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Tickers: MGM, WYNN, MNTG, SMGM, HOT, HLT, AWAY, RCL

EVENTS

  • Wed June 11 - Thurs June 12: Bally Systems User Conference Mohegan Sun
  • Thurs June 12: Blackstone Investor Day 8:00 am
  • Wed-Thurs June 18-19:  Hedgeye Cruise survey (pre-CCL F2Q)
  • Thurs June 19: LA May revs released

COMPANY NEWS

Genting Bhd (RWLV) – Gerald Gardner, Chief of Staff for Nevada Governor Brian Sandoval, is leaving his position to join Genting/Resorts World Las Vegas beginning July 7

Takeaway: A quick jump start to the Genting RWLV public relations effort as well as a good leader to facilitate dialogue between RWLV and local officials as needed.

Marina District Development Company "Borgata" (BYD & MGM) – entered into a settlement agreement between Borgata and the City of Atlantic City whereby both sides resolve the property tax dispute for tax years 2011 through 2014.  As a result of the agreement, Borgata will receive a tax refund of $88.25 million for tax years 2011 through 2013 and an estimated tax credit of $17.85 million for tax year 2014. MDDC believes the 2015 property tax expense will be significantly lower than 2013.  The agreement is independent and unrelated to the current appeal for property tax assessments for 2009 and 2010.

Takeaway:  One of several catalysts we've outlined for positive EPS revisions at BYD.  Could be worth a $1 per share in value to BYD.

MNTG – MTG Gaming Group and Eldorado Resorts LLC have extended the termination date of their planned merger because all the required approvals from applicable gaming authorities had not been obtained and the Company's stockholders had not approved the merger agreement at a special meeting to be called for such purpose.  The parties now expect to close the transaction during the their quarter of 2014. The combined company will operate six properties and have a total of 9,968 slot machines and video lottery terminals, 283 table games and 3,282 hotel rooms.

Takeaway:  A slight timing delay and not unusual.

 

PENN – Relating to Argosy Sioux City casino, at a hearing in Reading, Pa., Iowa assistant attorney general John Lundquist asked U.S. Bankruptcy Court Judge Richard E. Fehling to dismiss Argosy's Chapter 11 petition, arguing a lingering dispute over the floating casino's license should be settled in Iowa court. Ironically for PENN, PENN's chief legal expert testified under cross-examination by the Iowa Racing & Gaming Commission (IRGC) attorney,"conducting a gaming operation without a license would be a criminal offense." Previously both the Iowa Superior Court as well as the IRGC ruled PENN's Argosy Sioux City does not currently have a valid gaming license.

Separately, PENN is suing the IRGC in Polk County District Court (Iowa) in a bid to vacate or overturn the actions that led to the Hard Rock winning the license and final arguments in the judicial review case are scheduled for September. Penn National believes the Chapter 11 filing would nullify the IRGC order to close until all the legal issues are sorted out.  According to legal filings, Penn National does not want to lose its $110 million investment in Sioux City.

Takeaway:  As we've written previously, the end result of a closing of the property seems an inevitable outcome...why needlessly spend shareholder capital fighting against the outcome?


SGMS – announced the appointment of Gavin Isaacs as President and CEO.  Former CEO, David Kennedy will continue to serve as Executive Vice Chairman of the board.

Takeaway:  We expected a change and welcome Gavin back to the C-suite. We have a lot of respect for him and his abilities.

 

HOT – will stop managing what is now the Westin Resort Macau starting June 21. The hotel management company and the owner of the Coloane property have announced that the licence agreement “will cease on June 21, 2014 when it expires”. The 208-room hotel has been operating under the Westin brand since 1993. It is one of the few five-star properties in Macau with no casino in its facilities or surrounding area. 

Takeaway: Slight near term loss for long-term gain.

HLT – announced, via S-1 filing, the registration of 90 million shares (103.5 million with the green shoe) on behalf of selling shareholder Blackstone Group.  Assuming the exercise of the green shoe, Blackstone will own 648.99 million shares or 65.9% of the outstanding shares.  As of Tuesday's closing price of $23.43/share, HLT stock was up 17.15% since its IPO on December 12, 2013 at $20/share versus the S&P 500 up 8.2% (as of the close on Dec 11, 2013). 

Takeaway: By comparison HOT was up 9.7% and MAR was up 34.6% since December 11, 2013 through yesterday's close.  As the old Wall Street adage goes "nobody ever got fired for taking profit...."

STAY - filed a 21 million secondary offering for selling shareholders including 7 million shares each to Centerbridge Partners, Paulson, and The Blackstone Group.

Takeaway: More insider selling...

RCL -  pays bonus on high-end Oasis-class bookings (Travel Weekly)

RCL has set a $250 bonus commission on bookings of Crown Loft suites or higher accommodations on Oasis and Allure of the Seas cruises departing from June through August.  In addition, clients get a $1,000 onboard credit per stateroom with the booking, and third and fourth guests sail free. Agents will earn an additional 2% points in commission for all new bookings on any 2014 Caribbean or Bahamas sailings, and 1 point extra for all new bookings on any other 2014 sailing. 

Takeaway:  Best way to build a relationship with the agent community is to pay them more.

TUI Cruises -   Richard J. Vogel is giving up his position as CEO of TUI Cruises.  His successor has been chosen and will be disclosed during the next few weeks. TUI AG yesterday only confirmed that he ‘will take up a top management task outside the TUI Group’.

Takeaway:  Surprising departure only days before Mein Schiff 3 christening.

RCL -  Says Bon Voyage to New Orleans (WGNO)

New Orleans is losing one of its cruise ship lines.  Royal Caribbean announced it will leave the market effective in April 2015.  RCL says it has no ships planned once the Serenade of the Seas departs.  The move leaves New Orleans with two other cruise companies remaining, Carnival and Norwegian.

INDUSTRY NEWS

Union Pay & Macau Gaming – SJM Holdings Ltd says the Monetary Authority of Macau intends to restrict further the use of China UnionPay Co cards in casinos and has ordered jewellers and pawnshops on casino floors to remove their UnionPay card terminals by July 1.

Takeaway: As expected given our conversation with gaming operators.

 

Gaming Headwinds (Macau Business Daily) "Unlucky 13" reports casino profits in Macau could fall in the Q2 2014 - the first time in four years and further cited 13 reasons for negative sentiment overhang including: 1) stocks aren’t going to work due to continued ‘softness’ in consensus expectations for the second quarter of this year, 2) a slow down of the VIP segment, 3) continued negative macro-economic data in sectors such as real estate and banking from mainland China that impacts investor sentiment, 4) a potential decline in mainland Chinese visitor numbers once measures are implemented to target abuses in the transit visa scheme, 5) the ban on hand-held swipe card devices from casino floors, 6) possible bad press ahead of the full smoking ban and also links between a slower gross gaming revenue and the World Cup, 7) more bad press related to junket operations and delays in infrastructure projects such as the light rail, 8) and fluctuations in gross gaming revenue.

Takeaway: The tide is going out...don't fight the tape. 

 

Miami Beach Convention Center Hotel Sites Proposed – Miami Beach hopes to begin a $500 million renovation of its convention center by 2016 and city officials want to add an 800 room hotel to make the event space more attractive to groups. Early locations for the proposed hotel include current City Hall or the 17th Street parking garage near Lincoln Road.

Takeaway: Miami is one of the top performing hotel markets, so new development makes sense given the desirability of the Miami market to North Americans as well as South American tourists.

Odessa Issues Statement "Operations are Normal and Safe" (Cruise Industry News) 

Elvira Leschinskaya, head of Odessa development and external relations, said that most of the big cruise lines had cancelled their calls to Ukranian and Russian Black Sea ports for the season.  She said they have left altogether or come up with alternative Black Sea itineraries.  Leschinskaya said she hoped that some of the season could still be salvaged and that so far 79 calls for 2015 were still scheduled.

Chris Allen, Royal Caribbean director of deployment and itinerary planning, said that Royal Caribbean International had no cruises scheduled for this year, and Marc Miller, manager of deployment and itinerary planning, said that Celebrity Cruises has three sailings scheduled in the fall, but has removed the Ukrainian ports from the itineraries.  “For 2015, we have not made any changes in our plans,” Miller said. “What is new is that we are offering summer cruises in June and July in the Black Sea, where we used to only sail in the fall. These are open-jaw 14-day sailings on the Constellation between Venice and Istanbul.”

Takeaway:  Cruise lines shifting away from the volatile regions in the Black Sea.  They may have had a disruption for Europe summer cruising but we're still seeing strong overall pricing in that region.

Norwegian Cruise Line launches Bonus Days on Sailings to Bermuda, the Bahamas and Florida (Travel Agent Central)

NCLH is launching its Bermuda and Bahamas & Florida Bonus Days, offering savings on the line’s Bermuda and Bahamas & Florida cruises.  Guests who book a Bermuda or Bahamas & Florida cruise vacation from Sunday, June 8, 2014 through Saturday, June 14, 2014, can receive up to $100 per stateroom to spend on board.

Takeaway:  Promotions continue for the Caribbean

MACRO

Chinese Consumer Confidence – According to Nielsen, Chinese consumer confidence remained high in the first quarter of 2014 as in the previous quarter, higher than the same time period in the previous year and above the global average.  Nielsen also found that "fast moving consumer goods" in the Chinese market rebounded back to 8% growth in Q1, a 2% increase year-over-year. Nielsen noted that across China, consumer's greatest desire is for personal digital appliances. Lower tier cities and West China (in particular, mid-west China which includes Sichuan, Guizhou, Yunnan, Shaanxi, Chongqing and Guangxi) consumer confidence is rising. Health has become the top concern for all-tier city consumers in Q1, which is closely followed by their concern for income, according to Nielsen.

LEISURE LETTER (06/11/2014) - chinese consumer pref

Las Vegas Residential Real Estate – According to the Greater Las Vegas Association of Realtors, the median sales price of previously owned single-family homes last month in Southern Nevada was $195,000, up 1.6% from April and 14.7% from a year ago.  A mere 7.9% of pre-owned home sales during May were short sales, down from 12.4% in April and 9.1% of May’s sales were foreclosed properties, down from 11.4% in April.

Takeaway:  Still green arrows in LV housing market