Casinos gamble they can weather downturn

Atlantic City properties are more clearly feeling the pinch of increased competition from new Pennsylvania slot parlors and tight credit markets.

The city's gambling halls suffered through a 10-month decline in revenue until a much welcomed 1.5 percent uptick in February. Pinnacle Entertainment recently announced it was considering scraping a $2 billion megacasino project if credit markets don't improve.

Christiansen said such news has precedent. In 1991, when the U.S. was facing a similar mix of economic woes, the casino industry felt the blow. After outpacing increases in personal income for most of the 1980s, the growth in gross gambling revenue fell behind that year.

This time around experts and executives are talking about the industry's resiliency, rather than immunity, to economic downturns.

"Historically, gaming has been extremely resilient, very durable and held up better than almost any other sector during recessions," MGM Mirage president and chief operative officer Jim Murren said recently.

The industry, particularly in Las Vegas, pointed to several factors to bolster the claim.

Compared with other top U.S. tourist destinations, major gambling hubs — Las Vegas and Atlantic City — are still affordable to the bargain traveler.

D'Arrigo said MGM Mirage has seen an increase in comparison shopping for room rates with visitors opting for companies' mid-market properties over high-end luxury resorts.

Meanwhile, the high-end resorts may increasingly fill up with international travelers, thanks to a U.S. dollar so weak that a Las Vegas Strip room at the tony Bellagio can seem like a bargain for tourists from Europe and Asia. Roughly 13 percent of all visitors to Las Vegas are from outside the U.S. and that number is expected to rise.

But Eadington notes Las Vegas' fortunes are often closely tied to the development of new properties that create buzz and draw repeat visitors. In the past, when gambling revenue in the city has bested economic growth it's been in the wake of a building boom.

It's too soon to know whether the first new resort hotel on the Strip in three years, Las Vegas Sands' $1.9 billion Palazzo which began opening in late December, will be that sort of driver.

Early signs don't look promising. The number of visitors to Las Vegas fell slightly in January compared with year-ago numbers. Daily drive-in traffic has slowed compared with last winter, according to the Las Vegas Convention and Visitors Authority.

Many analysts are looking further down the road to the late 2009 opening of the CityCenter project and its 6,300-rooms for the rebound.

"There are a lot of arguments that this should be a softer market in '08 that it was in '07," Eadington said.

Robbie Hamilton, a regular at the Hooters and Orleans hotel-casinos, makes one such argument. The 27-year-old student at the University of Nevada, Las Vegas typically spends at least $40 a week betting on games, but he expects that amount to fall as gas prices rise.

"Gas and gambling kind of come out of the same pocket," he said. "I'll have to have less action because my gas tank needs it."

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