China Travel Warning to US Amid Ongoing Trade War Could Hurt Gaming Industry

Posted on: June 7, 2019, 12:07h. 

Last updated on: June 7, 2019, 12:07h.

China has warned its citizens about traveling to the US amid the ongoing trade war between the two countries, and that could damper revenue for businesses operating in the gaming industry.

China US trade war casino gaming
There could be fewer Hainan passengers coming from China to Las Vegas in the months ahead. (Image: McCarran International)

This week, China issued a travel advisory to its citizens warning them that unnecessary trips to the US should be avoided.

“Recently, US law enforcement agencies have on multiple occasions used methods such as entry and exit checks, and on-site interviews to harass Chinese citizens,” the Chinese Ministry of Foreign Affairs declared. “The Foreign Ministry and the Chinese Embassy and Consulate in the US warn Chinese citizens and Chinese-invested institutions to raise their safety awareness, strengthen preventative measures, and respond properly.”

As a result, Deutsche Bank said in a note that the number of Chinese tourists visiting America could plummet by almost 50 percent.

Chinese tourism is a big prize in global trade,” analyst Robin Winkler said. “On this front, the US has more to lose than China.”

President Donald Trump and China are at war over taxes on goods coming and going between the two superpowers. The fight has thrown the global economy into chaos, as countries around the world wait for the final outcome.

The US State Department has issued a “Level 2: Exercise Increased Caution” warning for travel to China. “China uses exit bans coercively to compel US citizens to participate in Chinese government investigations, to lure individuals back to China from abroad, and to aid Chinese authorities in resolving civil disputes in favor of Chinese parties.”

Gaming Industry Impact

CNBC reports that Chinese tourists contribute around $270 billion internationally each year traveling. But they account for just three percent of the US travel industry.

If the nearly 50 percent drop in visitation to the US is realized, analysts at Merrill Lynch say as much as $18 billion in fewer expenditures in the travel sector could result domestically. The Las Vegas Convention and Visitors Authority (LVCVA) says 20 percent of visitors last year came from foreign countries.

Hainan Airlines began direct service between Beijing and Las Vegas in December 2016. Demand prompted the carrier to increase frequency of flights between the two cities. More than 20,000 passengers arrived in Las Vegas direct from Beijing last year.

The game of choice for Asian visitors to Sin City is baccarat, a lucrative table game that has seen weaker play this year. Baccarat gross gaming revenue has declined more than 25 year to date.

The preferred gaming destination for the wealthiest residents in mainland China is of course Macau. Of the enclave’s record 35.8 million visitors last year, 25.26 million – more than 70 percent – originated from the mainland.

Gaming Stocks

The VanEck Vectors Gaming ETF (exchange-traded fund) is a good gauge of the overall health of the gaming industry. The fund presently includes 44 holdings, notably gaming manufacturer Aristocrat Leisure, Las Vegas Sands, Galaxy Entertainment, MGM Resorts, and Wynn Resorts.

Shares of the ETF have gained value in 2019, increasing from $33 to around $35.70 this week – an eight percent climb. But that lags behind the Dow Jones Industrial Average, which is up 11.5 percent during the same period.