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Home / World / Airlines and casinos will be affected by China's travel warning

Airlines and casinos will be affected by China's travel warning



The US flag waving at a welcoming ceremony between Chinese President Xi Jinping and US President Donald Trump in 2017.

Getty Images News | Getty Images

China's warning about travel in the US – the latest shot in the midst of the worsening trade war – could be a threat to some airlines and casinos, though the overall impact on US tourism would be manageable.

While Chinese tourists spend a lot of money Worldwide, they contributed $ 270 billion to overseas sales last year alone, accounting for only 3% of the $ 1

.1 trillion travel market, according to US Travel Association 2018. In the worst case scenario, the number of Chinese tourists to the United States could fall by nearly 50%, which would lead to a $ 18 billion decrease in travel costs, Bank of America Merrill Lynch estimates.

"Chinese tourism is a big prize for world trade … On this front, the US has more to lose than China," said Robin Winkler, foreign exchange strategist at Deutsche Bank, in a note. The trade war "would likely have a significant impact on household income growth to quell the appetite of the new middle class for passports and overseas travel, and a weaker exchange rate could make travel abroad less affordable," added Winkler.

[19659002] Chinese travel to the United States decreased by 5.7% year-on-year in 2018, compared with a 4% increase in 2017 and an increase of 15% in 2016, according to the US Travel Association. The number drops only after the Chinese government issued a warning to Chinese tourists traveling to America, citing "shootings, robberies and thefts" that "frequently" took place in the US

. Airlines

With only older airlines offering flights to China, the negative impact of declining Chinese tourists, according to Bank of America, would be mainly on United Continental, Delta Air Lines and American Airlines.

United carries the most flights to China with 47% of US airline capacity, compared with 25% at American Airlines and Delta, said Bank of America analyst Andrew Didora.

In the worst case scenario of the bank – a 50% decline in Chinese tourists – United generated revenue According to Didora, a resistance of 140 basis points could occur and the impact would be 70 basis points for American Airlines and Delta.

Las Vegas

Chinese travelers, who are big customers for casinos, may now turn their backs on gambling in the US amidst travel advice and tighter trade tensions. The casinos in Las Vegas are already feeling the crisis.

"Las Vegas has already seen weaker Asian gambling trends, with baccarat gross gaming revenues often being a barometer of Asian consumer health and down 26% [year to date]," said Didora.

The weakness could weigh on casinos like MGM, Las Vegas Sands and Wynn Resorts, which come in contact with Baccarat, said the analyst. Tiffany & Co. posted disappointing quarterly results Wednesday for a sharp decline in Chinese tourism due to the trade war.


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