Nomura Securities on Americas Gaming & Lodging: Proprietary Rate Surveys Show Positive Trends - Pricing Power Remains Intact
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Rating Summary:
23 Buy, 15 Hold, 4 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
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Nomura Securities on Americas Gaming & Lodging: Proprietary Rate Surveys Show Positive Trends - Pricing Power Remains Intact
Analyst, Harry C. Curtis, said, "Lodging Forward Pricing – Higher Through January Our forward rate survey shows YoY pricing for November-January. ADR is +6.5%, +1.3% and +8.0% in each successive month. These trends are in line with recent STR data in October and early November. In the last 28 days, U.S. RevPAR is +8.4%, 430bp of which is ADR...These data tell us that there has yet to be any sign of pricing deceleration through early next year. “First to last” call data has been consistent, so there has not been any deceleration of pricing power trends. Our sense is that Street RevPAR estimates for 2012 cluster around 5%, while the body language from companies is that, barring an economic slowdown, the high end of recent 2012 RevPAR guidance (4-8%) is still achievable."
"Gaming Forward Pricing – 4Q Should be Akin to 3Q. 1Q Tougher...4Q ADR gets better and better in Las Vegas. Earlier in our survey, YoY pricing in 4Q was up ~4%, but it now looks like it will be at least +8%. November is especially strong ~+12%, which is interesting because the back-half pricing is seasonally soft. It tells us that both group and transient demand is building. “First call to last call” pricing is also moving higher, +2%, +27% and +3% by month...MGM (NYSE: MGM) ADR is up ~6% through November. Pricing in December is volatile, so we’ll wait two weeks to see if a meaningful trend develops. Las Vegas (NYSE: LVS) has the strongest comps in the group (+16%), most likely due to the strength of its group calendar, while Wynn Resorts' (Nasdaq: WYNN) is relatively flat due to tougher comps...Pricing in January is mixed. WYNN’s ADR is +4.2%, LVS (14%), and MGM (6%). We don’t read too much into these numbers yet because sequential pricing power has been strong for a year. Many months that have begun with less ADR growth have seen the strongest follow-up rates. Nevertheless, 1Q should be the toughest ADR comp for the sector, as ConExpo (140,000 delegates) will cycle away from Vegas in March. The key for operators will be replacing this lower-rated, but larger, group, with higher-rated smaller meetings. On its 3Q EPS call, MGM commented that this trend of higher rate paying groups should boost overall spending in 1Q."
"Cruise Pricing – Trends Continue to Support 2% Yield in 1H:12...Our proprietary Global Cruise Survey continues to indicate positive sequential pricing in major markets. In addition, prices for 2012 are up sequentially, on average, from our first check to most recent check. On a YoY basis, we believe that bookings may be up 300-400bp, with pricing 2-4% ahead of last year. We’re forecasting ~2% net yield growth, but the Mediterranean’s easy comps could provide some upside." (Cruise stocks include Carnival (NYSE: CCL) and Royal Caribbean (NYSE: RCL)
Analyst, Harry C. Curtis, said, "Lodging Forward Pricing – Higher Through January Our forward rate survey shows YoY pricing for November-January. ADR is +6.5%, +1.3% and +8.0% in each successive month. These trends are in line with recent STR data in October and early November. In the last 28 days, U.S. RevPAR is +8.4%, 430bp of which is ADR...These data tell us that there has yet to be any sign of pricing deceleration through early next year. “First to last” call data has been consistent, so there has not been any deceleration of pricing power trends. Our sense is that Street RevPAR estimates for 2012 cluster around 5%, while the body language from companies is that, barring an economic slowdown, the high end of recent 2012 RevPAR guidance (4-8%) is still achievable."
"Gaming Forward Pricing – 4Q Should be Akin to 3Q. 1Q Tougher...4Q ADR gets better and better in Las Vegas. Earlier in our survey, YoY pricing in 4Q was up ~4%, but it now looks like it will be at least +8%. November is especially strong ~+12%, which is interesting because the back-half pricing is seasonally soft. It tells us that both group and transient demand is building. “First call to last call” pricing is also moving higher, +2%, +27% and +3% by month...MGM (NYSE: MGM) ADR is up ~6% through November. Pricing in December is volatile, so we’ll wait two weeks to see if a meaningful trend develops. Las Vegas (NYSE: LVS) has the strongest comps in the group (+16%), most likely due to the strength of its group calendar, while Wynn Resorts' (Nasdaq: WYNN) is relatively flat due to tougher comps...Pricing in January is mixed. WYNN’s ADR is +4.2%, LVS (14%), and MGM (6%). We don’t read too much into these numbers yet because sequential pricing power has been strong for a year. Many months that have begun with less ADR growth have seen the strongest follow-up rates. Nevertheless, 1Q should be the toughest ADR comp for the sector, as ConExpo (140,000 delegates) will cycle away from Vegas in March. The key for operators will be replacing this lower-rated, but larger, group, with higher-rated smaller meetings. On its 3Q EPS call, MGM commented that this trend of higher rate paying groups should boost overall spending in 1Q."
"Cruise Pricing – Trends Continue to Support 2% Yield in 1H:12...Our proprietary Global Cruise Survey continues to indicate positive sequential pricing in major markets. In addition, prices for 2012 are up sequentially, on average, from our first check to most recent check. On a YoY basis, we believe that bookings may be up 300-400bp, with pricing 2-4% ahead of last year. We’re forecasting ~2% net yield growth, but the Mediterranean’s easy comps could provide some upside." (Cruise stocks include Carnival (NYSE: CCL) and Royal Caribbean (NYSE: RCL)
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