LEISURE LETTER (01/27/2015)




  •  Jan 28:  LVS 4Q CC
    • , Passcode: 61558874
  • Jan 29:  
    • PENN 4Q CC
    • RCL 4Q CC
  • Feb 2: Cod Manila Grand Opening
  • Feb 3:  GLPI 4Q CC

headline story

MAR - 

  • Signed definitive agreements to acquire the Delta Hotels and Resorts® brand and management and franchise business from Delta Hotels Limited Partnership, a subsidiary of British Columbia Investment Management Corporation (bcIMC) for C$168 million (approximately $135 million).  
  • Delta brand:  38 hotels; 10,000 rooms in more than 30 cities across Canada
    • bcIMC-affiliated entities own 13 Delta hotels (and one under development) and will sign new 30-year management agreements with Marriott for these properties.  Third parties own the other 25 Delta hotels; 15 are managed by Delta and 10 are franchised.  In total, five managed hotels (approximately 1,100 rooms) are under development.

  • When completed, the transaction will increase Marriott's distribution in Canada to more than 120 hotels and 27,000 rooms, making Marriott the largest full service hotel company in Canada.
  • At stabilization, after realizing certain operating synergies, Marriott expects the purchase price to be approximately 10x annualized EBITDA 
  • Expect transaction to close 2Q 2015 
  • MAR does not expect the transaction will have a material impact on its 2015 results, excluding one-time transaction and integration costs.

Takeaway: This is a micro deal considering Delta would generate only $14m in EBITDA after synergies while MAR is expected to earn >$1.6bn in EBITDA in 2015.


Grand Korea Leisure - is seeking to operate casinos on cruise ships. The company has already engaged a consulting firm to study the economic feasibility of the project. 

Article HERE


MAR - will be introducing Moxy Hotels to the US via 8 projects slated for major metropolitan locations, including New York City (Chelsea, Mid-town and Lower Manhattan), San Francisco, Seattle, New Orleans and Chicago.

Takeaway:  Bringing the boutique, fun and hip to the big cities


H - introduced Hyatt Centric, a new, full service lifestyle brand designed for business and leisure travelers. The launch marks the sixth brand Hyatt has introduced since 2006.  More than 15 Hyatt Centric locations, comprised of open and previously announced hotels, will debut this summer in the heart of some of the world’s most popular cities, including New York, Paris, Atlanta, Chicago and Miami. 

Takeaway:  A lifestyle brand? What an original idea...


HST- announced that its European joint ventures' recently acquired 394-room Grand Hotel Esplanade Hotel in Berlin was converted to a Sheraton franchise in December 2014.  EVENT Hotel Group will continue to operate the hotel under a franchise agreement.

Takeaway: The European JV, in which HST holds a 33.4% interest, had already acquired a 90% ownership interest in the Grand Hotel Esplanade in October. At the time, the hotel was acquired for a gross purchase price of €81.0 million.


LHO - LaSalle Hotel acquires the Westin Market Street for $350M. Hotel was renamed Park Central San Francisco.  Michael D. Barnello, President and CEO of LHO, said, “The San Francisco lodging market remains very strong, with demand at peak levels and limited supply growth on the horizon, and we are excited about increasing our presence in San Francisco for the second time within 10 months – marking our seventh hotel in the city. Approximately 17% of our EBITDA is now generated in San Francisco.”

Takeaway:  Another transaction in a strong tier 1 market.  Average price per key was $513,950


NCLH - Regent Seven Seas Cruises reports that its new flagship, Seven Seas Explorer, has posted both single-day and first week record bookings since the ship went on sale to the line's loyalty members. Here's the latest on the new ship.

Article HERE

Takeaway:  Strong initial demand for Regent's new ship


CCL - will sign a MOU with China Merchants Group (CMG) for 2 potential JVs. 1) explore a potential partnership to form a Chinese cruise line for the domestic market, using new ships designed and built in China. The joint venture might also acquire existing vessels. 2) Develop ports and destinations in China and Northern Asia. CMG is already developing Prince Bay Cruise Terminal in Shenzhen.

Takeaway:  Carnival continuing to explore opportunities in China and build relationships there.

industry news

Gaming workforce The number of people in Macau working for the gaming industry reached an all-time high during 4Q 2014.  There were 87,000 people employed by the sector during the October-December 2014 period, said the Statistics and Census Service. The figure was up by 7% QoQ.  

Article HERE 

Takeaway: This number will be much higher after Galaxy Phase 2 and MSC opens later in 2015

Hotel transactions

  • Dubai Based Select Group Acquires the 211-key Radisson Blu Hotel Birmingham in the UK 

Article HERE

  • Arden Group Acquires Florida's 323-key Intercontinental Hotel Tampa Westshore; $7 Million Renovation Planned 

Article HERE

  • DelMonte Hotel Group Sells Four of its Fairfield Inn Hotels 

Article HERE


Caribbean capacity - According to the 2015-2016 Cruise Industry News Annual Report, Caribbean market capacity will level off for the 2015 calendar year, slightly dipping due to ship movements. After a record breaking 9.1 million passenger performance in 2014, up from 8 million passengers in 2013, the Caribbean cruise market will come down to an estimated 8.75 million for the 2015 season. The main driver of the slight decrease has been a few ship movements, including sending the Allure of the Seas to Europe. In addition, some operators are offering longer cruises and a few vessels were moved to Asia and Australia, thus offsetting capacity spikes from new tonnage.

Article HERE

Takeaway:  Lower capacity in the Caribbean is a known; will pricing grow?


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.

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