LEISURE LETTER (07/14/2015)

TICKERS: WYNN, HLT,  HTHT, CCL

EVENTS   

July 14 CCL Investor Event

July 23 9am:  PENN 2Q CC

July 24 11am-2pm:  PENN Plainridge tour and investor day

COMPANY NEWS     

WYNN - Wynn Macau Ltd says it will pay a summer bonus equivalent to one month’s salary to all eligible employees except senior managers. 

  • “Wynn Macau expects that the operating environment will still be challenging during the second half of the year,” the notice quotes company president Ian Michael Coughlan as saying.
  • “We hope our members will understand the difficulties that we may face, control each daily expense carefully and continue to provide excellent services.”

ARTICLE HERE  

Takeaway: Bonuses continue to be given out despite tough operating environment. No margin relief in sight.

WYNN - City of Boston Says WYNN Reps knew of Mob ties to land in Everett, MA. 

  • Five people interviewed claim that WYNN, knew a mob associate with felony convictions would profit from his stake in the waterfront land where the Las Vegas casino company plans to build a resort.
  • Boston, which is suing the state Gaming Commission over its decision to award Wynn a gambling license, says the witnesses told commission investigators that Wynn representatives were informed of or discussed Charles Lightbody's ownership stake before signing an option on roughly 30 acres on the Everett waterfront across from Boston.

ARTICLE HERE 

 

HLT - Hilton announced today its plans to recruit 500 full- and part-time, work-from-home positions to provide inbound reservation support for guests through the Hilton Reservations and Customer Care operation. 

HTHT - China Lodging Group, Limited announced its preliminary results for hotel operations in Q2 2015. Key takeaways from their results. 

  • Occupancy rate - Q2 2015 - 89% vs. Q2 2014 94% (-5%) YoY
  • ADR (in RMB) - Q2 2015 - 185RMB vs. Q2 2014 182RMB +1% YoY
  • RevPAR (in RMB) - Q2 2015 - 171RMB vs Q2 2014 164RMB (4%) YoY

ARTICLE HERE

Takeaway: RevPAR continues to decline for the economy scale in China. Not good news for WYN.

CCL - Carnival has taken shore excursions to another level by expanded offerings, adding exclusive new landside experiences and customized private tours, as well as new family-friendly enhancements, including fun complimentary beachside activities, value pricing and free tours in select ports for children under age five. 

ARTICLE HERE

Takeaway: CCL's onboard and other segment has seen stronger revenue growth recently. CCL is introducing new initiatives in that area. 

INDUSTRY NEWS

Macau Tourist Price Index - TPI for Q2 2015 increased by 0.82% YoY to 134.61, attributable to rising charges for restaurant services and dearer prices of local food products. Notable increase was observed in the price index of Entertainment & Cultural Activities +5.74%; Restaurant Services +5.13%; and Food, Alcoholic Beverages & Tobacco +4.50%. On the contrary, price index of Accommodation decreased by (2.82%) YoY due to lower room rates for three-and four-star hotels.  

ARTICLE HERE

  

Macau Luxury Retail Sales - The Macau Importers and Exporters Association expects that retail sales of luxuries in the city will turn out to be 30%-50% lower in 1H 2015 vs 1H 2014. 

ARTICLE HERE

Takeaway: Weak luxury sales is expected given mass deceleration.

Las Vegas Luxury Retail Sales - According to a report commissioned by the Las Vegas Convention and Visitors Authority, the average expenditure in 2014 among visitors who reported shopping during their trip was $246.12, up significantly from $192.34 in 2010, though down slightly from a recent peak in 2014. 

  • Senior Vice President of Retail at WYNN LV Hedy Woodrow said, "Luxury is definitely back.  We’ve had tremendous growth. [In 2014,] we actually beat the numbers from pre-recession.” In the last year, Woodrow said, she’s seen spending from domestic customers pick up, with guests coming from California and Texas to shop on the Strip.
  • Crystals Senior Vice President and General Manager Farid Matraki said, “We’ve never had one month where we did worse than the month before or the year before. Every quarter we have a record quarter. With Chinese customer numbers down, domestic business is now much stronger — and while Americans may not have the buying power of the Asian whales, they’re likely to visit Las Vegas more frequently."

ARTICLE HERE

Takeaway: Luxury retail may be considered strong, sales are still down from last year. Moreover, RevPAR growth was sluggish in Q2 (and likely for the summer) and Las Vegas is still dependent on the Chinese whales. 

   

Coloane CasinoSecretary for Economy and Finance Lionel Leong Vai Tac said on Monday that he would consider amending the law to keep Coloane free of casinos – if the public wishes.   

ARTICLE HERE

Philippine Gaming -  Philippine casino stocks surged after the nation’s regulator said gaming revenue could increase 20% this year even as China’s anti-corruption crackdown has weakened revenue in other parts of Asia.

  • First-half gaming revenue at the country’s casinos grew 16% to $1.4 billion, Philippine Amusement & Gaming Corp. Chairman Cristino Naguiat said in a telephone interview.  There’s a “good chance” it will reach $3 billion this year as he has predicted before, he added.
  • Tourist arrivals in the Philippines increased 8.2% to 2.23 million in the first five months of the year, with most coming from South Korea, who accounted for 24.5% of the total, followed by the U.S. and Japan, according to government data. China is the fourth largest source of tourists, with a 7.1% share.

ARTICLE HERE

Takeaway: Good news for MPEL Philippines  

U.S. Hotel Industry - Some of the largest hotel brands are reporting strong group business growth this year, signaling that businesses and organizations are continuing to feel more confident about the post-recession economy. 

  • Joseph Bates, VP of research for the Global Business Travel Association, estimates group meeting volume declined by 1.9% in 2014. Bates said much of the decline was as the result of a cyclical snapback from 2013, which saw an 8.6% growth. 
  • The foundation estimates that group business will increase this year by 1.6% and another 2.5% in 2016. Most of the growth is coming from the corporate sector. 

ARTICLE HERE

Takeaway: This is consistent with our meeting planner survey from late last year.

 

Iran Oil Embargo - Iran and six global powers reached a nuclear deal that could result in the easing of sanctions against Tehran and a gradual increase in its oil exports just as Asian economies showed further signs of weakness.  The deal will grant Tehran sanctions relief in exchange for curbs on its nuclear program, an Iranian diplomat said on Tuesday.

ARTICLE HERE

Takeaway: Lower oil impact has been a tailwind for cruisers and regional gaming.

MACRO 

China - new loans (June) 1.28T RMB vs. consensus 1T RMB and 900.8B RMB in May. 

  • Loan growth +13.4% YoY, vs. +14.0% YoY in May 
  • Deposits +10.7% YoY vs. +10.8% YoY in May

Takeaway: Loan data above expectations.

Singapore Economy - Numbers based on advance estimates:

  • Singapore economy grew by 1.7% on a YoY basis in the second quarter of 2015, lower than the 2.8 YoY growth in the previous quarter.
  • On a quarter-on-quarter seasonally-adjusted annualized basis, the economy contracted by 4.6%, a reversal from the 4.2% expansion in the preceding quarter.

ARTICLE HERE

Takeaway: Though these numbers will be revised, it's not a positive sign for Singapore.


Hedgeye Macro Team is incrementally bearish on U.S. consumption growth, based on the consumer's continued efforts to deleverage their household balance sheet combined with the peaking of consumer confidence and stagnating labor productivity.   

Takeaway:  For now, US regional gaming slowed in June but North American cruise pricing still doing well.