TICKERS: MPEL, GTECH, RCL, CCL
- Jan 22: Carnival Vista event
- Jan 28: LVS 4Q CC
- Jan 29: PENN 4Q CC
- Feb 2: Cod Manila Grand Opening
- Feb 3: GLPI 4Q CC
Macau Visitation fell in December – Macau received a record-breaking number of visitors in 2014 – more than 31.5 million visitor arrivals, +7.5% YoY according to director of Macau Government Tourist Office (MGTO) Maria Helena de Senna Fernandes. Mainland China visitation grew 14.1% in 2014. She also expects 5% visitation growth for CNY 2015 and FY 2015.
The average length of stay for visitors was 1.9 days, with 46.2% of them in 2014 choosing to stay overnight. The average occupancy rate of hotels in Macau is 86.5%, up by 3.4%, with total overnight guests in 2014 reaching 10,710,000. The average room rate of 3 to 5 star hotels in Macau was $199.9, up 8.6% YoY.
Takeaway: This suggests overall December visitation fell 2% and would represent the 1st monthly decline since January 2013. As for Mainland visitation in December, growth was 1% - the slowest pace since March 2013. Official results will be released tonight by DSEC.
MPEL – has said it will press on with extending the shopping arcade in its City of Dreams despite the death of a worker on the construction site. The Labour Affairs Bureau halted the use of all hoists on the site after a worker operating a hoist there fell to his death on Tuesday. Melco Crown said, "The temporary suspension of construction will not affect progress.” The company hopes to open the extension next year.
Takeaway: No delays for MPEL
GTECH/Italy Lottery tax – The additional gaming tax on video lottery and AWP licensees in Italy has now come into force and has been also allocated among licensees with surprises among operators. The peculiarity of such tax is that will be shared among video lottery licensees depending on their number of video lottery and AWPs regardless of the revenues generated by each machine. This circumstance led licensees to disinstall a large number of underperforming machines before the end of the year in order to maximize the revenues generated by their network and have a lower portion of the € 500 million additional tax allocated to them.
And apparently some licensees were very aggressive in disinstalling machines since, according to Italian gambling regulator, AAMS, some of them are now running a number of machines much lower than the video lotteries and AWP in place before the coming into force of the budget law.
GTECH is leading the table of tax payers with over € 96 million of allocated taxes.
Takeaway: This is the compromise for not having a gaming duty tax increase in Italy but still a higher cost, nonetheless, for the video lottery licensees. We're still waiting to see who gets the Lotto license.
CLDT – guided Q4 REVPAR to $112. $3.5m secondary offering at $30.
Takeaway: This is at the low end of their Q4 guidance of $112-114.
PEB – guided 2015 Same-Property RevPAR growth rate to 6.5-7.5%
Takeaway: Not surprisingly, this is lower than 2014's expected growth of 8.25-8.75%. However, it's a strong number.
RCL – The Celebrity Century will become the SkySea Golden Era this May, as she transfers to the new SkySea brand, a joint venture between Royal Caribbean Cruises, Ctrip and Stone Capital. Among the changes on the vessel will be a complete rethink of the restaurants, aiming them at the Chinese market. Also being added will be an ice bar, trampoline at sea, and mini-golf.
CTRP has a 35% stake in SkySea, while Royal Caribbean has an equal 35% share. Stone Capital has a 30% share and is a Shanghai-based private equity firm that invests for China’s wealthiest families and entrepreneurs. The ship’s inaugural season will see it homeport in Shanghai from May to October.
CCL – Cunard has launched an all-inclusive package for Grills Suites passengers to mark the line's 175th anniversary this year. The Grills Suites Inclusive Package includes onboard credit of $60 per day, four bottles of wine, dining credit, included gratuities, a photo, coffee card and internet minutes, all depending on the length of the cruise.
Takeaway: Another operator following the trend of offering all-inclusive deals
CCL - Carnival COO Alan Buckelew said, "We are looking at double-digit growth in China—20%, 30% annually—over the next few years while overall growth [in the industry] is around 3% and 4%.” “In China, the 25- to 45-year-olds are buying the cruises,” he said. “That is where the wealth is in China. They often bring along their parents. Extended-family cruises are common.”
Vacations are also shorter in China, with the average cruise lasting for four days compared with seven days in the West. Carnival says it already enjoys a 55% to 60% share of the tiny but fast-growing Chinese market, and executives expect it to grow to about half the size of the U.S. market—the industry’s largest—by 2020.
The Chinese also don’t stand in line for buffets, and spa treatments that are popular on Western routes have yet to catch on. Chinese cruisers require plenty of space for morning tai chi classes, and prefer private gambling parlors to the sort of elaborate evening shows that are popular in North America.
Takeaway: These demographics are well-known. China is a certainly a big opportunity but could also be a costly one, up front.
Las Vegas – According to the Las Vegas Review, January has been a big convention month for Las Vegas, starting with the International Consumer Electronics Show, which drew a record 170,000 attendees. The largest show this week will be the Shooting, Hunting & Outdoor Tradeshow, which is expected draw 67,000 visitors.
Takeaway: Convention business for Q1 2015 could be shaping up better than anticipated.
Maryland – wants to remove 300 slots each to make more room for table games and amenities. CZR wants to add 30 table games and Cordish intends to add 13. The Maryland Lottery must approve the reductions. Earlier, it allowed Gaming and Leisure Property’s Hollywood Casino to remove 308 machines..
Malyasia – offers free visa for tourists from China.
Takeaway: Another reason for tourists not to go to Macau. Korea/Philippines are also benefiting from Macau's slump.
US Treasury – The U.S. Treasury is telling casinos to do more to stop criminals from using their sports books to launder money in its latest warning to the industry to bolster compliance programs.
China Q4 GDP - 7.4% growth vs consensus of 7.2%
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.