China-US trade war could threaten Las Vegas casinos

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Las Vegas casinos could feel squeeze from China-US trade war

LAS VEGAS -- Baccarat is a card game played in Sin City that attracts some of the casinos’ highest rollers. It’s popular among moneyed foreigners, particularly those traveling from Asia.

The game is also a critical financial lifeline for Las Vegas that some believe could be threatened by the U.S.-Chinese trade war.

Gaming experts believe China could retaliate against the U.S. by making it difficult for the high-rolling gamblers to visit Vegas – which could impact millions of dollars a year currently pouring into the local economy.

“I think there is potential for great danger,” I. Nelson Rose, a visiting professor at the University of Macau and a gaming industry expert, told Fox News. “At the moment, China is pretty carefully retaliating against the United States. If China decides to go to the next step, they could really hit the Las Vegas casinos pretty hard.”

The Trump administration has slapped a total of roughly $250 billion in tariffs against China, as Chinese leader Xi Jinping already imposed tariffs on $110 billion in U.S. goods.

President Donald Trump recently agreed to hold off on a planned 25 percent hike on $200 billion worth of Chinese goods for a 90-day period, which was scheduled to go into effect in January, following a successful meeting with Xi.

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However, the two economic powerhouse are still divided on key issues.

It is this uncertainty that Nelson said is a cause for concern.

“The worry is that it can escalate to the point where China says to its residents: ‘You can’t go to the United States anymore, which would devastate Nevada, and a lot of the U.S. tourist industry,” he said.

If a deal cannot be reached by the March 1 deadline when the Trump administration threatens to raise tariffs, tensions could mount. And, depending on how China responds, the economic blowback in Vegas could have a lasting impact.

Sin City saw over 250,000 visitors from China in 2017, according to statistics from the Las Vegas Convention and Visitors Authority, accounting for a significant chunk of revenue for casinos in Nevada.

When tourists from China visit the Strip, their game of choice is Baccarat, which brings in a hefty portion of casinos revenue.

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“We get some of our best players from China. So, yeah it is a game that is probably more dependent on Chinese high-rollers than most,” Anthony Lucas, College of Hospitality professor at the University of Nevada Las Vegas and gaming industry veteran said. “On the high side, you could see bets as large as a quarter of a million dollars.”

From December 2017 to November 2018, there were a total of 364 Baccarat tables, compared to 2,485 Blackjack tables, yet Baccarat earned roughly $1.2 billion – more than $50 million more than Blackjack, according to the latest data from the Nevada Gaming Control Board.

“If China really wanted to hit Las Vegas, they would start perhaps by warning residents away, saying ‘Oh, Nevada and maybe even the United States is too dangerous,’” Nelson said. “But, they have the power to simply say we are not granting visas anymore… and that would hit the Nevada casinos by about a half a billion dollars a year.”

But Lucas said the impact the U.S.-China trade war would have on Vegas is overrated. He noted Baccarat revenue has been flat in recent years – dispelling any notion that the trade war is having an impact.

The Wynn and Caesars declined to comment on whether the China-US trade war has impacted business, while a spokesperson for MGM said they have not seen any impact.

Nelson noted that the large casinos should already be concerned about how the trade deal would impact their operations in Macau, a Chinese territory considered the gaming capital of the world. All their operations there are up for renewal soon – which puts the casinos in a precarious situation considering relations between the two nations are frosty.

“If those (casino licenses) don’t get renewed,” Nelson said, “that’s an instant multi-billion dollar hit.”

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David Huether, senior vice president of research at the U.S. Travel Association, said there have been rumblings that China has imposed some travel restrictions to the U.S., specifically on business travel, but it’s too early to know if it’s impacting international tourism.

The U.S. government recently warned citizens about traveling to China, saying the Chinese government could make it difficult for them to return. China issued its own warning to citizens traveling to the U.S. last, citing safety concerns.

Lucas said the icy relations, while not hurting Vegas immediately, could have a long-term impact.

“I can see some long term fallout, you know, if you consider rhetoric coming out of Beijing – you know, the anti-American rhetoric, or just general animosity or acrimony standing from the somewhat confrontational talks that we’ve had between the two countries,” Lucas said. “Sure, I can see something growing out of that, that would be negative. Absolutely.”