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Takeaway: Strong quarter and solid guidance. Story still intact.


  • 4Q REVPAR:  +10.3% - driven by 21k more corporate group nights vs last year
  • 4Q: Transient room nights up 7.9% YoY; transient ADR up $7.25 or 3.9% YoY
  • Bought National Harbor 192 room hotel in December:  Reflagged under AC brand.   Reopening expected by end of 1Q 2015
  • 2Q typically the best quarter
  • 4Q 2014:  booked 870k gross room nights for all future years +12.7% YoY. booked 775k net room nights +21.6% YoY.  December was best production month on record. Best bookings quarter since 2005 (2nd best ever)
  • Group segment very healthy
  • Aim for company properties to have a little over 80% occupancy
  • Opryland: room renovation will be unveiled in 2Q 2015
  • 2015 guidance:  have slightly more group nights booked than 2014. 
  • Group:  Prospects up 8% and tentatives up 10%.  Will have material impact on 2016-2017.  
  • 2016 Group book revenues up 5% YoY 
  • Raised menu pricing in 2014.  Banquets particularly did well.
  • Create value by settling convertible notes for cash and buy back stock
  • Q4: Modest increase in attrition/cancellations 
  • 2013 corporate EBITDA comp: positively impacted for $3.4m due to change in corporate deferred compensation plan.
  • Plan to complete repurchase of warrants by 1Q 2015 
  • AFFO: no longer deducting capex
  • New dividend policy: “The Company plans to pay a quarterly cash dividend to shareholders in an annualized amount equal to at least 50% of Adjusted Funds from Operations (Adjusted FFO) less maintenance capital expenditures, or 100% of REIT taxable income, whichever is greater.”
  • EBITDA guidance for AC hotel: $2-3m
  • 2Q 2015 and 4Q 2015:  strongest revenue and EBITDA growth quarters
  • 1Q 2015 impacted by norovirus outbreak at Opryland and weather effects
  • 1Q 2015 total REVPAR guidance: flat

Q & A

  • Limit group nights to have higher transient business? Want to leave open weekends/holidays opportunities for transient business.
  • Gaylord National:  market will continue to grow. 
  • Nashville:  bought a building 9 months ago in a great location. Looking to build a high-quality entertainment venue.
  • Gaylord Texan:  66k more group room nights on the books than this time last year.  Will have an excellent 2015. 
  • DC:  property will continue momentum.  Well-positioned.  
  • Orlando:  humming along. Expect slight growth YoY 
  • Will look potential asset purchases - want the right multiple

Keith's Macro Notebook 2/26: Germany | UST10YR | USD

Hedgeye CEO Keith McCullough shares the top three things in his macro notebook this morning.

LEISURE LETTER (02/26/2015)




  • 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


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.



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



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


Takeaway: Not as exciting as Quantum


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. 


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.  


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


Chinese: 5m traveled abroad in Spring Festival



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


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.


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KSS - Initial Reaction to the Print

Takeaway: Guidance was slightly weak. But not as weak as it should be. Numbers need to come down -- a lot.

1) Results Slightly Better…The 3.7% comp was already reported, which resulted in a $2.2bn pop in KSS EV (stock from $60 to $70). Nothing new on that front today. Gross margins looked slightly less bad – down 14bps.  But the comp allowed KSS to leverage SG&A growth of 2.4%, which is rare for this company. Combined with lower D&A, lower tax rate, and fewer shares (a positive), KSS leveraged the 3.7% comp into 7.4% EBIT growth, and 17.9% EPS growth – KSS’ fastest EPS growth rate in almost 5-years.

2) But Guidance Slightly Worse – Just 4 months ago KSS issued long-term guidance of 3% comps through 2017. 2015’s guidance of 1.5%-2.5% isn’t 3%. Coming off a solid 4Q, with such supposed company-specific momentum in its business on top of macro/weather tailwinds, we wonder why so conservative. It seems pretty soon to temper expectations.

3) While the market is telling us that we’re flat-out wrong in saying this, we think that this is the last year KSS earns over $4.00. It took a lot of financial engineering to get there: D&A $886 vs. initial guidance of $950 and most recent guide of $900, and a sub 36% tax rate got them enough to earn $4.24 for the year. Without these benefits KSS would have been seen negative EPS growth on a 7% share count reduction. We think that the incremental customer acquisition with its new rewards plan is extremely costly, not to mention the underlying drivers for the change in the plan are grossly misunderstood by the Street (including the risks to credit income -- 24% of EBIT).  To buy KSS here you need to believe in $6 earnings power. That’s simply not going to happen. Real EPS power is closer to $3-$3.50. That’s a stock of around $40 – 42% below where it is today. The risk/Reward looks solid to us on the short side here. 

Get The USD Right…

Client Talking Points


The German 10YR Bund crashes to a record low of 0.29% which is just jamming people into chasing German stocks, which are now up a big league +14.5% year-to-date (vs. boring SPX return of +2.6% year-to-date) – Italian stock market +15.8% year-to-date! #centralplanning.


The UST 10YR is down -17 basis points for the week-to-date ahead of slowing U.S. CPI and GDP reports (today and tomorrow) – you’d buy the Long Bond on those fundamental factors alone, never mind a +162 basis points spread over 10YR Bunds.


The USD continues to weaken (post Janet Yellen’s dovishness, and ahead of the economic data – remember the CPI deflating will spin the Fed’s rhetoric) – we think it’s just another counter-TREND move, but short-term bullish for Oil, Gold, etc.

Asset Allocation


Top Long Ideas

Company Ticker Sector Duration

You want to own the Vanguard Extended Duration Treasury (EDV) in this current yield-chasing, growth slowing environment. The trend in domestic growth continues to signal growth slowing, and the counter-TREND moves we’ve seen over the last few weeks (@Hedgeye TREND is our view on a 3-Month or more duration) remain something to fade until we can see more follow-through that growth is trending more positively (second-derivative positive).


Low-volatility Long Bonds (TLT) have plenty of room to run. Late-Cycle Economic Indicators are still deteriorating on a TRENDING Basis (Manufacturing, CapEX, inflation) while consumption driven numbers have improved. Inflation readings for January are #SLOWING. We saw deceleration in CPI year-over-year at +0.8% vs. +1.3% prior and month-over-month at -0.4% vs. -0.3% prior. Growth is still #SLOWING with Real GDP growth decelerating at -20 basis points to +2.5% year-over-year for Q4 2014.The GDP deflator decelerated -40 basis points to +1.2% year-over-year.


Hologic (HOLX), at this stage in their product cycle and in the current stage of the economic cycle, has some very impactful tailwinds emerging to their revenue growth and the implied growth in the future. A stock generally will perform really well when doubt about future growth turns to optimism while the most recent data confirms the optimism. So far, we have a little bit of both; recent positive data like the December 2014 quarter upside and consensus estimates and ratings starting to move off of multi-year lows. A less-worse trend in Pap testing and rising patient volume can combine to get us close to flat for HOX’s Cytology (Pap) business. As the growth in Cytology improves and is less of a drag, the 3D Mammography growth can flow through. We think the outlook is bright, and with a few more data points, we think a lot more investors will agree with us.

Three for the Road


Tune Into Hedgeye's Morning Macro Call 2/26 LIVE at 8:30AM ET https://app.hedgeye.com/insights/42585-hedgeye-s-morning-macro-call-2-26-live-at-8-30am-et



Live in the sunshine, swim the sea, drink the wild air.

-Ralph Waldo Emerson


The Japanese Nikkei rips +1.1% to a new 15 year high of +7.7% year-to-date (vs the SPX +2.6% year-to-date).

CHART OF THE DAY: Paul Krugman Completely Disagrees With This

CHART OF THE DAY: Paul Krugman Completely Disagrees With This - chareal


This is an excerpt from today's Morning Newsletter. If you're tired of following consensus lemmings and are interested in becoming a subscriber click here.


In today’s Chart of The Day we show what the Federal Reserve currently uses as its definition of “inflation” – something academic wonks call “Core PCE”, or the US Personal Consumption Expenditure Core Price Index.


Other than this chart going straight down for the foreseeable future (until at least Q3), here’s what this time-series means to me:


  1. Instead of using real-world inflation, Bernanke deferred to a made-up calculation that fit his policy narrative
  2. In 2011, the US Dollar hit its lowest-level since 1978 - that’s what perpetuated the highs in this chart
  3. But since, at $1900 Gold, “there was no inflation” (per the Fed); it said it was just about right at 2%


I can guarantee you that everyone Paul Krugman influences in the Yale and Princeton econ departments completely disagrees with the context I just provided you. So that means I’m probably onto something…


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