LEISURE LETTER (02/26/2015)

TICKERS: H, RCL, CCL


 EVENTS

  • Feb 26: RHP 4Q CC 10:00am  pw: 73087325
  • Mar 5: The 3rd Session of the 12th National People’s Congress (NPC), China’s top legislature will convene in Beijing

COMPANY NEWS

MCRI - announced details of its long-awaited project intended to transform its Black Hawk casino into a full-fledged resort. The total Monarch expansion is expected to cost $285 million to $295 million, which will double casino space, triple garage parking to 1,500 spaces and add a 500-room hotel and three more restaurants. So far, $21 million has been spent.

CEO John Farahi said MCRI is adding the hotel and resort amenities to an underserved market that has only 928 casino hotel rooms to serve the Denver metro area.

The property is currently in the middle of a three-phase $110 million to $112 million upgrade that is expected to be completed by the third quarter and will increase the number of slot machines by 13 percent to 710.

The casino and hotel expansion will be complete in late 2017, with the casino and new restaurants opening while final hotel floors are being completed.

The current upgrade and coming expansion will total $395 million to $407 million, of which $281 million to $293 million is still to be spent.

Takeaway:  PNK/ASCA Black Hawk will face greater competition

GTK/SGMS -  Massachusetts' Lottery is accepting bids to replace 8,500 of GTECH’s 18-year-old lottery terminals, the oldest in the nation. Lottery officials are hoping to spend less than $65.5 million to replace the machines. They expect bids from GTK, Intralot and Scientific Games.

ARTICLE HERE

H -  On February 24, 2015, the Company entered into a Purchase and Sale Agreement (each, a "Purchase and Sale Agreement") with each of (i) RKMP H Company LP, a Delaware limited partnership owned indirectly by a trust for the benefit of certain of the lineal descendants of Daniel Pritzker, and (ii) TGFJ H Company LP, a Delaware limited partnership owned indirectly by a trust for the benefit of Daniel Pritzker, pursuant to which the Company agreed to purchase an aggregate of 750,000 shares of Class B Common Stock at a price of $59.5389 per share, which represents the Volume Weighted Average Price for the Class A Common Stock for the three (3) trading-day period ending February 23, 2015 as reported by Bloomberg, for an aggregate purchase price of $44,654,175. 

Takeaway: H continues to surprise on the upside with the buyback

 

CCL - Princess is trimming capacity in Europe and Alaska for 2016

ARTICLE HERE

RCL - Harmony of the Seas features water slides, larger cabins, and new specialty restaurants.

ARTICLE HERE

Takeaway: Not as exciting as Quantum

INDUSTRY NEWS

Beijing talks on visitor cap not yet scheduled: Macau govt

Maria Helena de Senna Fernandes, director of the Macau Government Tourist Office said, “We should focus on thinking about [how to deal with] so many visitors entering the city during holidays…the most important thing is how to improve our tourism environment and minimize the impact on local residents’ lives. Visitors who come to Macau want to have a comfortable trip…they don’t want to see so many people, they want to have a relaxing trip.”

Ms Senna Fernandes said that before any cap was introduced, the government would conduct a public consultation and also discuss the issue with representatives from the city’s tourism industry.

Macau’s Secretary for Social Affairs and Culture, Alexis Tam Chon Weng  old reporters that the Macau government planned to discuss soon the issue with China’s central government. He said no cap had yet been decided and that limits could vary for different seasons of the year. Mr Tam added he hoped the cap could be introduced this year. 

ARTICLE HERE

Takeaway: It's not just premium mass and VIP under government pressure...


CNY visitation - Mainland visitation from 2/19/2015-2/25/2015 increased 5.6% over the respective CNY period last year.  Overall visitation increased 3.3% over the respective CNY period last year.

LEISURE LETTER (02/26/2015) - cnyaa

 

Takeaway: In-line with expectations

Jan visitation - overall visitation in January fell 1.5% YoY - the 2nd consecutive monthly decline.  Mainland China visitors declined 1.2% YoY, its 1st drop since March 2013.

LEISURE LETTER (02/26/2015) - mva

Mainland Chinese HK visitation- The number of mainland Chinese visitors to Hong Kong during the Lunar New Year holidays fell for the first time in about 20 years as they have felt increasingly unwelcome amid political unrest in the city. The drop, though, was a mild 0.3% over the first three days of the holiday.

"If we have to restrict or decrease the numbers of mainland Chinese coming to Hong Kong then we must continue to discuss this with (China)...this is a difficult task," he said.  

ARTICLE HERE

Takeaway:  20 years is a long time. HK-China tensions remain.

Chinese: 5m traveled abroad in Spring Festival

ARTICLE HERE

LEISURE LETTER (02/26/2015) - cn

Takeaway: South Korea has been a hot spot

LV McCarran airport traffic - gained 0.3% YoY in January.

Takeaway: Continuing winning streak of 17 months, barely

MACRO

Macau CPI - Jan 2015 increased by 4.75% YoY but edged down by 0.03% MoM 

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 anegative pivot here looks increasingly likely in 2015.