LEISURE LETTER (04/23/2014)



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.
  • RCL Q1 earnings - 10 a.m.
  • HOT Q1 earnings - 10:30 a.m. , Passcode: 12049644
  • LVS Q1 earnings - 4:30 p.m. ; PW: 18236529
  • LA March revenues out

Friday, April 25

  • PEB Q1 earnings – 9:00 a.m.

Monday, April 28

  • CHH Q1 earnings – 10:00 a.m. , Passcode: 70683172

Tuesday, April 29

  • NCLH Q1 earnings
  • VAC Q1 earnings – 10:00 a.m. , Passcode: 4679876
  • MGM Q1 earnings – 11:00 a.m. , Passcode: 20455736


MGM – A group including MGM Resorts, Cirque de Soliel, Ron Burkle, and Roberto Medina announced plans to build a 33-acre open-air music venue named “City of Rock” and built between the Circus Circus resort and Sahara Avenue on the Las Vegas Strip.  The venue is planned to host a four-day Rock in Rio USA festival beginning in May 2015.  MGM will invest $20 million to develop infrastructure and a five stage, 80,000 patron capacity venue which is forecast to draw 300,000 people over the four days music festival.

Takeaway:  It is said, mockery is the greatest form of flattery and such is the case because Las Vegas already has Electric Daisy, iHeartRadio Music Festival, as well as Life is Beautiful.


LVS – Cotai Strip Resorts Macao, including The Venetian® Macao; Conrad Macao, Cotai Central; Sheraton Macao Hotel, Cotai Central; and Holiday Inn Macao Cotai Central, is launching an Anniversary 5-Day Sale promotion from April 22 until 10 p.m. April 26, 2014 (Macao time), offering an appealing discount of 35% of each participating hotel’s room rate, valid for stays between April 22 and July 10, 2014.

Takeaway:  The only company with enough rooms to actually run a promo.


Galaxy (Macau Business) announced the refurbished Grand Waldo will reopen in early 2015.  What is unclear is whether the property would retain any gaming amenities. 

Takeaway:  The gaming tables have already been moved.


Summit Ascent – plans to increase its interest in the Vladivostok casino project from 45% to 60% with the purchase of half of Mr. Oleg Drozdov’s 30% interest in the development.  Mr. Drozdov is Summit’s local development partners.  Fitch Enterprises will continue to own 20%, while Melco International will continue to own 5% and Mr. Drozdov will own 15%.  The first phase of the planned casino-resort in Primorye Russia is scheduled to open by the end of this year.

Takeaway:  Lawrence Ho (Summit) continues to build his own empire.



Macau to review VIP rule – Chief Executive Fernando Chui Sai On has said the government will review the rules governing VIP gaming rooms when it negotiates the renewal of gaming licences in 2015-2016. The Chief Executive conveyed 2015-16 is “an appropriate time” for the city to discuss the renewal of the six gaming concessions and sub-concessions, which will expire from 2020 to 2022.                 

Takeaway: The concession renewal discussions are earlier than we expected.  Hard to imagine that discussions will yield anything positive for the concessionaires.  Status quo is the best outcome.


Macau Junket Crackdown (Macau Daily Times) as a follow up to the comments on March 17 and the arrest of a person linked to junket operator Neptune, it is now known the person arrested was Ng Chor Har, the wife of Cheong Chi-tai, owner of the Neptune Group.  Ms. Ng was apparently targeted by an anti-corruption operation by the Chinese central government.  Additionally, the Chinese central government is allegedly targeting a list of more than 20 junket operators who are supposedly assisting corrupt mainland officials in money laundering.  

Takeaway:  This story explains the recent slowdown in VIP gaming traffic from Mainland China to Macau.  We've long thought that corruption crackdowns are the most likely near term risk for Macau.


Hengqin Land Request –  the Macau government has officially put in an application for use of five square kilometers of land on neighboring Hengqin Island, as well as asking to be granted maritime authority similar to that which Hong Kong exercises over its nearby marine territory.

Takeaway:  An attempt by the Macau government to address the housing shortage.


Gulf Coast Gaming – the Poarch Band of Creek Indians are looking to build a new Las Vegas-style casino in Escambia County, Florida, just over the border from the Mississippi Gulf Coast casinos. The casino would offer slot machines, poker, craps and roulette tables.

Takeaway: More competition for Mississippi by tribal gaming.


Hotel M&A  

  • Santa Cruz Holiday Inn Express sold for $16.5 million. The property features 100 guest rooms and is located at 1410 Ocean Street.  According to various trade journals, the property is in turn-key condition and does not require significant capex.

Takeaway: At $165k/key, this seems like a reasonable transaction price and valuation.  

  • Langham Hospitality Group, the hotel arm of Great Eagle, is looking to make a big splash in the U.S., with an expectation to acquire 10 hotels.  Langham wants to expand its portfolio to 100 hotels over the next five years.  The company is reviewing acquisition opportunities in Washington, D.C., Miami, New York, San Francisco, London, Prague and Shanghai.  Langham owns or manages 23 hotels, under The Langham, Langham Place, and Eaton brands, with more than 8,500 rooms. It has more than 30 hotel projects either confirmed or in a developed stage of negotiations from China through India and the rest of Asia to the Middle East.

Takeaway:  A prudent buyer or simply a buyer looking for size and scale?  


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.

Cartoon of the Day: Hard-Headed Bears

How's this for "hard data"? So far, 107 of 497 S&P 500 companies have reported aggregate sales and earnings growth of 4.4% and 13.2% respectively.

read more

Premium insight

McCullough [Uncensored]: When People Say ‘Everyone is Bullish, That’s Bulls@#t’

“You wonder why the performance of the hedge fund indices is so horrendous,” says Hedgeye CEO Keith McCullough, “they’re all doing the same thing, after the market moves. You shouldn’t be paid for that.”

read more

SECTOR SPOTLIGHT Replay | Healthcare Analyst Tom Tobin Today at 2:30PM ET

Tune in to this edition of Sector Spotlight with Healthcare analyst Tom Tobin and Healthcare Policy analyst Emily Evans.

read more

Ouchy!! Wall Street Consensus Hit By Epic Short Squeeze

In the latest example of what not to do with your portfolio, we have Wall Street consensus positioning...

read more

Cartoon of the Day: Bulls Leading the People

Investors rejoiced as centrist Emmanuel Macron edged out far-right Marine Le Pen in France's election day voting. European equities were up as much as 4.7% on the news.

read more

McCullough: ‘This Crazy Stat Drives Stock Market Bears Nuts’

If you’re short the stock market today, and your boss asks why is the Nasdaq at an all-time high, here’s the only honest answer: So far, Nasdaq company earnings are up 46% year-over-year.

read more

Who's Right? The Stock Market or the Bond Market?

"As I see it, bonds look like they have further to fall, while stocks look tenuous at these levels," writes Peter Atwater, founder of Financial Insyghts.

read more

Poll of the Day: If You Could Have Lunch with One Fed Chair...

What do you think? Cast your vote. Let us know.

read more

Are Millennials Actually Lazy, Narcissists? An Interview with Neil Howe (Part 2)

An interview with Neil Howe on why Boomers and Xers get it all wrong.

read more

6 Charts: The French Election, Nasdaq All-Time Highs & An Earnings Scorecard

We've been telling investors for some time that global growth is picking up, get long stocks.

read more

Another French Revolution?

"Don't be complacent," writes Hedgeye Managing Director Neil Howe. "Tectonic shifts are underway in France. Is there the prospect of the new Sixth Republic? C'est vraiment possible."

read more

Cartoon of the Day: The Trend is Your Friend

"All of the key trending macro data suggests the U.S. economy is accelerating," Hedgeye CEO Keith McCullough says.

read more