LEISURE LETTER (12/19/2014)

Tickers:  FLL, PENN, HOT, LHO, PEB, CCL, NCLH

EVENTS

  • Dec 19: CCL F4Q earnings call:
  • Dec 20: Trump Taj Mahal Closing - CANCELLED

Today's Headline Story

Macau DICJ Not Expect GGR Growth Until Mid-2015 – Leong Man Ion, deputy director of Macau’s Gaming Inspection and Coordination Bureau (DICJ), is not expecting year-on-year growth in gross gaming revenue (GGR) in Macau to resume before mid-2015.

Article HERE

Takeaway:  We're currently forecasting a return to growth in September.

COMPANY NEWS

FLL – announced, Deborah J. Pierce resigned her role as a Chief Financial Officer of the Company, effective as of December 26, 2014.

Article HERE

Takeaway: Not entirely surprising given the arrival of new CEO Dan Lee.

 

577.HK – Louis XIII announced Beijing builder Jangho Group Co Ltd Macau subsidiary, Sundart Engineering Services (Macau) Ltd, was awarded a HK$70.5 million (US$9.09 million) contract to fit out the Louis XIII hotel standard rooms, superior suites and corridors. The build-out will occur over the next nine months. 

Article HERE

Takeaway: Progress continues at Louis XIII but no table game allocation to date.

 

PENN – Live Nation on Wednesday announced a multi-year agreement with Hollywood Casino to become the new name-in-title sponsor of their popular amphitheater located in Maryland Heights near St. Louis. The new venue name is Hollywood Casino Amphitheatre.  In 2014 the venue, formerly known as Verizon Wireless Amphitheater, hosted approximately 400,000 guests.

Article HERE

 

HOT – announced next year the company will eliminate Internet charges across most of its properties. As of Feb. 2, Starwood Preferred Guest loyalty program members booking through Starwood's brand websites and mobile apps will get free Internet access at "the majority of the portfolio." 

Takeaway: Free internet is becoming the industry norm for loyalty card members

 

LHO – The Portland Business Journal is reporting the Heathman Hotel was sold to LaSalle Hotel Properties. London-based Taylor-Clark Inc. announced in September it was selling the 150-room, 10-story Heathman Hotel, at 1001 S.W. Broadway, and the 91-room Heathman Hotel Kirkland in Seattle.

Article HERE

 

PEB – announced that it has acquired the 356-room Revere Hotel Boston Common, an attached 826-space parking garage and an adjacent land parcel for $260.4 million. In 2015, PEB forecasts the hotel will generate EBITDA of $18.0 to $18.5M and net operating income after capital reserves of $16.2 to $16.7M.

Takeaway: This UUP scale hotel traded for forward 14x EBITDA

 

CCL – 2 new ships

  • Carnival Cruise Line brand with 3,954 berths, scheduled for delivery in March 2018
  • Holland America brand (new Pinnacle class) with 2,650 berths, scheduled for delivery in late November 2018

Article HERE

Takeaway: Carnival Corp now has 10 ships on order 

 

CCL – Carnival is turning to the Super Bowl to market together – for the first time – all nine of its brands, which include Carnival Cruise Line, Holland America, Princess Cruises, Cunard, Seaborn, AIDA Cruises, P&O Cruises in Australia and the U.K. and Costa Cruises.

Article HERE

 

NCLH – Norwegian Cruise Line became one of the first major cruise companies to roll out a promotion for Wave Season. NCLH says customers who book a cruise of five nights or longer by Jan. 31 can choose a free Ultimate Dining Package, a free Ultimate Beverage Package or up to $300 in on-board credits. Customers booking a cruise in Europe or Hawaii can choose two of three offers. Under the terms of the Freestyle Choice offer, as it's being called, customers must book an ocean-view or higher category of cabin. Customers booking a suite or a room in the upscale area on Norwegian ships known as The Haven will get all three offers.

Article HERE

INDUSTRY NEWS

Macau Challenges Highlighted as President Xi Visits – a WSJ story reviews the issues facing Macau as the Special Administrative Region attempts to grow and diversify its economy (which until recently was entirely built on gambling) in the face of Mainland money laundering enforcement and attempts to stem the flow of capital out of China.

Article HERE

Takeaway:  Relief rally in the stocks after he leaves?

 

China Lottery Sales – China lottery sales increased 24.4% to $5.567 billion in November.  Sports Lottery sales rose 31.6% to $2.593 billion while Welfare Lottery sales grew 18.8% to $2.974 billion. Lottery sales were up in 28 provinces and cities in November, the exceptions being Gansu and Liaoning provinces and Beijing, according to the ministry’s data published this week. 

Article HERE

Takeaway:  Mainland lottery sales continue to be robust.

 

Trump Taj Mahal  – Carl Icahn announced he will "provide up to $20 million of additional financing to keep the Taj operating throughout the bankruptcy proceedings, will also work collaboratively with the State of New Jersey, Atlantic City and the Union to try to forge a global settlement that will bring real stability to the Taj and its employees."

Article HERE

 

New Orleans Considering Smoking Ban – New Orleans City Council is considering an ordinance to make it illegal to smoke in bars, casinos, parks, at bus stops, work places and other public venues such as the zoo and festivals. Bars, restaurants, video poker outlets, tobacco wholesalers and gambling halls — including the big downtown casino, Harrah's New Orleans — have come out against the measure and vowed to fight it. Businesses that allow smoking worry about a loss of revenues, at least in the short term. Proponents of the ban say studies show business increases over time following a smoking ban.

Article HERE

Takeaway:  Potential negative for Harrah's New Orleans.

 

South Dakota Free Play Not Taxable GGR – South Dakota Supreme Court ruled free play in casinos should not be subject to state taxation. 

Article HERE

Takeaway:  Good news for the Deadwood Casinos.

MACRO

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:  European pricing has been a tailwind for CCL and RCL but a negative pivot here looks increasingly likely in 2015.