Coming Attractions

Saudi Arabia Has Lifted a Ban on Movie Theaters, Creating a Building Frenzy

 
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Rendering of AMC's first movie theater in Saudi Arabia

PHOTO COURTESY AMC THEATERS

Project management is taking a starring role as Saudi Arabia lifts its 37-year ban on movie theaters. The move is part of Crown Prince Mohammed bin Salman's efforts to diversify the economy and modernize the country. And major theater companies are rushing to capitalize by launching projects to build new cinemas across the country.

“We think there is enormous pent-up demand to go and see a movie in a theater, to watch movies the way they're supposed to be seen, on the big screen,” AMC Entertainment CEO Adam Aron told CNBC.

AMC built Saudi Arabia's first new theater, which showed its first film in April. The company plans to open 40 theaters in 15 cities within five years and up to 100 theaters by 2030. Vox Cinemas was the second organization to get regulatory approval. It plans to invest an additional US$533.2 million on projects to develop 600 screens in the next five years. In all, the government aims to have nearly 350 theaters built by 2030, creating more than 30,000 jobs.

One way to speed up projects is to retrofit theaters in existing buildings rather than build from scratch, says Hammad Atassi, CEO of Cinemacity, Beirut, Lebanon. But he says it's difficult for organizations to find existing spaces that meet their unique requirements: large enough to seat thousands of patrons in multiple theaters, ceilings that are at least 10 meters (33 feet) or higher to accommodate movie screens, and at least 800 parking spaces. “We spent the last eight months going to every mall in the kingdom looking for locations,” he says.

His company also is navigating the permitting process, which is the greatest challenge project teams face, particularly for smaller theater operators, he says. “It's the most complicated part of the project planning process.”

License to View

To break ground, site owners must submit project plans and a business model to secure a government construction license. This includes documenting how the theater will generate revenue and how cultural requirements will be addressed. For instance, theaters must provide prayer spaces and offer separate auditoriums: one for men and another for women and families. Project teams will also need to secure separate licenses to operate, which adds time to the back end of the project, Mr. Atassi says.

In April, Cinemacity signed a business contract with CJ 4DPLEX to open three theater locations in Saudi Arabia for a planned expansion. However, the project team can't start construction until licenses are secured from the government. “We check in daily, but there have been many delays,” Mr. Atassi says.

Another obstacle is talent. The theater ban means project managers will have to ensure team members who have never worked on movie theater construction projects get a crash course in the essentials, such as acoustics and seating arrangements, and enhanced details, such as advanced signage and special lighting. “If you have knowledge of acoustics and a good project manager, it's not complicated to teach construction teams what to do,” Mr. Atassi says.

Mr. Atassi believes construction on the first theaters will be completed in eight to 10 months. Industry experts believe theaters could generate US$1 billion a year in annual box-office receipts, with ticket prices potentially exceeding US$30, according to Mr. Aron. That expected revenue will help justify fast-tracking construction if necessary, Mr. Atassi says.

“That level of income can cover a lot of worries.” So even if the project goes a little over budget, Mr. Atassi thinks the project appetite will persist. “We are just eager to move forward.”—Sarah Fister Gale

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