LEISURE LETTER (04/03/2014)

TICKERS:  GLPI, NYNY, HOT

EVENTS TO WATCH:  UPCOMING EARNINGS / CONFERENCES / RELEASES

Friday, April 4

  • March NFP report

Tuesday-Thursday, April 8-10

  • Mid-America Gaming Congress (Columbus, OH)

Wednesday, April 9

  • SHO Investor Day

Thursday, April 10

  • HST Investor Day

COMPANY NEWS

GLPI - announced that Curtis Magleby has joined the Company as Senior Vice President of Corporate Development.  Mr. Magleby will be responsible for the identification and acquisition of gaming assets across the United States.  

TAKEAWAY:  GLPI hires a former banker and capital markets professional to lead the acquisition effort.  Given the cycle, we'd expect acquisitions announcements in 90-120 days. 

NYNY - Empire Resorts, Inc. announced it commenced a rights offering for approximate gross proceeds of $15,390,000. Empire granted, at no charge to the holders of record of its common stock and Series B Preferred Stock on March 31, 2014, the record date for the rights offering, one non-transferable subscription right for each 15 shares of common stock owned, or into which the Series B Preferred Stock is convertible, as more fully described in the prospectus supplement relating to the rights offering. Each subscription right will entitle the holder to purchase one share of common stock at a subscription price of $6.25 per share. 

TAKEAWAY:  Building capital for what purpose? 

HOT - announced Achim Lenders, is the company’s new vice president for its Global Food and Beverage division. More than 2,000 F&B venues will fall under his purview.  Lenders was most recently in a similar role for Hyatt Hotels Corp. He will oversee the alignment and development of Starwood’s multibillion- dollar global food and beverage strategy, reporting to John Peyton, the company’s senior vice president for global initiatives.

TAKEAWAY:  Sounds to us like a focus on costs and margins across the "other hotel revenue" segment.  

INDUSTRY NEWS            

Malaysia and another PR nightmare - following the unsolved disappearance of Malaysia Airlines flight 370, armed kidnappers raided a dive resort in Malaysia’s eastern state of Sabah late on the night of April 2 and left with a 28 year-old female Chinese tourist and a Filipino hotel employee. 

TAKEAWAY:  We would not be surprised to see decreased tourist interest in Malaysia and greater Indonesia, which would be a negative for hotels in the region. 

Las Vegas named to final 6 for RNC convention - Las Vegas is one of six cities that have made the next cut as judged by a 13-member site selection committee that heard bidder presentations last month in Washington.  Besides Las Vegas, cities still in are Dallas, Kansas City, Denver, Cleveland and Cincinnati while Phoenix and Columbus, Ohio, were eliminated. The RNC indicated a site decision is expected in late summer or in the fall. The party is considering the weeks of June 27 or July 18 for the 2016 convention.

TAKEAWAY:  As we said last month and we continue to believe Las Vegas is the 3:2 favorite.

Palm Hotel Las Vegas - to close Moon Nightclub for a new, not yet revealed, nightlife concept.  

TAKEAWAY:  Properties need to constantly reinvent to keep the buzz alive, which in turn, keeps patrons visiting = $$.

A hotel merger - very quietly and nearly dismissed as an April Fool’s joke, we hear hotel chatter that a merger between Four Seasons Hotels and Fairmont Raffles Hotels International is in the works.  We also read that Prince Alwaleed bin Talal, has suggested such an event.  The Prince’s Kingdom Holding has major equity interests in both hotel firms. 

TAKEAWAY:  While both private, M&A would be good for the lodging stocks. 

Hotel M&A 

  • FCH: Felcor sold Doubletree Suites in Charlotte for $37MM. Average price per key (APPK): $178k
  • Holloway Lodging Corporation has sold the Holiday Inn Express(R) hotel located in Kamloops, BC. Holloway realized cash proceeds from the sale of $8.9 million, representing a cap rate of approximately 7.6%. APPK: $119k
  • Carey Watermark Investors acquires Hyatt Place Austin Downtown for $87MM. APPK: $294k 
  • In 2013, $16.9 billion in hotel transactions occurred in the United States, according to the Hotel Transaction Almanac, a report from STR Analytics. This represents an increase of nearly $4.0 billion in asset trades compared to the US$13.0 billion that occurred in 2012.

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.