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Cineworld could be boosted by cutting online booking fee, says broker

Peel Hunt believes cinema group could make online booking cheaper, and also learn more about its customers

One of the irritating things about buying cinema tickets online rather than at the box office is the hefty booking fee the chains slap on for the privilege.

But could that be about to change? In the case of the Cineworld group, analysts at Peel Hunt believe it could. They point out that the group has stopped this practice in Scotland, and could be planning to extend this across the rest of the country. Not only will this benefit consumers, Peel Hunt also believes such a move would give Cineworld some valuable insights into its customers:

Like other cinema operators, Cineworld knows relatively little about the vast majority of its customers that pass through its doors. Furthermore, the vast majority of tickets are sold just hours before the film starts. Part of the problem has been that customers are actually penalised for buying tickets online (which incurs an additional booking fee). As a consequence, just 10% or so of tickets are sold via the internet.

However, in Scotland the group has dropped the booking fee, and it is now cheaper to book online. When the group reports in March, we expect management to announce it is now rolling this out across the rest of the UK.

By driving online sales, Cineworld will know so much more about its customers. Not only will the group be able to offer special promotions (meal deals, music downloads, etc) but in theory customers will spend less time queuing for their ticket and have more time to spend at the retail points. With nearly 50m admissions, the potential upside in additional spend is substantial.

This is one of the reasons Peel Hunt is positive about the company’s prospects. It also expects the group to see a lift in advertising when all its cinemas are fully digitised.

But there is a note of caution in terms of the actual box office performance at the moment. Revenues are down around 20% so far this year, with 2011 boosted by a strong performance from The King’s Speech and 2010 lifted by Avatar. The pipeline looks quite strong, with James Bond, the Avengers, Batman and Spiderman all due this year, but there are also the distractions of Euro 2012 and the London Olympics:

Investors should not be surprised if they start reading negative headlines in the press regarding the current performance of the UK box office. If this does impact the price, then we would view this as an excellent buying opportunity.

Shares in Cineworld, which said in early January its results were likely to be in line with market expectations, are currently 1p higher at 215p. © 2012 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds