LEISURE LETTER (06/15/2015)



CCL- Announced it has signed a multi-billion dollar contract to build four next-generation cruise ships (total capacity of 6,600 guests, feature more than 5,000 lower berths, exceed 180,000 gross tons). The contract with Meyer Werft is part of larger previously announced strategic memo of understanding with leading shipbuilders Meyer Werft and Fincantieri S.p.A for nine new ship orders between 2019 and 2022.  The ships will be the first in the cruise industry to be powered at sea by Liquefied Natural Gas (LNG).

  • Two of the ships will be manufactured for AIDA Cruises at Meyer Werft's shipyard in Papenburg, Germany.
  • CCL CEO Arnold Donald said the contract is consistent with the company's measured capacity growth strategy to replace ships with less efficient capacity with newer, larger and more fuel efficient vessels over time.

Takeaway: These ships are enormous - CCL taking a page out of RCL's playbook on ship size. Let's hope there is enough demand in Europe by the time these ships are done. 


RCL- Royal Caribbean to begin 5-day WOW Sale with up to $200 onboard credit & 50% reduced deposit.  The WOW sale is valid on all sailings departing on or after July 13, 2015, excluding China departures.

  • 5 nights or less
    • $50 onboard credit (per stateroom) & 50% reduced deposit
  • 6-9 nights
    • $100 onboard credit (per stateroom) & 50% reduced deposit
  • 10 nights or longer
    • $200 onboard credit (per stateroom) & 50% reduced deposit



NCLH – Four extra amenities on 3-to-16-night voyages can be booked through July 31. Depending on the stateroom category, guests can select one to four extra perks: a free Ultimate Beverage Package, a free Ultimate Dining Package, $75 per stateroom shore excursion credit for each port, or a 250-minute WiFi package. These offers are in addition to Friends & Family Sail Free, in which the third through eighth guest in each stateroom sails at no cost. 




Paul Gaguin- Paul Gaguin Cruises has sold one of its two ships,Tere Moana, after less than three years in its fleet. The 88-passenger vessel, formerly Ponant's Le Levant, joined the Tahiti-based cruise in December 2012 after a renovation. According to a report by Seatrade, the ship was acquired by Boston-based Grand Circle Travel. 




MGM -  MGM chief Murren sees no new hotel-casinos on the strip for now. “It’s not my expectation during my career here that we will build another casino resort in Las Vegas,” said Murren. 





Industry News


Indiana - A second year of failing to meet target revenue for the state spurred the Hoosier Lottery Commission on Friday to restructure its contract with GTECH Indiana and substantially reduce the goals the company originally promised to meet in the 2012 bidding process.

  • The private vendor also agreed to lower its annual management fee and give the state a one-time lump-sum payment of $18.25 million.

  • GTECH's new minimum goal for fiscal year 2016 is $270 million, with an extra incentive goal of $290 million. By comparison, under the original agreement, the goal for fiscal year 2015 was $320 million and fiscal year 2016 was $365 million.

  • Last year about $251 million in lottery revenue was sent to state government. This year the number is expected to drop to $243 million. And that is after GTECH pays a $16 million shortfall payment for not meeting goals. 


 Takeaway: Like Illinois, Indiana has also underperformed in lottery sales. A restructuring agreement with GTECH was expected.


Oregon - Over the past year, the state has been replacing its old video lottery terminals with new state-of-the-art machines.  Since the new machines began going in, lottery revenues climbed 10%.  The plan is to replace all 12,000 old terminals by the end of next year.

LEISURE LETTER (06/15/2015) - oregon lottery sales



Takeaway: Oregon VLT phase 2 could be already under way. Good news for the suppliers.


Missouri - The state lottery reported that proceeds increased over the previous fiscal year. Today’s final transfer of $25,258,803 brings FY15 proceeds to $270,701,018, the third highest ever. 




Maryland - Maryland's five casinos have asked the state to let them reduce required payouts on slot machines — a move that could shift tens of millions of dollars in winnings from customers to the casinos, state records show.  Under the proposal, the state would relax a requirement that each casino must pay out an average of 90% to 95% of the money bet at its machines over the course of a year.  The casinos want to lower the minimum payout to 85%. 



Atlantic City SS Revs: +4.35% YoY


Saipan - Imperial Pacific International Holdings Ltd, a company that has pledged to spend as much as US$7 billion on a casino resort on the Pacific island of Saipan (pictured), said in a Friday filing that it would launch and operate a “temporary casino” there in the third quarter.





China - Stock market gains in China has created an extra one million millionaires, according to the Global Wealth Report. 




Singapore - Unemployment rate falls to 1.8% in Q1 from 1.9% in Q4 2014. 


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.

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