In preparation for RCL's 3Q earnings release tomorrow, we’ve put together the recent pertinent forward looking company commentary.






  • “At the same time, our operating groups have been working diligently and effectively to control our costs. In previous calls, I've noted that we are seeing inflationary pressures in selected areas such as food and transportation expenses.  Unfortunately, I have to report that those pressures have not abated, and they continue to be a costly factor for us.  But our operating teams have been extremely effective in reducing our costs in other areas, which has allowed us to reduce total costs for the year by about 100 basis points.”
  • “Eastern Mediterranean itineraries will account for 18% of our total capacity in the third quarter and are unfortunately weighing down stronger yield performance by most of our other products.  Western Mediterranean sailings, in contrast, are expected to have slightly higher yields than last year, which is still encouraging, giving the large capacity increases in the region.”
  •  “The Caribbean, which represents our largest capacity allocation, will have yield improvements approaching double-digits.  We continue to make good progress in the southern hemisphere, which includes South America and Australia.  The Baltic and Alaska are the clear stars this year and likely benefited from some of the weakness in the Eastern Mediterranean.  Asia is the only other product in our portfolio that is expected to show declines this year. The redeployment effects resulting from the events in Japan are expected to linger through October, but the environment is clearly stabilized, and we remain very bullish on this region’s long-term prospects.
  • “Looking to our 2012 deployment, with the departure of Voyager of the Seas from the Mediterranean to China and Australia, and the arrival of Serenade of the Seas in the Baltic, we will somewhat shift the balance of our European presence from south to north.  While we would have done this irrespective of this year’s events, one implication of this set of moves will be to further diversify our product range, and lessen our exposure to any ongoing geopolitical risks that may affect the Mediterranean.”
  • “Later this year, we will revitalize Splendour of the Seas, and we are planning on continuing our revitalization program throughout the next several years.  With 15 ships in our Voyager, Radiance, and Vision classes, and a slower rate of new capacity coming online, we are committed to offering an outstanding and up-to-date Royal Caribbean experience on our older ship classes.”
  • “We’ve actually seen higher year-over-year bookings in July than we did before albeit it’s the new discounted rates that we implemented in late May and early June.”
  • [Mediterranean] “What we had said is that the pricing actions that we’ve taken have stimulated demand and the guidance that we’re putting out today is our best estimate of what’s going to happen in the market as we go forward.  But we have seen a nice pick-up in demand as a result of the pricing that we have there today.  We don’t particularly really care for the pricing, but we have seen a nice pick-up in the demand."

3Q 2011

  • “For all of our other major product groups, we are seeing very strong demand.  The Caribbean, Alaska, and the Baltic are all performing significantly better than last year and are all forecasted to generate solid double-digit yield improvements in the third quarter.”

4Q 2011/FY11/1Q 2012


  • “Interest expense for the year is currently expected to be between $355 million and $365 million, which is an increase of approximately $44 million, or $0.20 per share due to the new amortization schedule.
  • “Looking ahead, we’ll have all four Solstice-class ships operating in the Caribbean in this fall and winter, and we’ll have over 60% of our capacity in this market during this time period.  Since our cruises to the Caribbean book closer in than those to Europe and Alaska, we have less visibility to performance for this time period, but we are on pace to finish ahead of where we finished in Q4 2010 and Q1 2011.”
  • “Our non-Caribbean products, which represent 40% of our capacity for the period, are also performing well.  We are particularly pleased with the performance of our South American products and our soon-to-be Solsticeized Infinity, as well as the reintroduction of our brand in the Australia and New Zealand markets.”


  • “Based on current interest rates, our current fixed floating ratio in our existing loan structures, 2012 would also be approximately 4.4%.  Earnings per share for the year are now expected to be between $2.85 and $2.95.”
  • “It is very early in the selling cycle, and slightly less than a quarter of our inventory is sold at this point.  Our APDs and load factors are running ahead in all four quarters, but it is too early to provide any definitive yield guidance other than to say we expect improvements.”
  • “Early bookings for Europe are showing better load factors and APDs, but there is very limited visibility at this point.  It is encouraging to see the early order book, though, especially when you consider our comparables are prior to the turmoil in the Eastern Med.”
  • “Indications are, as Richard mentioned, next year that the pricing looks better, but we are still very, very early days when it comes to 2012 at this point.  But, I do want to stress that the Western Med has held up nicely, and we’ve actually seen some price increases.  It’s just that area that Brian described in the Eastern.”

AMZN: Buying On Sale

Keith doing some bargain hunting on AMZN. There’s clearly a lot of warranted concern about the cost side of the house. But when we see the market beat up a company with blue-sky growth opportunity that is investing in future, we get interested. Tack on a bullet proof brand name, huge barriers to entry, and the conceivability that incremental Retail Sales over the next 10 yrs could = AMZN’s sales growth, and we get downright excited.  The stock is a long way from its $191 TAIL line of support.

AMZN: Buying On Sale - AMZN 10 26 11

Booking It: SP500 Levels, Refreshed

POSITION: Long Consumer Discretionary (XLY), Short Consumer Staples (XLP)


After a 30 handle drop in the SP500, I’m booking it.


That doesn’t mean I’m bullish. It doesn’t mean I’m bearish. It doesn’t mean I can’t re-short it either. It just means that we’re holding my most immediate-term TRADE line of support at 1217.


Across our 3 risk management durations, here are the lines that matter most: 

  1. TAIL = 1266
  2. TREND = 1254
  3. TRADE = 1217 

So the intermediate-to-long-term picture still supports selling all rallies that extend themselves toward 1. And, until the immediate-term TRADE is no longer bullish (1217 support), I’ll respect whatever it is that the market sees coming next. As the Keynesian central planners have proven in the last 3 weeks, anything can happen.


If 1217 snaps, there is no support to 1182. So that’s where you’ll see me get as active as I was up at 1258. I’m comfortable being neutral right here and now with 1 Sector ETF on each side.




Keith R. McCullough
Chief Executive Officer


Booking It: SP500 Levels, Refreshed - SPX

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In preparation for HOT's 3Q earnings release tomorrow, we’ve put together the recent pertinent forward looking company commentary



"Our conviction [is] that the value of our company is set to rise with an unprecedented and seemingly unstoppable growth in the ranks of a new class of affluent global business and leisure travelers.  This major secular trend will continue to fuel demand for our brands well into the future.”



  • “Occupancies have now reached the point where we expect rates to rise further, and as you expect, higher revenues mean higher margins
  • “With supply already tight in the U.S. and Europe, we foresee strong rate increases not just for the rest of this year, but also for corporate rate negotiations for next year.”
  • “Our leisure business is doing quite well as high-end guests fare better than the economy as a whole.  The strength of our business will mean less inventory sold through costly channels such as OTAs.”
  • “Tour flows steadily improved up 4% and for the first time in nearly four years, realized price increased.  Our vacation ownership team continues to do a stellar job driving sales and generating cash from the business.  We expect more of the same for the coming years.”
  • “Our outlook for the rest of 2011 is robust with solid group and transient pays and with good prospects for rate and margin.  In line with our baseline scenario, we expect REVPAR growth of 7% to 9% in 2012. We’re sticking to our 2011 EBITDA range to of $975 million to $1 billion and I should add that’s in spite of asset sales, which will reduce full-year EBITDA by about $20 million.  We’re also raising our EPS range to $1.67 to $1.77.  We have maintained the outlook range we first provided late last year despite a $25 million to $30 million EBITDA hit from the unexpected events in North Africa and Japan and an additional $20 million in lost EBITDA from asset sales completed in Q2 which were not included in our outlook”
  • “At this point, there is no discernible impact on our business from the much-discussed soft patch in the U.S. economy or the debt limit shenanigans in Washington.  Transient revenue pace, both corporate and leisure, is up double digits in Q3.  Leads are up, group pace is gaining steam and booking windows are lengthening.  So far in July, the momentum of the second quarter has been sustained.  As we’ve said before, rate is a make or break variable this year.  Rate trends are improving as occupancies enter the 70s percent.  Like you, we remain on high alert for any signs of a change in trend.  Since we do not see any evidence of that, our outlook assumes the normal cyclical recovery we have been experiencing in lodging will continue”
  • “The Euro crisis has not impacted our business so far in Europe which is one of our strongest regions in the quarter.  In local currencies, system REVPAR in Europe was up 12%.  Rate was up 5.1% and occupancies up 4.5 points.”
  • “Tour flows have improved while close rates are stable.  Mixed management is improving price realization. Default rates continue to improve and are now back to 2007 levels.  We expect these trends to continue.  We remain focused on cash flow generation with a securitization plan in the fourth quarter.  SVO will generate over $150 million in cash this year and over $700 million in total in the last three years.”
  • “Our SG&A declined in the quarter.  This is partially due to lapping incentive compensation accruals from last year.  We also had some legal expenses last year.  These positives were offset by higher cost of non-U.S. overhead due to the weak dollar.  For the year, we continue to expect a 4% to 5% increase.”
  • “We are more comfortable with the middle of the EBITDA outlook range rather than the high end where many of your estimates currently are.”
  • “On the fee front, North Africa and Japan hurt 2011 management fees by as much as $18 million or the reduction of almost 300 basis points in year over year fee growth.  Two-thirds of the impact is on incentive fees and most significantly in the fourth quarter when these fees were anticipated.  As such, our Q4 fee growth rate will be lower than the trend we have seen in the first three quarters.  Some of this impact is offset by favorable currency translation due to the weak dollar of 200 basis points positive for the year.”
  • “At Bal Harbour, construction is proceeding on schedule.  We’re also on track to receive our TCO in Q4. Our plan is to start closing in November.  Meanwhile, the sales pace is good this year, particularly from Latin-American buyers. Square foot rates realized on new sales are at pre-crisis levels and deposits are much higher, more than 40%. We expect that there will be revenue profits and cash from Bal Harbour in the fourth quarter as we start closings, which are not currently in our outlook.
    • “We’re approaching close to 60% of the value that is already on the contract, and the value we provided you before is north of $1 billion in terms of the condos.  Now there will also be a hotel there that we intend to keep.  We have got deposits already for many of the sales done prior to this year in the 20% range and then more recently our deposits have been much higher than that…more than 40%.  Our indications are very good that the closing rates will be high… The good news is the square footage rates we’re selling at right now are at pre-crisis level….It does vary depending upon the units, but it’s well north of $1,000 and could be north of $1,300 and $1,400 depending upon the unit.”
  • “We expect that ratings will move probably toward the end of this year or into next year and our priority is we have maturities next year, roughly $600 million in public debt as well as there’s some debt on assets which is a small amount, maybe another $50 million or so that can be pre-paid.  So there’s about $615 in prepayments and in repayments that we can make next year.  So our priorities remain, as we’ve said before, healthy reinvestment in our business, reducing our debt levels, and then, of course, returning cash to shareholders”
  • “The group pace in 2012 continues to improve particularly as you’re seeing the booking window lengthen.  Today, it’s still volume driven.  Rate is marginally positive, but as Frits mentioned in his comments, rate on newly booked business in the second quarter was up 9% and for periods beyond 2012, we saw rate increases closer to 13%.  Another interesting thing that we saw during the second quarter was a pretty big shift in percentage of business being booked more than 12 months out.  So we saw very strong pickup in terms of the business being booked for 2013 and beyond.”
  • NOLs: “There’s a fair amount of work underway that we’re comfortable that we will use most if not all of it before the end of the year and essentially be able to realize the value as asset sales are done in the future”
  • “We see a market for 1s and 2s as we’ve been doing, but not a market for a mega sale”


In preparation for PNK's 3Q earnings release tomorrow, we’ve put together the recent pertinent forward looking company commentary.




  • Adding a 200-room hotel, a 10,000 square-foot event center and a covered parking structure to River City
  • Construction scheduled to begin in 1Q 2012 and will be complete in 2H 2013




  • “Regarding customer spend, we are seeing improvements across all our customer’s tiers with higher increases coming from our top three tiers on our players program.  Across all our customer tiers, we are seeing a shift in revenue as the customer base has responded to our shift into focus on profitable revenue, not just revenue.”
  • “The corporate expense included roughly – just shy of $200,000 in severance costs, which we included in those numbers.  And there was some increased corporate overhead associated with some litigation – legal expenses, for a run rate basis for folks out there that are projecting us, somewhere between the first quarter and second quarter it’s probably a decent run rate to use going forward.”
  • “We had $10 million drawn on the facility at the end of the quarter, that it should reflect the lower cost going forward.  We obviously expect to use that facility as we look to build out Baton Rouge and build out River Downs sometime in the next year.”
  • “Trips to Wynn Las Vegas and Royal Caribbean cruises are being made by our guests in the top three tiers. All of these targeted marketing initiatives resulted in double-digit increases in both trips.  In addition to play consolidation and increased trip frequency, reallocation or reinvestment to reward higher value guests led to an 80 basis point decline in marketing expense as a percent of revenue year-over-year.  It’s important to note, and as I mentioned during our last call, the new construct of mychoice with its aspirational rewards will be net neutral to our overall marketing expense.”
  • “We still plan on opening our Baton Rouge facility in the summer of 2012.  We are still expecting that we will be at budget of $357 million, although there is some additional pressure on us due to the delay that we’ve had...If there was a change in that, at this point, we don’t believe it would be significant.”
  • “Marketing is an effort that we have focused on over the last year plus and we’re still in the very early stages of implementing that. That is our largest arguably controllable expense, and so that we very much agree that we’re still in the – at worst, the middle innings.”
  • “We don’t think that Las Vegas is a market today that it make sense for us to be in, and we couldn’t be more pleased with our relationship with Wynn Resorts, and how that’s working out for us.”
  • [Baton Rouge] “We have changed the mix of our casino floor, both with better slot product, with a new poker room that really just recently opened up in the third quarter.”
  • “So far in Baton Rouge has been about $51 million or so this year. The real spend will really start increasing now that we’ve started, and accelerating to the fourth quarter. I would tell you the number is going to be roughly about 75% of what we have left to spend, will happen in the next year.”
  • Q: “On a run rate going forward, we’re still talking $2 million, $3 million a quarter of cash charges related to Atlantic City?”
    • A: At most.

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