LEISURE LETTER (03/20/2015)



  • March 26: Macau Legend 4Q CC


WYNN - raised the pay of employees previously paid MOP 65,000 a month or less by 5%. This represents 98% of its current 81,00 workforce. "This increase is in addition to the 1,000 shares we granted to each of our employees, which now totals 8.3 million shares given since July 2014. These shares, including their annual dividends, represent an additional 10% increase in pay,’ said CEO Steve Wynn.

Takeaway: WYNN following what other operators (except Galaxy) have already declared.


GENTING - More staycation bookings for SG50 long weekend (Aug 7th). This is encouraging, they said, as such inquiries and bookings usually occur two to four weeks before a long weekend.  


The Ritz-Carlton, Millenia Singapore, bookings made for the National Day weekend were more than double those made at the same time last year - mostly due to local demand. Orchard Hotel Singapore is 25% booked for the long weekend, with half of them being staycations. 


Inquiries for staycations at Resorts World Sentosa have grown by 10%. 


Takeaway:  RWS outperformed on REVPAR vs its upscale peers in Q4. It could continue.


Lightstone/Moxy - Lightstone in February had announced plans to invest $2 billion in the development of hotels in the United States. Half that total will be used to help jump-start MAR's Moxy brand, which has one open property in Milan. 


Lightstone President and COO Mitchell Hochberg said the mix of new builds and conversions would take place during the next 24 months. In addition to Moxy, Lightstone officials will look to develop other select-service hotels. 


“We believe we are in the fourth or fifth inning of a nine-inning game,” he said of the industry cycle. 


NCLH - laid off an unspecified number of employees Thursday, confirming rumors that circulated widely during the industry's annual Cruise Shipping Miami conference this week.


Several sources estimated the number at 200 or more affected workers and said the layoffs may take place over time, although it was not clear how long that period would be. It was also unclear how many workers were immediately laid off on Thursday.


Takeaway:  Cost synergies is just a nice way to say layoffs


CCL/MSC (update) - A total of 17 cruise passengers were among the 20 people killed in the Tunis terrorist attack, according to Costa Cruises and MSC Cruises. A further 21 passengers were injured. All Tunisia calls from Costa/MSC have been canceled for the year.



CCL - AIDA Cruises will have 35% of its 2015 capacity in the Mediterranean this year, according to the 2015-2016 Cruise Industry News Annual Report. This is a major change for the leading German cruise line as prior years saw Northern Europe dominate AIDA’s fleet deployment data.


While Mediterranean capacity has grown, AIDA has slowly cut back in Northern Europe, cutting back nearly 18% from 2014 to 2015. The line has also added capacity and offerings in the Caribbean, where it will carry over 70,000 passengers this year, as opposed to 50,000 in 2014.


AIDA is making moves in Asia as well, as the line will double its Asia capacity this year, growing by nearly 100% to carry over 20,000 passengers in the region.

Takeaway:  AIDA's diversifying from its German hub. Good thing since additional supply from TUI is pressuring pricing there.



RCL - a rumor that SkySea be adding a second ship to start operation as soon as April of 2016. The Ctrip and Royal Caribbean joint venture has been busy building up its sales channels through Ctrip and other retailers and news could come soon. 





IVS capacity report - Chief Executive Fernando Chui Sai On has announced that the tourism capacity report, conducted by the Secretary for Security, Wong Sio Chak, and the Secretary for Social Affairs and Culture, Alexis Tam Chon Weng, has been completed and will be submitted to the central government with regard to improving the city’s Individual Visit Scheme (IVS) for Mainland tourists.


Secretary Wong told local broadcaster TDM Radio yesterday that the capacity report covers studies on the measures applied for crowd control and border crossing in the past few years, especially during the Chinese New Year. In addition, he said that the underlying concerns and risks for the measures were also evaluated.

The CE, meanwhile, said that the central government would study how to adjust and improve the current IVS policy based on the report, aiming to reach a balance between the capacity and life quality of Macau residents.

Takeaway: The IVS report is done. The govt is quiet on the details.


Construction death - Three fatalities this month alone. Most recently yesterday, on the Hollywood Roosvelt Hotel construction site in Taipa.


Takeaway: So far, these incidents haven't affected the timeline of the upcoming Cotai projects.


HK - With cross-border tensions exacerbated by pro-democracy Hong Kong protests, tour groups visiting Hong Kong from China plunged about 80% in early March. A Beijing crackdown on conspicuous spending by mainlanders also shows no signs of letting up, sending tourists further afield.


While daytrippers from just outside Hong Kong continue to buy daily essentials there, Chinese travelers with cash to burn are homing in on places like South Korea and Japan. According to the Japan National Tourism Organization, Chinese visitors lured by the weaker yen and easier visa rules nearly tripled in February to a monthly record: With one in four tourists in Japan, Chinese became the biggest visitor group in a country with which relations have often been fraught.


Takeaway: Japan and S Korea have seen an influx of Chinese visitors.


Turkish Lottery - The group that won the license to run Turkey’s national lottery is seeking $2 billion from lenders including Deutsche Bank AG, Akbank and Denizbank to help pay for the bid, people with knowledge of the matter said.

The lottery operator, set up by Istanbul-based companies Net Holding AS and Hitay Investment Holding AS, plans to borrow the funds for eight or nine years and is close to gaining commitments from banks.



US REVPAR - February REVPAR growth was 8% YoY. Week ending March 14, REVPAR was up 3.8% YoY.

Takeaway: US REVPAR averaged an impressive 8.3% YoY growth in Jan-Feb, although March growth will be much slower. 


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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