LEISURE LETTER (05/11/2015)

Tickers: HLT, PENN, CCL



  • TODAY (1:30pm) - Stations Casino 1Q CC

  • May 13 - IGT 1Q CC 8am, ; PW: 2660253

  • May 14 - Genting Singapore 1Q CC  6am

  • May 14 - Macau Legend Development 1Q CC 8:30pm


HLT - announces 90m secondary offering for Blackstone. The underwriters (DB, BofA/ML, Citi) for the share sale have an option to purchase an additional 13.5 million shares. Blackstone owns 55% of HLT's shares outstanding. 

Takeaway:  This is the fourth 90m secondary for Blackstone. HLT recovered an average of 3% off the initial drop on the announcement in the week of trading following the previous 3 Blackstone sales.


Frasers Hospitality Trust - reached a deal to acquire five-star heritage-listed hotel in Sydney – Sofitel Wentworth for A$224 million ($236 million). The Hotel will continue to be operated by the Accor Hotel Group under its luxury-tier brand Sofitel.


Takeaway: Average price per key of $541,284 for this 5-star property in Australia. 


PENN - has lost its request to reduce Bangor’s property tax assessment of its Hollywood casino in Bangor, ME by $36.8 million. PENN now has 60 days to appeal the decision. 


Genting - might be interested in buying a 51% stake in Baha Mar.


Takeaway: This resort property has been long-delayed, mired with multiple operational and financial difficulties. Baha Mar is reportedly losing $10m a month with the delays.


CCL- dry dock slated for Azamara Quest this September has been moved to April 2016. The change was made as the scope of the upgrades has been expanded. Azamara Journey's dry dock remains on schedule for January 2016.



Korean cruise casinos - plans to enable its citizens and foreign tourists to wager on new cruise ship services that will serve ports around the country, reports the Korea Joongang Daily newspaper. 


The Ministry of Oceans and Fisheries on Thursday announced that the government will launch South Korean cruises within the year.  The initiative will establish docks exclusively for cruise ships in Busan, Incheon, Jeju, and Sokcho, Gangwon, by 2016. Existing docks will also be modified to allow cruise ship access, the newspaper added.


The Oceans Ministry said it plans to operate two trial runs to major tourist destinations in South Korea and Japan within the month. The runs are intended to check for glitches, including dock usage as well as the departure and arrival process.


According to the ministry, in 2014 the spending by each tourist on South Korean cruise ships averaged KRW1.17 million (US$1,075). Total spending exceeded 1.22 trillion won, as there were 1.05 million cruise tourists that travelled on South Korean ships.

Takeaway: Is this a precursor for an eventual lift of the ban on locals land casino betting?  Kangwon Land is the only land-based casino that allows locals betting.


Indiana land casinosGov. Mike Pence has decided to allow legislation permitting on land casinos to become law without his signature, paving the way for Tropicana in Evansville and Majestic Star in Gary.  The new law also gives other riverboats the option to build new on-land casinos on property near their current locations. 


Indiana April SS revs: -3% YoY

Missouri April SS revs: +2% YoY

Illinois April SS revs: -1% YoY

Pennsylvania (slots only) April SS revs: +4% YoY

Takeaway: April has been mixed but overall, it is a little better than our model projection for flat growth.


D LV/Golden Gate - owner Derek Stevens bought all gaming machines and tables from just-shuttered Riviera, the Las Vegas Review-Journal reported. Stevens bought 852 machines, four roulette wheels and spare machine parts for an undisclosed price. He will sell about 500 slots at auction next month.  Not all of the Riviera equipment was for sale, Stevens said. Popular, vendor-owned machines such as Wheel of Fortune and Megabucks were sent back to IGT. The other games will be installed at D and Golden Gate before Memorial Day.




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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