Themed Megaplexes
Entice Shoppers to Malls

As shopping mall owners turn to increasingly lavish entertainment to attract the crowds once drawn by department stores, an upstart movie chain with opulent theaters that include valet parking, babysitting and restaurants is emerging as a big winner.

Muvico Theaters Inc., founded by an Iranian immigrant who fell in love with Hollywood as a boy going to his local cinema, operates 12 theaters and says it will double that number over the next few years. The company also plans to build what it expects will be the nation's biggest theater by seats -- 6,500 on 26 screens.

Palace 20 in Boca Raton, Fla.

The Florida-based chain has found that glitz can overcome, at least so far, declining movie ticket sales that have hurt other chains. At the Muvico Egyptian 24 in Hanover, Md., outside Baltimore, moviegoers are greeted by reproduction hieroglyphs and huge statues. Specific seats can be reserved online and kids can be dropped off in a supervised playroom. At the Muvico Palace 20 in Boca Raton, Fla., valet parking is offered and mint ahi tuna is on the menu at the full-service restaurant. Customers can sink into six-foot-wide loveseats in the balcony to watch the movie with a glass of wine from the bar.

Mixing flash and service seem to work -- attendance at the Egyptian 24 last year was 2.5 million, the company says. Muvico expanded during the sharp downturn in the theater industry while other chains suffered. Now, Hamid Hashemi's theaters are in demand by mall owners who are becoming increasingly creative in finding tenants to replace department stores, which have consolidated in recent years. One solution? Developers are building "lifestyle centers," outdoor malls that try to emulate a neighborhood, complete with entertainment and restaurants in addition to shopping.

Egyptian 24 in Hanover, Md.

"We're always chasing him for our centers," says Larry Siegel, chief executive of Mills Corp., the big mall landlord known for its mixing of retail and entertainment. The Egyptian 24 is in Mills' Arundel Mills mall in Hanover, Md.

Mills is building an enormous mall called Xanadu in New Jersey, a few miles from New York City, and has signed Muvico to build the biggest movie theater in the U.S. to anchor the entertainment portion of the mall.

Mr. Hashemi founded closely held Muvico a few years after he arrived in the U.S. in 1984, buying a three-screen theater in Coral Springs, Fla. It was an inauspicious start -- the theater promptly went bust after an eight-screen theater opened down the street. He learned that bigger can be better. "I decided to do the homework I should have done in the first place," Mr. Hashemi says.

He looked to the golden age of American cinema for cues, citing the Fox Theatre in Atlanta, with its Arabesque architecture, and the Paramount Theatre in Seattle, with its lavish Beaux-Arts interior. "In the '20s and '30s the forefathers of this industry built very thematic and very experiential theaters," he says. "We haven't really created anything. We've just taken old ideas and applied them to modern-day theaters."

Parisian 20 in West Palm Beach, Fla.

While Muvico theaters haven't quite achieved the majesty of the Paramount or the Fox -- some of its theaters can be garish and over the top -- the Parisian 20 in West Palm Beach, Fla., with its faux French facade comes closest to emulating the elegance of the old-style theaters.

In the mid-1990s, the movie-theater business went into overdrive building megaplexes, causing a glut of screens and a shakeout in the industry. Big chains such as Loews, United Artists and Regal all filed for bankruptcy in the early part of this decade. Loews was later taken private as Loews Cineplex Entertainment Corp. while United Artists and Regal were spun off into Regal Entertainment Group. Muvico had its biggest growth spurt during this time, with revenues rising from about $12 million in the late 1990s to $130 million today.

Today 10 of the chain's theaters are in Florida and one each in Maryland and Memphis, Tenn. Muvico has six theaters in development and another half a dozen deals close to being finalized, Mr. Hashemi says. The company is focusing on the Mid-Atlantic region.

Mall owners have had an on-again, off-again relationship with movie theaters. The mall movie theater faded away a decade ago with the growth of megaplexes, which were typically free-standing. "Movies went out of favor because they suck up parking and they're a somewhat less-productive use" of space, says Edward A. Glickman, president and chief operating officer of Pennsylvania Real Estate Investment Trust, which owns malls and strip centers in the Eastern part of the U.S. "It's two hours for 10 bucks plus popcorn, when the average shopping trip is seven to eight times that for the same amount of time."

Mills, for one, thinks a stylized movie theater like Muvico's is crucial to making its Xanadu mall -- which will have a roller coaster, fashion shows and live TV shows -- a destination. "I believe this is the future," Mr. Siegel says. "He's one of the few retailers in the world that says the customer needs to be treated differently." The Xanadu theater, which is scheduled to open in 2007, is estimated to attract four million people a year, Mills and Muvico say.

The Xanadu theater will also be modeled on ancient Egypt with huge sphinxes and hieroglyphs on the walls. The largest auditoriums will have 750 seats and screens nearly the size of an IMAX. One screen will sit on the roof in an amphitheater amidst a park, like a drive-in movie theater without the cars.

The seats in the VIP balcony sections, like other Muvico theaters, will be loveseats that are 73 inches wide, compared with about 22 inches for the average individual seat in other theaters.

The movie theater business has always been highly promotional, and Mr. Hashemi is not above a little hype. "We can accommodate all the premieres that happen in New York City," Mr. Hashemi says. The theater will have a helipad on top to shuttle movie stars from Manhattan to New Jersey.

All of those amenities might end up being worthless if Americans continue to shun movie theaters in favor of DVDs. The number of movie tickets purchased this year has dropped sharply, following declines in the previous two years. Despite the slump -- Exhibitor Relations Co., a box-office tracking firm based in Los Angeles, says overall sales are down 16 weekends in a row -- Muvico says its sales are up 2% this year.

"They're doing what needs to be done," says Paul Dergarabedian, Exhibitor Relations' president. The industry needs to emphasize the difference between watching movies at a theater and at home. Muvico "does that by creating these incredible theaters," he says. "It tells people, 'I can't do the same thing at home.' " National Amusements Inc. and Pacific Theatres Exhibition Corp. are two other chains with similar state-of-the-art theaters, he says.

"The industry is still going through changes," Muvico's Mr. Hashemi says. "With the shortening of the window between the DVD and the theatrical release we really have to create an event."

Email your comments to rjeditor@dowjones.com.