Still too early to call if trade war will impact Las Vegas resorts

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While commentators suggest that Las Vegas baccarat revenues may decline if China decides to introduce tourism restrictions to the US, it’s unlikely to be a game changer for the City of Lights’ casino operators.

Given that China was previously in line to become the third largest overseas visitor market for the US by 2020, will Las Vegas casino operators see any repercussions from president Donald Trump’s decision to enact tariffs on a range of Chinese goods?

US tariffs of 25 percent on $34bn of Chinese imports took effect on 6 July. The Chinese government retaliated with duties on the same value of US imports and asserted that it will respond proportionately to any new US tariffs.

Following this, Trump announced that the US may impose further tariffs on more than $500bn worth of Chinese goods, while his administration has prepared a new $200bn list of Chinese products that could be levied with 10 percent tariffs.

During an official visit to Bulgaria, China’s premier Li Keqiang, said “no one will win by fighting a trade war, yet China will take countermeasures in the face of unilateral moves”.

While China has pledged to hit back on an equal scale and with equal strength, it will not be able to do that by raising tariffs alone, given that it has fewer US goods to work with. While the US imports $505bn of goods from China, the PRC only imports $130bn in goods from the US. Thus China’s options are limited in a quid pro quo trade fight. So what could this mean for tourism to the
US?

China restricted tourism to South Korea after the US deployed its THAAD missile defence system the country last year. Although Beijing never specifically linked the ban to the THAAD deployment, the decision to limit package tour sales reportedly costing the economy nearly $7bn.

It’s possible that China may choose to pursue a similar policy against the US. A report in China’s state-controlled Global Times tabloid on 11 July ominously suggested that “interest in travelling to the US has withered as peak vacation season approaches”.

“I would expect that the Chinese would play up the angle of the trade war costing the US in terms of tourism because they want to amplify the impact,” said Martin Chorzempa, a fellow at the Peterson Institute for International Economics. “If people in the tourism industry see these things, the Chinese might hope that they put pressure on the US administration to roll back some of these measures.”

At present, China represents the fifth largest visitor source for the US, while Las Vegas is a popular destination for Chinese tourists, bolstered by a direct flight from Beijing.

Figures from the Las Vegas Convention and Visitors Authority show that 233,132 Chinese tourists visited the city in 2016.

While this makes up only a small percentage of Las Vegas’ overall visitor numbers, Chinese visitors are valuable for casino operators given their preference for baccarat, which now accounts for nearly 18 percent of total casino win on the Strip.

David G. Schwartz, director of the University of Nevada Las Vegas’ Center for Gaming Research, explains that there is a correlation between Chinese visitation and baccarat revenues.

“There is definitely an impact,” he explained. “While the state does not measure gambling by national origin, it is worth noting that, since the Chinese government’s anti-graft crackdown, Nevada baccarat revenues have declined.

“In 2013, they were $1.6bn, and last year they were below $1.2bn. In 2013, baccarat was 24.4 percent of Strip gaming win, while in 2017, it was 17.5 percent.”

However, looking to Las Vegas, Schwartz states that if China were to introduce a ban on package tours, the effects may be less pronounced than was the case in in South Korea.

“It might not be as significant overall, since in sheer numbers Chinese visitors are less numerous than those from other countries,” he added.

In a similar vein, commentators have proposed that higher-revenue customer segments such as independent, business, and VFR (visiting friends and relatives) travellers would most likely be completely unaffected by a hypothetical ban.

“It is to early to determine what kind of impact [the trade dispute] may have,” said Amanda Peters, a spokesperson for the Las Vegas Convention and Visitors Authority, speaking to CNBC.


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