Las Vegas Baccarat Could Be Next Target in Chinese Trade War

Las Vegas Baccarat Revenues

The theory, put forward by I. Nelson Rose and others, is China might restrict travel of its high rollers to the United States.

Gaming analysts believe Las Vegas could be a target in the continuing tariff war between the United States and China. Those analysts believe travel for VIP gamblers from China to the United States could be restricted if the battle over trade continues for months longer.

Chinese high rollers visit Las Vegas Strip casinos to play baccarat, just like they visit Macau to play their favorite table game. Baccarat has been a growing revenue generator over the past 10 years.

As the United States gaming industry dealt with the fallout of the Global Recession, baccarat gaming involving Asian high rollers were a consistent source of revenues. The blackjack section was downsized or poker rooms were closed to make way for more baccarat tables.

Anthony Lucas, professor at the UNLV’s College of Hospitality and a longtime observer of Las Vegas’s casino economy, explained the impact of Chinese high rollers on the Las Vegas Strip.

The UNLV professor said: “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. On the high side, you could see bets as large as a quarter of a million dollars.”

How China Could Hurt Casino Revenues

I. Nelson Rose, a visiting professor at the University of Macau, told Fox News in a tv interview, “I think there is potential for great danger. 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.”

Baccarat has shown a small decline in the past several years. One might have thought a crackdown on high rollers visiting Macau might have led to more VIP high rollers visiting Las Vegas.

Instead, China restricted the foreign travel of high rollers, due to concerns about capital flight. Just as important, wealthy Chinese residents were reluctant to show conspicuous consumption, because of Xi Jinping’s anti-corruption crackdown.

High Rollers Visit Las Vegas Less

In that environment, many Chinese high rollers did not want to risk drawing attention to themselves by taking expansive jaunts to Sin City. The number of VIP players flying to Las Vegas dwindled, so baccarat revenues declined. Analysts say those numbers could get worse, if the trade war continues.

China has shown the ability to prescience and ability to target Donald Trump supporters in the tariff war. Instead of targeting companies in major American cities — where support for Donald Trump is low — Chinese-imposed tariffs targeted American agricultural areas where Trump is popular. Those who voted for the president who started the trade war were punished.

Donald Trump’s Casino Buddies

That could put Las Vegas casino companies in a bad spot. President Donald Trump is a former casino executive himself. Over the decades, he has met and befriended many of the top casino executives: Sheldon Adelson, Steve Wynn, and Carl Icahn to name a few.

Sheldon Adelson is Trump’s biggest political donor. Steve Wynn resigned amidst scandal, but his company is still a top choice for high-end casino goers. Carl Icahn is said to be a close personal friend of Trump’s, and was even a regulatory advisor in the early months of the Trump administration.

If China wants to target another base of Trump support, it might target the American casino industry. Shelson Adelson’s close political ties to Donald Trump make him a particular target, though Adelson has a lot of friends in China.

Sheldon Adelson’s Chinese Connections

Las Vegas Sands, the Nevada casino company with world famous resorts in Macau — The Venetian Macau and Parisian Macau — has a good history with Chinese officials going back to his original investment in the former Portuguese colony in 2001. Since the Venetian Macau opened in 2004, it has been one of the most lucrative casinos in the world.

When Steve Wynn and Lawrence Ho complained about the baccarat table allotments for their new multi-billion dollar casinos a couple of years ago, Sheldon Adelson praised Chinese officials and claimed they would give him a fair allotment for the Parisian Macau. He was right, as Parisian Macau received twice the baccarat tables of some competitors when it opened in September 2016.

How the Trade War Can Escalate?

As Professor Rose said, “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.'”

The Macau University scholar said, “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.’ 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.”

Even if China’s officials decided to target Las Vegas Strip casinos with travel restrictions, it would have a less radical impact on casino revenues than it would in Macau. Las Vegas Strip casinos generate over 60% of their revenue from non-gaming revenues these days, while the number is much lower in Macau.

2020 Macau Casino Licensing Concerns

Ultimately, the three US companies operating in Macau — Las Vegas Sands, MGM Resorts, and Wynn Resorts — are far more vulnerable than their competitors. Not only could the Beijing government place restrictions on VIP high roller visits to casinos on the Cotai Strip, but an upcoming review of casino licenses in 2020 looms over the city’s casino industry.

Macau has six major license holders, including the three American companies and their three Chinese competitors: Galaxy Entertainment Group (GEG), Melco Resorts & Entertainment, and SJM Holdings (Casino Lisboa). All six companies are up for licensing renewal in 2020 or soon after, and it is possible China could strip the license of one or more American casino companies — costing them billions in investments.

Those familiar with the Macau casino industry consider that unthinkable, but nothing keeps it from happening. If the tariff war goes on for another year and China’s economy slows down, Chinese officials might not be in a mood to be reasonable. Even prior to the trade war, the 2020 casino licensing situation was discussed by analysts and investors.

*Note: Punto Banco Baccarat played in Las Vegas Strip casinos is a game of chance with no strategy or skill elements. “Best” in this context probably means big spenders — not best skilled.