LEISURE LETTER (06/17/2014)

Tickers: PENN, RCL


  • Wed-Thur June 18-19: Todd in Macau for meetings
  • Wed-Thurs June 18-19:  Hedgeye Cruise survey (pre-CCL F2Q)
  • Thurs June 19: LA May revs released


PENN – PENN and the Cordish Companies unveiled project details for 'Live! Hotel & Casino New York' to the Village of South Blooming Grove Board of Trustees.  The $750 million “Live! Hotel & Casino New York” is slated to include an upscale boutique 300-room hotel with luxury suites; a destination spa and fitness center; over 3,000 slot machines; more than 250 live table games; several marquee restaurants; as well as a live entertainment venue and a spacious conference center.

Takeaway: The balancing act of building with enough pizzazz to draw visitation and gaming spend while earning a sufficiently high ROIC to keep investors happy - while also considering the risk of cannibalization in seven years when metropolitan NYC opens to casino expansion.


RCL – signed an agreement with Taiwan International Ports Co. worth $33.3 million to build a cruise ship pier in outlying Penghu County to allow the company's cruise ships to dock there.  RCL will have a 51% stake in the investment.  The new pier will be complete in 2016 and will allow for cruise ships as large as Oasis of the Seas to dock there.

Takeaway:  Project aims to increase cruise awareness in China


Japan Gaming Legislation – The legislative process to approve gaming will on Wednesday when Hiroyuki Horsoda, the deputy secretary-general of the ruling Liberal Democratic Party, will introduce an integrated-resort legislation promotion bill.  Upon passage of this bill, a second bill will be introduced to set the standards by which Japan will open to legalized gambling (wagering via table games and slot machines).

Takeaway:  It's important that this bill reaches agreement in the Lower House as the much tougher battle will be in the Upper House, which may occur in Fall 2014.


Macau Visitation Rules - Secretary for Security Cheong Kuoc Van announced Macau reduced to five days, from seven, the permitted stay for Chinese passport holders who transit in the enclave effective from July 1.  Previously, mainlander Chinese were allowed to enter Macau, stay for up to seven days if they were in transit, and traveling on to a third country.  

Takeaway:  More of a headline to appease the Mainland than an issue that will negatively impact Macau visitation.


Indonesian Gaming Expansion – the first phase of Treasure Bay Bintan, an integrated-resort nearly five times the size (upon completion) of Marina Bay Sands, will open by year end.  The integrated-resort, developed by Landmarks Berhad, could cost around $4 billion and will be located just next to Bandar Bintan Telani Ferry Terminal - a 45-minute ferry ride from Singapore.  Spanning 90 hectares, the first phase of Treasure Bay Bintan will add 1,500 hotel rooms to the island. The third and final phase of the development will open in 2020. Upon completion the resort will encompass 338 hectares. 

Takeaway: A potential threat to Singapore integrated resorts. 


Beijing Home Sales - home sales in Beijing fell 34.9% YoY during the first five months of 2014. The city said real estate developers sold 3.29 million square meters of housing during the period.  Housing starts fell 0.3% to 4.84 million square meters.  Sales of commercial buildings fell 33.6% YoY to 4.54 million square meters.


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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