LEISURE LETTER (04/10/2014)

TICKERS: PNK, RHP, NCLH, MTN

 

EVENTS TO WATCH:  UPCOMING EARNINGS / CONFERENCES / RELEASES

Thursday, April 10

Mid-America Gaming Congress (Columbus, OH)

 

Thursday, April 10

HST Investor Day

 

COMPANY NEWS

PNK - CEO Anthony Sanfilippo and CFO Carlos Ruisanchez met with Albany Mayor Kathy Sheehan and toured a proposed site in the city adjacent to Exit 23 on the New York Thruway, neighboring the town of Bethlehem.  

TAKEAWAY: PNK’s intentions are unclear and whether the company is looking for a management contract or an all-inclusive management and ownership opportunity. Regardless the direction, a new growth strategy is needed.

  

RHP – Judge Norman Haglund, a Denver District Court judge, on Wednesday dismissed a lawsuit for lack of standing filed by a group hotels (including the Curtis, the Broadmoor, the Brown Palace, the JW Marriott Denver Cherry Creek, the Courtyard Denver Downtown, the Magnolia, the Oxford and the Westin Westminster hotels) against Aurora's Gaylord Rockies Hotel and Conference Center.  The dismissal cleared the path for the 1,500-room hotel and water park near Denver International Airport.  The plaintiffs sought to overturn the $81.4 million award to Aurora under the Regional Tourism Act by the Colorado Economic Development Commission in 2012.  Depending on the outcome of another lawsuit, construction could start on the $750 million to $850 million Gaylord project sometime next year, with an opening in 2017. The property will be located on 64th Avenue between Tower Road and E-470.

TAKEAWAY: Another Gaylord Conference Center for both RHP and MAR in 2017 - a year in which the US will experience a large increase in hotel rooms with more than 3,500 also at Genting's RWLV.

 

SHO - held an investor day yesterday by the senior management team highlighted the significantly lower leverage (debt plus preferreds divided by LTM EBITDA) >8x to <5x today and a goal of <3x in 3 years) as well as a more focused and improved hotel portfolio. Q1 RevPAR guidance was raised.

TAKEAWAY: Phase 1 of the restructuring is complete, Phase 2 which includes driving room and F&B revenues is more difficult.

 

NCLH - canceled port stops in Roatan, Honduras this week after a crew member from Norwegian Pearl was killed during an attempted robbery

TAKEAWAY: More negative press associated with the cruise industry.

 

MTN - in a bizarre twist to the Park City Mountain Resort-Talisker lawsuit, PCMR filed documents with the court wherein PCMR indicated it would dismantle and remove most of the area's chair lifts except for Jupiter, Thaynes, and Motherlode.  Talisker's eviction notice to PCMR maintains that structures and improvements "that are affixed" to the property belong to Talisker. PCMR disagrees and asserted they can remove most of the lifts because although the ski lift towers are bolted to concrete footings, they are not "otherwise affixed to the land."

TAKEAWAY: Sounds like capex will be higher than MTN's forecast.

 

INDUSTRY NEWS

US Gaming Industry - the United States commercial casino industry generated $37.8 billion in 2013, expanding by 1.3 percent. The growth in gaming revenue was the result of gaming expansion in new markets, but was tempered by existing markets experiencing declining revenue and market cannibalization.  In 2013, there were 23 states with commercial gaming operations. Of these states, six expanded gaming in 2013. Gaming expansion is defined as the opening of new casinos or expanding casino game offerings, such as table games.

TAKEAWAY:  New property openings continue to pressure ROIC. 

  

Revel Atlantic City - The city's main casino workers' union, Local 54 of the Unite-HERE, issued a report on Wednesday claiming Revel Casino Hotel is worth between $25 million and $73 million.based on Revel's finances through publicly available documents versus $2.4 billion cost to build.  Revel is presently seeking a buyer. Presently, the casino, which is seeking a buyer.

TAKEAWAY: Yeah, yeah we get it. Revel was a disaster.

 

Las Vegas Valley feeling ill - Southern Nevada Health District officials report they have seen an increase in cases Norovirus , the gastrointestinal illness, over the past few weeks. Health officials said an investigation began March 28 when people at a conference at the Planet Hollywood started feeling unwell.

TAKEAWAY: Norovirus not just for cruise ships. 

 

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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