LEISURE LETTER (08/27/2014)

Tickers: HOT, NCLH, CCL


  • Aug 27: 
    • ISLE FQ1 2015, 11 am
    • BYI 2Q earnings
  • Aug 28:  Hollywood Dayton Raceway Opening
  • Sept 1/2:  Revel closes


HOT – Starwood Hotels & Resorts named Thomas Mangas EVP, CFO, effective September 29, 2014. Most recently, Mr. Mangas was EVP and CEO of Armstrong Floor Products, a division of Armstrong World Industries, Inc.  

Takeaway:  A differentiated background.


NCLH (TTG Digital)–  Norwegian considers another 'try before you buy' day

Francis Riley, vice-president and general manager international, said the “try before you buy” concept that was successful for Getaway, will be implemented on Escape.  The new ship, which comes into operation in October 2015, is scheduled to sail from Europe to Southampton on October 25.  


Riley said while both the UK and German market are performing strongly, he could not yet say whether the company would base a ship in either country in the immediate future.  “With four ships coming between 2015 and 2019 we’re adding close to a million guests by 2020. We’re starting to figure through the deployment plan. Does that mean a UK ship? A German ship? Nothing’s off the table - but there’s also a lot of North American ports we’re not in yet, and clearly Asia is a massive opportunity for us and it’s more of a case of when, rather than if, we’ll go into Asia,” he said.

Takeaway:  A firm date on Escape's debut.  NCL still needs to diversify from its congested Florida home.


CCL (Reuters) Japan's Mitsubishi Heavy is planning to exit the cruise ship-making business, German business daily Handelsblatt reported, citing several ship owners. That means Germany's Meyer-Werft stands a good chance of winning back Carnival's Aida Cruises as a customer, the paper reported.

Mitsubishi Heavy took a hit to its results for the 2013/14 fiscal year after delays in the construction of two big cruise ships for Aida led to unexpectedly high costs.

Takeaway:  Less competition for the shipyards


24-hour crossing – The Cross Border Industrial Zone immigration checkpoint can open from midnight to 7:00am for Macau residents as well as migrant workers.

Takeaway:  Good news to lessen congestion


Clarion closing – The 200-room Clarion hotel and casino in Las Vegas is reportedly closing on Monday.

Takeaway:  Too small to be profitable in LV

LV home prices  rose 15.2% YoY in June, according to S&P/Case-Shiller 

Takeaway:  June was 2 months ago.  Our housing team continues to believe price growth will slow in 2H 2014.

Singapore June visitor arrivals  fell 8.4% YoY as Mainland China visitors tumbled 45.2% YoY to 91,422, the lowest level since Sept 2010.


LEISURE LETTER (08/27/2014) - ss


Takeaway:  One reason why S'pore gaming is struggling to grow.


New Jersey Sports Betting – New Jersey State Senator Ray Lesniak has decided to try to override Gov. Chris Christie’s veto of his sports betting bill, and Lesniak has set September 22 as the date for the override attempt. The sports betting legislation overwhelmingly passed through the legislature, but there is considerable doubt about an override given that Republican legislators will stick by Christie.

Takeaway: Low probability of an override.



Glendale Casino (AZ Central) – Tohono O'odham Indians broke ground on their $400m Glendale Casino.  The development will include a 75,000-square-foot gaming floor, 400 hotel rooms, restaurants and a spa.  It is designed to include 1 million square feet of space when completed.

Takeaway:  This long-delayed project is finally coming along. Some roadblocks remain, including a bill in Congress to outlaw any new casinos in the Phoenix area until 2017. 


Cherokee Casino South Coffeyville – The Cherokee Indians will break ground on the Cherokee Casino South Coffeyville Wednesday. Construction is expected to finish in six months. The new casino will feature 300 electronic games. 

Takeaway:  Too small to matter for the suppliers.

Hotel fees (Hotel News Now) – U.S. hotels are expected to collect a record $2.3 billion in fees and surcharges this year, according to an analysis by Bjorn Hanson, clinical professor with the New York University School of Professional Studies Preston Robert Tisch Center for Hospitality, Tourism and Sports Management.  This would surpass 2013's $2.1 billion in fees and surcharges.  “Fees and surcharges are highly profitable; most have incremental profitability of 80(%) to 90% or more of the amounts collected,” according to the analysis.

Takeaway: No surprise here since 2013 was a record and the industry has only gotten stronger.

London Luxury Hotel Development – Singapore-based  UOL Group Limited acquired the site for the future Heron Plaza development on Bishopsgate and plans to open a hotel under its Pan Pacific brand.  Not only this be the first Pan Pacific for Europe, and only the fifth outside Asia-Pacific (current offerings include: Seattle, Vancouver, and Whistler times two), this location is also the end for what everyone had long accepted would be the third Four Seasons hotel in London City. UOL paid £97 million for the land, which currently has zoning approval for a 43-story tower with 109 residences, 190-room hotel, and retail. The group will “review” the currently approved configuration.

Takeaway: Strong ADRs support luxury hotel development in global cities.  


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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