Langton Capital – 2016-02-12 – Daily Wrap: Drink-driving, hotel rates, equity markets & other:
Leisure Wrap & Other:
So the trading day is grinding to a close. We’re another day older but are we any wiser? After a day of intensive head-scratching, pen flipping and gossip, we have been considering the following. As always, contact us if you’d like further details:
Drink drive limits:
• So there are no plans to put it down in England & Wales.
• And, though it’s clearly a hot political potato that may be reasonable.
• Not that it’s sensible to drink and drive but rather (though stats are hard to come by) because those who cause a problem when driving under the influence typically haven’t had 1.1, 1.2 or 1.3 pints but rather have had 4, 5 or 6 meaning that enforcement is perhaps critical.
• We reported earlier today that STR numbers had the US hotel industry reporting positive REVPAR for the week to 6 Feb.
• This is micro-analysis, of course, but it is of some interest.
• Because though REVPAR was up, this was >100% due to higher rates (up 5.2%) because occupancy was actually down by 1.9%.
• This, if maintained, is symptomatic of a market that is past its peak.
• We summarised the situation thus, earlier in the week. ‘The top of the market, maybe a year ago, features rising room rates and occupancy. It’s a win-win. But then occupancy stalls and declines. Rates go up further and REVPAR continues to increase. But it is rate rather than volume-driven. Then one or more players, usually those with gearing, cuts rates. The individual hotelier performs well but, before long, competitors have to follow suit and rates fall across the market. Towards the bottom, maybe a year or two from now, rates and occupancy are both falling and there’s real distress. And then the cycle turns again, occupancy starts to rise. Initially, operators do not dare to jack prices but, before long, they do – and it all starts over again.’
• We have no reason to think that anything has changed in the last two days.
• Nor have we much reason to believe that what is happening in the US is not also happening in the UK – particularly in London and, perhaps less strikingly, in areas such as Aberdeen where reduced oil-related spending is having an impact
Random information, hopefully not all of it useless:
• Equity markets in the middle of a meaningful bounce at time of writing. However, 80pts up has to be put in the context of 1,500pts down.
• Sterling similarly ‘bouncing’. But, having fallen 10% or so in recent weeks, it was up yesterday by half a percent or so against both the USD and Euro.
• RIO cut its dividend yesterday & fell. Rolls Royce did the same thing today and its shares are currently some 13% higher. Timing is everything.
• Some suggesting that a 4% dividend yield on the FTSE indices will provide some support. Against a gilt yield of around 1.3% that should be the case but, when the bears get the upper hand, it may mean little.
• Bounce in gold price now becoming rather irritating. What’s in it with the yellow stuff? Tend to follow the Warren Buffett logic (i.e. that you could fit all the gold in the world into a medium-sized warehouse and, if you left it for a decade, it wouldn’t actually produce anything worthwhile) but that’s not shared by the markets. Despite recent admittedly sharp bounce, however, it’s still up only 3% on the last 12mths.
• Oil price bounced a little but main story is that it failed to hold its rally to the $35 level. And even that would have been rather anaemic as far as rallies go.
We’re so 21st Century, this morning’s Tweets (diff. font size denotes importance):
1. Miller Coors reports 2015 numbers, says Q4 underlying net income fell by 10.2%. Total net income for year was $1.328bn
2. The Department for Transport has said that there are no plans to lower the drink-drive limit in England & Wales.
3. McDonald’s UK boss Paul Pomroy has confirmed that the company has no immediate plans to introduce alcohol to its sales mix
4. Pepsi reports Q4 & FY numbers. Says it has hit or exceeded all of its 2015 targets. Organic revenue growth of 4% in Q4, 5% in full year
a. Pepsi Q4 revenues down 7% (on translation of currencies) but margin up by 185bps. EPS in Q4 +35% to 117c.
5. CAMRA has pointed out that a fifth of all pubs have closed in the last decade. The UK now has around 52,750 pubs
6. Millennium & Copthorne Hotels has reported that it will take a charge of ‘approximately £43m’ for asset impairment in FY15
7. STR reports US hotel industry strong last week (to 6 Feb). Says occupancy down 1.9% but daily rate +5.2% and REVPAR up 3.3%
8. Hoseasons has reported its best-ever January UK bookings with sales up 15% on the same period last year.
9. UKinbound has surveyed its members and found that as many as 82% would like the UK to remain within the EU
10. Twitter shares hit an all-time low yesterday on the back of disappointing usage numbers. Shares down >50% since July