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Let Lifestyles Entertain You

BY Debra Hazel

Despite the ups and downs of the film industry, nothing beats an old-fashioned night at the movies, at least according to lifestyle center developers. A state-of-the-art cinema remains a favored entertainment anchor for their projects.

However, the definition of entertainment continues to evolve for these town center-like complexes, and now includes amenities such as fountains and playgrounds, and even certain retailers themselves.

“People are spending more on experience than on ‘things,’” said Theodore Amenta, president of A & Co., the New York City-based developer of the Shops at Atlas Park lifestyle center in Queens, N.Y. “In the United States, the cost of women’s apparel is flat or going down. But the cost of experiences, such as health are or legal processes, is going up dramatically.”

To some degree, the lifestyle center is itself an evolution of the entertainment-oriented projects of the early 1990s. Though many of those projects were less than successful, developers that had previously scorned heaters as parking hogs and attracting on-shoppers saw that, in fact, they kept shoppers at their projects longer, and attracted an evening user who might otherwise stay at home.

They remain important to the mix, even as the business faces increasing competition from home-entertainment options such as digital cable, video on demand and film downloads.

“Theaters generate 650,000 to 1 million visits a year. You’re trying to maintain loyalty and bring back shoppers for something besides apparel,” said Kevin Polston, senior VP of retail for Cousins Properties, Atlanta.

To compete, theater operators are augmenting experience beyond just the film, adding arcades and more sophisticated dining. Some are adding mini-theaters more like a large home theater or a Hollywood mogul-style screening room to create a more intimate experience, he said.

Restaurants also joined the mix to create the full dinner-and-a-movie experience. At first, A & Co.’s menta noted, the restaurants usually were more family-oriented. In time, though, finer dining has joined the lifestyle center mix, creating an evening out by themselves. The mix, however, is critical, with a combination of full service and fast food, different ethnic cuisines and price points preferred.

The types of restaurants included tie in closely with the overall image of the project. “A Chili’s is on one level, a Fleming’s s another,” said Joshua D. Poag, executive VP and CFO of format pioneer Poag & McEwen Lifestyle Centers, Memphis. “And a McDonald’s or a Dairy Queen are yet another. That’s where the image of the center resides.”

But other entertainment venues increasingly are coming into play. Other possibilities such as Dave & Buster’s can work, largely in tourist or resort areas. Bowling alleys, once likely scorned as too downscale for these projects, have improved their facilities and image.

“Lucky Strike has taken bowling and created a culture around it,” Cousins’ Polston said. Spas that offer services from traditional hair care to massages also are a possibility, as are medispas, which integrate some medical procedures such as laser surgery into the mix.

Live-performance theaters and art galleries do not provide the same regular draw as a cinema, and instead serve to position a project with a particular demographic. Amphitheaters, on the other hand, also are becoming increasingly popular, a way to host small performances and events comfortably. They also can help to create a closer bond with the community.

“At Del Monte Center, we have summertime theater, and readings,” said John Chamberlain, CEO of San Diego-based American Assets, Inc., which is redeveloping Del Monte Center in Monterey, Calif., into a lifestyle project. “But it has to be meaningful. It can’t just be a jazz band on Friday nights, but when a school has a performance, it’s wonderful.”

But it’s not the same draw as a cinema, doing only 15% to 20% of the traffic of a movie theater.

Parks, too, can help unite a community through entertainment.

“Our 2 1/4-acre park at Atlas Park is open to the public. It’s a programmed space, managed with activities and a cafe,” A & Co.’s Amenta said.

Added American Assets’ Chamberlain, “We’re using playgrounds, and carousels are becoming more and more popular in Southern California,” he said. “In warmer climates, we see interactive fountains.”

Fountains are moving to chillier areas, too.

“At the Shops at Saucon Valley near Allentown, Pa., we have a pop-jet fountain and a gazebo with a fireplace,” Poag of Poag & McEwen said. “To see kids wearing their full winter coats and itching to jump into the fountains was wonderful.”

Children’s play areas have become popular, as well, giving the whole family an entertainment component. Entertainment must be carefully thought out, however, to avoid mixing messages at a center, or causing logistical problems. A Dave & Buster’s, for example, should not be used as a de facto teenager babysitting service, Chamberlain advised. And even restaurants can be overdone, creating parking and financial problems.

“On the financial feasibility side, you must balance these things,” Amenta noted. “You don’t make money on the big restaurants, but you do make money on the small ones.”

Other large-space users such as auto racetracks likely are impractical, as well.

“There are people who have tried to take retail to the next level,” Chamberlain said. “But do we need to build indoor ski runs? I don’t think so.”

Ultimately, perhaps the greatest entertainment element is the retail tenant mix. Even some retailers have become experiential in nature, becoming an entertainment element themselves.

“A lifestyle center is entertainment for women. Stores like L.L. Bean are entertainment for the male customer,” Poag said. Bass Pro Shops and Cabela’s, by allowing the customer to test the merchandise, also provide entertainment.

And ultimately, entertainment is about service and experience, regardless of the tenant.

“An IKEA sells more than furniture; it sells a Scandinavian point of view. It’s an experience,” Cousins’ Polston said. “Dean & DeLuca is more than just the food. It comes back to customer service. It’s about removing yourself from the daily routine. Where entertainment starts and stops, I don’t know. It’s the experience that matters.”

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Home Depot Projects Lower Profit in 2007

BY CSA STAFF

Atlanta, The Home Depot Inc. said Wednesday it will pump $2.2 billion into improving its business this year even as it expects lower earnings and slim sales growth. Home Depot said that for fiscal 2007 it expects sales growth in the range of flat to an increase of 2%, a decline in comp-store sales in the middle single digit percentages and an earnings per share decline of 4% to 9%.

Including the effect of a 53rd week in its fiscal year, consolidated sales are expected to increase by 1% to 2%, and earnings per share are expected to decline by 3% to 8%, Home Depot said.

CEO Frank Blake told investors at Wednesday’s conference that like last year, “2007 also will be a difficult year.” But he said it will be a year of focus on Home Depot’s priorities and a year with “hopefully less noise.”

The “noise” was apparently a reference to the investor furor over former CEO Bob Nardelli’s hefty compensation in light of the company’s lagging stock price. Nardelli resigned in early January after six years at the helm of the company. He took with him a severance package valued at $210 million.

To improve its business, Home Depot said it will invest $2.2 billion this fiscal year in key priorities, including the opening of 115 stores. The investment includes $1.6 billion in capital spending and $600 million in expense.

Home Depot said it will recruit master trade specialists, simplify its staffing model, use more technology to aid customer service, and redesign employee compensation and reward plans. It also will invest in new merchandise and review its pricing strategies. Additionally, the chain will spend money on customer loyalty programs, direct-ship programs, credit programs and other specialty sales initiatives.

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Federated Plans Name Change

BY CSA STAFF

New York City, Federated Department Stores on Tuesday said it would ask shareholders to approve changing the company’s corporate name to Macy’s Group Inc. A vote to amend the corporation’s charter to accommodate the new name will be held in conjunction with Federated’s annual meeting on May 18. If approved, the company will be known as Macy’s Group Inc., effective June 1. The move comes on the heels of the company changing most of its store nameplates to Macy’s.

“Macy’s Group is the appropriate name for our company, given that about 90% of our sales involve the Macy’s brand. That said, Bloomingdale’s is—and will remain—a very important part of our company,” said Terry J. Lundgren, Federated’s chief executive. Federated Department Stores also said stronger sales at established stores and lower costs drove a 5% rise in fourth-quarter earnings. For the quarter ended Feb. 3, net income rose to $733 million from $699 million the prior-year period. Sales fell 4% to $9.16 billion from $9.57 billion, as the company shuttered 80 “duplicative” store locations. Comp-store sales rose 6.1% in the quarter.

During the quarter, Federated lowered its selling, general and administrative costs 11% to $2.31 billion.

The company also announced a $4 billion increase to its stock buyback program and said it will immediately repurchase 45 million shares for $2 billion under the plan.

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