Each month we track several indicators, which have historically led Macau GGR growth. The data points for the most recent month show 12 of the 19 y/y indicators are better than the prior month versus 7 of 19 last month, but we’d still call the data soft and mixed. We chart all 19 of the indicators, and we show a summary table in Exhibit 2.
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In May 2018 the Supreme Court overturned PASPA, which gave each state the right to legalize sports betting. Today 18 states have legalized sports betting, and it’s currently operational in 13 of them. In this note we examine the initial impact, project the incremental near-term impact with the start of the NFL season, and project the long-term opportunity for the industry.
WYNN provided an intra-quarter update today (09/10/19) buried in an 8-K of a proposed notes offering, and the results were poor. The monthly Macau GGR data has been softer than initially expected, which is known, but WYNN’s commentary today was worse than expected for other reasons, too.
The U.S. ISM manufacturing PMI has been in a downtrend for the last year, and this week it fell below the key 50 level for the first time since August 2016. In this week’s piece we examine the implications for our coverage by looking at industry stock returns over the last 25 years in relation to when PMI drops below 50 as well as when PMI eventually bottoms.
Hurricane Dorian has continued to impact several voyages and we are lowering our estimates. For now, it seems the financial impact and potential prolonged impact may not be as bad as it could have been, but that’s still to be fully seen as the situation remains fluid. Port Miami, Everglades, and Canaveral closed on Saturday, but Miami and Everglades just re-opened. This means that cruise lines have had to extend sailings, cancel sailings, and shorten sailings, which results in refunds/credits paid out to guests, as well as compensation for other travel arrangements. The lost revenue from the cancellations and itinerary changes has the biggest negative impact to C-3Q results. We are not expecting a prolonged impact to the industry as experienced during the 2017 hurricane season because 1) Puerto Rico was a key home port, unlike the Bahamas, 2) there are other alternate destinations, if any ports/islands experienced meaningful lasting damage, and the eye of the storm also missed the Nassau port, and 3) the 2017 season also faced a series of back-to-back storms, which we can only hope doesn’t happen again.
U.S. RevPAR growth has been sluggish and has continued to decelerate. The weekly data reported by STR last week grew y/y (+1.2% y/y) for the first time in seven weeks, as the comps were particularly tough over that time period before easing a little for this last week. The forward indicators we track are showing mixed signs for future months, and in this week’s piece we’ll examine those indicators and discuss our outlook going forward.
Macau August GGR was released overnight (9/1/19) showing a decline of -8.6% y/y, versus the Consensus Metrix average estimate of -3.2%. The month was likely negatively impacted by several factors, including the Hong Kong protests; Typhoon Wipha, which may have had a small impact on the first day of the month with public transportation canceled; Typhoon Lekima hitting the eastern coast of mainland China the weekend of 8/9-8/11; and a meaningfully weakening CNY/HKD throughout the month, as a weaker local CNY reduces the purchasing power of Chinese residents when they go to Macau (+0.48 correlation to Macau GGR, we have found). We think consensus assumed these impacts would be modest, but in reality they may have had a bigger affect than people expected.
Current reports indicate Hurricane Dorian is strengthening and could make landfall in Florida as a Category 3 storm on Sunday.
Resort fees are additional charges outside of advertised room rates (for access to the gym, pool, internet, etc.), which have been gaining more attention following criticism from consumers, OTAs, and some regulators. In this note we discuss the key issues and the financial impact to our coverage.
July Vegas Strip GGR reported this morning (08/28/19) showed an increase of 1.6% y/y versus our guess of up mid-to-high-single digits y/y growth, but the data is volatile month to month, like last month when June was significantly better than expected. Normalizing for slightly better hold the result was roughly flattish y/y. We will refrain from judging the month until the RevPAR data is released later today at around 2 PM ET. We are looking for Strip RevPAR growth of about mid-single digits y/y. We feel good about 3Q CZR and MGM estimates, as we heard from both companies at 2Q reports when July should have been mostly known.
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