LEISURE LETTER (6/22/2015)

TICKERS: PENN, CZR, HOT, ALL.AX, CCL

EVENTS

  • June 23 - CCL Q2 2015 earnings 10am  
  • June 24 - PENN Opening of Plainridge Park Casino
  • June 25 - AC tax bill 

COMPANY NEWS    

Aristocrat - Aristocrat won a contract to deploy its entire Oasis 360™ solution that includes its full Casino Management System, Professional Services, SpeedMedia™, Oasis ONE LINK™ (bonusing, progressives and poker frenzy), Table Management System and Oasis HALO™ Loyalty (core software, kiosks, mobile app and promotions), subject to regulatory approvals at the Scarlet Pearl Casino Resort in D'Iberville, MS, which is set to open December 2015.

Louis XIII - The US$1.1 billion Louis XIII casino-resort is due to open in the middle of next year. “The superstructure was topped out in early June 2015 and excavation of the basement has been completed. Approximately 89% of all construction works have been tendered,” the company said.

ARTICLE HERE

Takeaway: Will Louis XIII get the tables they need?

CZR - Omega Advisors liquidated its entire stake of CZR, (roughly 5.1% of the float), according to their 13-G filing last week. 

ARTICLE HERE

HOT - The Luxury Collection® announced, in coordination with its owner partners, a $300 million effort to expand and improve its hotel portfolio in North America. The Luxury Collection is investing in marquee hotel conversions and landmark renovations in diverse U.S. destinations, including Key West, Lake Tahoe, San Antonio and San Francisco, as it continues to grow around the world. A milestone year for the brand, The Luxury Collection is on track to surpass 100 hotels in more than 30 countries by the end of 2015. 

“Domestic demand for luxury travel is at pre-recession levels, which makes this an excellent time to invest in The Luxury Collection hotels in the U.S.,” said Hoyt H. Harper II, Global Brand Leader, The Luxury Collection Hotels & Resorts. “Additionally, we continue to see increasing demand from owners of independent luxury hotels who find tremendous value in partnering with Starwood to take advantage of our powerful distribution, loyalty and sales platforms. We expect this to be a period of significant growth for The Luxury Collection both in the U.S. and abroad as we sharpen the brand and drive profound consumer awareness around the world.” 

CCL - After initially adding faster internet speeds and less expensive packages on three of its ships, CCL has made the offerings available on nine additional vessels, with plans to include the majority of its fleet by October. 

  • Better web access has rolled out on Carnival Freedom, Carnival Breeze, Carnival Sunshine, Carnival Ecstasy, Carnival Sensation, Carnival Paradise, Carnival Fascination, Carnival Victory, Carnival Elation, Carnival Pride, Carnival Imagination and Carnival Inspiration.
  • Included on the list of new, notably cheaper connectivity packages are a $5 per-day package that allows you to connect to social media, such as Facebook, Twitter and Instagram; this choice does not allow access to the entire internet.
  • Meanwhile, AIDA introduced flat-rate Internet plans.  For social media, passengers can access popular sites for 4 euro per day, or 19 euros per week, including Facebook, Twitter, Instagram and WhatsApp.

ARTICLE HERE 

Takeaway: We believe more and more cruise brands will have to upgrade their internet network and offerings to remain competitive.

MSC - MSC Cruises, which is coming back to the United States when MSC Divina returns to Miami in November, is aiming to carve out a niche in the market rather than become a major player, according to its CEO. CEO Gianni Onorato said the line was looking to carry "a couple of hundred thousand" passengers across two Miami-based ships -- MSC Divina and new ship MSC Seaside -- by 2017/2018.

He acknowledged that the company needed to change its philosophy to succeed with Americans on its second push into the country. "We need to get there with a different proposal," Onorato said. "And we will be doing that by improving the brand, investing in the organization and investing in the product." 

When asked, Onorato said MSC was considering basing a ship out of New York "before 2022" -- when the last of the line's newbuilds are complete.

ARTICLE HERE 

INDUSTRY NEWS

China - China arrests 14 South Koreans for allegedly luring Chinese gamblers to foreigners-only casinos in South Korea, a South Korean official said Friday. Among the arrested are employees from Grand Korea Leisure Co. and Paradise Co., South Korea's top 2 casino operators, and workers at travel agencies in China, according to the official.

In February, China’s Ministry of Public Security Deputy Director Hua Jingfeng announced that authorities would pursue and prosecute operators from other countries who had “set up offices in China to attract and drum up interest from Chinese citizens to go abroad and gamble." 

ARTICLE HERE

ARTICLE HERE

Takeaway: This also serves as a warning to other Asian countries (South Korea, Laos, Myanmar, Cambodia, Malaysia, Vietnam, Philippines, and Malaysia) regarding marketing Chinese citizens to gamble. 

Hainan Island Typhoon - The first typhoon of the year to hit China was expected to make landfall on or near the southern island of Hainan on Monday.

ARTICLE HERE

 

Vietnam - Vietnam’s Prime Minister, Nguyen Tan Dung, has approved a new location for a proposed casino resort on Phu Quoc Island off mainland Vietnam’s Kien Giang province. The site to be pitched to investors will be at Bai Dai Ecotourism Area in Ganh Dau Commune on the island instead of Bai Thom Commune. Vietnamnet in April reported that no foreign investor had been found for the originally proposed site.

The complex proposed for the new site is expected to have 3,000-rooms worth of luxury hotel space, a conference center and a casino with 200 to 400 live tables and 2,000 gaming machines.

ARTICLE HERE

Iowa - The Iowa Lottery is seeing big benefits from a special scratch ticket it launched to commemorate the organization’s 30th anniversary. The ticket called “30 Somethings” hit $3.1 million in sales in its first 5 months. Iowa Lottery CEO Terry Rich, says that’s the hottest start ever for a new scratch ticket.

ARTICLE HERE

MACRO

Hedgeye Macro Team remains negative on Europe 

Takeaway:  European pricing has been a tailwind for CCL and RCL but a negative pivot here looks increasingly likely in 2015.