LEISURE LETTER (04/25/2014)

TICKERS: MGM, WYNN, HOT, HLT, ZNGA, NCLH

EVENTS TO WATCH

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 – 10 a.m. , Passcode: 22334128
  • VAC Q1 earnings – 10:00 a.m. , Passcode: 4679876
  • MGM Q1 earnings – 11:00 a.m. , Passcode: 20455736
  • Las Vegas March revenues out

Wednesday, April 30

  • PNK Q1 earnings – 8 a.m. , Passcode: 27759612
  • GLPI Q1 earnings – 9 a.m.
  • MAR Q1 earnings – 10 a.m. , Passcode: 10575194
  • H Q1 earnings – 11:30 a.m. , Passcode:  11561402
  • BYD Q1 earnings – 5 p.m. , Passcode:  44440004

Thursday, May 1

  • HST Q1 earnings – 10 a.m.
  • OEH Q1 earnings – 10 a.m. , Passcode: 22074904
  • FCH Q1 earnings – 12 p.m. , Passcode: 28469900
  • BYI FQ3 earnings – 4:30 p.m.
  • EXPE Q1 earnings – 4:30 p.m.

COMPANY NEWS

MGM – announced an expansion of the Mandalay Bay Convention Center which will add 350,000 sq. ft. for exhibition area, a 70,000 sq. ft. ballroom and underground parking.  The estimated cost of the expansion is $66 million. The expo space will come online next year while the parking garage should complete in 2016.

Takeaway: Following the concert venue JV announcement earlier this week, we wonder how such redevelopments help to increase hotel ADRs?

 

WYNN – consummated a surrounding community agreement with the city of Medford and agreed to pay $1 million a year to mitigate the city’s expenses as a result of its planned casino in nearby Everett.

Takeaway: A positive step in the development plan but Boston remains a sticking point.

 

HOT – 10Q filing:

  • The company closed on the sale of one hotel during April 2014.  The asset was subject to a purchase and sale agreement during Q1 2014.
  • HOT is currently under audit by the Internal Revenue Service (IRS) for years 2007 through 2009.  During the year ended December 31, 2013, HOT received certain Notices of Proposed Adjustment from the IRS for such years; however, HOT disagree with the IRS on certain of these adjustments and intend to vigorously contest them, including pursuing all available remedies such as the IRS Appeals process and litigation, if necessary.  These unagreed adjustments, if upheld, would result in a significant cash tax and interest payment.

Takeaway: Several interesting pronouncements worthy of a follow-up conversation.

 

HLT – announced the return of one of its most popular promotions, Double Your HHonors.  Through Double Your HHonors, members choose between either earning Double HHonors Points or Double Airline Miles for qualified hotel stays completed between May 1 and July 31, 2014, at participating hotels

Takeaway: We look forward to a discussion of this promotion and how the promotion stimulates bookings on next week's earnings call.

 

NCLH – Norwegian Epic has added two sailings to and from Southampton, England in 2015, marking the 1st time that the ship has visited the port since the in

 

Takeaway:  Norwegian needs to get some ships out of the super congested Caribbean market.


INDUSTRY NEWS          

Lorne Weil – resigned from Sportech's board of directors effective immediately (Thursday, April 24, 2014). Sportech confirmed Thursday that Weil had tendered his resignation from the board with immediate effect, although he will continue to be affiliated with the company as an advisor to the business.

Takeaway: A gaming executive looking for a new opportunity? 

 

New York Gaming Expansion – the next big gaming expansion for up to four upstate gaming licenses, drew 22 applications who each submitted a $1 million application fee prior to Wednesday's deadline. 

Takeaway: While an interesting near-term growth opportunity, how much cannibalization occurs to these facilities after the 7 year waiting period and commercial gaming is opened "down state" (Metropolitan New York City) with potential casinos located in Westchester, Bronx, Putnam, Nassau or Suffolk Counties - or a casino opens near the Meadowlands?

  

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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