LEISURE LETTER (06/16/2015)

TICKERS: Galaxy Entertainment (0027.HK), G13.SI, RCL, HOT, HLT, SGMS, CCL

HeadLine NewS 

Galaxy -  Business at the second phase of Galaxy’s Cotai casino resort “is satisfactory, but not as good as what we expected,” Chairman Lui Che Woo said after the company’s annual general meeting, adding he expects further impact of its gaming business if the city allows a smoking ban to be extended to VIP rooms. 

Phase 2 “will be better in the next one to two months,” said Galaxy Vice Chairman Francis Lui, adding he was happy with the performance of the non-gaming elements at its new properties such as its hotel bookings and dining outlets.

“Be patient, we believe the scale, facilities and services of the second phase are the best,” he said. Business should improve in July and August, compared with June which is an exam season for students, he added.

ARTICLE HERE 

Takeaway:  Share gains in June due to good luck and the opening of Phase 2, not just the expansion. Comments can only be taken as a disappointment. 

Cruise Selling Agents Report Robust Sales for First Half of 2015 - Agencies show: Soft sales out of Asia Pacific, Australia, New Zealand, Mexico. Strong sales out of Alaska. Strong uptick in interest for World and River Cruises.

  • Lucinda Belden, franchise owner,CruiseOne in Carrollton, TX, says her agency has posted a 19% increase in cruise sales thus far this year, compared to the same period last year. 
  • David Walsh, owner of CWCruises, an independent agency of Avoya Travel in Bradenton, FL, says sales for his agency have never been better.
  • Geoff Cox, supplier relations director for KHM Travel Group, a Vacation.com member agency in Brunswick, OH, reports: “Our 2015 sales with several cruise lines are up over 35%.”

ARTICLE HERE

Takeaway: Overall, bookings have been strong in 2015 but it's far from a perfect picture.

COMPANY NEWS    

GENTING SINGAPORE – On June 16, bought back 2.5 million shares at S$0.91 each. On June 15, Genting also bought 7.5 million shares at S$0.91 each.

Takeaway: These share buybacks continue but larger in the the last 2 days.


SGMS - Launches Online Titles With Paddy Power.  Bob Hays, vice-president, commercial, interactive at Scientific Games, added: “The interest in our full slots and table games library from Paddy Power, widely considered one of the top online casino operators in Europe, is another testament to the wide player appeal of the proprietary and third party brands in our portfolio." 

HOT - announced the planned spin-off of its vacation ownership business into a separate publicly traded company. Starwood Vacation Ownership (SVO), which will be named Vistana Signature Experiences, Inc. upon completion of the spin-off transaction, has filed an initial Form 10. 

FORM 10 HERE

Takeaway:  Completion of spin-off of SVO on track for Q4 2015.

ARC Hospitality Trust - ARC Hospitality announces agreement to acquire portfolio of 13 Hotels for a purchase price of $300 million from Noble Investment Group.($156,822 per key)  

The Noble Portfolio consists of 12 premium-branded select-service and extended-stay hotels and one full-service hotel totaling 1,913 rooms. The hotels are franchised by major global brands including Hyatt Hotels, Hilton Hotels & Resorts and Marriott International. Hotel flags include Hyatt Place®, Hilton Garden Inn, Hyatt House®, Courtyard by Marriott and Hilton. 

ARTICLE HERE 

CCL - Costa Croicere has announced the Costa Fascinosa will join the Costa Pacifica in South America for the upcoming 2015/2016. The Costa Fascinosa increases the company’s capacity in the region, as it takes over from the previously announced Costa Mediterranea, which is a slightly smaller vessel. The Costa Fascinosa had been set to stay in the Mediterranean for the winter, but will now make up the line's two ship program in South America.

"With the operation of Costa Fascinosa, we are increasing our capacity by 41% out of Rio,” said Rene Hermann, General Director of Costa Cruises to South America.

ARTICLE HERE

INDUSTRY NEWS

Macau instant lottery - The government has renewed for one more year Sociedade de Lotarias e Apostas Mútuas de Macau Lda’s concession to run instant lotteries and take bets on football and basketball, the Official Gazette says. The concession had been due to expire on June 5.

ARTICLE HERE

  

Macau govt finances - The government’s fiscal surplus was MOP25.28 billion (about US$ 3.16 billion) in the first five months this year, 54.9% less than in the corresponding period last year, the Financial Services Bureau says. Additionally: The government collected a total of MOP38.45 billion (US$4.82 billion) in direct taxes from gaming in the first five months of 2015, down by 35.4% YoY, according to data disclosed on Monday by the city’s Financial Services Bureau.

ARTICLE HERE

ARTICLE HERE 

UK - The National Lottery is about to change the way millions choose their lotto numbers by adding ten more balls to the pot. In the biggest change in its 21-year history, players will be able to select from 59 instead of 49 numbers - while average jackpots are going to TRIPLE. 

  • Camelot said the revamp, due in October, would create an extra 1.8 million winners a week and increase the overall chance of winning any prize from one in 54 now to one in 9.3.

ARTICLE HERE

REGIONAL GAMING REVENUES

CT SS Revs: -0.51% YoY

FL SS Revs: +11.38% YoY

NY SS Revs: +2.52% YoY 

London - Negative performance for London Hotels in May. Based on the data:

  • increases in supply (+3.3%) and demand (+4.1%);
  • a 0.8% decrease in occupancy to 85.0%;
  • a 10.8% decrease in average daily rate to GBP125.91; and
  • a 10.1% decrease in revenue per available room to GBP107.04.

ARTICLE HERE

Takeaway:  London REVPAR in 2Q has underperformed.

South Korea - Flight bookings to South Korea have plummeted following the outbreak of MERS, according to ForwardKeys, a company that analyzes flight data. Data shows that between May 20 and June 5, international flight bookings to South Korea were down 14.9%, compared to the same period last year. Additionally, flight cancellations were up 21.3%, compared with the same year-ago period. 

ARTICLE HERE

Takeaway: MERS should not be disregarded. Macau inboard visitation, S Korea lodging and Asia-destined cruise lines could already be affected.

MACRO

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.