LEISURE LETTER (11/11/2014)

Tickers: H


  • Nov 11
    • Stations Casino Q3 earnings: 4:30pm
  • Nov 13-16
    • Macau Grand Prix
    • Hedgeye Cruise Pricing Survey
  • Nov 16-18
    • Quantum of the Seas investor event


H – Hyatt Hotels and Playa Hotels & Resorts B.V., announced the upcoming opening of Hyatt Ziva Puerto Vallarta, Mexico. The new all inclusive resort, which is scheduled to open December in time for the winter holiday season, is at the site of the former Dreams Puerto Vallarta. It is the culmination of an approximate $20 million expansion, renovation and repositioning that is intended to reinvent this resort destination in a way that brings effortless indulgence to the all inclusive vacation experience.

Takeaway: Based on our search, we found availability beginning on Sunday, December 28 at a nightly rate of $368 for a Ziva Terrace King Bed.


Insider Transactions:

BYD - Vice Chairman Marianne Boyd Johnson sold 22,800 shares, sold 800 shares at $11.84 each and another 22,000 at $11.54 each out of the Marianne Boyd Gaming Properties Trust. The trust still owns 5.612 million shares.

Takeaway:  Not sure why she is selling but it does not appear to be related to the expiration of options.  Ms Boyd has sold 74,300 shares so far in November.


Macau's Secretary for Economy & Finance – Lionel Leong Vai Tac is rumored to be the favorite to replace Francis Tam Pak Yuen as Secretary for Economy and Finance, the official that oversees Macau’s gaming industry. Lionel Leong Vai Tac, Vice-Chairman of the Advisory Council on the Environment and member of the Executive Council and the National People’s Congress.


Takeaway: If true, it will be interesting to see how Mr. Leong Vai Tac works with the gaming operators - in a prior business life, he provided laundry services to many of the Macau casinos/hotels.


Macau Population Increase – The population of Macau was 631,000 at the end of September, 7,000 more than three months earlier. The Statistics and Census Service attributes the increase to the influx of migrant workers, whose number rose by 7,567 to 162,877. In the third quarter 1,971 babies were born in the city, 419 people died, 2,656 Chinese immigrated and 538 people gained the right of abode.




Zhuhai MICE – last week, the Zhuhai International Convention & Exhibition Center (ZCEC) opened to its first event when it hosted the China (Zhuhai) International Automobile Exhibition.  Costing 7 billion yuan ($1.14 billion), the 269,000sqm CEC is comparable to the Shenzhen Convention & Exhibition and the Guangzhou (Pazhou) International Convention & Exhibition center. The first phase, with floor space of 700,000sqm, encompasses the International Exhibition Wing with six 5,000sqm halls at ground level; International Convention Wing with the 2,000sqm Plenary Hall; Opera Theater, Concert Hall; 35 meeting rooms; and support facilities. The 30,000sqm exhibition floor accommodates 1,600 standard 3-square-metre booths. The CEC also has a 4,500sqm column-free, divisible Grand Ballroom with a 4,000sqm kitchen capable of catering round-table banquets of up to 6,000 people.


Takeaway: Increased competition for MICE from Zhuhai and more importantly MICE attendees will not need a Macau visa. 


Macau Loansharking Increasing – A total of 177 loansharking cases, mostly related to ‘gaming activities’ in the city, were recorded for the first nine months of this year, according to Secretary for Security Cheong Kuoc Va. The number of registered loansharking cases as at end-September represent a rise of 48.7% when compared with the same period last year, making it one of the types of crime recording the most rapid increase so far. Of the 98 people arrested for the loansharking cases in the period this year, most were from mainland China.


Takeaway: Increased loanshark activity, an outward sign of tighter credit for the mass population.


Macau Visitation Overstay Crackdown – for the January to September period, Macau Immigration Security Units have seen more mainland Chinese overstay using permits other than the individual visit scheme visas. A total of 31,198 of these overstays were recorded for the period, which is 5,520 more people than a year ago, while the number of overstays using a permit for the individual visit scheme in the period is 3,426 people, 75 people less than the same period last year.  However, Secretary for Security Cheong Kuoc Va noted the number of overstays from the mainland has already fallen since July, the month authorities imposed the new rule requiring mainland Chinese passport holders transiting Macau to and from another country or territory be granted a stay of five days maximum instead of seven.



Florida Casino Boat Files for Bankruptcy – the Palm Beach-based, 600-passenger Island Breeze Casino filed for bankruptcy.  The operators are hoping to restart operations next month after reaching an agreement with its Miami slot machine leaser. The Island Breeze charges a $15 boarding fee to non-members and $10 fee to player club members.


Takeaway: Apparently not quite the "from Palm Beach to Vegas in 30 minutes" experience as advertised.  The operators promised the Port of Palm Beach the vessel would carry 125,000 passengers per year OR pay $5 for each person below that headcount.


Real Estate to be 11 GICS Sector – last night MSCI and S&P announced Real Estate will become the 11th Global Industry Classification Standard (GICS) sector with implementation to be effective after market close on August 31, 2016. Both, MSCI & S&P are requesting feedback on the implementation by February 13, 2015. 

Takeaway: While likely an initial 3.5% weighting in the Index (based on current weighting), this segregation likely paves the way for additional REIT inclusions in the Index. 


Japan Consumer Sentiment dropped for the third consecutive month in October.  The Japanese Consumer Confidence Index was 38.9 in October, down from 39.9 in September. A reading below 50 suggests consumer pessimism


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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