THE LEISURE LETTER (3/12/2014)

Tickers:  NCLH, CCL

EVENTS TO WATCH:  UPCOMING EARNINGS/CONFERENCES 

 

TODAY

  • SGMS F4Q 2013 conference call:  5:00 pm (pw: 36357318)
  • STN F4Q 2013 conference call: 4:30pm 
  • MTN FY2Q 2014 conference call:  4:30 pm
  • JP Morgan Gaming, Lodging, Restaurant & Leisure Forum
    • HOT, STAY, WYN, MGM, HLT, BYD, BEE, WYNN, LVS, MGAM, RHP, HST, IGT

Thursday, March 13

  • JP Morgan Gaming, Lodging, Restaurant & Leisure Forum
    • FCH, PNK, PENN, BYI, CCL, SGMS, GLPI, SHO, MCRI

Monday-Thursday, March 10-13

  • 2014 Cruise Shipping Miami Conference (CSM)

Friday, March 14

  • Hyatt Investor Day

COMPANY NEWS

NCLH (CSM):  Norwegian Escape home base in Miami - will sail Eastern Caribbean itineraries starting 11/14/2015.  Harvest Caye in Belize on track for 2015. 

 

Takeaway:  Isn't Miami and the Caribbean crowded enough?

 

NCLH (CSM):  The rates for near-term Caribbean continue to be pressured, and it appears that when others are troubled, Norwegian’s rates suffer in tandem, though perhaps it could be a temporary situation because Norwegian’s increasing Caribbean capacity is happening so quickly.  Asked if Norwegian gained or lost from Carnival's woes last year, CEO Sheehan said, "We're competing with two big public companies that have multiple brands. In the case of Carnival Corp., there are 10 or 11  brands, so we never really know exactly what's going on in a particular brand."  Sheehan stressed the importance of attracting the 1st time cruiser -  "At the end of the day, when you think about that last third, or whatever the percentage that people say is new to cruising piece, maybe that was a little bit more [for us due to the woes of] Carnival."

 

Takeaway:  Our pricing survey detected price discounting by NCLH in the Caribbean a couple of months ago. This remains an overhang on the company.  

 

CCL (CSM):  Costa to add a second seasonal ship in Miami Miami Herald

Costa Cruises will double its presence in Miami at the end of the year, sailing two ships in the Caribbean - Costa Luminosa and Costa Mediterranea.  Scott Knutson, vice president of sales and marketing for Costa Cruises North America, said the demand was strong enough to bring more capacity over.  “We’ve had nice momentum here in the North American market,” he said. “I think that’s been recognized.”

 

Takeaway:  Costa is having a decent year in Europe.  Positive commentary for its small Caribbean presence is encouraging for the brand.

 

NCLH:  Israeli tourists on cruise prevented from disembarking in Tunis Jerusalem Post

Israeli tourists traveling on Norwegian Jade were prevented from disembarking at a stop at the Port of Tunis.  As a result of this incident, NCLH has dropped Tunisia from its itineraries and will not return.

INDUSTRY

Ukraine & Russia Tensions (CSM):  RCL CEO Richard Fain said while many customers aren’t concerned, “some customers” booked on Baltic voyages visiting St. Petersburg were indeed calling to express concern or ask to make changes to their booking.  At present, there are no changes in his brands’ itineraries, though.

 

Takeaway:  While the Baltic/Black Sea itineraries are a small part of European cruise itineraries, they will still have an impact on cruiser sentiment and should not be ignored.

 

Macau – United States Department of State’s wants Macau to lower the threshold for reporting gaming-related financial transactions from US$62,500 to US$3,000.  The US Department of State also wants increased oversight and regulation of junkets in an effort to reduce potential money laundering activities.

 

Takeaway:  Political payback for Steve and Sheldon?  Maybe.  It's not like US government agencies haven't been used against political enemies in the [recent] past (cough, cough, IRS, cough, cough).  Macau can tell the US to pound sand and probably will.  It is something to monitor, however, as this would not be good for the Operators and Junkets for obvious reasons.

 

Delaware – The Lottery and Gaming Commission recommended financial relief to Delaware’s casinos including a decrease in table gaming tax from 29.4% to 15%, elimination of the annual table game fee, and sharing the cost of slot machines.  The recommendations were sent to Delaware’s General Assembly for debate and vote.

 

Takeaway:  Another gaming jurisdiction under pressure.  Would be good for DDE.

 

Las Vegas – Culinary Workers Union Local 226 continue to picketed outside Strip properties ahead of a March 20 vote that would give the union the right to call a strike.  Culinary Workers Union Local 226 is pushing about a dozen of its employers to contribute more money to its health insurance fund to cover rising Affordable Care Act costs.  Local 226 it is pressing its employers to boost their contributions by 35 cents per worker in the first year, 50 cents in the second and 55 cents in the third. So far, the union has reached agreement with five casino operators, leaving 7,000 union members with expiring contracts.

 

Takeaways:  Can't really keep modelling flat costs for Vegas operators.

 

MACRO

Hedgeye remains negative on consumer spending and believes in more inflation.  Following  a great call on rising housing prices, the Hedgeye Macro/Financials team is turning decidedly less positive. 

 

Takeaway:  We’ve found housing prices to be the single most significant factor in driving gaming revenues over the past 20 years in virtually all gaming markets across the US.

 


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