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June 25: NJ Senate votes on AC PILOT tax bill


RCL - A MERS outbreak in South Korea has prompted RCL to cancel planned cruise ship stops in South Korea for Mariner of the Seas, Voyager of the Seas, and Quantum of the Seas until the health situation improves.  Royal Caribbean replaced the stops with an alternate port or a sea day.


Takeaway: More of a negative for Mariner/Voyager, neither of which has seen much pricing power in Asia. 


AHT- Ashford Trust announced a pair of acquisitions. It completed the acquisition of the 226-room Le Pavillon Hotel for total consideration of $62.5 million in cash ($277,000 per key).  Ashford Inc., will provide $4M in key money for AHT's acquisitions of the Le Pavilion.   

  • Purchase price (after adjusting for key money) equates to an estimated forward 12-month cap rate of 7.8% and an estimated forward 12-month EBITDA multiple of 11.4x

AHT also announced that it has signed a definitive agreement to acquire the 237-room W Atlanta Downtown hotel for total consideration of $56.8 million ($239,000 per key). The previous owner was Capri Capital Partners. HOT will maintain its mgmt contract.

  • Purchase price represents an estimated forward 12-month cap rate of 7.2% and an estimated forward 12-month EBITDA multiple of 11.6x



Takeaway: W Atlanta's price per key is roughly in-line with the Hyatt Atlanta Midtown property sold last July. 

PEB – Pebblebrook Hotel Trust announced that it has acquired The Tuscan Fisherman’s Wharf, a Best Western Plus Hotel (“The Tuscan”) for $122.0 million. ($552,036 per key). The property will continue to be managed by Kimpton Hotels & Restaurants.  


CCL – Announces that they are cancelling their "Cruise to Nowhere" from Norfolk, VA. “Due to recent changes in how ships are cleared into and out of the United States by U.S. officials, certain short duration cruises without a foreign port of call are subject to itinerary changes beginning in 2016,” said a spokesperson for CCL. 

The regulation also forced Norwegian to cancel three two-night cruises Breakaway, scheduled for 2016 out of New York.




Leong comments on Coloane Leong states that there is no law prohibiting casinos on the island.  Louis XIII has a casino/hotel under construction in Coloane, expected to open in 201 6. No hotelier on Coloane has ever applied for a licence to run a casino on the island, Secretary of the Economy and Finance Lionel Leong Vai Tac has said.  Leong told reporters that only gaming concessionaires – and not hotel operators – could be granted casino licences. 


Atlantic City bill -  NJ state Assembly on Thursday approved a package of five bills for the struggling seaside resort town. The most important would let its eight casinos make payments in lieu of taxes for 15 years, letting them know exactly how much they owe instead of facing huge potential increases each year.

The so-called PILOT bill would let the casinos collectively pay $150 million for the first two years, and $120 million annually for 13 years, assuming gambling revenue stays within certain ranges in the city. Calculations made in December, which the casinos say are still in effect, would grant large tax reductions to billionaire Carl Icahn and Caesars Entertainment, two of whose three Atlantic City casinos are in bankruptcy.

  • The Tropicana, which Icahn owns, and the Trump Taj Mahal, which he is soon to acquire, would pay nearly $19 million less in the first year of the plan. 
  • Caesars and Harrah's would see a nearly $20 million reduction, though Bally's would see a $2.6 million increase in payments. 
  • The Borgata would see a $2.7 million reduction.

That led lawmakers to amend the bill to provide that any casino asked to pay more under the PILOT plan than their tax bill would have been will get an equivalent credit on redevelopment taxes they are obligated to pay the state. Without such a credit, casinos including Resorts and the Golden Nugget would have faced steep increases.

The casinos would no longer be able to appeal their tax payments under the PILOT plan, eliminating a vexing financial uncertainty for Atlantic City each year.

The state Senate is due to vote on the bills on June 25.


Takeaway: Important casino tax bill in AC to keep an eye on as Borgata continues to wait on its tax refunds.

1Q 2015 Lottery - increased by 8% globally. The chart below shows Latin American Asia Pacific leading the way. For North America, the California Lottery was the strongest with 12.4% YoY increase in sales. Also performing strongly were the Minnesota State Lottery, which reported a +10.1% increase in sales, and the Connecticut Lottery Corporation, which rose 7.5% YoY. All other participating U.S. lotteries also recorded results in positive territory. This contrasted with the situation with respect to the participating Canadian lotteries, which either saw their sales decline or hold steady.

LEISURE LETTER (06/12/2015) - wla


Takeaway: North American lottery sales was solid in 1Q 2015 despite a tough macro environment. 

New Jersey – Newark: Essex County Executive Joseph DiVincenzo is pushing for a casino to help the beleaguered city. In a letter sent today to Gov. Chris Christie, state Senate President Stephen Sweeney (D-Gloucester), and state Assembly Speaker Vincent Prieto (D-Hudson), DiVincenzo said the city — the largest in the state — is well-positioned to host a north Jersey casino, given its access to highways, public transportation and Newark Liberty International Airport.



Hedgeye Macro Team remains negative on 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.