Q2 2023 Marcus Corp Earnings Call
Participants
Chad M. Paris; CFO & Treasurer; The Marcus Corporation
Gregory S. Marcus; President, CEO & Chairman; The Marcus Corporation
Andrew Evan Shapiro; Founder, Chairman, President, Portfolio Manager, and Managing Member; Lawndale Capital Management LLC
Christopher K. Potter; President; Northern Border Advisors
Eric Christian Wold; Senior Equity Analyst; B. Riley Securities, Inc., Research Division
James Charles Goss; MD; Barrington Research Associates, Inc., Research Division
Michael Joseph Hickey; Senior Equity Analyst; The Benchmark Company, LLC, Research Division
Presentation
Operator
Good morning, everyone, and welcome to The Marcus Corporation Second Quarter Earnings Conference Call. My name is Brika, and I'll be your moderator for today. (Operator Instructions) As a reminder, this conference is being recorded.
Joining us today are Greg 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.
Chad M. Paris
Good morning, and welcome to our fiscal 2023 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, all of which we intend to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act. Our forward-looking statements may generally be identified by our use of words such as we believe, anticipate, expect, or words of similar import. Our forward-looking statements are subject to certain risks and uncertainties, which may cause our actual results to differ materially from those expected. Listeners are cautioned not to place undue reliance on our forward-looking statements.
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 2023 second quarter results and in the Risk Factors section of our Fiscal 2022 Annual Report on Form 10-K, which you can access on the SEC's website. We will also post all Regulation G disclosures when applicable on our website at marcuscorp.com. The forward-looking statements made during this conference call 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.
In addition, we routinely post news releases and other information regarding developments at our company that impact our investors, customers, vendors and other stakeholders. You should look to our website, marcuscorp.com, as an important source of information regarding our company.
We also refer you to the disclosures we provided in today's earnings press release regarding the use of adjusted EBITDA, a non-GAAP measure used in evaluating our performance and its limitations. A reconciliation of adjusted EBITDA to the nearest GAAP measure is provided in today's release.
All right. With that behind us, let's begin. This morning, I'll start by spending a few minutes sharing the results from our second quarter with you 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.
This morning, we reported another quarter of revenue and earnings growth with healthy customer demand and solid operational execution in both of our divisions. In Theaters, strong increases in both our average ticket price and average concession revenue per customer, coupled with a film slate featuring an increased number of wide-release films to drive the division's growth. In our Hotel division, comparable hotel revenues grew, and we continued to see year-over-year improvement in both occupancy and average daily rate.
I'll start with our consolidated results. Total revenues were $207 million in the second quarter, an increase of 4.3% compared to the prior year quarter. Operating income was $20.8 million in the second quarter, an increase of 10.1% compared to the second quarter of fiscal 2022. Below operating income, the one item to highlight is our second quarter interest expense decreased by approximately $1 million or 24% as a result of our lower overall debt level, which was approximately $35 million or 16% lower than the end of the second quarter last year.
Net earnings for the second quarter were $13.5 million, an increase of over 50% compared to the second quarter last year. Finally, adjusted EBITDA for the second quarter was $38.7 million, a 3.7% increase from the prior year's second quarter. We provided a breakdown of our second quarter numbers by segment in our press release. And as we will discuss today, our earnings growth in the quarter was driven by strong results from both of our businesses, partially offset by the negative earnings impact of our sale of the Skirvin Hilton late last year.
Turning to our segment results. In Theaters, our second quarter fiscal 2023 admission revenue increased 9.4% compared to the second quarter of 2022, with strong growth in our per capita revenues offsetting a decrease in comparable theater attendance of 3.8%. The decrease in attendance primarily resulted from lower performances from the top 3 blockbuster films this year compared to the top 3 films last year during the second quarter, which was led by Top Gun Maverick, partially offset by an increase in the number of wide-release films debuting in the quarter, which Greg will discuss further.
The film slate for the quarter not only featured more wide releases, but once again included a more balanced mix of smaller and midsized films. According to data received from Comscore and compiled by us to evaluate our fiscal 2023 second quarter results, United States box office receipts increased 13.6% during our fiscal 2023 second quarter compared to U.S. box office receipts during fiscal 2022. Our comparable theater admission revenue growth of 9.7% lagged by approximately 3.9 percentage points, which we believe was attributable to a film mix that was more appealing to audiences in other parts of the U.S. outside of our primarily Midwestern markets. We also believe that a dry May and June with few rainy days in the Midwest kept customers outside enjoying early summer weather and negatively affected attendance.
Our admission -- average admission price increased by 14.2% during the second quarter of fiscal 2023 compared to last year. The increase in average admission price in the quarter was primarily driven by: one, the favorable impact of full schedule pricing actions taken during fiscal 2022 and at the beginning of 2023 in response to inflation; and two, by the impact of the changes to our value Tuesday promotion effective at the end of the first quarter of this year.
Looking forward, as we have now lapped the 1-year mark of the pricing changes we implemented in mid-June last year, we expect our average admission price growth rate to moderate in the third quarter this year, while still growing from the impact of pricing changes implemented at the beginning of 2023 and the value Tuesday pricing changes. This was the first full quarter of the Tuesday changes, so we will continue to see this benefit to average admission price through the first quarter of next year.
Our average concession food and beverage revenues per person at our comparable theaters increased by 7.3% during the second quarter of fiscal 2023 compared to last year's second quarter. The increase in our concession food and beverage per caps was driven by higher check averages, including the impact of higher menu prices compared to the second quarter of last year as we are still seeing the impact of inflationary price increases implemented during the last year.
In addition, the changes to our value Tuesday promotion, which replaced a free complimentary-sized popcorn with a 20% discount on all food and nonalcoholic beverages, positively impacted per caps as our customers bought more items with the 20% discount. We also expect our average concession food and beverage revenues per person to grow at a more moderate rate beginning in the third quarter this year.
Our top 10 films in the quarter represented approximately 82% of the box office in the second quarter of fiscal 2023 compared to 84% for the top 10 films in the second quarter last year. While there was an overall larger slate of films in the quarter, there was not a lower concentration among the top performers at higher film costs, resulting in an overall film cost as a percentage of admission revenues that was essentially flat.
Theater division adjusted EBITDA of $31.3 million during the second quarter of fiscal 2023 increased 8.7% compared to the prior year second quarter on our higher revenues.
Finally, during the quarter, we closed 3 underperforming theaters as part of our ongoing evaluation of individual theater performance and our footprint. The closure of these locations is accretive to earnings and cash flow, and the results of these theaters are excluded from our comparable theater financial metrics that I discuss today.
Turning to our Hotels and Resorts division. Revenues were $70.1 million for the second quarter of fiscal 2023, an increase of 1.5% compared to the prior year. The sale of the Skirvin Hilton late in the fourth quarter of fiscal 2022 had a $4.4 million negative impact on revenues in the second quarter of fiscal 2023 compared to the second quarter of fiscal 2022. Excluding this impact, comparable hotel revenues in the second quarter of fiscal 2023 increased $5.5 million or 8.5%. Total revenue before cost reimbursements at our 7 comparable owned hotels increased over $4.1 million or 7.2% over the second quarter of last year.
RevPAR for our comparable owned hotels grew 9.1% during the second quarter compared to the prior year. According to data received from Smith Travel Research, comparable upper upscale hotels throughout the United States experienced an increase in RevPAR of 4.8% during our second quarter compared to the second quarter of fiscal 2022, indicating that our hotels outperformed the industry by approximately 4.3 percentage points.
When comparing our RevPAR results to comparable competitive hotels in our markets, the comparable competitive hotels experienced an increase in RevPAR of 10.1% for the second quarter of fiscal 2023 compared to the second quarter of fiscal 2022, indicating that our hotels underperformed their competitive set by approximately 1 percentage point.
As we discussed on our first quarter call, we believe that after our owned hotels outperformed the comparable competitive hotels with significant market share gains during 2020, 2021 and 2022, the comparable competitive hotels are catching up, resulting in RevPAR growth rates that were higher than our owned hotel portfolio. In other words, competitive hotels in our markets had more opportunity to grow year-over-year off a lower base last year.
Breaking out the second quarter numbers for the comparable owned hotels more specifically, our overall RevPAR increase during the fiscal 2023 second quarter compared to the second quarter of fiscal 2022 was due to a 4.5% increase in our average daily rate, or ADR, and an overall occupancy rate increase of 2.9 percentage points. Our average fiscal 2023 second quarter occupancy rate for our owned hotels was 68.2%.
Finally, our banquet and catering operations continued to perform well. Food and beverage revenue at our comparable owned hotels was up 6.4% in the second quarter of fiscal 2023 compared to the prior year.
Hotel division adjusted EBITDA was negatively impacted by approximately $900,000 from the sale of the Skirvin compared to the second quarter of last year. Excluding this impact, comparable hotel adjusted EBITDA in the second quarter of fiscal 2023 increased $400,000 or 3.8% on higher revenues.
Shifting to cash flow and the balance sheet. Our cash flow provided by operations was $55 million in the second quarter of fiscal 2023, an increase of $6.3 million or 12.9% compared to the prior year second quarter.
Total capital expenditures during the second quarter of fiscal 2023 were $7 million compared to $9.8 million in the second quarter last year and were impacted by timing of cash payments for projects compared to the prior year. A large portion of our capital expenditures during the second quarter were invested in the guest rooms renovation at the Grand Geneva Resort & Spa with the balance of capital expenditures going to maintenance projects in both businesses.
Based on our current expectations for the timing of capital projects, we now expect capital expenditures of $40 million to $50 million for fiscal 2023, a decrease from our prior estimate of $60 million to $75 million. The decrease in our estimate is the result of a change in timing for a potential hotel renovation project, which we continue to evaluate and we no longer expect to begin in fiscal 2023.
We ended the second quarter with $44.6 million in cash and over $265 million in total liquidity with a debt to capitalization ratio of 28% and net leverage of 1.5x net debt to adjusted EBITDA. Our balance sheet remains strong, which we view as a strategic advantage that provides flexibility and allows us to move quickly to invest in growth for the long term when actionable opportunities are identified.
With that, I will now turn the call over to Greg.
Gregory S. Marcus
Thanks, Chad. Good morning, everybody. When we were last together for our quarterly update, we knew that the ingredients were there to set up for a good second quarter.
In our Theater division, the Super Mario Brothers movie started the quarter off with a huge positive surprise, and we had a promising slate of films in front of us for the summer. Our Hotels division was well positioned to serve our customers with excellence heading into the peak summer travel season in the Midwest. I'm happy to report that excluding the impact of the divestiture in the Hotel division, both of our businesses contributed to our revenue and earnings growth this quarter. Our overall execution was strong. And while there were some surprises along the way, both positive and negative, our teams were ready for our returning customers this summer.
The second quarter that we are reporting today continues our trend of year-over-year improvement, and we're pleased to be sharing these results with you.
I'll start with Theaters. Chad went over the numbers with you, including our continued significant increases in per person revenues, with our admission revenues per person growing over 14% year-over-year. As I shared on our call last quarter, we expected that our strategic pricing initiatives would favorably impact our admission per caps and total admission revenue throughout 2023, and they certainly are.
The impact of the changes to our value Tuesday promotion were in full effect during the quarter with admission per caps also benefiting from the impact of pricing changes made late in the second quarter last year and at the beginning of this year. As we have shared, we were thoughtful and diligent in making these pricing changes and tested several different versions of the program before rolling out our new value Tuesday program across our circuit in late March this year. I'm pleased to share that our experience with the changes to value Tuesday are producing the results we expected.
First, we believe the changes have not negatively affected attendance on Tuesdays in any meaningful or even measurable way. With the $6 admission for members of our free to join Magical Movie Rewards loyalty program and $7 admission for non-loyalty customers, we continue to offer a significant discount on Tuesdays to regular pricing the rest of the week and provide great value compared to other entertainment options. We remain committed to our value-oriented customers, and we believe our new value Tuesday offering continues to deliver a great value for our customers while making the program even better.
Second, our new 20% discount on all concessions, food and nonalcoholic drinks for MMR loyalty members on value Tuesdays is resulting in higher concessions, food and beverage per caps, which were up 7.3% during the second quarter of 2023 compared to the second quarter last year. We are seeing customers not only buy popcorn in place of the free complimentary-sized popcorn offered under our old Tuesday program, but we're also seeing an increase in sales of other food and beverage menu items that are now offered at a 20% discount on Tuesdays instead of full price.
We believe that the expansion of Tuesday discounts to our entire food menu provides a more affordable offering that will increase the number of customers who are buying concessions, food and beverage and also increase how much they're buying with the goal of increasing our overall F&B per caps.
While attendance was down in the second quarter compared to the prior year due to lower performances from the top films, we are encouraged by the improvement in the number of wide releases during the quarter, which again grew considerably from 19 last year to 29% this year. Not all wide releases deliver the same results; in this quarter, featured a few positive surprises along with a few that missed the mark. While the misses are disappointing, it is not unusual. Some films work better than expected and some do not. What is more important in the long run was that the quarter featured a more steady supply to 2 or more wide releases each weekend for audiences to come out and see that helped -- come out to see, and that helps rehabituate moviegoing.
As we look ahead, the third quarter in our Theater division is once again off to a great start with a positive surprise: Sound of Freedom, another film that has blown away expectations and has played extremely well in our Midwest markets. Mission: Impossible - Dead Reckoning Part One followed with a solid performance. And then came Barbie and Oppenheimer, the phenomenon, otherwise known as Barbenheimer. These 2 great films, along with the others, delivered the fourth largest domestic weekend box office ever. And we were ready for them.
I'm particularly proud of how well our team created excitement in our theaters, from the creation of incredible lobby displays to Barbie blowout parties with early access screenings at 65 of our locations with bars and lounges serving alcohol. Our associates delivered a great experience that helped build excitement and buzz for these films.
And what happens when you combine Sound of Freedom and Mission Impossible with the opening of Barbie and Oppenheimer in theaters the same week? We had our busiest week since the opening week of Star Wars: The Rise of Skywalker in December of 2019. The impressive performance of these films underscored an audience appetite for diverse non-superhero narratives, and it was a great reminder to all of us in the entertainment industry of the power of theatrical exhibition and building awareness of great movies.
I also want to highlight an important example of how our investments in premium large format screens provided a significant operational advantage that continues to pay dividends for us. Not only do we have a PLF screen at 80% of our theater locations, we actually have multiple PLFs at 73% of those PLF theaters. This allowed us to play both Barbie and Oppenheimer on 2 or more PLFs in the same location on opening weekend and maximize our PLF gross box office. In addition, because our PLF screens are almost entirely our proprietary UltraScreens and super screens, we had the scheduling flexibility to split show times in our single PLF locations.
In short, we didn't have to choose which film to play on our PLFs. We played both. As a result, on opening weekend, 39% of our Barbie gross box office and 50% of our Oppenheimer gross box office was on PLF screens. We view this as a significant advantage. And according to Comscore data, on opening weekend, our circuit led the industry in gross box office PLF percentage on Barbie by a factor of over 2x. So that 40% is 2x better, 40% of our Baby box is 2x better than the rest of the industry, and came in second among all U.S. exhibitors in gross box office PLF percentage on Oppenheimer.
As we look ahead to the film slate for the rest of the year, while there's a lot to be excited about, we acknowledge that the writers and actors strikes have disrupted film production and may impact the future release calendar. While the timing of a resolution and the ultimate impact of the strikes is difficult, it's not impossible, [a handicap]. I'd like to share my perspective with you.
Here is what this isn't. This isn't anyone questioning whether people want to go to the theater anymore, determined that they're going to watch everything while bolted to their sofa. This isn't Hollywood saying that they're shifting movies to streaming, nor suggesting the future is day-and-date releases. This isn't people locked in their homes and our facilities closed or people concerned to be around one another.
What this is, is a labor dispute that will cause some interruptions in supply. Does the business on the men need this? No, of course, not. But we can work through it and it doesn't come close to what we just went through. I guess if we were a company with much higher levels of debt, I might worry a bit more. But we are not.
Today, we look around and we see Barbenheimer, a theatrical event that became the only thing in pop culture that people were talking about for weeks and still are. These films once again prove the value of the theatrical piece of the ecosystem many times over. Audiences have spoken, and they want to go to the movies. Thankfully, this is not a demand problem. It's a supply chain disruption.
Of course, the disruption from the strikes is not helpful, and we don't yet know what the extent of the impact will be. While there will likely be shifts in the film release calendar, we believe in a short term -- we believe it as a short-term dispute that will ultimately be resolved. As metaphorically speaking, mom and dad are fighting, but they have no choice but to live in the same house. In the long run, I'm far more encouraged by the examples that Mario, Spider-Man, Barbie and Oppenheimer and others provide in illustrating the importance of theatrical to this industry.
Shifting to our Hotels and Resorts division. You've seen the segment numbers, and Chad shared some additional detail, including the bridge from our reported results to our comparable hotel results following the sale of Skirvin Hilton late last year. We were happy to see the calendar turn past Memorial Day for it is really the start of our busy summer season. There are a few highlights in the quarter that I'd like to point out. Overall, revenue before cost reimbursements at our comparable properties grew over 7.2% compared to the prior year.
We continue to see strong average daily rates and improving occupancy. RevPAR grew at all 7 of our comparable owned hotels with average daily rate growth at 6 of our 7 hotels and occupancy growth at 4 out of 7 hotels, resulting in overall RevPAR growth of 9.1%.
As Chad mentioned, while we outperformed the normal upper upscale RevPAR growth, we underperformed the RevPAR growth of our competitive sets, as was the case last quarter. It was ultimately because occupancy at our hotels recovered faster in 2022 than the competitive hotels in our markets. We still feel very good about the performance of our assets in their markets and their ability to take more than their share of the market.
Group demand in the quarter continued to increase with weekday and weekend growth increasing our group rooms' revenue to approximately 40% of our total rooms' revenue in the second quarter of fiscal 2023 compared to approximately 38% in the second quarter last year. This compares to our pre-pandemic group mix of approximately 43% in the second quarter of 2019.
Group booking trends remain positive with our group room revenue bookings for the remainder of fiscal 2023, our group pace in the year, for the year running approximately 8% ahead of where we were at the same time last year. Group pace for fiscal 2024 is running approximately 7% ahead of where we were at the same time last year for fiscal 2023. In addition, banquet and catering pace for the remainder of fiscal '23 and fiscal '24 is similarly running ahead of where we were at this time last year.
The industry outlook for group events remain strong with Nolan, an industry provider of data insights on meetings and hospitality, reporting June 2023 meeting and event volume was up 30% over June 2022. Leisure demand remains healthy, particularly on the weekends, while showing signs of normalizing to pre-pandemic levels on weekdays following record demand in fiscal '22 with higher weekday demand due to extended leisure stays.
Finally, Chad mentioned our investments during the quarter in renovations at our owned hotels. And last quarter, I shared that we completed the guest room renovation at the Grand Geneva Resort & Spa. The finished product was ready just in time for our peak summer season, and the customer feedback has been great. In June, our team quickly moved to begin our next major project, the renovation of The Pfister, with the first phase commencing with the meeting space.
We are renovating the ballrooms one at a time to minimize the disruption to operations, and we completed the renovation of the 130-year-old Imperial ballroom in time for its first post-renovation event just over a week ago. And I will tell you, the results of restoring this historic ballroom are stunning. And this is just the beginning of what is to come over the next several months at The Pfister. Following the renovation of the meeting space this fall and winter, we will renovate the guest rooms in the historic tower of the hotel, followed by a lobby renovation next spring.
Before we open up the call for questions, I once again thank all the people that work so hard every single day making ordinary days extraordinary for our guests. We talk a lot about the investments that we make in our business. 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'll be happy to open the call up for any questions you may have.
Question and Answer Session
Operator
(Operator Instructions) We have the first question from Jim Goss of Barington Research.
James Charles Goss
All right. Wondering a couple of things. First, Greg, do you have any sense of how linked the writers and actors strike actions might be? Like is one dependent on another? Or are they totally separate actions at this stage would you say?
Gregory S. Marcus
When you say -- I guess, I'm not -- look -- let me just start with saying I really don't know what -- how -- what the mechanisms that they're dealing with and how -- if there's -- if you're asking about internal linkage -- I mean, I can talk about the external impacts. For example, the writers go on strike, and all of a sudden, there's no late night talk shows. Now there's still the Today Show in the morning, Good Morning America, and all of the morning stuff and there's lots of other avenues for actors. They were to promote their films when they were out promoting their films, but there was a there was nowhere for the actors to go to promote on late night.
Now the actors aren't even promoting their films. So it doesn't matter that there's no late night shows. So -- now, if the late night shows come back, it won't matter. They announced today they're getting back to the table. It has something to do with the 100-day force majeure clause. I was Googling, trying to figure it out. I don't even understand it. Because again, these...
James Charles Goss
I was just thinking whether or not you -- they get solved together or are they just separate issues that happen to be coincident?
Gregory S. Marcus
Above my pay grade.
James Charles Goss
In terms of how they impact you?
Gregory S. Marcus
I just don't know.
James Charles Goss
Well, okay. A couple of other things. How would you -- well, what was the impact on your average ticket price per person in July as the third quarter began from this preponderance of like high share from PLF? Is it a noticeable impact? I assume it would be. Is there a way to quantify it?
Chad M. Paris
Yes. I would say, Jim, for us, we've had this large PLF footprint and the flexibility that Greg talked about in his remarks in the past. And so if you're comparing to prior periods, we benefited from having that ability in our prior results. It just really stood out this quarter because you have 2 big films opening on the same weekend and it gave us that incremental flexibility. I don't have a quantified impact here in July. We're still reviewing the July results. But look, net, it's favorable.
Gregory S. Marcus
But yes, to your point, Chad, our PLF percentage tends to lead the industry in terms of relative performance compared to overall box office. And that's not a new impact.
James Charles Goss
Okay. And a couple of other things. One, with the Magical Movie Rewards, the way you've structured the $6 and $7 pricing obviously is sort of pushing people to join the club. Are you getting a big uptick in subs? And are there other key benefits aside from the 20% in the dollar discount, relatively speaking, that you are offering with the club at this point, because I know you're using that information as data to drive some promotions. So anything else to say about that?
Gregory S. Marcus
You hit it on the head. I mean there's -- those are the 2 key benefits. But there's other stuff. Yes, if you're in the club, you'll see discounts come your way. We use the market for discounts. Some were -- some have to do screenings. And we're getting the club members first. And we're always looking for ways to say, "What are the benefits of being in the club?"
Chad M. Paris
Yes. Jim...
James Charles Goss
And on the hotel side -- I'm sorry.
Chad M. Paris
Go ahead, Jim.
James Charles Goss
Go ahead.
Chad M. Paris
No, I was just saying on the question on MMR, we certainly have seen an increase in the number of MMR sign-ups as a result of the Tuesday changes. I believe the current number is around $5.5 million. I'll circle back on that as we go through the call here. But that's up from roughly about $5 million at the beginning of the year.
James Charles Goss
Okay. And on the hotel side, could you walk us through the like disruption to, say, The Pfister and other properties as you renovate them. I'm sure there's never a good time to do those sort of things. But how -- will there be a way to gauge how it's going to impact near-term results as it works its way through the system?
Gregory S. Marcus
Look, we're always looking -- our businesses are seasonal. So we're always looking for ways to minimize that disruption. And so we -- so we've got a quantifiable number to say what we are. But we think we can minimize it pretty significantly. So for example, you take The Pfister. When it's a really quiet period -- and we're not renovating every single room at every single time. We're going floor by floor. We're only doing part of the building. Just like now, we did the ballrooms. We only did half the seventh floor on The Pfister, which is where all the ballrooms are. And you get up there and you could use the other -- there was always a ballroom available.
Chad M. Paris
And there's a similar impact just from scheduling on the ballrooms. And we try to do this out of peak season and do it around the gala season. So we're not displacing those events. So we've done this for a long time. Our team is very good at project management and working with our commercial teams to minimize that impact. I don't have a quantified expected impact from it for The Pfister, but we're doing it at our slowest period.
James Charles Goss
Maybe one last thing then. Do you also implement sort of selective price increases as you go through these renovations so that if somebody wants to stay in one of the newly renovated rooms, they might pay a little bit more because of that premium aspect? Or is it -- is there a different aspect to your pricing strategy then?
Gregory S. Marcus
No. I mean we're just looking at overall revenue management, how do we -- given what the market is and -- we believe our rooms are all of a certain level. So we're not going to say, "Oh, well, you can have a good room or a bad room." So we want them -- we all want them at a certain level. And then we're just using the revenue management tools to maximize our performance.
Chad M. Paris
Jim, just to close out on your earlier question, it was 5.5 million MMR members at the end of the second quarter. And that compares to around $5 million at the beginning of the year.
Operator
We now have Michael Hickey from the Benchmark Company.
Michael Joseph Hickey
Great result. Nice commentary this morning as well. I appreciate all of that. I think I'm good, guys. Jim asked all my questions, Greg. Just kidding. A few more on top of Jim's. Just curious on July, guys. You're seeing some of your peer set. You're seeing the numbers for the industry look pretty spectacular. It looks like on a sort of quarter-to-date, we're sort of up 18%.
Curious how your network is indexing. Obviously, you had some challenges that you illustrated in the second half. I'm curious if you feel like you're back to pace with the industry here. And how you're thinking about momentum. You see this sort of Barbenheaimer effect. And if you think if there's going to be a follow-on momentum for additional films coming out. And if you think that's a motivation maybe for the studios to stick to plan here in terms of the pipeline for the remainder of the year versus some movement given the strike?
Chad M. Paris
Yes, I'll take the first part, and then I'll let Greg comment on the second part. Look, we believe we're getting our share and with the benefit of our PLFs that we covered on the call, more than our share of box office on the 2 big July films. And really all of those films -- these are films that have played really well in the Midwest as well. And we had record attendance. The week of the premier of both of those films, we had over 1.1 million people come through the doors from Friday to Thursday on opening weekend for the film. So the indications are we're getting our share and our participation in the box office.
Gregory S. Marcus
As for what the studios are going to do, I don't have a clue what they're going to do. I would like to -- I'd like -- I like to hope that they're sitting there, saying, "Wow, what's going is pretty" -- we're not done. I mean, again, we're all focused on Barbenheimer, but I mean the Sound of Freedom they're going wow. The rival executive saying, "Where did that come from?"
And then we've got Teenage Mutant Ninja Turtles about to open up, and that looks like it's going to be really strong. There's still some strong films. So we're looking around and we're seeing -- I mean -- but this last thing with Barbie, not the first time it's happened and it doesn't -- I don't want to overstate its value to the industry. And yet, it does just highlight what can happen with theatrical and really good marketing.
You got to give it to the Warner Bros. again. I mean they marketed this thing beautifully. They really -- I mean they just got people everywhere focused on it and talking about it. It's been going on for at least like a month, and it doesn't seem to be slowing down. You don't get that anywhere else. And so, I hope the other one is looking around, saying, "If we can do it, we will." I just don't know what they're -- they're not inviting me to the meetings to discuss strategy, unfortunately.
Michael Joseph Hickey
Greg, how impactful was your Barbie promotion, do you think? You're kind of a legend now, I think, on TikTok.
Gregory S. Marcus
Yes. Fortunately Mike, you and only a few select analysts on this call have any idea what you are talking about. And -- because most people over the age of 17 never see that, so. But I will tell you, look, we've leveraged TikTok. I got to give -- I got to say, joking aside. And for those who haven't seen it, please don't go look. But the -- our people -- our social media -- we tried the social media through lots of different things to get -- to leverage the social media to help build awareness for our business. We want to try and sell in addition to having the studios do the marketing.
And our people who in our social media group, especially the ones who are focused on the TikTok stuff, they have tapped into it. And I would argue that if all the exhibitors for sure, we have got the most unique approach to it. I will pretty much do whatever they tell me to do, because when I go on -- our big one is one -- it will have million views. And so for a chain of our size to get things that get anywhere from 0.5 million to 1 million views on stuff we put up, that's got to be beneficial to our business. And so I will keep doing it if it will get the turnstile spining.
Michael Joseph Hickey
Nice. Yes. And if you continue to meet Ninja Turtles, Greg, MEG 2, The Nun and maybe Troll, stand together, would be good promo opportunities for you.
Gregory S. Marcus
(inaudible).
Chad M. Paris
No pressure.
Michael Joseph Hickey
All right. I guess last question. You guys were early on your dividend. That was a great testament to return to your business, strong cash flows coming out of obviously the difficult stretch with COVID. Just curious -- and obviously, there's still some potential disruptions here, but obviously nothing like you've been through. Curious how you're thinking about the dividend here moving forward?
And also, it looks like your CapEx is down a bit this year. Curious how you're thinking about buyback or debt reduction or plans, I guess, generally with your capital, guys?
Chad M. Paris
Yes. Look, the year has been trending really nicely along what we expected. And now we have a new event that's created some near-term uncertainty. But point taken. We're feeling really good about the balance sheet. And as we look at our capital investment in the business, yes, we have some major projects going on in the Hotel business.
And the pull down of the CapEx guidance for the year doesn't mean that the projects go away. It's really a timing shift into '24. So we're still focused on some of those internal investments. And then also -- although we haven't actioned anything yet, working on opportunities for inorganic investments as those become available, which we don't control the timing of, but we want to be ready for.
So then we think about the dividend. And it's an ongoing discussion that we're going to continue to revisit each quarter. So stay tuned.
Gregory S. Marcus
But I guess I'll add to that. The way we are looking at it, and we are -- every quarter we're looking at it and we're thinking about where we should go with it. We look at it on a quarterly basis and we talk about what's happening right now with this work disruption. What we really are looking at is we want to look at the next 3 years in a total and say, "Okay, how comfortable do we feel of what we're doing?" We don't want to be guided by -- we've said this a million times. We don't want to be guided by a quarterly-by-quarterly issues. Because if we did that, oh man, we're going to go crazy. This is, as we've said a million times, being a straight line. We zig around. We get a little forward. We move a little back. And then -- but overall, we're moving forward.
Michael Joseph Hickey
Chad, just a follow-up on that inorganic comment. Can you add any color there? Is that more -- I think kind of M&A on the theater side, are you starting to see more opportunities there? Or is it just sort of your comfort level now given the rebuilding of the strength in your business and your forward outlook that's making you more curious?
Chad M. Paris
Look, we're seeing a few things that we're taking a look at. Nothing to announce today. But you do start to get a better picture long term of what the pipeline looks like and things stabilizing. So we'll move on those things as opportunities become available, but nothing right now.
Operator
We now have Eric Wold of B. Riley.
Eric Christian Wold
I only have 2 questions. I'm going to bring down the average questions for caller pretty dramatically in a segment. So I guess 2 things. One, on the last question, you made Chad around with the CapEx and the push out of some hotel projects. Any more details on those? Are those completely being evaluated, so they may not be pushed into '24 they may not happen at all? Are they definitely pushing to 24? Are those related to the PIPs that you're considering on a couple of hotels, any details around those?
Chad M. Paris
Yes, it does relate to a PIP on one of the owned hotels, and it really is just us continuing to evaluate trying to make the returns make sense and make sure that strategically, as we think about the portfolio that this is the right move and then get the right local incentives to the extent that tax credits or other things are available for us. So we're working through it. It takes time, and it's a significant investment. So we want to be disciplined about it. And just because of the diligence that we're doing, it is something that's not going to get done this year. I know it's certainly an area of interest and we'll continue to provide updates on it as we go. But right now, it's looking like that's going to be 2024.
Eric Christian Wold
Is there a chance that it's not '24 not at all? Or are you committed to the project in some form?
Chad M. Paris
Yes. I mean, it's -- there is that chance. We are -- as I said, we're trying to evaluate it and get the math to make sense and get comfortable with the risk around the project. And we may conclude that there's a different strategic alternative that may make more sense. So it's -- obviously, it's something that we're spending a lot of time on to make sure that we get it right. And there are a number of different paths that this could go.
Eric Christian Wold
Got it. And then last question on labor. Maybe just update us on the labor situation in both segments. What are you seeing now? What kind of wage trends for theaters and hotels? And then where would you say you are relative to what you would consider kind of "Full employment" at an average theater and an average hotel?
Chad M. Paris
Yes. So the general labor environment is sort of a similar feel to what we saw last quarter in that the wage pressure has moderated a bit. And though it certainly is still there and call it kind of the mid-single-digit wage increases and availability of labor, we're able to fill those positions more easily. People are showing up instead of no shows after hires and examples like that. In the hotel business, we're operating the business with about 90% of the staffing or the headcount that we had pre-pandemic. It feels like it's stabilizing around there, and we're really focused on getting the customer service levels back up to deliver the level of service at our upper upscale properties that our customers expect and that is commanded by the rates that we're charging. So that continues to be an area of focus and doing more with less.
But theaters, it's -- there's a time so much variability from peak to trough and the staffing from week to week, particularly during our summer season. But that's got a similar feel to it. We're getting the heads that we need. There are some weeks where there's pinch points, but it's nothing like what we saw last year.
Operator
We now have Christopher Potter, Northern Border Investment.
Christopher K. Potter
It's great to see how well the 2 businesses are doing. I had a question about the convertible notes. And almost all of the significant short interest in the stock happened immediately after you issued those notes in early 2020 or late 2020, should I say. And since then, you can see the short interest rise and fall as the share price approaches or falls below the conversion price of those notes. And it's obvious that it's the convert holders hedging out their equity risk. My point is that the convert seems to be a serious -- seems to be serious pressure on the stock price as it almost always does with small companies and illiquid share structures. So I realize that you can extinguish or redeem those notes early and maybe that's not even your desire to do so, but you could certainly make it more painful for the shorts and less desirable to be short by raising your dividend. So I guess it's not really a question but more of a suggestion from a long term, optimistic about your prospects, shareholder.
Chad M. Paris
Yes, Chris. I appreciate the comments and the feedback. We're certainly aware of the dynamic that we get in the capital structure as a result of the convert. And at the moment, it's not our top priority with the capital structure, but it's something that we -- as we get closer to that maturity date, we continue to think about what that ultimate refinancing looks like. And as I said earlier, with respect to the dividend, and Greg commented it's an ongoing evaluation, but I understand the point.
Christopher K. Potter
And if you permit me to ask one other question. When you consider pricing trends in your hotel business and all of the improvements you've made in the last few years and all the improvements that are going to accrue as a result of your current capital program. Is there anything -- is there anything you can say about what the revenue-generating capacity of your hotel business will be in, say, 12 months relative to where it was in 2019?
Gregory S. Marcus
That I would argue that's more market dependent than renovation dependent. I mean it's because a lot of what we're doing is work that just happened -- that happened as part of the reinvestment cycle that we've extended because we've got behind and sort of it's catch-up capital investment. Yes, it does allow us to continue to lead our markets and to be aggressive, but I'm not sure I can put a percentage and say, okay, but this is going to really propel us a bigger number because again, we're trying to -- we look at say we don't do this what will happen.
Chad M. Paris
Right. I was just going to say, I think a bit more as a defensive investment of our market-leading positions for these hotels to keep them fresh to command market-leading rates and it's more maintenance capital, but it just happens in big cycles over a longer period of time. And we happen to be in a big part of the cycle right now with a few of our properties really because, as Greg just said, some of this was deferred due to the pandemic.
Operator
We now have Andrew Shapiro, Lawndale.
Andrew Evan Shapiro
Just a few questions. You mentioned closing some underperforming theaters. Were these money losers that will improve cash flow bottom line or just low cash flow generators that will improve your ROI metric?
Chad M. Paris
They were actually locations that are -- were cash flow negative. So these are some of our smaller locations and locations where maybe we had other presence. It's not -- I'll just tell you, Andrew, it's not game changing to the overall EBIT of the division. It's accretive, but it's -- these weren't huge cash flow losers.
Andrew Evan Shapiro
Yes. No, I appreciate that. I was just trying to understand the cutoffs or thresholds. And along the capital deployment, the governor -- with the government COVID venue grant money drying up, that went to a lot of these private cinema exhibitors, you in Reading and Cinemark and AMC didn't qualify for that grant money. But with that grant money now drying up, are you seeing some cinema acquisition opportunities as of yet?
Gregory S. Marcus
There's been a little bit of -- we've heard of a little bit of activity, but -- and people -- there's some stuff going on. It's not worth changing and I don't think there was -- there's one I know that I wouldn't say it's a lot of really high quality. But...
Andrew Evan Shapiro
So not a big wave yet for people who are going to wind up and help consolidate this industry that's still fragmented?
Gregory S. Marcus
Not yet.
Andrew Evan Shapiro
Is that right? Okay. And then I'm looking forward to seeing your TikTok. But with respect to promotion, obviously, the lack of promotion, it did impact Indiana Jones and Mission Impossible somewhat. And frankly, Barbenheimer might even be -- have become bigger if there was promotion. Are there things that both Marcus and more importantly, NATO let the National Cinema Day or National Cinema Week, ideas that were done on short notice last year, but with more advanced notice, I don't think the industry should roll that out during the success of Barbenheimer. But as things start slowing down end of August, is NATO thinking of doing something kind of industry-wide for a promotion? And alternatively, is there any talk amongst the studios who choose to release some movies in theaters but don't get to benefit from the promotion of their actors to potentially provide rent breaks to the exhibitors that would be tied to your local promotional efforts?
Gregory S. Marcus
That's a good idea. I hope you send it to them. No, I don't -- we haven't -- we aren't even there yet because...
Andrew Evan Shapiro
You have a direct line to them. I don't. Yes.
Gregory S. Marcus
Yes, but I...
Andrew Evan Shapiro
Direct line in to them, I don't. So if you like the idea, you should definitely feed it into them.
Gregory S. Marcus
The -- but we don't have, we're not there yet with that. There hasn't been enough movement yet at this point. And the issue -- look, we're trying to push them to be marketing more. I don't -- I guess if things are a little cyclical, I think one of the things that happened in the streaming, one of the things I thought was the allure streaming was they wouldn't have to market individual movies. And so probably some of that muscle strength has needed to be a little more reinvigorated as we go back to saying, you know what, really theatrical matters, and it's a really good marketing piece for all the ancillary markets as well.
We -- personally, I can't -- I will speak more to what's going on inside of our company. And we've had a very big push on showmanship. And that's what we call promoting in the theaters. And we, in the last year, I would say under -- really with Mark Graham's coming on and focusing on sort of bringing back some of the old playbook, we we've been very focused on trying to get those -- get activities inside the theaters. So the Barbie blowout parties we did, things like that around any kind of our event, special drinks for things.
I've seen in Indiana Jones. I was in one of our theaters, and there's Indiana Jones display of like archeological stuff is trying to create a more fun atmosphere that's we call showmanship and we've had a big push on that, and I'm seeing the benefits of it as we've gone on as of late. And that's -- as the TikTok's just another example of it. It's the market leader TikTok. Not mine, mind really doesn't have much on it, but Marcus leaders, which they've done a gradated again, they've done a fantastic job.
Andrew Evan Shapiro
And I think some of the feedback from the National Cinema Day was that it was kind of sprung on with short notice and that with some advanced planning, it could have been or be a much bigger activity. Have you heard anything via NATO about advanced planning for doing something this time with greater strategic thought?
Gregory S. Marcus
Look, NATO will announce whatever they're going to announce or they're going to on their schedule. I -- look, we're always talking and they go about what can we do to promote the industry and continue to rebuild this business. And I'll leave it at that.
Operator
At this time, it appears there are no questions. I'd like to turn the call back to Mr. Paris for any additional or closing moment.
Chad M. Paris
Great. Thank you. Well, we'd like to thank you once again for joining us today. We look forward to talking with you again in early November when we release our fiscal '23 third quarter results. Until then, thank you, and have a good day.
Operator
Thank you. This does conclude today's call. You may now disconnect your lines.
