LEISURE LETTER (03/12/2015)

Tickers: RCL, CCL


  • March 16-19: Cruise Shipping Miami Conference
  • March 19: Galaxy FY 2014 results


Macau Legend- Macau Legend Development Ltd’s CEO, David Chow Kam Fai, expects the adjustment in Macau’s gaming market to last for two more years. Chow said Macau’s gaming industry has enough money to see it through the slump in business. Chow failed to answer directly when asked if the government was going to give his company its own gaming licence.


Takeaway: A bearish outlook from David Chow


Genting Singapore- repurchased 5.989 million shares totaling US$4 million, bringing its repurchases to more than 11 million shares. Genting Singapore has said it will repurchase up to 1.224 billion of its 12.084 billion shares.



  • Royal Caribbean's newest ship Harmony of the Seas will spend the start of the 2016 summer season in Europe.
  • Independence of the Seas will return to Southampton in 2016.
  • Also returning to the UK is Navigator of the Seas, having recently been through a £50 million pound makeover as part of Royal Caribbean's fleet-wide refurbishment programme.


Takeaway: It will be a busy time for the UK in 2016. Will higher supply affect pricing?


CCL  - CEO Arnold Donald has admitted the way the company cut commission in the UK in 2011 was executed poorly. But he suggested agents put customer service above earning potential when booking first-time cruisers.


Donald said the remuneration cuts to 5% were an “honest attempt” to respond to discounting but he conceded the lines, which include P&O Cruises and Cunard, hadn’t got it right.


He said the commission cuts were an attempt to help the trade eradicate discounting but the move had backfired. Now, he added, he was keen to build ties for the future to ensure the success of agents’ businesses and that of the Carnival Corporation brands.






Beijing-  The Chinese Security Ministry has continued its hardened stance against corruption in Macau, by warning mainland officials and Chinese business leaders that they would be monitored if they visited Macau gambling enterprises.


The hardened approach to Macau casino enterprises is part of President Xi Jinping’s wider ongoing effort to curve Chinese corruption through the ‘Tigers & Flies’ special taskforce. Xi Jinping wants officials to lead the fight by shunning away from practices associated with corruption (in particular money laundering) such as gambling,


To its financial detriment, Macau has suffered from the Security Ministry’s anti-corruption measures. Asian news sources have reported that the Ministry has the authority to carry background checks on all national gamblers visiting Macau casinos.


Takeaway: A followup to Li Gang's comments earlier in the week.


Las Vegas - Visitors to Las Vegas last year spent an estimated $723 each. Spending per visitor is also up by $33 compared to 2013 with convention-goers spending more than leisure travelers. Jeremy Aguero with Applied Analysis says 2014 represented the highest visitor spending the destination has ever seen on everything but gambling.



China February new yuan loans CNY1.02T vs consensus CNY700B and CNY1.47T in January

  • Loan growth +14.3% y/y vs +13.9% in January
  • Deposits +10.9% y/y vs +13.7% in January
  • Total social financing CNY1.35 vs consensus CNY1.100T and CNY2.05T in January
  • M0 +17.0% y/y vs (17.6%) in January
  • M1 +5.6% y/y vs +10.6% in January
  • M2 +12.5% y/y vs consensus +11.1% and +10.8% in January

Takeaway: A surprisingly positive loan data point. It may alleviate some pressure from the Central government to push for more stimulus. 


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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