Las Vegas “could find some reprieve in its struggling baccarat business” with the help potentially of three direct flights per week from China, says a note from Union Gaming Securities LLC.
According to the brokerage, the Civil Aviation Administration of China has approved that country’s Hainan Airlines to operate three direct weekly flights from the Chinese capital Beijing to Las Vegas. The carrier, based in Hainan’s principal city Haikou, plans to begin the flights in September but still needs approval from the U.S. Department of Transportation, said Union Gaming.
“The approval [from Chinese authorities] is a major first step in potentially bringing even more Chinese carriers to Las Vegas,” said analyst John DeCree in a note on Thursday. “The direct flights from China to Las Vegas would create incremental visitation, increased frequency, and length of stay.”
Conservative estimates suggest about 300,000 Chinese travellers are visiting Las Vegas annually, according to Union Gaming’s note. These visitors however have to take more than one flight and as a result are likely to spend less time in Las Vegas. “This limits how much time and money a Chinese tourist could spend in Las Vegas,” said Mr DeCree.
Hainan Airlines, China’s fourth largest carrier, is expected to operate a Boeing 787 Dreamliner on the Las Vegas service, according to an announcement released on the website of the Civil Aviation Administration of China in October. According to the aircraft’s manufacturer, variants of the Boeing 787 seat between 242 and 335 passengers.
“Direct flights would allow Chinese travellers to spend more time in Las Vegas and ultimately spend more money. Second, incremental flights and carriers would likely follow suit after the first three flights begin,” said Union Gaming’s Mr DeCree.
He added: “While we expect international visitation will continue to expand, the direct flights from China and a potentially recovering baccarat business on the [Las Vegas] Strip represent upside to our current outlook.”
Weak baccarat volume
Nevada gambling revenue fell 3 percent year-on-year in March due to lower winnings in the Las Vegas area, show data from the Nevada Gaming Control Board.
The Nevada Gaming Control Board said on Thursday that the state’s casinos recorded revenue of US$922.3 million in March.
More than US$486.8 million – about 53 percent – of Nevada’s total gaming win in March came from the Las Vegas Strip. The Strip’s revenue was down 4.0 percent from the prior-year period.
“The [Strip] results were, impacted by: 1) weak baccarat volume; (2) February 2015 ended on a Saturday, so March 2015 benefited from slot revenue timing; (3) last year had an extra Sunday; and (4) Easter timing this year,” said analyst Cameron McKnight of Wells Fargo Securities LLC.
March baccarat volumes were down 29 percent year-on-year on the Las Vegas Strip, while revenues were down 3.9 percent year-on-year. Baccarat is the table game of choice for Chinese and many other East Asian gamblers.
Overall, gross gaming revenue on the Las Vegas Strip in the three months to March 31 was down 1.6 percent from the prior-year period, “as slot handle dipped 2.2 percent … and table drop excluding baccarat was down 6.9 percent,” said a note from Deutsche Bank Securities Inc.
“Baccarat remains weak, as first quarter 2016 baccarat drop fell 16.9 percent year-on-year and revenue was down 11.6 percent as hold tempered the damage,” said Deutsche Bank’s analysts Carlo Santarelli and Danny Valoy.
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Professor emeritus at Whittier Law School in California, in the United States, and a visiting professor at University of Macau