LEISURE LETTER (02/02/2015)

TICKERS: 1680.HK, RCL, NCLH, CCL

EVENTS

  • Feb 3:  GLPI 4Q CC
  • Feb 3: WYNN 4Q CC
    • ; pw: 57961245
  • Feb 12: MPEL 4Q CC
    • (1866) ; pw: MPEL
  • Feb 17: MGM 4Q CC
    • ; pw: 8870181

HEADLINE STORIES 

GGR - Macau GGR for January came in at  28.74 billion MOP (27.90 HKD, 3.60 USD), down 17.4% YoY. 

Takeaway: Slightly worse than consensus in-line with Hedgeye

Cruise 2015 Wave color – 

  • Jean Paugh, manager at All About You Travel Unlimited in Rockledge, Fla. “It’s been a good first month of the year; we sort of picked up where we left off in December.”  Paugh said a number of cruise lines jumped the gun by introducing promotional specials for Wave season in December or even November, which has helped drive early Wave business.  A variety of destinations are in demand, Paugh said, ranging from Florida cruises for clients who don’t mind repeating itineraries, to Alaska and beyond.
    • The soft spot for Paugh is Europe. While river cruises are still doing well, as are luxury cruises, the higher airfares to Europe have put a damper on midmarket demand. “It’s the Mediterraneans and Baltics, that’s what’s really soft with us so far,” she said.
  • Other sellers report a different experience. “We’re selling a lot of Europe,” said Karen Kimmey, owner of OK Travel Agency, in Chicago.
  • Cruise lines were advertising more, especially Viking River Cruises, which was a sponsor of the U.S. Figure Skating Championship on TV in mid-January.
  • Shari Marsh, owner of a Cruise Holidays franchise in Raleigh, N.C., said her sales for January were up 50% from last year. “Europe is selling really, really well,” she said. But there’s a catch. “I’m scared to death because a lot of people will go ahead and book, but they don’t do air right away,” Marsh said. “I’m worried what people will say when I circle back around and tell them what the air prices are.”
  • “I’m seeing we’re having a tough time with Europe,” said Ross Spalding, president of Crown Cruise Vacations, an Ensemble agency in Princeton, N.J.
    • Spalding said the Jan. 7 terrorist attack in Paris and subsequent events “are causing people to hold off just a little...We are about half of where we were last year for the first few weeks.”   
    • Spalding said he has to sell considerably more Caribbean cruises to make up for lost European sales, “although the offers these suppliers have out there are pretty darn aggressive in Europe.”
  • Ken Muskat, executive vice president of sales at MSC Cruises said the company’s Wave season promotion of reduced deposits, onboard spending credits and a complimentary beverage package in some cases is driving an increase in call volume compared with last January.
    • “The large majority of the bookings are associated with the Wave offer,” he said. “Europe is doing well. We’ve been very focused on Europe for a while,” he said, using a package that combines a cruise, airfare and a two-night stay in a hotel pre-cruise.
    • Muskat said MSC recently reduced its peak season rate on the package for departures out of Barcelona. “You really can’t get on your own the air, a two-night hotel stay and a seven-night cruise for the price we’ve got out there,” he said.
    • Muskat said he sees that happening, as well: “We’re probably this year focused on sending more North Americans to more of our ships that are deployed in Europe than ever before.”

Article HERE

 Takeaway:  While there are some mixed reactions, Europe continues to be a concern with many agents.  MSC's comments signal more promotions ahead for the European sailing season which will drive bookings at the expense of lower pricing. 

COMPANY NEWS

Macau Legend/1680.HK  said it has received all the necessary permits from the Macau government to open its 444-room Harbourview Hotel. The hotel is having a soft opening on Monday and an official opening on February 11.  The hotel will not have any gaming. But it is connected by bridge to the firm’s Babylon Casino.

Macau Legend added in their Monday filing:  “As the redevelopment of the Macau Fisherman’s Wharf progresses, the board expects that more gaming tables would be granted by the DICJ to the company on an incremental basis to support the redevelopment of the Macau Fisherman’s Wharf.”

Takeaway: The number of additional tables Macau Legend receives is absolutely critical to its long-term growth targets.

Landing Mainland China real estate developer Landing International Development Ltd said there would be a groundbreaking ceremony on February 12 for its new US$2.2 billion casino project to be located on Jeju Island in South Korea. It will be called ‘Myth-History Park’.  

According to building permits granted by the Jeju government, Landing Jeju is permitted to develop and construct “a gaming and integrated resort with a total gross floor area (GFA) of approximately 306,763 square metres [3.30 million sq. feet]” added the filing.

It would include “premium hotels and villa hotel and other conferencing and exhibition facilities, a gaming facility, a theme park and shopping and other entertainment and tourism facilities” plus condominiums, villas, bungalows and other accommodation facilities with a GFA of approximately 132,265 square metres.

NCLH - customers who book a cruise of three nights or longer can choose from one of four value-added perks that include a free Ultimate Dining Package, a free Ultimate Beverage Package or up to $300 in on-board credits. The fourth option is to bring along extra passengers in a cabin for free when there already are two paying passengers (up to the limit allowed in the cabin). The option only is available on select sailings.

Article HERE

Takeaway: New Norwegian Wave deal

 

CCL -  According to Carnival UK’s executive vice president of operations, David Noya, "There is a lot of interest and bookings for the new ship, and since we launched the new ads, we are on track for our biggest ever wave for P&O. We’re seeing a lot of newcomers – people who are totally new to cruise, as well as people that have cruised before.”

Article HERE

Takeaway: Bookings are doing well for P&O Cruises UK possibly due to an earlier Wave. There hasn't been any commentary on pricing, which we think is slowing in the UK.

 

RCL - According to RCL Senior Vice President, Sales, Trade Support and Service Vicki Freed, there will be a new rotational dining program for RCL. Under the new program, guests will dine at different complimentary restaurants each night of their cruise based on their rotational schedule.  At each restaurant, guests will have the same wait staff and table mates each evening.

The new rotational dining program will begin with Anthem of the Seas, but there is no indication yet if it will spread to Quantum of the Seas, Oasis of the Seas and/or Allure of the Seas.

Article HERE

 Takeaway:  We think this modification is due to the negative feedback regarding the implementation of the Dynamic Dining on Quantum.


RCL latest Weekend WoW deal

Article HERE

CCL – Carnival aired its first-ever Super Bowl TV commercial entitled "Come Back to the Sea" – a 60-second spot combining stunning cinematic images of the ocean and stirring words from President John F. Kennedy to create an emotional storyline about people's universal connection with the sea.

Article HERE

Montage Laguna Beach - Strategic Hotels & Resorts Inc. bought the 250-room Montage Laguna Beach from an affiliate of Ohana Real Estate Investors, a Redwood City investment firm funded by Pierre Omidyar, the founder and chairman of eBay. Ohana still owns the Travelodge Laguna Beach and the Montage Beverly Hills, among other properties. The sale was for $360 million.

Article HERE

Takeaway: This luxury property was sold at a California record of $1.44m average price per key.

WYN - Wyndham Hotel Group, announced it has acquired Dolce Hotels and Resorts, a provider and manager of group accommodations with a portfolio of 24 properties and over 5,500 guestrooms across seven countries in Europe and North America, for $57M in cash.

Article HERE

INDUSTRY NEWS

Las Vegas - According to cheaptickets.com, 2015 LV hotel prices are down 5% YoY over the Spring Break period. 

Article HERE

 

Macau – The average daily wage of construction workers increased by 6.1% QoQ in 4Q 2014, and the average daily wage of local construction workers was up by 8.2%.

Article HERE

 Takeaway:  Higher construction worker wages is another headwind 

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.