LEISURE LETTER (03/23/2015)



  • March 26: Macau Legend 4Q conf call 8:30-9:30pm (EST)
  • March 27: CCL F1Q, 10am -

headline news

GGR forecast lowered - Macau CEO Chui lowered his monthly GGR forecast for 2015 from MOP 27.5 billion to only MOP 20 billion, representing a 32% YoY decline for the year.  Chui said in the first policy of his second-term. Macau has entered an “adjustment” period of slower growth and needed to develop a broader range of attractions to draw tourists from around the world, he said.


Chui’s tourism panel would draft a five-year plan for stable casino growth while expanding the city’s tourist offerings, the chief executive said.  


According to the median estimate of nine analysts surveyed by Bloomberg News in January, gaming revenues would probably drop another 8% drop this year. The most pessimistic expected a 21% decline.


Greater oversight and adjustments - Chui stated that the Macau government plans to “enhance gaming-related laws and regulations, strengthen supervision of the gaming industry, regulate gaming businesses’ operation and continue to push for responsible gaming”.


The policy address added that the review of the gaming industry would analyse how each of the six gaming concessionaires have conducted their business since the liberalisation of the industry in 2002. The analysis would include the development of non-gaming elements, the creation of jobs and the promotion of Macau residents within each company.


But the Chief Executive warned of the possibility of job losses arising from the “adjustments” to the casino industry, saying the government would keep a close eye and take the necessary meaures to prevent the problem from affecting other industries.


New smoking rules - The policy address, as announced on Monday, confirmed the government would propose a full ban on smoking inside public areas, including casinos. It is expected that the ban would impact VIP rooms and mean that smoking lounges on mass floors would no longer be allowed.


New smoking rules are likely to be proposed in the second half of 2015.



Takeaway: Chui's even more bearish than even us. The casino 'adjustments and further regulation' will be costly to the operators.


PENN - Plainridge Park will open on June 24th with over 1,200 slots/ETGs. 


MGM - will break ground on its Springfield casino this Tuesday. 


MGM - MGM Grand, which hosts the big fight, said 98% of rooms are already sold out for the weekend of May 1-2. MGM Grand President Scott Sibella said room prices immediately shot up to $900-$1,000 a night once the bout was announced and now the going rate is more than $1,600 with still six weeks to go. This contrasts with a regular weekend price of $338 at this time of year.


Other Strip hotels such as the Venetian and Palazzo are sold out but vacancies still exist at some hotels with four-star properties going for an average $716 and five-stars for $1,033 according to a quick search online at Expedia.com.

Coveted ringside seats are rumored to be changing hands for a mind boggling $100,000. 


Takeaway: May 1-2 will set records in Vegas


BYD/MGM - Borgata sued Friday to block Atlantic City from borrowing $43 million in the bond market to repay a state loan due March 31. The lawsuit, filed in Superior Court of New Jersey in Atlantic County, claims that the borrowing plan, endorsed by Atlantic City Council on March 4, violates a September ordinance allowing the city to borrow up to $140 million to pay property-tax refunds, such as $88.25 million owed to Borgata.


The Borgata lawsuit came just days before the emergency manager appointed Jan. 22. by Gov. Christie is expected to issue recommendations on stabilizing Atlantic City's finances, and it sets up a three-way fight between the state, the city and Borgata.


Borgata said it had to file its complaint Friday to beat a legal deadline to appeal Atlantic City's plan to repay the state, but not casinos owed tax refunds, which is what City Council authorized last year.

Takeaway: It will be an intense legal battle to get the $88 million




IVS capacity report (Nomura) - the key points in the report include: “1) balance between tourism capacity and local resident life quality, 2) potential free arrival and departure in Macau and Hengqin within the seven days granted by the Individual Visit Scheme (IVS), and 3) potential tightening of the IVS via four measures.”  


Possible IVS restrictions include: spreading to other provinces a practice of Macau’s neighbouring province Guangdong – whereby visitors can only apply for the IVS to Macau every two months; extending the interval on Guangdong residents’ applications to once every three months; blocking approval of any new cities for the IVS, or reducing the number of existing cities covered; limiting IVS approval numbers during peak seasons.

Takeaway: IVS changes are coming and they are likely negative for mass gaming. We continue to believe the sell side is overestimating mass gaming revenues for 2015 and overestimating margins


Mississippi FEB GGR - Gulf Coast: +7%, River Counties -13%; statewide: -4%




Guangzhou housing

  • The Guangzhou Daily cited authoritative sources who said that more government relief for the property market was coming, including measures to relax tax burdens and purchasing limits.
  • The bulk of the article discussed the government lowering the threshold to access the public housing fund, including increasing its lending quota. The paper said that the fund will play a larger role to support housing.  

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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