LEISURE LETTER (07/01/2015)

TICKERS: 1159.HK, H, TUI.LN, NCLH

HEADLINE NEWS

Macau Casino Revenue - GGR down 36.2% YoY in June. Macau raked in MOP17.4 billion (US$2.2 billion) in gross gaming revenue in June, official figures released today by the Gaming Inspection and Coordination Bureau show.

  • This is a decrease of 36.2% YoY, represents thirteen straight months of slump in casino revenue in the city. 
  • The latest data also means that the accumulated gross gaming revenue for the first six months of 2015 at MOP121.6 billion is 37% lower than the same period in 2014.

ARTICLE HERE

Takeaway: Slightly better than the most recent conensus but exactly in line with our forecast. However, June represented a sequential, seasonally adjusted GGR decline. Based on the prior 3 months, June should've fallen only 27% per our estimate, which was our forecast at the beginning of the month. 

COMPANY NEWS     

1159.HK - Jimei International Entertainment Group Ltd, known junket investor, has agreed on a deal to operate at least seven VIP gambling tables at NagaWorld casino resort, in Cambodia.  The filing didn’t specify the incentives the Jimei entity would receive in order to send players to NagaWorld. But it did say that the Jimei side would be responsible for services including accommodation, transportation, food and beverages.

ARTICLE HERE

Takeaway: China won't make it easy for VIPs to visit often but luring mainland junkets could pay off.

 

Mohegan Sun - Mohegan Sun finalizes ideas for South Korea Casino.  U.S. regional tribal casino operator Mohegan Tribal Gaming Authority, known as Mohegan Sun, announced on Tuesday it has finalized what it referred to as a “concept agreement” for a casino resort it hopes to develop in South Korea. The project, first announced in April, is to be in partnership with South Korea’s Incheon International Airport Corp (IIAC).

  • The integrated resort would have a two-tower luxury hotel complex with 1,000 rooms, a private air terminal, and more than 18,500 sq. meters of shops, restaurants, art exhibition and music entertainment areas.
  • The companies estimate the construction cost for the private terminal at $35 million, with a further US$320 million to be spent on the entertainment arena and US$140 million for the theme park. The statement did not provide an estimated cost either for the hotel towers or the casino.

LEISURE LETTER (07/01/2015) - Korea Casino

ARTICLE HERE

Takeaway: The competition to win over foreign gamblers continues.

 

H - Kansas City, MO, developers of the proposed downtown Hyatt convention headquarters hotel, now estimated to cost $310.8 million, took a big step forward Tuesday, with a recommendation of approval of a tax increment financing plan.The Tax Increment Financing Commission of Kansas City board voted 8-2 for the TIF levels KC Hotel Developers LLC requested for the 800-room hotel, which remains on track for a late 2018 opening.

ARTICLE HERE

 

TUI.LN - TUI Cruises and Meyer Turku signed an agreement for two more cruise ships. The newbuilds, planned for 2018 and 2019, will successively replace Mein Schiff 1 and Mein Schiff 2. "We regard the cruise market as a growth market for our Group. By expanding our activities in this segment we want to drive the planned revenue and earnings increases for the TUI Group and at the same time develop into one of Europe's leading cruise providers," said Sebastian Ebel, responsible for cruise activities on the board of TUI Group. 

ARTICLE HERE


Celebrity Cruises - Starting July 6, Celebrity Cruises is set to roll out a permanent change to its pricing structure.  The new system builds on Celebrity's 123Go! promotion, which offers a menu of perquisites, such as free gratuities, beverage packages or an onboard spending credit. 

  • The pricing structure, to be called Go!Big, Go!Better, Go!Best, adopts the rhythm and language of the 123Go! promotion, but Celebrity is emphasizing that it is not a temporary campaign. 
  • Guests can choose among four perquisites: a Classic beverage package, free gratuities, unlimited internet or a $150-per-person spending credit.  All ocean view, balcony and suite accommodations will be priced at minimum with the choice of one perquisite built in. 
  • The new pricing will not apply to Celebrity's Xpedition ship or to transatlantic and transpacific crossings.

ARTICLE HERE

 

NCLH - Norwegian Cruise Line Holdings is making a bigger push into Australia and the surrounding region.

  • "In view of the growing international interest in cruising combined with our strong growth strategy, the new office in Australia is a natural next step in our global expansion of Norwegian Cruise Line Holdings,"Harry Sommer, executive vice president of international business development for Norwegian Cruise Line Holdings, said in a statement. 

  • "It reflects our confidence in the growing Australia and New Zealand markets and we believe that our three brands...are all a perfect fit for the Australian market, offering a wide variety of experiences and worldwide itineraries."

ARTICLE HERE 

INDUSTRY NEWS

Macau Casino Promotions - Casinos in Macau are assigning an increasing share of their revenues to promotions and discounts in order to attract new customers, now that the market has slowed.

  • From discounts on room rates to free meals to shopping vouchers to better loyalty programs everything has been thrown at Macau visitors.  Never have the casino operators here spent so much on promotions as a share of gaming revenues as today. 
  • In the first quarter of this year, casino operators MPEL, WYNN, and LVS collected $2,011 million in mass gaming revenues in Macau and gave away $206 million in promotions, a 10.2% YoY increase.

ARTICLE HERE

Takeaway: Too competitive to cut promotional allowances faster than gaming volumes are falling. Not good for margins.  Given the state of the midweek business, we wouldn't be surprised to see elevated promotional activity targeted at this segment, i.e. "double point Tuesdays"

 

Macau Smoking Ban - The government will present to the Legislative Assembly a bill to ban smoking in casinos, increase taxes on tobacco products and prohibit the sale of electronic cigarettes, officials have said. “Predictions tell us that the economy will be hit by these measures,” Health Bureau director Lei Chin Ion told a press conference.  “But there are different predictions. We are concerned with public health – and without health there is no economy at all.”

ARTICLE HERE

 

Singapore Home Prices - Singapore’s home prices dropped for a seventh consecutive quarter, the longest losing streak in 13 years, as tighter mortgage curbs cooled demand in Asia’s second-most expensive housing market.  An index tracking private residential prices fell 0.9 percent in the three months ended June 30th. 

  • Residential prices have already declined 6.7 percent since the peak in September 2013. 
  • Home sales dropped 57 percent to 638 units in May from a year earlier as developers offered fewer projects, according to previously released URA data.
  • The government began introducing residential property curbs in 2009 as low interest rates and demand from foreign buyers raised concerns that the market was overheating. They have included a cap on debt repayment costs at 60 percent of a borrower’s monthly income, higher stamp duties on home purchases and an increase in real estate taxes.

ARTICLE HERE

 

Massachusetts Lottery - Record lottery sales made way for $935 million in profits for the state.  Lottery sales for the fiscal year through June 27 totaled $4.973 billion, compared to $4.825 billion for the same period in fiscal 2014. June has been a "high payout month," a Lottery spokesman said, with one $15 million prize claimed and one $10 million prize, as well as ten $1 million prizes.

ARTICLE HERE

 

4th of July Weekend - According to a projection from AAA, this holiday period between Wednesday and Sunday is expected to be the busiest since 2007, with an estimated 41.9 million people traveling 50 or more miles from home nationwide. According to an early survey of Miami-Dade hotels, occupancy is expected to be higher than last year, at about 81% between Thursday and Sunday. On Miami Beach, that figure is 88%, according to William Talbert III, president and CEO of the Greater Miami Convention & Visitors Bureau. 

ARTICLE HERE

MACRO 

China Home Prices - New Home prices up 0.56% MoM (100 major cities index) 

Macau Home Prices - MoM home prices dropped 12.6%, and the number of homes sold fell from 664 in May to 582 in June. 

 

Hedgeye Macro Team remains negative on Europe 

Takeaway:  European pricing has been a tailwind for CCL and RCL but a negative pivot has happened in 2015.