Due to China’s recent US travel warning urging its citizens not to travel to the United States because of the increase in shootings, robberies and crimes it is being speculated that the legacy US airlines and the Casinos in Las Vegas will get affected badly.
The ongoing trade war between US and China is the main reason for China’s US travel warning to its citizens. The Chinese are known for spending a lot of money overseas and last year alone they have contributed $270 billion to the overseas travel market, reports cnbc.com. While China is one of the major countries for the US in terms of the number of tourists visiting every year, China only accounts for 3% of the total 1.1 trillion US travel market in 2018 according to the US Travel Association.
According to an estimate by Bank of America, in the worst case scenario the recent travel warning by the Chinese officials could reduce the number of Chinese tourists by 50%, resulting in $18 billion hit to travel spending in the US.
For the first time in a decade there has been a decline in the number of Chinese tourists entering the US, 5.7% decline in 2018 when compared to the previous year, reports the US Travel Association.
This number is declining only because of the recent warning by the Chinese officials to its citizens urging them not to visit United States for the reasons cited above. This decline in Chinese tourists to the US will greatly affect legacy flight carriers in the US who have flight services to China and the Casinos in Las Vegas which thrive on Chinese customers for its revenue.
American Airlines, Delta and United are the major US airlines offering flights to China, United Airlines accounts for 47% of flights to China while American and Delta account for about 25% of flights to China. Bank of America analyst Andrew Didora estimates that in the worst case scenario when there is a decline of 50% drop in Chinese tourism United’s unit revenue could see a 140 points drag and American and Delta would be impacted by 70 basis points.
Chinese tourists are known for their patronage to the Las Vegas Casinos and most of them are addicted to playing the card game Baccarat. Las Vegas casinos including MGM, Las Vegas Sands and Wynn Resorts will be the most affected as these casinos are popular for hosting this card game-Baccarat.
Bank of America analyst Andrew Didora says “Las Vegas has already noted weaker Asian gambling trends. Baccarat gross gaming revenues are often a barometer for the health of the Asian consumer and are down 26%.”