautious, and we're still very much committed to driving attendance because getting people in the door is really paramount to driving overall total revenue and the ancillary revenues that go with it. It will provide uplift to admission per capita revenues in the second half of the year.

Speaker 4

Yeah, because one thing we do know is moviegoing is habitual. You come, you see trailers, and you come again. That investment, we view it as an investment to build that attendance.

Speaker 5

Got it. Thank you both.

Speaker 3

The next question today comes from the line of Drew Crum from V Rally Securities. Please go ahead, your line is now open.

Okay, thanks. Hey guys, good morning. I'm wondering if you're willing to share some preliminary thoughts for the domestic box office going into the second half. It looks like July ended down about 7%. The industry is going to be lapping a tough comparison in 4Q against what looks to be a pretty good slate for the holidays. There are a lot of moving pieces there, but you know, how do you see the second half shaking out for domestic box office?

Speaker 4

You're right. We're lapping some tough comparisons. We also have some good film coming certainly at the end of the year, with Wicked and then Avatar. Those should be very strong. I find it very hard to predict how the box office is going to do in any period of any short period of time. You just don't know. It looks very positive, and we should end up strong.

Speaker 5

Yeah, fair enough, Drew. I would just add to that one housekeeping item. As you may know, we've got a change in our fiscal year this year. Last year, the year ended on December 26. This year, we will pick up the full week between Christmas and New Year's. For us, that fourth quarter growth will benefit from that. We're going to have a good quality slate and a good number of films, and we're going to have a few more days.

Okay, helpful. On the hotel segment, guys, I think a number of puts and takes on 3Q revenue. Can you address those and how you see that netting out for the current period? Thanks.

Yeah, I mean, we've done extremely well with our banquet and catering business, and that really stems from the growth in group that we've seen over the last year and talked about for the last year coming into the bookings. Now those bookings are converting into business, and along with the rooms business for groups, you get the banquet and catering. It does come at a bit lower margins, and that's a bit of the trade-off that we have going on there. Added into a take for the quarter was the impact of the Hilton Milwaukee renovation. When you strip that out, I think all things considered, we're pretty happy with the overall performance in the environment. As Greg commented, we see stability in continuing bookings in the group business, and our transient business is doing pretty well relative to other parts of the nation.

We'll see where the economy goes overall over the second half of the year, but at least the headwind of the Hilton Milwaukee renovation will be behind us, and we should have a little bit easier path operationally.

Got it. Okay, thanks guys.

Thanks, Drew, and welcome.

Speaker 3

As a reminder, if you would like to ask a question on today's call, please press star followed by one on your telephone keypad. The next question today comes from Brighton Sholl from Barrington Research. Please go ahead, your line is now open.

Hi, thanks for taking the question. I just had another question on capital allocation. As we move past the reinvestment cycle in hotels, I guess how long should we think of this kind of being at a low, maybe perhaps a lower CapEx level, or is there like additional investments within the theater side that would look to step up? Maybe just for some of the properties outside of Wisconsin and how we should think about the timing of a reinvestment cycle for the Chicago Hotel and then the Nebraska Hotel.

Speaker 5

Yeah, Pat, you know, the last three years really, we've been going through this heavy reinvestment period coming out of the pandemic in CapEx and reinvesting into the hotels. A bit of that we would have done during the pandemic, but it just got deferred. We're catching up. The Hilton Milwaukee is by far the biggest project of the various things that we've done over the last three years, and it's a $40 million project with about three-fourths of that falling into this year. We go into a more normal run rate for CapEx in the hotel business. I would just say there's always some level of refresh or renovations going on across the portfolio with smaller projects, but nothing like the magnitude of what we've just gone through. I'm not going to provide a specific guide on a number next year.

I think if you look at the big step up here in 2025 and 2024, and then you go back and look at where we were in hotels pre-pandemic, you could probably triangulate around what that might be. I think the point being we're going to see a big step in the run rate down next year. In the theater business, probably pretty close to the run rate that we've been at. We've done some ROI projects within that, call it $20 to $25 million we're doing this year, and I don't see that range shifting very much going forward with the current footprint of theaters that we have today.

Speaker 4

I would add on the hotel side, we talked about this before, in addition to just having deferred and bumping into a bunch of maintenance that came up, that may be CapEx that came up. The nature of some of this CapEx, as we've taught, there's seven-year CapEx, which is soft goods. There's 15 to 20-year CapEx, which is more your case goods, your nightstands, things like that. Then you've got your, I would call it 30 to 40-year CapEx, and that's things like gutting bathrooms and redoing those. At The Pfister, at the Grand Geneva Resort and Spa, and at the Hilton Milwaukee, we all had these significant bathroom projects that really even exacerbated what would have been a high CapEx period anyway. Even as you think out more long-term, it's just not that we won't have those again.

Okay. On theaters, just with your value matinee pricing, with the increase that you implemented, where is that relative to where it had been before you implemented the Everyday Matinee program?

Speaker 5

Can you ask that question again? What period are we trying to compare?

I guess maybe like comparing the value matinee pricing compared to before instituting the $7 Everyday Matinee.

Speaker 4

What was our pricing before the seven? It really was very market-specific. It was sort of all over the place. Moving it to seniors and to kids seven days a week, that was pretty broad. I'd have to go back and look and see exactly where we were for all these.

Okay. Lastly, just on the theater footprint, can you maybe talk about the opportunities for new builds or the acquisition market and how you're kind of seeing that evolve with maybe a stabilizing box office?

I think that the, let's take the new build. I don't think there's a lot of new build opportunities. There's going to be some here and there as markets grow, and markets will demand, in terms of, there'll be demand in new growth markets. I don't think that's a huge thing. We are looking at a few here and there. On the M&A side, again, it's so hard to predict what's going to happen there. It's very sporadic. These are not owned generally by funds that have five and seven-year hold periods. They're owned by families who sort of, they march to the beat of their own drummers.

Okay. Thank you.

Speaker 3

Thank you. At this time, it appears there are no other questions. I would like to turn the call back over to Mr. Paris for any closing remarks.

Speaker 5

All right. We'd like to thank everyone for joining us once again today, and we look forward to talking with you in early November when we release our third quarter results. Until then, thank you and have a great day.

Speaker 3

That concludes today's call. You may disconnect your lines at any time.