There were certain businesses that took a notable hit in the course of the pandemic, and movie theaters were one of them. Not only were many theaters forced to close their doors completely early on in the coronavirus outbreak, but even once they got approved to reopen, they were hit with capacity restrictions that made screening films a lot less profitable off the bat. Throw in the fact that there were basically no new movies to screen in 2020, and it's no wonder so many theater chains saw their revenue take a massive hit.
One such chain was Alamo Drafthouse, which is known for its extensive drink and food menu (extensive in the context of a movie theater, anyway). Earlier this year, Alamo Drafthouse filed for Chapter 11 bankruptcy, and at the time, it gave real estate investors a very valid reason to be worried.
But now, Alamo Drafthouse has managed to emerge from bankruptcy. And it has plans to expand its footprint as the movie theater industry on a whole stages its recovery.
Alamo Drafthouse is roaring back
Coming off of a year when many businesses were forced to file for bankruptcy and liquidate, Alamo Drafthouse's reign is far from over. The chain recently announced plans to not only reopen its existing theaters, but open five new theaters. Specifically, the chain has plans in the works to open its first location in New York City, plus two locations in Washington, D.C., and another two in St. Louis.
That said, the chain did have to close down a few of its underperforming locations as part of its bankruptcy filing. But Alamo Drafthouse still has nearly 40 locations in total, and that number could grow if the chain enjoys success in a post-pandemic world.
Great news for real estate investors
Alamo Drafthouse wasn't the only theater chain to struggle during the pandemic. AMC Entertainment came dangerously close to filing for bankruptcy on more than one occasion as well.
But now that the U.S. seems to be opening up and Hollywood production is back on, things are looking very different for movie theaters. Not only are cinema fans likely to flock to theaters after more than a year of streaming movies (which, let's face it, does not offer the same experience), but given that the broad economy is showing signs of improvement, patrons may have more financial wiggle room to frequent theaters in the near term.
That's great news for investors in entertainment REITs (real estate investment trusts), which derive a chunk of their revenue from movie theaters. It's also great news for shopping centers, which commonly rely on movie theaters to serve as paying tenants.
While movie theaters will continue to face competition from streaming services, which, for many consumers, are an easier and more affordable way to enjoy new films, things are looking up not just for Alamo Drafthouse, but the theater industry as a whole. And that's something real estate investors are apt to be grateful for.