By Jasudha Kirpalani

MUMBAI (Reuters) - Cinema chains are opening luxury halls in large cities to differentiate their offering to increase brand recall in crowding markets and lure the indulgent and well-heeled film buff, industry players said.

Exclusive halls with recliner seats and in-seat service complete with a lounge would command ticket prices 2-3 times higher and generate more revenue from food and drinks, they said.

"You have to drive differentiation. Where do you go next in the cinema level?" asked Gautam Dutta, chief executive of PVR Ltd's sales and marketing division. He also views other leisure activities as competition.

PVR, an early entrant on the luxury hall scene, began with its first 'Gold Class' screen in Bangalore in 2004 and plans four more to take its total to eight by December.

In India's newly-bustling cities these halls are becoming choice venues for corporate and private parties. These clients crave space and exclusivity the halls, housing about a third or less patrons than a regular one, provide, cinema operators said.

Students also lap up the luxury of early shows on weekdays when fares are lower, enabling these premium halls to clock an occupancy rate of 65-70 percent compared with half that for a regular one, they add.

However, brand building in a very competitive market seems to be the underlying theme for luxury halls with revenue not a prime consideration, at least for now.

"Eventually, capacities drive revenues. It is still left to the main cinemas to drive revenues," said PVR's Dutta.

"Occupancies may go down in metros because the multiplexes are coming up in close vicinity of one another," said Viraj Nadkarni, an analyst at Finquest. "Branding is important."

Cinema operators said they made a cautious entry into the segment a couple of years ago offering only few rows of recliner seats with food service in existing halls. The steadily rising demand in large cities prompted some to move to luxury halls.

Riding on the success of its recliner seats in some back rows in its halls, Shringar is adding a luxury screen in Kolkata.

"It wasn't originally there because the market wasn't ready for 'Gold Class'," Shravan Shroff, managing director of Shringar Cinemas Ltd, said.

After setting up and filling such halls in large cities, operators are now assessing the enthusiasm for these in smaller towns.

Mixed-seaters could be the way to go in smaller towns and cities, Mayur Parekh, General Manager-Finance and Accounts of Cinemax India Ltd, said. Cinemax's fourth 'Red Lounge'is coming up in Nagpur.

"Maybe one row of recliners might work," he said. "Red Lounge may be a novelty for one time but not on a regular basis. I cannot have a dedicated high-end recliner theatre."

Adlabs Cinemas, part of Adlabs Films Ltd, opened an 'Ebony Lounge' in Mumbai about a year ago, and in June a mixed seater that includes luxury seats and lounge area in Ahmedabad. Inox Leisure Ltd also has mixed-seat halls.