Disaster’s tourism impact uncertain

Analysts, seeking to restrain the jittery investment community, have rightfully said Japan's human, economic and environmental disaster will have a marginal short-term effect on Las Vegas, Macau and Singapore.

Japanese visitation to the gaming destinations is small.

Singapore has the largest market share with roughly 5 percent of its annual tourism volume coming from Japan. Union Gaming Group Principal Bill Lerner said the bulk of Japanese visits to Singapore are business-related rather than for casino purposes.

But as the aftermath of the earthquake, tsunami and catastrophic systems failure at a Japanese nuclear power plant continues to unfold, the tourism industry in both Asia and the United States could be damaged.

"This is a huge tourism story that has obviously flown under the radar because of the human element," said economist Jonathan Galaviz, whose independent consulting firm advises gaming and hospitality companies.

"Japan is an important site for travel to and from Asia," Galaviz said. "There are concerns."

The Las Vegas Convention and Visitors Authority said roughly 100,000 Japanese tourists visited Las Vegas in 2009.

Lerner, in a research note to his firm's clients, said Japanese visitation to the United States has declined by 50 percent since 2004, according to figures supplied by the U.S. Department of Commerce. He equated the volume of visitation to Las Vegas from Japan to tourist numbers coming from various Midwestern U.S. cities.

Unlike visitors from other Asian markets, high-end play from Japanese gamblers is minimal, Lerner added.

Galaviz, who specializes in the Far East, said Japanese visitation to Las Vegas is much higher than reported by official statistics. Las Vegas does not have direct flights from Japan, so visitors arrive through San Francisco, Los Angeles, Seattle and New York.

Japanese tourists also combine visits to multiple destinations in one trip, such as seeing Disneyland, the Strip and the Golden Gate Bridge.

"As far as travelers from Asia go, Japanese are the most robust tourists," Galaviz said. "They don't come just to Las Vegas."

The impact of Japanese visitation to Las Vegas is seen in nongaming spending, such as shopping, dining and excursions to the Grand Canyon, Red Rock and other natural wonders.

Japanese enjoy gambling, but the activity is not ingrained culturally, like China.

"Pachinko is a multibillion-dollar industry in Japan," Galaviz said. "Pachinko is defacto gambling."

That visitor segment to Las Vegas, however, may soon disappear.

Japan is facing potential economic peril, stemming from hundreds of millions of dollars in damages associated with the earthquake and tsunami.

"With their country in dire straits, Japanese are going to stay home," Galaviz said.

Subsequently, poisonous radiation leaking from the damaged Fukushima Daiichi nuclear plant in Northern Japan, and its lingering presence, will keep tourists away from the country.

Tokyo, which is 150 miles south of the plant, is the major gateway for airline travel into Asia. U.S.-based air carriers such as Delta and United Airlines operate large hubs in Tokyo. Hysteria surrounding the nuclear disaster could force travelers to find other routes into Asia, such as through Seoul, South Korea and Hong Kong.

Japan had been looking for ways to revive tourism, including casino development. It's been speculated the country would copy the successful Singapore model. The island nation licensed two integrated resorts with a casino element to spur visitation. Tourism jumped 20 percent in 2010 and may grow another 30 percent by 2015.

Recovery from the disaster might speed up Japan's casino development plans, slow the process down or scrap the idea all together.

"The radiation issues could impact some of the coastal areas for a long time," Galaviz said.

Wells Fargo Securities gaming analyst Carlo Santarelli said Italy turned to casinos following an earthquake in 2009.

"While we don't care to speculate on how these events will impact the process in Japan, we do believe investors may come to the conclusion that the need to raise funds for Japan will have more urgency post these tragic events," he said.

Howard Stutz's Inside Gaming column appears Sundays. He can be reached at hstutz@reviewjournal.com or
702-477-3871. He blogs at lvrj.com/blogs/stutz.