• It's Coming...

    MARKET EDGES

    Identify global risks and opportunities with essential macro intel using Hedgeye’s Market Edges.

TICKERS: HLT, IGT, RCL,

EVENTS

  • Feb 12: 
    • MPEL 4Q CC 8:30am
      • (1866) ; pw: MPEL
    • PNK 4Q CC 10:00am
      • ; pw: 68847867
    • BYD 4Q CC 5:00pm
      • ; pw: 5378350
  • Feb 17: MGM 4Q CC 11:00am
    • ; pw: 8870181
  • Feb 18: 
    • NCLH 4Q CC 11:00am
    • HYATT 4Q CC 11:30am
      • ; PW: 62845475
    • MAR 4Q release 5pm
  • Feb 19:
    • HST 4Q CC 9:00am
    • MAR 4Q CC 10:00am
      • ; pw: 41025602
  • Feb 25: Prestige analyst day  

HEADLINE STORY

HLT- closes sale of the Waldorf Astoria New York and uses proceeds to acquire five landmark hotels for $1.76B. The five hotels are:  

  • Hilton Orlando Bonnet Creek in Orlando, FL (1,001 rooms)
  • Waldorf Astoria Orlando in Orlando, FL (498 rooms)
  • The Reach, A Waldorf Astoria Resort in Key West, FL (150 rooms)
  • Casa Marina, A Waldorf Astoria Resort in Key West, FL (311 rooms)
  • Parc 55 in San Francisco, CA (1,024 rooms)

Purchase price of these five hotels of $1.76 billion represents ~13x the midpoint of the five properties’ combined full-year forecasted 2015 Adjusted EBITDA of between $132 million to $138 million.

Hilton Worldwide expects that these hotels will not require meaningful incremental capital expense in the near term, and will expand the footprint of Hilton Worldwide’s portfolio of iconic owned hotels in Florida resort markets and San Francisco, a key growth market.

Expects to close transaction in February 2015 and use the balance of the proceeds of the sale of the Waldorf Astoria New York net of prorations, adjustments and transaction expenses, estimated to be approximately $100 million, to purchase additional assets within the next six months.

Article HERE

Takeaway:  Quality assets bought with Waldorf Astoria money in a tax efficient manner. Good arbitrage of multiples while avoiding the inevitable cash outlay for the Waldorf renovation/expansion. Hedgeye believe HLT could spin off all of its real estate into a REIT, possibly announce the deal in 2H 2015.

COMPANY NEWS

IGT  - Shareholders approve merger with GTECH. Declared 11 cent/share dividend payable March 20.

 

IGT  - won 100% slot floor share (100 slots) and system installations at Grey Rock Entertainment & Casino, slated to open this month

Article HERE

MSC-  will expand its capacity on the German market by basing a second Fantasia-Class vessel in a German port for the 2016 season. MSC Fantasia is to operate seven-day cruises from Kiel, April to September next year, replacing the smaller MSC Orchestra.The Fantasia-class MSC Splendida, which is going to operate from Germany for the first time this year, will be based in Hamburg again in 2016.  The fleet reshuffle responds to strong demand for cruises in Northern Europe, according to Michael Zengerle, md of MSC Kreuzfahrten in Munich.

Article HERE

Takeaway:  The Germany market getting crowded.

RCL - Royal Caribbean International has partnered with hospitality technology provider Eleven to provide unlimited onboard Internet access based on a per day rate.

Article HERE

INDUSTRY NEWs 

Slump has cost 1,000 VIP gaming jobs, union says. The trade union Forefront of Macau Gaming estimates that at least 1,000 staff of VIP gaming rooms have been laid off since July. Union vice-director Lei Kuok Keong says about one-third of Macau’s VIP rooms have closed temporarily or permanently because of the slump in gaming, which is due to the mainland’s credit squeeze and campaign against corruption deterring rich mainlanders from gambling.

Lei says the employees laid off include cashiers, accountants, public relations staff, customer service staff and drivers.

Article HERE

Takeaway: If true, these are the 1st meaningful job cuts in a while in Macau although no dealers have been laid off.

Beijing’s main representative in Macau Li Gang, director of the Central People's Government Liaison Office in Macau said on Tuesday that the city’s casino industry had entered “an interim development period” that would allow for its stable growth in the future. He added it was “normal” that gross gaming revenue (GGR) had dropped for consecutive months – eight at current count, and heading for a ninth sequential decline in February.

Article HERE

The government expects gross gaming revenue in Macau’s casinos to be lower this month than a year ago. “GGR reached MOP38 billion in February 2014. We estimate that GGR [this month] will not be as high, as MOP38 billion in GGR was the highest that Macau has registered,”

Article HERE

 

Govt to persist with LRT project. Chief Executive Fernando Chui Sai On has said he and his advisers agree that the Light Rapid Transit elevated railway project should continue.

Article HERE

Takeaway:  This project has been a disappointment and an embarrassment.

Singapore - Singapore reported fewer international visitors last year, the first annual fall since 2009, hurt by a stronger Singapore dollar and a drop in the number of Chinese tourists amid slower regional tourism growth. International visitor arrivals fell 3 percent last year to 15.1 million, missing the Singapore Tourism Board's forecast of an increase of 5 to 8 percent from 2013.

China visitors grew for the 3rd consecutive month in December.

Article HERE

LEISURE LETTER (02/11/2015) - MA

South Korea - Incheon Airport, the gateway to Seoul, is planning a tourism project to emulate Resorts World Sentosa in Singapore that aims to lure Chinese gamblers with a new casino, shopping mall and hotels. The project may cost 5 trillion to 6 trillion won (S$6.3 billion to S$7.6 billion), Mr Lim Byung Kee, an official at Incheon International Airport Corp, said in an interview. The airport is looking to receive proposals to build the facilities and sign deals this year, he added.

Article HERE

Takeaway:  Better hope the Chinese VIPs can get out of China.

Texas - The Texas Lottery set a record last week for scratch-off ticket sales. The lottery said sales of scratch-off games topped out at $75,677,650 last week, beating the previous record set in March 2013 of $75,360,138.

Article HERE

Takeaway:  Powerball is alive today with a $485 million jackpot. All other lottery games are benefiting from it.

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.