LEISURE LETTER (10/24/2014)

Tickers: WYNN, HLT, PEB, CCL


  • Oct 24:
    • WYN Q3 earnings 8:30 am "wyndham"
    • PEB Q3 earnings 9 am
    • CHH Q3 earnings 10 am , code 86921299
  • Oct 28:
    • GLPI Q3 earnings 10 am
    • HOT Q3 earnings 11:30 am , code "10325720"
    • WYNN Q3 earnings 4:30 pm
    • MAR Q3 earnings 5 pm , ID "59390131"
  • Oct 29: H Q3 earnings 11:30 am code "95150754"
  • Oct 30:
    • HST Q3 earnings 10 am
    • MGM Q3 earnings 11 am , pw "6307991"
    • BYD Q3 earnings 5 pm , pw "8021592"



WYNN (LVRJ) is redesigning its proposed $1.6 billion resort casino in Everett and has scheduled a public meeting to discuss its cleanup plan for the heavily polluted former chemical plant site. The Las Vegas gambling giant said the environmental cleanup meeting will take place Tuesday at Tufts University in Medford. The updates were part of Wynn’s first status report to state regulators since besting Mohegan Sun for the lucrative Boston-area casino license last month.

Takeaway: Moving forward in the process, but awaiting the results of the referendum.


HLT – Waldorf Astoria Hotels & Resorts announced the launch a global gastronomy-focused program in partnership with the James Beard Foundation (JBF).  The JBF chefs will visit their selected property for one week, spending time with the Waldorf Astoria master chef inside and outside the kitchen. At the end of the week, each chef pairing will have devised a unique recipe. The winning Taste will be included on the menus of Waldorf Astoria's 28 hotels and resorts worldwide.

Takeaway: Hilton attempting to improve the quality of food and guest experience while creating a buzz.


PEB – announced very strong Q3 results with same-property RevPAR was 11.4%, well above the high end of guidance +7 to +8% with ADR up 8.5% while occupancy increased 2.6%.  Comparable hotel margins rose 350 bps versus guidance of +175 to +225 bps. New full year RevPAR guidance is now 8.25% to 8.75%, up from 7.25% to 8.0%. 

Takeaway: Another strong Q3 beat for the lodging REIT group as well as results that out performed Smith Travel Research RevPAR. The strong results bode well for Lodging REIT HST as well as BEE and SHO.


CCL(Cruise Critic) Princess Cruises canceled calls to West Africa due to the Ebola epidemic. The line has cancelled port calls in Cotonou, Benin; Lome, Togo; Tema, Ghana; and Dakar, Senegal on Ocean Princess' 30-day West Africa Adventure cruise departing May 5, 2015 from Cape Town to Dover. The ship will instead call at Luanda, Angola; Madeira (Funchal), Portugal; Malaga (for Grenada), Spain; and Lisbon, Portugal.


Princess Cruises also axed two Ukraine ports of call from 12 Mediterranean cruises. Scheduled port calls to Yalta and Odessa on a Mediterranean cruise scheduled for August were canceled and replaced with calls to Khios, Greece, and Constanta, Romania. Since March, seven other cruise lines -- including Azamara Club Cruises, Oceania, Regent Seven Seas, Siloversea and Windstar -- have cancelled Ukraine port stops. 

Takeaway:  More itinerary reconfigurations given Ukraine unrest and Ebola risk


Macau Smoking Ban Enforcement(GGR Asia) The Macau Gaming Enterprises Staff Association, affiliated with the influential Macau Federation of Trade Unions, has asked the government to have full-time inspectors inside casinos to enforce the full smoking ban on mass floors that was introduced on October 6. Local media this week quoted Leong Sun Iok, deputy director of the association, claiming that some gamblers ignore the no smoking signs and verbal warnings from casino staff if government inspectors are not present.

Takeaway: We've heard of punters ignoring the smoking ban and openly smoking in corridors, restrooms as well as stairwells.


Macau GGR Recovery (Macau Daily Times) Francis Tam forecast the city’s drop in casino revenue will worsen this month and a recovery will come in the second half of next year. A new bridge connecting Macau, Zhuhai and Hong Kong, coupled with the new casinos opening next year, will increase the city’s capacity to handle tourists, the official was also cited as saying.

Takeaway: Not exactly stepping out on a limb with that prediction.


Macau Boarder Opening(Macau Business) A mainland official has said he is confident that the border between Hengqin Island and Macau will open around the clock this year. The director-general of the Hengqin Administrative Committee, Niu Jing, said the mainland authorities were busy getting the facilities on their side of the border ready.

Takeaway: Long anticipated and anxiously desired, and while a positive event, the border crossing is not likely to meaningfully impact GGR growth.


Chinese Communist Party Central Committee on Graft – Approved by the central authority, the 18th Central Commission for Discipline Inspection of the Communist Party of China will hold its fourth plenary session on Saturday, October 25th. 

Takeaway: Expect more headlines regarding anti-graft and corruption crackdowns - which in turn are near term headwinds for Macau GGR. 


China New Home Prices decreased 1% month-to-month as compared to down 1.2% during August.


Hedgeye Macro Team remains negative Europe, their bottom-up, qualitative analysis (Growth/Inflation/Policy framework) indicates that the Eurozone is setting up to enter the ugly Quad4 in Q4 (equating to growth decelerates and inflation decelerates) = Europe Slowing.

Takeaway:  We're seeing bottoms up slowing in Europe cruise pricing in our monthly survey. Europe has been a tailwind for CCL and RCL but a negative pivot here looks increasingly likely. Following CCL's earnings release, we recently turned negative on those stocks based on the negative European thesis. 


Hedgeye Macro Team remains negative on consumer spending and believes in muted inflation, a Quad4 set-up.  Following  a great call on rising housing prices, the Hedgeye Macro/Financials team is 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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