LEISURE LETTER (04/17/2014)



Thursday, April 17

  • Iowa Racing & Gaming Commission Meeting - scheduled to decide whether it will grant Cedar Crossing Casino a state gaming license, which would make the facility the 19th casino in Iowa.
  • BX 1Q14 Earnings – 11 am Conf Call PIN 149 943 55 – lodging comments & color?
  • TZOO  Earnings – 11 am Con Call
  • DIS – Investor Day – cruise & parks commentary?

Monday, April 21

  • Genting Singapore – Annual General Meeting

Tuesday, April 22

  • IGT FQ2 earnings:  5 p.m. Conf Call   , Passcode: IGT

Thursday, April 24

  • WYN Q1 earnings - 8:30 a.m. , Passcode: Wyndham
  • LHO Q1 earnings - 9:30 a.m.
  • PENN Q1 earnings - 10 a.m.
  • HOT Q1 earnings - 10:30 a.m. , Passcode: 12049644
  • LVS Q1 earnings - 4:30 p.m. ; PW: 18236529

Friday, April 25

  • PEB Q1 earnings – 9:00 a.m. ,



MGM - Company executives are asking the Massachusetts Gaming Commission to delay the formal award of the license, currently planned for June, because the license award would trigger $200 million in obligations for the company.  According to MGM, the company does not want to pay the fees (including, $85 million state licensing fee, which by law must be paid within 30 days of the commission making the award) while the state casino law is under the threat of a possible repeal.

TAKEAWAY: MA living up to its reputation...


PENN - PENN and the Cordish Cos., which are competing for Philadelphia's second casino license, joined forces to pursue a license in New York's Hudson Valley-Catskills region. The companies said they would propose a $750 million casino and resort in South Blooming Grove, a small town in Orange County. The casino would operate under the Cordish's Live! brand.

TAKEAWAY: Need to maintain the growth story... but what happens in 7 years when the Greater NYC becomes open to new casino development?  Not our favorite idea.


PENN - Construction of Hollywood Casino Jamul is facing a construction delay as a result of a lawsuit claiming ground excavated for the casino was relocated and illegally dumped on an Indian burial ground - thus desecrating the site.

TAKEAWAY:  A potential blow to a big part of PENN's growth story.


RCL - Royal Caribbean International reports will have the Quantum of the Seas homeport in Shanghai, China effective May 2015, following her inaugural winter season sailing out of Cape Liberty (Bayonne, N.J.).  In China, Quantum will join Mariner of the Seas and Voyager of the Seas in Asia, increasing the company's capacity in the region by 66%. 


Anthem of the Seas will debut in Southampton, England in April 2015 first and then move to New York for the winter.  This is a change for Anthem of the Seas since she was previously planned to be sailing out of Fort Lauderdale in Winter 2015. 

TAKEAWAY:  The Quantum decision is a bold but risky one.


Macau - the Legislative Assembly again voted against a bill to allow unions to organize strikes and provide workers legal advice.  This was the fifth time such legislation was voted down. 

TAKEAWAY:  We find it peculiar the Unions would have any influence with casino workers when the casino operators have repeatedly and annually raised worker wages.  


Cosmopolitan to be sold - Deutsche Bank is in talks with potential buyers of the Cosmopolitan resort in Las Vegas.  The bank is seeking more than $2 billion and has attracted at least four possible bidders.  However, other bidders believe the value is closer to $1.5 billion.

TAKEAWAY:  Given the size, location and issues, could Barry Sternlicht's Starwood Capital Group be the odds on favored buyer?  We are hearing the leading buyer has ties to USA hotel interests on the East Coast and shopping centers on the West Coast.  $2 billion could be a stretch.


Illinois Gaming Expansion – the General Assembly will again consider legislation to expand commercial gaming from 10 riverboat casinos and thousands of local video slot machines spread across the state with the expansion of four new casinos (Lake County, the south suburbs, Danville and Rockford) as well as the addition of slot machines at horse racing tracks across the state. 

TAKEAWAY:  Will this ever pass?


Massachusetts Gaming - the Massachusetts Gaming Commission on Thursday delayed the second-phase application deadline for commercial casino proposals in Southeastern Massachusetts to at least Sept. 23 – which will likely postpone the award of a casino license in Greater Boston till at least August and delay a license for Southeastern Massachusetts even longer, to February or later. The exact application deadline will likely be set at the Commission’s next meeting, when it is also expected to decide whether to waive the $500 million minimum investment requirement in an effort to encourage more applications. Such moves would delay the license award date until 2015.

TAKEAWAY:  More delays, which has become the norm in Massachusetts.


Atlantic City - Hoping to lure new carriers to Atlantic City International Airport, the Casino Reinvestment Development Authority voted to devote funding to a risk-abatement program, allowing airlines to compete for up to $5 million in total grant funding (subsidies). 

TAKEAWAY:  Need to promote new airline lift; we remain skeptical on AC's turnaround.


Atlantic City - A State of New Jersey report that preceded the creation of the Tourism District called for increasing convention business 30% per year for five years.  Data released this week show that in 1Q 2014, the number of shows hosted at the Atlantic City Convention Center remained flat compared to the first quarter of 2013, but the number of delegates who attended shows rose 9% to 21,219.

TAKEAWAY:  AC still a tough draw.


Hotel CMBS Lending - Deutsche Bank AG will lend $1.9 billion to Kyo-ya Hotels & Resorts LP, which owns five HOT hotels in Hawaii. Deutsche Bank will package the debt into about $1.5 billion of commercial-mortgage bonds, and sell the rest of the debt to investors as mezzanine loans.  The Kyo-ya portfolio includes the Sheraton Waikiki, The Royal Hawaiian, the Westin Moana Surfrider, Sheraton Princess Kaiulani and the Sheraton Maui, which are all managed by HOT.

TAKEAWAY:  The availability of securitized debt is a positive for hotel transactions as Starwood looks to continue selling assets. 


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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