Gaming and Lodging Primer · 2019. 3. 31. · Gaming & Lodging Primer M O R G A N S T A N L E Y R E...

Gaming & Lodging Primer M O R G A N S T A N L E Y R E S E A R C H North America Morgan Stanley & Co. LLC

Thomas Allen [email protected] 212 761 3356

Mark Savino [email protected] 212 761 8576

Chaodan Zheng [email protected] 212 761 8215

May 9, 2017

Morgan Stanley does and seeks to do business with companies covered in Morgan Stanley Research. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of Morgan Stanley Research. Investors should consider Morgan Stanley Research as only a single factor in making their investment decision.

For analyst certification and other important disclosures, refer to the Disclosure Section, located at the end of this report.

Stock recommendations and disclosures in this report are as of May 9, 2017; stock prices as of May 8, 2017, unless otherwise noted.

Image Source: Shutterstock

May 9, 2017 10:42 PM GMT

M O R G A N S T A N L E Y R E S E A R C H

1

Gaming & Lodging May 9, 2017

Gaming



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Who Are the Gaming Companies We Cover?

Source: Company Data, Morgan Stanley Research estimates

62%

11%

41% 42%

61%

38%

65%

12%

7%

44%

39%

100%

93%

56%

24%

4%

0% 20% 40% 60% 80% 100%

$6.8B MGP

$7.2B GLPI

$1.7B PENN

$2.5B BYD

$11.8B WYNN

$16.4B MGM

$45.5B LVS

Macau

Singapore

Las Vegas Strip

Other Las Vegas

US Regional

Mkt Cap

($bn) Large Caps

Regionals

REITs


3


Ratings / Theses

• WYNN (OW) Outperformance driven by Macau strength, and greater market share, supported by new property opened Aug ‘16

• MGM (OW) Continued Vegas momentum, strong performance in Macau, an improving balance sheet, and attractive valuation

• BYD (OW) Regional gaming inflection, driven by acceleration in consumer spending, improving LV locals, and expense mgmt.

• LVS (EW) Well positioned LT, but most exposed to competition in Macau; also risk from potential slowdown in Singapore

• PENN (EW) Regional gaming inflection, but don’t own real estate and relative valuation less attractive than BYD, competitive risk

• GLPI (EW) High dividend yield; acquisitive growth opportunity; Risks: tenant concentration and interest rates

• MGP (EW) High dividend yield; unique acquisition opp through MGM ownership; Risks: tenant concentration and interest rates


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Macau

Companies Impacted: US Coverage

LVS

MGM

WYNN

HK Coverage*

Galaxy Entertainment (0027.HK)

Melco Resorts & Entertainment (MLCO.O)

SJM Holdings(0880.HK)

Sands China (1928.HK)

MGM China Holdings (2282.HK)

Wynn Macau (1128.HK)

* Covered by Morgan Stanley analyst Praveen Choudhary


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What is Macau? A Special Administrative Region (SAR) of China, similar to Hong Kong

Source: Magellan Geographix, Morgan Stanley Research


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Macau: Only Place in Greater China Legal to Gamble

Macau 2016 Gaming Revenue: $28 billion; Las Vegas $6 billion. Sands broke SJM monopoly in 2004, year of growth

peaked in 2013 at $45 billion. Macau suffered from China corruption crackdown, but has since rebounded.

Source: Macau DSEC, Macau DICJ, Company data, Morgan Stanley Research estimates

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Macau: Market is >90% Gaming. Within Gaming, Two Sub-segments, VIP and Mass


LT structural bull case focuses on growth in the mass market, recent trends have VIP growing faster than mass

VIP Market Mass Market

Number of tables: ~1,600

2016 win/table/day: ~$25,500

2016 growth: -7%

Margins: 10-15%

Top 5 VIP Properties (based on 2016 gross revenue) Galaxy Cotai (Galaxy) Wynn Macau (WYNN) City of Dreams (MPEL) MGM Macau (MGM) Grand Lisboa (SJM)

Number of tables: ~4,850

2016 win/table/day: ~$6,500

2016 growth: +1%

Margins: ~40%

Top 5 Mass Properties (based on 2016 gross revenue) Galaxy Cotai (Galaxy) Venetian Macau (LVS) City of Dreams (MPEL) Sands Cotai Central (LVS) MGM Grand (MGM)

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Macau Drivers / Headwinds

Fundamental drivers 1. China macro / sentiment

2. Hotel room / gaming capacity – significant new supply opened / opening in 2015-2018

3. Infrastructure improvement – Ferry terminal expansion (May 2017), high speed train (2019), rail extension to Hengqin (2018 for the first phase), and Macau-Zhuhai-HK car bridge (2H18)

4. Junket liquidity and availability of capital

Regulatory Risk

1. Anti-corruption campaign – Intensity likely peaked and has re-based the market

2. Cutback of China capital outflows / UnionPay card usage – Illegal devices were banned end of June 2014; Pawn shops were removed from casino floors in December 2014; ATM withdrawal limits enforced in December 2016; Ongoing risk of pawn shop monitoring and/or further restrictions

3. Transit visa restrictions – Tightened in late 2014, but have since been relaxed

4. Smoking ban – Partial ban effective Jan 1, 2013; Full ban on mass floors on Oct 6, 2014; Full smoking ban (including VIP areas) effective January 1, 2019 (but lounges allowed)

5. License renewal beyond 2020/22

6. Table cap – # of tables capped at ~6,500, growing at 3%. New Cotai projects have receive 100 incremental tables initially and an extra 25 in year 2 and year 3.

Liquidity Risk 1. Regulatory crackdown, increasing regulations, junket thefts, and weaker China macro trends all hurt junket liquidity

2. Limited visibility on junkets’ balance sheets and velocity of payment

3. Junkets have consolidated, where the largest 3 have 80% of market share

Competition 1. New supply could result in more competitive promotional environment

2. Potential competitive impact from casinos in Australia, Taiwan, Korea, Cambodia, and Philippines


9


Macau: Spend per Visitor vs. Visitation


Visitation long-term driver, spend per visitor more meaningful short-term driver

Macau Visitation Trends

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Mainland China Visitors Non-Chinese Visitors

Macau Spend/Visitor Trends

• In 2015 (weakest year), visitation dropped 3% while spend/visitor declined 33%

• YTD, visitation +6% and spend/visitor +7%

• Mainland Chinese 66% of Macau visitors, Hong Kong 21%

• 41% of visitors are same-day

• 39% of visitors stay at a hotel

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Macau: Significant Supply Recently Opened/Opening

Source: Macau DSEC, Macau DICJ, Company data, Morgan Stanley Research estimates *Note excludes smaller properties like The XIII and Macau Legend

There are currently 36 casinos in Macau. 2 additional sizeable properties opened in 2016 (Wynn Palace and the Parisian), 2 more are expected to open up between now and 2018. These properties will generate a 14% increase in 4/5 star hotel rooms in the market. *

Current Macau Properties

Property Operator Tables Rooms Location

Sands Macau LVS 274 289 PeninsulaVenetian Macau LVS 626 2,900 CotaiFour Seasons LVS 100 379 CotaiSands Cotai Central LVS 503 5,800 CotaiParisian LVS 404 3,000 CotaiWynn Macau WYNN 441 1,010 PeninsulaWynn Palace WYNN 333 1,706 CotaiMGM Macau MGM 421 582 PeninsulaAltira MPEL 129 216 TaipaCity of Dreams MPEL 495 1,461 CotaiStudio City MPEL 195 1,600 CotaiTaipa Square Casino MPEL 46 356 TaipaRio Casino Galaxy - Satellite 80 450 PeninsulaWaldo Casino Galaxy - Satellite 35 162 PeninsulaPresidente Casino Galaxy - Satellite 15 265 PeninsulaBroadway Galaxy 38 320 CotaiGalaxy StarWorld Galaxy 250 509 PeninsulaGalaxy Cotai (Phase I & II) Galaxy 750 2,250 CotaiCasino Lisboa SJM 172 1,000 PeninsulaGrand Lisboa SJM 407 413 PeninsulaOceanus Casino SJM 180 110 PeninsulaCasa Real Casino SJM - Satellite 48 381 PeninsulaGrandview Casino SJM - Satellite 20 425 TaipaPharoah's Palace Casino SJM - Satellite 123 439 PeninsulaKam Pek Casino SJM - Satellite 24 - PeninsulaGolden Dragon Casino SJM - Satellite 85 483 PeninsulaGreek Mythology Casino SJM - Satellite - 554 TaipaEmperor Palace Casino SJM - Satellite 77 320 PeninsulaFortuna Casino SJM - Satellite 58 342 PeninsulaPonte 16 SJM - Satellite 109 408 PeninsulaMacau Jockey Club Casino SJM - Satellite 4 404 TaipaL'Arc Macau SJM - Satellite 170 301 PeninsulaDiamond Casino SJM - Satellite 33 NA PeninsulaCasino Babylon SJM - Satellite 23 516 PeninsulaJimei Casino SJM - Satellite 47 416 PeninsulaCasino Lan Kwai Fong SJM - Satellite 84 162 Peninsula

New Target Cost

Properties Opening ($mm) Rooms

Galaxy Macau Phase 2 5/27/2015 $2,065 1,400MPEL Studio City 10/27/2015 2,300 1,600Wynn Palace 8/22/2016 4,100 1,700Sands Parisian 9/13/2016 3,000 3,000MGM Cotai 4Q17 3,300 1,500SJM Lisboa Palace 2H18 3,871 2,000


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Macau Debate #1: What is the True Underlying Demand for Macau?

Gaming Revenue Penetration by Country Macau Visitor Penetration by Region

Source: Company data, Morgan Stanley Research estimates. Note: Visitor penetration based on percentage of urban population that visited Macau in 2015.

0.5%0.8%0.8%0.8%1.0%1.0%1.0%1.0%1.0%1.1%1.1%1.2%1.4%1.4%1.6%1.8%1.9%2.0%

2.3%2.4%2.4%2.6%

3.6%12.1%

13.1%

0% 2% 4% 6% 8% 10% 12% 14%

ShandongAnhuiHebei

Inner MongoliaTianjinHenan

SichuanShaanxiJiangsu

LiaoningShanxi

HeilongjiangChongqing

JilinZhejiang

BeijingJiangxiHubei

HunanShanghaiGuangxi

ChinaFujian

GuangdongLas Vegas

$745 $259 $222 $108 $102 $102 $36 $12

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0.63%

0.33%

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Australia US Italy Spain Sweden UK MacauMass

MacauTotal

Gaming Revenue / Adult Mass Mkt Rev as % of GDP

TOTAL DEVELOPED MARKET AVERAGE = 0.39%


12


Macau Debate #2: Will Expansion Drive Stronger Market Growth?

Source: Nevada Gaming Control Board, Morgan Stanley Research

We look to the expansion of Las Vegas as a precedent…

Three major supply waves in Las Vegas all resulted in an acceleration of market growth (12% CAGR during these periods vs. Las Vegas long-term 4% CAGR)

Margins came under pressure as promotional spending ramped, but impact proved to be temporary

Las Vegas Strip

($ in millions) 1993 1994 . . . 1999 2000 . . . 2004 2005 2006

Gaming Revenue $2,897 $3,485 $4,489 $4,806 $5,334 $6,036 $6,689

y/y growth 10.3% 20.3% 17.7% 7.1% 12.0% 13.2% 10.8%

Room Supply (avg) 81,288 87,307 114,830 122,282 130,993 132,345 132,896

y/y growth 6.0% 7.4% 7.0% 6.5% 1.8% 1.0% 0.4%

Positions (avg) 58,314 63,142 74,291 75,419 72,800 73,535 71,067

y/y growth 9.5% 8.3% 10.2% 1.5% -2.0% 1.0% -3.4%

Visitation 23.5 28.2 33.8 35.8 37.4 38.6 38.9

y/y growth 7.5% 19.9% 10.5% 6.0% 5.2% 3.2% 0.9%

Win / Positon / Day $136 $151 $166 $175 $201 $225 $258

y/y growth 0.8% 11.1% 6.8% 5.5% 14.3% 12.0% 14.7%

Win / Visitor $123 $124 $133 $134 $143 $156 $172

y/y growth 2.7% 0.3% 6.6% 1.0% 6.4% 9.7% 9.9%

Win / Room / Day $98 $109 $107 $108 $112 $125 $138

y/y growth 4.1% 12.0% 10.1% 0.5% 9.9% 12.0% 10.4%

Hotel Occupancy 92.6% 92.6% 92.1% 92.5% 92.0% 91.8% 93.2%

y/y growth 4.3% 0.0% 2.0% 0.4% 2.7% -0.2% 1.5%


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Macau Debate #3: What Will the Chinese Economy and Government Do?


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Las Vegas

Companies Impacted:

MGM

WYNN

LVS

CZR (not covered)


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Las Vegas: Understanding the Revenue Mix

Source: Company data, Morgan Stanley Research estimates

The Las Vegas market has become significantly less dependent on gaming over the last ~40 years

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Las Vegas Strip Revenue Mix

Gaming Rooms Food & Beverage Other


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Las Vegas: Gaming Revenue: Largest Market in US but Fraction of Macau

Las Vegas gaming revenue growth has been modest following the US recession

• From 2009-2013, market grew driven by baccarat growth (proxy for high-end Chinese play)

• However, over the past 3 years, baccarat revenues have dropped 24%

• Since 2009, non-baccarat revenue has grown at a 1.7% CAGR

Source: Nevada Gaming Control Board, Morgan Stanley Research estimates

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Las Vegas: Room Revenue: Lack of Supply Growth Should Drive Strong RevPAR Growth

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Vegas Supply Growth US Supply Growth

Source: Company data, Thomson Reuters, STR, Morgan Stanley Research

Oversupply

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Las Vegas: More Room to Grow

Source: Company data, LVCVA, Morgan Stanley Research

• In 2016, overall US hotel RevPAR was +24% above prior peak

• Average Vegas RevPAR was still -6% below prior peak

• However, given the lack of recent supply growth, Vegas RevPAR growth in 2016 was +8%, outperforming US +3%

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US Regionals

Companies Impacted: BYD

PENN

PNK (not covered)

ISLE (not covered)

MCRI (not covered)

CHDN (not covered)

ERI (not covered)

RRR (not covered)

NYNY (not covered)


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Regional Gaming: US Gaming Revenue Breakdown

Source: US state gaming regulatory reports, H2 Gambling, Morgan Stanley Research

Total US Gross Gaming Revenue (mm)

Commercial Casinos $39,949

Native American Casinos (2016) 30,500

Lottery (Sales - Prizes) 26,475

Horse Racing 2,562

Total $99,487

US adult population 240

US GGR / adult $415

US GGR / adult (Casinos Only) $294


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Regional Gaming: Commercial / Tribal Casino Landscape

Source: US state gaming regulatory reports, Morgan Stanley Research


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Regional Gaming: US Regional Gaming a Growth Industry until 2008

Source: BEA, BLS, US state gaming regulatory reports, Morgan Stanley Research

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US Commercial Casino Revenue (ex-NV) Clark County, NV US Real GDP Growth

2008-2016CAGR: +0.2%

2008-2016CAGR: -0.1%


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REIT Opportunity

Companies Impacted: GLPI MGP


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Regional Gaming Roll-up Opportunity

Source: State Gaming Regulators; Morgan Stanley Research

Bottom-up analysis suggest $1.7B of acquirable EBITDA in US Regional Gaming

Bottom-up Market Opportunity 2015 2015

Property Revenue State Parent Revenue

Dover Downs $152 DE $152

Delaware Park 160 DE 160

Prairie Meadows 183 IA 183

Riverside Casino 84 IA 84

Rivers (Des Plaines) 425 IL Rush Street / Clairvest

Grand Victoria Elgin 171 IL MGM (50%)

Indiana Grand 227 IN New Centaur / Clairvest

Hoosier Park 186 IN New Centaur / Clairvest

Tropicana Evansville 121 IN TPCA

Majestic Star 89 IN 89

Golden Nugget LC 249 LA Landry's

Eldorado Resort 140 LA 140

Margaritaville 142 LA 142

Plainridge Park 159 MA PENN 159

Maryland Live 630 MD Cordish

Motorcity 464 MI 464

Greektown 330 MI Rock Gaming

Borgata 696 NJ BYD / MGM 696

Trump Taj Mahal 180 NJ 180

Tropicana 280 NJ TPCA

Golden Nugget 200 NJ Landry's

Resorts 162 NJ 162

Horseshoe Cleveland 213 OH CZR / Rock Gaming

Horseshoe Cincinnati 197 OH CZR / Rock Gaming

Thistle Downs 108 OH 108

Scioto Downs 145 OH 145

Hard Rock Rocksino 210 OH 210

Miami Valley Gaming 124 OH 124

Parx 523 PA Greenwood Gaming

Sands Bethlehem 514 PA LVS 514

The Rivers 348 PA Rush Street

Mohegan Sun (Pocono Downs) 265 PA 265

Sugarhouse 269 PA Rush Street

Mount Airy - Pocono 186 PA 186

Presque Isle Downs 131 PA 131

Valley Forge 113 PA 113

Twin River Casino 552 RI 552

Mountaineer Park 165 WV 165

Wheeling Downs 94 WV Delaware North

CZR Las Vegas Properties 3,030 NV CZR 3,030

CZR Regional Properties 3,378 Multiple CZR 3,378

ISLE Properties 662 Multiple ISLE 662

BYD Properties 1,036 Multiple BYD 1,036

Total Casino Revenue ($mm) $17,693 $13,231

EBITDA Margins 25% 25%

Total EBITDA Opportunity $4,423 $3,308

Rent Coverage 2.0x 2.0x

Total Sold EBITDA Opportunity $2,212 Excl. unlikely sellers $1,654


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Top Gaming Pick: WYNN ($130 Price Target)

Source: Thomson Reuters, Morgan Stanley Research estimates

• Best positioned to capitalize on Macau strength and incremental demand driven by its new property, Wynn Palace, that opened on 8/22/16.

• Despite Wynn Palace’s weak opening, Street only assuming 0.2% Macau market share gain from 4Q16 to 2018. First property took 370bps of share. Data suggesting share upside

• Wynn’s properties have a proven track record of slow starts leading to outperformance, and performance has begun to improve

• Stock is trading at 14x/12x our 2018e/2019e EBITDA compared to its LT average multiple of 14x. The stock remains attractive on a relative basis as well, trading at a ~1x discount to LVS in 2018 and a ~2.5x discount in 2019, despite historically trading at a 1x premium.

• Future properties in Boston and Las Vegas create a multi-year growth story

• Bull case of $212 would be achievable if WYNN can match its prior ability to drive meaningful fair share premiums and expand the market.

$1,233

$1,458$1,572

$1,947$2,082

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Las Vegas Wynn Macau Wynn Palace Boston


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Lodging



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Ratings / Theses

• MAR (OW) EBITDA growth to surpass peers, driven by synergies from Starwood acq. and unit growth

• HLT (OW) Leading unit growth and asset-light should drive stable earnings growth, buy back ~5% stock/year

• CHH (OW) Stable franchise fee stream, more immune to Airbnb threat than peers given lower –tier positioning

• STAY (EW) Dominant position in niche extended stay segment, renovation story; however, greater Airbnb risk

• LQ (EW) Underpenetrated brand; however, commoditized product and high oil mkt exposure

• H (EW) Strong M+F unit growth but asset-heavy translates into larger impact from muted RevPAR growth

C-Corps

REITs

• HST (EW) Scale / liquidity historically led to a higher multiple. Attractive div yield offset by RevPAR risk

• LHO (EW) High quality, independent hotels deserve premium multiple. High div yield offset by RevPAR risk

• XHR (EW) Mgmt has a proven track record of putting together attractive portfolios, high Houston exposure risk

• SHO (UW) Current premium multiple from renovation tailwinds; see greater RevPAR risk from broad portfolio

• DRH (UW) Current premium multiple at risk from broader RevPAR slowdown


28


Who Are the Lodging Companies? C-Corps vs. REITs

Source: Company Data, Morgan Stanley Research.

C-Corps Market Cap (m) Group Business Mix Int'l Mix by # of Rooms Chainscale Mix

Marriott $35,764 US 33%

Global 30%

14% Owned

86% M+F (35% M, 65% F)

US 64%, Other Americas 8%,

Europe 9%, MEA 4%, APAC 15%

Luxury 9%, Upper Upscale 49%, Upscale

32%

Upper Midscale 10%

Hilton $19,139 25% 10% Owned

90% M+F (29% M, 71% F)

US 71%, Europe 12%

Americas, ex-U.S. 4%, APAC 10%,

MEA 3%

Luxury 3%, Upper Upscale 34%, Upscale

33%, Upper Midscale 29%, Other 1%

Hyatt $6,941 US 40%

Global 31%

56% Owned

44% M+F (76% M, 24% F)

Americas 64%, ASPAC 17%,

Other Americas 7%,

EAME / SW Asia 6%

Luxury 22% , Upper Upscale 48%,

Upscale 29%

Choice $3,573 Minimal 100% Franchised US 79%, Europe 9%, Canada 5%,

APAC 4%, LatAm 3%

Upscale 3%, Upper Midscale 38%,

Midscale 36%, Economy 23%

Extended Stay $3,349 Minimal 100% Owned US 99%

Canada 1%

Economy 100%

La Quinta $1,614 Minimal 78% Owned

22% Franchised

US 98%

International 2%

Upscale 9%, Upper Midscale 31%,

Midscale 51%, Economy 8%

REITs Market Cap (m) Group Business Mix US City Mix by # of Rooms Chainscale Mix

Host Hotels $14,021 35% 100% Owned NYC 14%, DC 12%, San Fran 6%, Boston

6%, Los Angeles 6%,

Chicago 5%

Luxury 27%

Upper Upscale 71%

Other 2%

Sunstone $3,425 33% 100% Owned Boston 14%, DC 9%, Chicago 8%,

San Fran 6%, NYC 6%, Los Angeles 8%

Luxury 7%

Upper Upscale 88%

Upscale 5%

LaSalle $3,330 26% 100% Owned DC 18%, Boston 13%, San Fran 15%, NYC

11%, Chicago 10%,

Los Angeles 7%

Luxury 24%,

Upper Upscale 67%

Upscale 9%

Diamondrock $2,288 30% 100% Owned NYC 16%, Chicago 16%, Boston 13%, DC

4%, San Fran 3%

Luxury 6%

Upper Upscale 80%

Upscale 10%

Xenia $1,868 30% 100% Owned San Fran 14%, Boston 4%, Chicago 3%,

DC 3%

Luxury 13%, Upper Upscale 62%,

Upscale 72%, Upper Midscale 8%


29


What’s The Dynamic Between Owners / Managers / Franchisers

Owners - Typically REITs or private investment vehicles

- Large brand companies still own / lease some hotels but have been moving away from the model because most cyclical / less scale advantage

- Neither REITs nor C-corps are currently building new hotels, rely on developers

- Most operating leverage (attractive in an upcycle)

Managers - Manager runs hotel

- Operating costs paid back by owner so runs through P&L as revenue offset by similar cost

- Manager earns base fee of ~2% (in Emerging Markets) or 3% (in US / Europe) of hotel revenues

- Also earns incentive management fees (IMF) of 10% of profit (in Emerging Markets) or 20-25% of profit in US / Europe (but after surpass owners’ priority of ~10% of invested capital)

Franchisers

- Earns fee of ~5% of room revenue only (not incurred on Food & Beverage and other revenue)


30


Typical Hotel Profit & Loss

Source: Company Data, Morgan Stanley Research estimates, STR.

92%

65%

5%

30%

3% 5%

0%

20%

40%

60%

80%

100%

Select Service Hotel Full Service Hotel

Rooms F&B Other

• Select Service hotels have higher operating margins as they are smaller (more efficient to run) and have less Food & Beverage

• Operating leverage is with the hotel owners (including REITs) as pay managers / franchisors set fee %

Estimated Revenue Breakdown Estimated Operating Margins Breakdown

37%

27%

15%

15%

5%

5%

4.5%

3.5%

5%

4%

3.5%

3.0%

4.5%

3.5%

1%

1%

4.5%

18.0%

20% 20%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Select Service Hotel Full Service Hotel

Room Costs

F&B Costs

Property Insurance

Property Taxes

Mgmt Fees

Franchise Fees

Utilities

Marketing

Other Costs

Operating Income


31


US RevPAR (SSS) Performance Tied to Overall Economic Conditions (GDP)

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

4Q

88

4Q

89

4Q

90

4Q

91

4Q

92

4Q

93

4Q

94

4Q

95

4Q

96

4Q

97

4Q

98

4Q

99

4Q

00

4Q

01

4Q

02

4Q

03

4Q

04

4Q

05

4Q

06

4Q

07

4Q

08

4Q

09

4Q

10

4Q

11

4Q

12

4Q

13

4Q

14

4Q

15

4Q

16

Room Demand Growth Real GDP Growth

Source: Company Data, STR, Morgan Stanley Research


32


Lodging: Stocks Have Typically Outperformed when RevPAR Accelerates

Source: Thomson Reuters , Morgan Stanley Research estimates

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

-60%

-40%

-20%

0%

20%

40%

60%19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

YT

D

US

Rev

PA

R G

row

th

Lo

dg

ing

Sto

cks P

erf

. v

s. S

&P

US RevPAR Growth Lodging Stocks vs. S&P 500


33


Key Debate #1: RevPAR growth outlook? Macro tailwinds vs. structural headwinds

Source: Company Data, STR, Morgan Stanley Research

• We expect structural headwinds to RevPAR growth to be partially offset by macro tailwinds resulting in

+2%/0% for 2017e/2018e

3.2%

2.0%

0.5%

0.9%

-0.8%

0.8%

-0.4%

-0.9%

-0.3%

-0.5%

-0.5%

-0.4%

-0.6%

-1.5%

-0.5%

0.5%

1.5%

2.5%

3.5%

2016RevPAR

Supply Airbnb OTAPricing

War

CorpTravelRates

Macro 2017ERevPAR

Supply Airbnb OTAPricing

War

CorpTravelRates

Macro 2018ERevPAR


34


Key Debate #2: Threat of Airbnb

12% 12%

18%

16%

19%18%

25%23%

0%

5%

10%

15%

20%

25%

30%

Leisure Travelers Business Travelers

Airbnb Use (Among Travelers) 2015

2016E

2016A

2017E

• We’ve conducted an annual survey of 4,000 consumers in 4 countries (US, UK, France, Germany) to track adoption trends by country

• Airbnb use among both leisure and business travelers is growing significantly, with adoption projected to reach ~25% in 2017

Source: AlphaWise, Morgan Stanley Research


35


Threat of Airbnb

41%

35%33%

29%

19%22%

20%

5% 4%

49%

37%35%

26%22% 22%

20%

4% 2%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Traditionalhotel

Bed &Breakfast

Friends/family Extended stayhotel

Vacationrental site

OtherVacationRentals

Corporateapartment

Other I would nothave taken

this trip if notfor Airbnb

Accommodation Alternatives that Airbnb Replaced (Among Airbnb Total Users Past 12 Months)

2015

2016

+888bp +212bp +176bp -265bp +322bp -6bp -11bp -117bp -108bp

Source: AlphaWise, Morgan Stanley Research

• Airbnb users are substituting away from a variety of accommodations, but traditional hotels is the most

common


36


Threat of Airbnb

Source: AlphaWise, Morgan Stanley Research estimates

• Substitution away from traditional hotels for Airbnb stays has softened occupancy, resulting in a

compounding effect on rate and RevPAR


37


Key Debate #3: Threat of OTAs

% of Rate Cost to an Owner

Brand.com 1-4%

OTAs 10-20%+

Call centers 4-8%

GDS, etc. 8-10%

Property direct 3-5%

Source: Company data, Morgan Stanley Research

• OTAs are the most expensive booking channel for hotels, so hotels try to minimize their distribution mix


38


Threat of OTAs

Source: Company Data, Morgan Stanley Research estimates, STR.

• OTAs continue to gain share of distribution

15%16%

18%19%

20%

22%

24%

0%

20%

40%

60%

80%

100%

120%

140%

0%

5%

10%

15%

20%

25%

2009 2010 2011 2012 2013 2014 2015

OT

A P

en

etr

ati

on

(%

)

OTA Penetration (%) US RevPAR vs. Prior Peak


39


Threat of OTAs

Source: Company data, Phocuswright’s Search, Shop, Buy: The New Digital Funnel (Aug 2015), Morgan Stanley Research

5%

8%

18%

20%

23%

28%

30%

33%

37%

45%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

I couldn't find what I wanted to book anywhere else

I like their mobile app

Provider websites typically have the best prices

I trust the brand

It's easier to change/cancel my booking

I prefer the airline or hotel handling my payment directly

The website is easy to use

Booking directly with an airline or hotel is easier

I am used to booking travel this way

I am a member of that hotel or airline's loyalty/rewards program

Reasons why US travelers book direct

Reasons why US travelers book through OTAs

5%

9%

10%

17%

27%

30%

32%

36%

38%

52%

0% 10% 20% 30% 40% 50% 60%

I couldn't find what I wanted to book anywhere else

I am a member of their loyalty/rewards program

I like their mobile app

It's easier to change/cancel my booking

OTAs typically have the best prices

It is easy to book all of your travel in one place

The website had the most selection

I trust the brand

I am used to booking travel this way

The website is easy to use


40


Threat of OTAs: Largest hotel brands have built loyalty programs to combat

100 100

60

45

0

20

40

60

80

100

120

IHG Marriott Hilton Expedia

Me

mb

ers

(m

)

Source: Company data, Morgan Stanley Research


41


Key Debate #4: Supply Risk

Source: STR, Morgan Stanley Research estimates

• US returning to long-term average growth of 2.0% in 2017

• Major cities seeing much higher growth

-1.4%

-0.1%

0.8% 0.9% 0.9% 0.9% 1.1%1.3% 1.4% 1.4% 1.5%

1.8% 1.8% 1.9%2.2% 2.2%

2.4% 2.5%2.7%

3.4%3.7% 3.8%

4.2%

5.1%

5.7%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

7%

No

rfo

lk/V

irg

inia

Be

ach

, V

A

Los

An

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g B

ea

ch,

CA

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t P

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A-N

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ork

, N

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ust

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, T

X

20

16

Su

pp

ly G

row

th (

%)

2016 Supply Growth 2016 Avg US Supply Growth


42


Supply Risk: Compression Nights in Top 25 Markets Declined 17% in 2016

Source: Company Data, STR, Morgan Stanley Research.

• We believe traditional supply and alternative accommodations have put pressure on the ability of hotels

to charge premium rates on nights with close to full (>95%) occupancy

108 118

42

26

59

124

169

232

299

332

275

0

50

100

150

200

250

300

350

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

# o

f C

om

pre

ssio

n N

igh

ts i

n T

op

25

Mk

ts

-17%


43


Key Debate #5: Interest Rates: Unlike Other REITs, Rising Rates Not Bad for Lodging

Source: Company Data, Morgan Stanley Research

-30%

-20%

-10%

0%

10%

20%L

od

gin

g

Mu

ltifa

mily

Off

ice

Ma

ll

RE

ITs

Sto

rag

e

Sh

op

Ctr

s

Ind

ustr

ial

Tri

ple

Ne

t

He

alth

Ca

re

NAREIT Index Returns vs. Changes in 10yr Treasuries

• Lodging stock prices (including REITs) have historically had a positive correlation with interest rates

• Rising rates typically signal improving economic conditions which bodes well for lodging companies

o Hoteliers are able to increase room rates on a daily basis as compared to an office lease where rents are locked for longer periods of time

Lodging REITs have the opposite correlation to rate changes vs. other property types


44



44

APPENDIX


45


Gaming Comps Table

Source: Thomson Reuters; Morgan Stanley Research estimates, except for non-covered companies (NC), which are consensus estimates. (1) Based on consensus estimates compiled by Thomson Reuters. (2) Estimates provided by Praveen Choudhary, Morgan Stanley’s Gaming analyst in Hong Kong. (3) Adjusted for proportional share of partially-owned assets. For valuation methodology and risks associated with any price targets, ratings or recommendations referenced in this research report, please contact the Client Support Team as follows: US/Canada +1 800 303-2495; Hong Kong +852 2848-5999; Latin America +1 718 754-5444 (U.S.); London +44 (0)20-7425-8169; Singapore +65 6834-6860; Sydney +61 (0)2-9770-1505; Tokyo +81 (0)3-5424-4349. Alternatively you may contact your investment representative or Morgan Stanley Research at 1585 Broadway, (Attention: Research Management), New York, NY 10036 USA.

(US$MM except per-share data) Daily

Price Price % to Mkt. Ent. Vol. EBITDA EPS EV / EBITDA3

P/E3

Operating FCF Yield3

5/8/17 Rating Target PT Shares Cap. Value ($MM) 2016 2017E 2018E 2016 2017E 2018E 2016 2017E 2018E 2016 2017E 2018E 2016 2017E 2018E

Large-Cap Operators

MGM Resorts Int'l $30.42 OW $33 9% 578 $17,583 $29,115 218.9 $2,390 $2,879 $3,204 $1.14 $1.42 $1.67 12.9x 11.3x 10.0x 26.6x 21.5x 18.3x 7% 6% 8%

Wynn Resorts $120.20 OW 133 11% 102 12,221 19,893 332.7 1,136 1,525 1,673 3.54 4.11 4.99 19.4x 14.7x 13.6x 33.9x 29.3x 24.1x 5% 7% 7%

Las Vegas Sands 57.20 EW 58 2% 795 45,474 52,941 229.5 3,822 4,223 4,374 3.58 2.55 2.36 16.3x 14.8x 14.3x 16.0x 22.4x 24.3x 7% 5% 6%

Average 16.2x 13.6x 12.7x 25.5x 24.4x 22.2x 6% 6% 7%

Small-Cap Operators

Boyd Gaming $24.45 OW $23 -6% 113 $2,766 $5,771 31.7 $629 $559 $613 $0.98 $1.12 $1.32 10.3x 8.9x 8.0x 24.9x 21.8x 18.5x 14% 11% 11%

Penn National 18.63 EW 18 -2% 91 1,694 6,354 24.8 844 870 901 1.16 0.83 1.12 7.5x 7.2x 7.0x 16.1x 22.6x 16.7x 15% 13% 13%

Red Rock Resorts 22.51 NC NA NA 142 3,199 5,054 12.4 N/A 466 526 1.03 1.19 1.40 10.8x 9.6x 9.1x 21.9x 18.9x 16.1x NA NA NA

Pinnacle Ent.1 20.97 NC NA NA 56 1,183 4,574 13.2 654 698 716 (7.79) 0.67 0.86 7.0x 6.5x 6.4x NM 31.2x 24.4x NA NA NA

Average 8.9x 8.1x 7.6x 21.0x 23.6x 18.9x 14% 12% 12%

Total Operators Average 12.0x 10.5x 9.8x 23.2x 23.9x 20.3x 10% 8% 9%

Equipment Suppliers

Int'l Game Tech $21.62 NC NA NA 197 4,262 12,646 24.8 2,049 1,705 1,764 2.33 2.11 2.29 6.2x 7.4x 7.2x 9.3x 10.2x 9.4x NA NA NA

Scientific Games 22.55 NC NA NA 86 1,937 10,291 20.9 1,104 1,177 1,231 (4.05) (2.50) (0.93) 9.3x 8.7x 8.4x NM NM NM NA NA NA

Average 9.3x 8.7x 8.4x NM NM NM NA NA NA

Triple Net Lease REITs

MGM Growth Prop $28.27 EW $27 -6% 243 $6,872 $10,063 18.0 NA $638 $656 NA $1.94 $1.98 NA 15.8x 15.3x 14.5x 14.6x 14.3x NA 7% 7%

Gaming & Leisure Prop 35.28 EW 35 -1% 211 $7,448 $12,040 39.3 872 883 893 3.11 3.17 3.18 13.9x 13.6x 13.5x 11.3x 11.1x 11.1x 9% 9% 9%

Asian Subsidiaries

Wynn Macau2

$2.05 OW $2.6 29% 5,187 10,655 14,580 31.3 698 864 1,006 0.07 0.07 0.10 20.9x 16.9x 14.5x 27.6x 28.6x 20.5x NA NA NA

Sands China24.44 EW 4.6 5% 8,071 $35,823 $40,029 76.7 2,008 2,254 2,302 0.17 0.18 0.18 19.9x 17.8x 17.4x 26.6x 24.9x 24.1x NA NA NA

MGM China2

2.23 EW 2.1 -5% 3,800 8,483 10,355 11.8 473 547 687 0.09 0.06 0.08 21.9x 18.9x 15.1x 26.2x 35.2x 28.1x NA NA NA

Asian Gaming

Galaxy Ent.2 $5.15 OW $6.45 25% 4,293 22,130 20,720 82.4 1,221 1,264 1,307 0.16 0.16 0.18 17.0x 16.4x 15.9x 32.8x 31.9x 29.0x NA NA NA

Melco Crown Ent2

21.46 OW 25.0 16% 542 11,639 14,135 83.0 959 1,044 1,079 0.43 0.46 0.43 14.7x 13.5x 13.1x 50.4x 47.2x 49.3x NA NA NA

Genting SIngapore20.77 EW 0.73 -5% 12,085 9,274 6,289 15.7 539 699 751 0.01 0.02 0.03 11.7x 9.0x 8.4x 65.3x 33.8x 28.8x NA NA NA

SJM2

0.91 UW 0.93 2% 5,661 5,135 3,856 11.9 414 370 462 0.05 0.04 0.02 9.3x 10.4x 8.3x 19.0x 21.1x 40.9x NA NA NA

Average 15.7x 14.3x 13.0x 36.7x 32.4x 33.4x NA NA NA

Online

Amaya CAD 24.41 NC NA NA 199 4,856 6,992 9.7913 524 565 NA 1.88 2.05 NA 13.3x 12.4x NA 13.0x 11.9x NA NA NA NA

Paddy Power Betfair 98.00 OW £101 3% 86 8,428 8,483 11.5 383 478 550 3.03 3.94 4.66 22.1x 17.8x 15.3x 32.4x 24.9x 21.0x 5% 6% 6%

OPAP EUR 9 EW £9 -3% 319 2,948 2,918 4.8147 307 315 336 0.52 0.54 0.58 9.5x 9.3x 8.7x 17.7x 17.3x 15.9x NA NA NA

Kindred Group SEK 92.55 EW SEK 100 8% 232 21,495 21,504 83.5 1,093 1,355 NA 3.65 4.44 NA 19.7x 15.9x NA 25.3x NA NA 4% NA NA

Playtech 943p OW 1350p 43% 335 3,156 2,942 1,309.0 258 307 341 0.60 0.72 0.80 10.1x 8.9x NA 13.8x 12.2x NA 8% 10% NA

Average 15.0x 12.8x NA 20.5x 16.6x 18.4x 6% NA NA


46


Historical Adjusted EV/EBITDA Multiples

Source: Thomson Reuters, Morgan Stanley Research

LVS MGM

US Regionals WYNN

8.0x

10.0x

12.0x

14.0x

16.0x

18.0x

20.0x

Apr-

10

Oct-

10

Apr-

11

Oct-

11

Apr-

12

Oct-

12

Apr-

13

Oct-

13

Apr-

14

Oct-

14

Apr-

15

Oct-

15

Apr-

16

Oct-

16

Apr-

17

1 Standard Deviation Market Cap Avg Historical Multiple

12.3x

13.9x

14.5x

15.5x

9.0x

11.0x

13.0x

15.0x

17.0x

Apr-

12

Oct-

12

Apr-

13

Oct-

13

Apr-

14

Oct-

14

Apr-

15

Oct-

15

Apr-

16

Oct-

16

Apr-

17

1 Standard Deviation EV/EBITDA Multiple Avg Historical Multiple

12.2x

13.6x14.2x

14.9x

5.0x

6.0x

7.0x

8.0x

9.0x

10.0x

Jan-1

1

Jun-1

1

No

v-11

Apr-

12

Sep-1

2

Feb

-13

Jul-1

3

De

c-13

Ma

y-1

4

Oct-

14

Ma

r-1

5

Aug-1

5

Jan-1

6

Jun-1

6

No

v-16

Apr-

17

PENN BYD

9.1x

7.4x

9.0x

9.5x

10.0x

10.5x

11.0x

11.5x

12.0x

12.5x

13.0x

13.5x

14.0x

Apr-

12

Oct-

12

Apr-

13

Oct-

13

Apr-

14

Oct-

14

Apr-

15

Oct-

15

Apr-

16

Oct-

16

Apr-

17

1 Standard Deviation EV/EBITDA Multiple Avg Historical Multiple

10.2x

11.3x

10.8x

12.4x


47


Lodging Comps Table

Source: Company Data, Thomson Reuters, Morgan Stanley Research estimates, except for non-covered companies (NC), which are consensus estimates. For valuation methodology and risks associated with any price targets, ratings or recommendations referenced in this research report, please contact the Client Support Team as follows: US/Canada +1 800 303-2495; Hong Kong +852 2848-5999; Latin America +1 718 754-5444 (U.S.); London +44 (0)20-7425-8169; Singapore +65 6834-6860; Sydney +61 (0)2-9770-1505; Tokyo +81 (0)3-5424-4349. Alternatively you may contact your investment representative or Morgan Stanley Research at 1585 Broadway, (Attention: Research Management), New York, NY 10036 USA.

Lodging Coverage - Valuation Summary

(US$mm, except % to EBITDA EPS

per-share data) Price Price % to PT Shrs Market Ent. EBITDA CAGR EPS CAGR EV / EBITDA P/ EPS Op FCF Yield Price /

Company Ticker 5/8/17 Rating Target PT + Div Out. Cap Value 2016 2017E 2018E 2016-18E 2016 2017E 2018E 2016-18E 2016 2017E 2018E 2016 2017E 2018E 2016 2017E 2018E Key

Lodging C-corps

Marriott MAR.O 96.37 O $95.00 -1% -0.011 358 $34,525 $42,173 $2,793 $2,972 $3,299 9% $3.32 $3.97 $4.84 21% 15.1x 14.2x 12.8x 29.1x 24.2x 19.9x 5.2% 5.6% 6.9% NA

Hilton Worldwide HLT.N 60.68 O 63.00 4% 5% 320 19,411 25,156 NM 1,774 1,893 NM NM 1.65 2.15 NM NM 14.2x 13.3x NM 36.8x 28.2x NM 4.1% 5.0% NA

Choice Hotels CHH.N 61.60 E 65.00 6% 7% 57 3,496 4,134 253 294 317 12% 2.38 2.70 2.77 8% 16.3x 14.0x 13.0x 25.9x 22.8x 22.3x 2.2% 3.3% 4.9% NA

La Quinta LQ.N 13.46 E 14.00 4% 4% 116 1,566 3,106 346 319 323 -3% 0.49 0.41 0.39 -11% 9.0x 9.7x 9.6x 27.3x 33.2x 34.8x 8.5% -1.4% 4.3% NA

Extended Stay STAY.N 17.66 E 18.00 2% 6% 205 3,451 5,931 604 620 632 2% 0.84 1.00 0.95 7% 9.8x 9.6x 9.4x 21.0x 17.7x 18.5x 6.5% 11.0% 9.7% NA

Hyatt Hotels H.N 57.30 E 58.00 1% 1% 125 7,151 8,157 760 769 804 3% 1.64 1.64 1.43 -7% 10.7x 10.6x 10.1x 34.8x 34.9x 40.2x 5.5% 5.5% 5.0% NA

InterContinental2 IHG.N 54.07 E 38.00 NA NA 214 11,571 13,269 803 841 880 5% 2.01 2.33 2.49 11% 16.5x 15.8x 15.1x 26.8x 23.2x 21.7x NA NA NA NA

Wyndham1WYN 95.97 NC NA NA NA 106 10,173 15,664 1,362 1,420 1,499 5% 5.75 6.19 6.97 10% 11.5x 11.0x 10.5x 16.7x 15.5x 13.8x NA NA NA NA

C-corp Average 3% 4% 5% 5% 12.7x 12.4x 11.7x 25.9x 26.0x 24.9x 5.6% 4.7% 6.0% NA

Lodging REITs P/ AFFO Cap Rate

Xenia Hotels & Resorts XHR.N $17.94 E $16.00 -11% -5% 107 $1,921 $2,782 $279 $239 $233 -7% $2.21 $1.87 $1.87 -5% 10.0x 11.6x 11.9x 8.1x 9.6x 9.6x 9.1% 8.2% 7.3% $255

LaSalle Hotel Props. LHO.N 28.56 E 26.00 -9% -3% 113 3,232 4,545 397 362 346 -4% 2.90 2.69 2.50 -4% 11.5x 12.5x 13.1x 9.8x 10.6x 11.4x 13.3% 7.4% 6.9% 363

Host Hotels & Res. HST.N 17.80 E 18.00 1% 6% 738 13,140 16,751 1,471 1,467 1,447 1% 1.69 1.66 1.61 1% 11.4x 11.4x 11.6x 10.5x 10.7x 11.1x 7.6% 7.7% 7.5% 284

Diamondrock Hosp. DRH.N 10.91 U 10.00 -8% -4% 202 2,202 2,879 259 240 235 -4% 1.02 0.96 0.93 -3% 11.1x 12.0x 12.3x 10.7x 11.3x 11.7x 8.1% 7.5% 7.4% 274

Sunstone Hotels SHO.N 15.57 U 14.00 -10% -5% 219 3,411 4,044 330 329 328 -2% 1.21 1.14 0.89 -12% 12.3x 12.3x 12.3x 12.8x 13.7x 17.6x 7.1% 6.7% 6.5% 296

Park Hotels & Resorts PK 25.32 NC NA NA NA 197 4,988 7,865 719 758 779 NM 2.60 2.74 2.81 NM 10.9x 10.4x 10.1x 9.7x 9.3x 9.0x NA NA NA NA

Ashford Hospitality AHT 6.08 NC NA NA NA 95 575 3,895 431 429 442 3% 1.51 1.50 1.56 3% 9.0x 9.1x 8.8x 4.0x 4.1x 3.9x NA NA NA NA

Ashford Prime AHP 10.31 NC NA NA NA 27 281 1,080 93 107 111 7% 1.73 1.74 1.69 5% 11.6x 10.1x 9.7x 6.0x 5.9x 6.1x NA NA NA NA

Chesapeake Lodging1

CHSP 23.33 NC NA NA NA 59 1,376 2,056 185 173 182 2% 2.39 2.17 2.31 2% 11.1x 11.9x 11.3x 9.8x 10.8x 10.1x NA NA NA NA

Felcor Lodging Trust1

FCH 7.58 NC NA NA NA 137 1,040 2,698 240 232 237 0% 0.92 0.89 0.91 3% 11.2x 11.6x 11.4x 8.2x 8.6x 8.3x NA NA NA NA

Hersha Hospitality1HT 18.41 NC NA NA NA 42 775 1,791 141 169 170 3% 2.40 2.25 2.28 -1% 12.7x 10.6x 10.6x 7.7x 8.2x 8.1x NA NA NA NA

Hospitality Property1HPT 31.59 NC NA NA NA 164 5,187 8,227 751 776 804 6% 3.60 3.68 3.82 5% 11.0x 10.6x 10.2x 8.8x 8.6x 8.3x NA NA NA NA

Pebblebrook Hotel Trust1 PEB 30.97 NC NA NA NA 72 2,227 3,261 273 231 234 -3% 2.78 2.48 2.54 1% 11.9x 14.1x 14.0x 11.1x 12.5x 12.2x NA NA NA NA

RLJ Lodging Trust1 RLJ 21.41 NC NA NA NA 124 2,653 3,797 392 367 371 -1% 2.67 2.43 2.49 0% 9.7x 10.4x 10.2x 8.0x 8.8x 8.6x NA NA NA NA

Ryman Hosp.1

RHP 62.56 NC NA NA NA 51 3,192 3,964 350 350 372 5% 5.49 5.47 5.89 4% 11.3x 11.3x 10.7x 11.4x 11.4x 10.6x NA NA NA NA

Chatham Lodging1

CLDT 19.19 NC NA NA NA 38 735 1,281 128 130 124 -1% 2.30 2.18 2.15 -2% 10.0x 9.9x 10.3x 8.3x 8.8x 8.9x NA NA NA NA

Apple Hospitality1

APLE 18.78 NC NA NA NA 223 4,189 5,562 333 444 455 14% 1.76 1.75 1.79 4% 16.7x 12.5x 12.2x 10.7x 10.7x 10.5x NA NA NA NA

Summit Hotel Prop.1 INN 17.13 NC NA NA NA 93 1,597 2,216 155 171 179 8% 1.41 1.39 1.47 5% 14.3x 12.9x 12.4x 12.1x 12.3x 11.7x NA NA NA NA

REIT Average -7% -2% 11.5x 11.4x 11.3x 9.3x 9.8x 9.9x 9.1% 7.5% 7.1% $294

Timeshare

Marriott Vacations 1 VAC $115.30 NC NA NA NA 28 $3,217 $3,800 $261 $281 $304 9% $4.73 $5.29 $5.81 16% 14.5x 13.5x 12.5x 24.4x 21.8x 19.8x NA NA NA NA

Wyndham1WYN 95.97 NC NA NA NA 106 10,173 15,664 1,362 1,420 1,499 5% 5.75 6.19 6.97 11% 11.5x 11.0x 10.5x 16.7x 15.5x 13.8x NA NA NA NA

Interval Leisure Group1IILG 25.52 NC NA NA NA 126 3,205 3,689 302 355 387 31% 1.28 1.14 1.28 -1% 12.2x 10.4x 9.5x 19.9x 22.4x 20.0x NA NA NA NA

Hilton Grand Vacations1HGV 35.34 NC NA NA NA 99 3,511 4,510 347 396 426 NM 1.70 1.94 2.13 NM 13.0x 11.4x 10.6x 20.8x 18.3x 16.6x NA NA NA NA

Timeshare Average 12.8x 11.6x 10.8x 20.4x 19.5x 17.6x NA NA NA NA

Lodging 11.9x 11.7x 11.4x 14.0x 14.8x 14.5x 7.3% 6.0% 6.5% $294

(1) Not covered, based on consensus estimates provided by ThomsonOne

(2) Covered by Morgan Stanley European team.


48


Historical EV / EBITDA Multiples – Lodging C-Corps Average 11x


6.0x

8.0x

10.0x

12.0x

14.0x

16.0x

18.0x

Ja

n-0

3

Ju

l-0

3

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n-0

4

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4

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5

Ju

l-0

5

Ja

n-0

6

Ju

l-0

6

Ja

n-0

7

Ju

l-0

7

Ja

n-0

8

Ju

l-0

8

Ja

n-0

9

Ju

l-0

9

Ja

n-1

0

Ju

l-1

0

Ja

n-1

1

Ju

l-1

1

Ja

n-1

2

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l-1

2

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n-1

3

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3

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4

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l-1

4

Ja

n-1

5

Ju

l-1

5

Ja

n-1

6

Ju

l-1

6

Ja

n-1

7

Average 11.7x


49


Historical EV / EBITDA Multiples – Lodging REITs Average 11x


6.0x

8.0x

10.0x

12.0x

14.0x

16.0x

18.0x

Ja

n-0

3

Ju

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3

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4

Ju

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4

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5

Ju

l-0

5

Ja

n-0

6

Ju

l-0

6

Ja

n-0

7

Ju

l-0

7

Ja

n-0

8

Ju

l-0

8

Ja

n-0

9

Ju

l-0

9

Ja

n-1

0

Ju

l-1

0

Ja

n-1

1

Ju

l-1

1

Ja

n-1

2

Ju

l-1

2

Ja

n-1

3

Ju

l-1

3

Ja

n-1

4

Ju

l-1

4

Ja

n-1

5

Ju

l-1

5

Ja

n-1

6

Ju

l-1

6

Ja

n-1

7

Average 11.5x


50



50

DISCLOSURES


51


Disclosures

The information and opinions in Morgan Stanley Research were prepared by Morgan Stanley & Co. LLC, and/or Morgan Stanley C.T.V.M. S.A., and/or Morgan Stanley Mexico, Casa de Bolsa, S.A. de C.V., and/or Morgan Stanley Canada Limited. As used in this disclosure section, "Morgan Stanley" includes Morgan Stanley & Co. LLC, Morgan Stanley C.T.V.M. S.A., Morgan Stanley Mexico, Casa de Bolsa, S.A. de C.V., Morgan Stanley Canada Limited and their affiliates as necessary. For important disclosures, stock price charts and equity rating histories regarding companies that are the subject of this report, please see the Morgan Stanley Research Disclosure Website at www.morganstanley.com/researchdisclosures, or contact your investment representative or Morgan Stanley Research at 1585 Broadway, (Attention: Research Management), New York, NY, 10036 USA. For valuation methodology and risks associated with any recommendation, rating or price target referenced in this research report, please contact the Client Support Team as follows: US/Canada +1 800 303-2495; Hong Kong +852 2848-5999; Latin America +1 718 754-5444 (U.S.); London +44 (0)20-7425-8169; Singapore +65 6834-6860; Sydney +61 (0)2-9770-1505; Tokyo +81 (0)3-6836-9000. Alternatively you may contact your investment representative or Morgan Stanley Research at 1585 Broadway, (Attention: Research Management), New York, NY 10036 USA. Analyst Certification The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report: Thomas Allen; Mark Savino; Chaodan Zheng. Unless otherwise stated, the individuals listed on the cover page of this report are research analysts. Global Research Conflict Management Policy Morgan Stanley Research has been published in accordance with our conflict management policy, which is available at www.morganstanley.com/institutional/research/conflictpolicies. Important US Regulatory Disclosures on Subject Companies As of April 28, 2017, Morgan Stanley beneficially owned 1% or more of a class of common equity securities of the following companies covered in Morgan Stanley Research: DiamondRock Hospitality Co, Hilton Worldwide Holdings Inc, Host Hotels & Resorts, Inc., Hyatt Hotels Corporation, La Quinta Holdings Inc, LaSalle Hotel Properties, Marriott International Inc., Xenia Hotels & Resorts Inc. Within the last 12 months, Morgan Stanley managed or co-managed a public offering (or 144A offering) of securities of Hilton Worldwide Holdings Inc, MGM Growth Properties LLC, MGM Resorts International, Wynn Resorts, Limited. Within the last 12 months, Morgan Stanley has received compensation for investment banking services from Extended Stay America Inc, Hilton Worldwide Holdings Inc, MGM Growth Properties LLC, MGM Resorts International, Penn National Gaming, Inc., Wynn Resorts, Limited. In the next 3 months, Morgan Stanley expects to receive or intends to seek compensation for investment banking services from Boyd Gaming Corporation, Choice Hotels International Inc, DiamondRock Hospitality Co, Extended Stay America Inc, Gaming and Leisure Properties Inc, Hilton Worldwide Holdings Inc, Host Hotels & Resorts, Inc., Hyatt Hotels Corporation, La Quinta Holdings Inc, Las Vegas Sands Corp., LaSalle Hotel Properties, Marriott International Inc., MGM Growth Properties LLC, MGM Resorts International, Penn National Gaming, Inc., Sunstone Hotel Investors Inc, Wynn Resorts, Limited, Xenia Hotels & Resorts Inc. Within the last 12 months, Morgan Stanley has received compensation for products and services other than investment banking services from Hilton Worldwide Holdings Inc, Hyatt Hotels Corporation, La Quinta Holdings Inc, Las Vegas Sands Corp., Marriott International Inc., MGM Resorts International, Penn National Gaming, Inc., Wynn Resorts, Limited, Xenia Hotels & Resorts Inc. Within the last 12 months, Morgan Stanley has provided or is providing investment banking services to, or has an investment banking client relationship with, the following company: Boyd Gaming Corporation, Choice Hotels International Inc, DiamondRock Hospitality Co, Extended Stay America Inc, Gaming and Leisure Properties Inc, Hilton Worldwide Holdings Inc, Host Hotels & Resorts, Inc., Hyatt Hotels Corporation, La Quinta Holdings Inc, Las Vegas Sands Corp., LaSalle Hotel Properties, Marriott International Inc., MGM Growth Properties LLC, MGM Resorts International, Penn National Gaming, Inc., Sunstone Hotel Investors Inc, Wynn Resorts, Limited, Xenia Hotels & Resorts Inc. Within the last 12 months, Morgan Stanley has either provided or is providing non-investment banking, securities-related services to and/or in the past has entered into an agreement to provide services or has a client relationship with the following company: Hilton Worldwide Holdings Inc, Hyatt Hotels Corporation, La Quinta Holdings Inc, Las Vegas Sands Corp., Marriott International Inc., MGM Resorts International, Penn National Gaming, Inc., Wynn Resorts, Limited, Xenia Hotels & Resorts Inc. Morgan Stanley & Co. LLC makes a market in the securities of Boyd Gaming Corporation, Choice Hotels International Inc, DiamondRock Hospitality Co, Extended Stay America Inc, Gaming and Leisure Properties Inc, Hilton Worldwide Holdings Inc, Host Hotels & Resorts, Inc., Hyatt Hotels Corporation, La Quinta Holdings Inc, Las Vegas Sands Corp., LaSalle Hotel Properties, Marriott International Inc., MGM Growth Properties LLC, MGM Resorts International, Penn National Gaming, Inc., Sunstone Hotel Investors Inc, Wynn Resorts, Limited, Xenia Hotels & Resorts Inc.


52


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53


Disclosures

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Gaming and Lodging Primer · 2019. 3. 31. · Gaming & Lodging Primer M O R G A N S T A N L E Y R E...

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Transcript of Gaming and Lodging Primer · 2019. 3. 31. · Gaming & Lodging Primer M O R G A N S T A N L E Y R E...