- Some on the sell side have defended the recent only modest drop in Las Vegas' monthly casino revenues. The fact that casino revenues are down just slightly is not terribly surprising considering the historical resiliency of the casino to economic cycles. However, the revenue and margin contribution of Hotel and F&B has never been higher than now. That is terrific in an expanding economy, but last we checked the US consumer was facing stronger headwinds than they have in the past 15 years. I am obviously concerned about falling airline capacity, the rising airfares to Las Vegas, housing, inflation, etc but I'll leave that analysis for a later posting. Here I've looked at what happens if margins revert to the average of the last 15 years. F&B contribution falls by 67%, hotel contribution by 10%, and total EBITDA by $869 million or 17%. Take it a step further and assume 2002 margins, EBITDA for the industry in Las Vegas would fall by a whopping $1.9 billion or 37%.
- Gaming companies have done a phenomenal job transforming the product and developing other profitable revenue sources. The downside is that they have tied the industry much more to the economy. I'm really showing my age here but I still remember when Las Vegas was the city of great deals: $3.99 buffets, $75 hotel rooms, and $0.25 craps. Those days are long gone and good riddance. There hasn't been a time over the last 5 years that I've gone to Las Vegas and haven't been astonished at how expensive everything is. Indeed, hotel and F&B margins expanded 590 and 400bps in the last 5 years alone, all due to pricing. How will pricing and margins hold up with the US consumer under siege? We haven't had a consumer recession in 15 years but I have a feeling we are going to find out.
7 Tweets Summing Up What You Need to Know About Today's GDP Report
"There's a tremendous opportunity to educate people in our profession on how GDP is stated and projected," Hedgeye CEO Keith McCullough wrote today. Here's everything you need to know about today's GDP report.read more
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“If you saved in gold over the past 20 to 25 years rather than any currency anywhere in the world, gold has outperformed all these currencies,” says Stefan Wieler, Vice President of Goldmoney in this edition of Real Conversations.read more
Inside the Atlanta Fed's Flawed GDP Tracker
"The Atlanta Fed’s GDPNowcast model, while useful at amalgamating investor consensus on one singular GDP estimate for any given quarter, is certainly not the end-all-be-all of forecasting U.S. GDP," writes Hedgeye Senior Macro analyst Darius Dale.read more
People's Bank of China Spins China’s Bad-Loan Data
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UnderArmour: 'I Am Much More Bearish Than I Was 3 Hours Ago'
“The consumer has a short memory.” Yes, Plank actually said this," writes Hedgeye Retail analyst Brian McGough. "Last time I heard such arrogance was Ron Johnson."read more
Buffalo Wild Wings: Complacency & Lack of Leadership (by Howard Penney)
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An Update on Defense Spending by Lt. Gen Emo Gardner
"Congress' FY17 omnibus appropriation will fully fund the Pentagon's original budget request plus $15B of its $30B supplemental request," writes Hedgeye Potomac Defense Policy analyst Lt. Gen Emerson "Emo" Gardner USMC Ret.read more