Gas or Gamble? Economy Forces Some to Choose

Carlos Bueno and his wife, Mayra, drove three times last year from their home in Houston to a casino in Lake Charles, La., but they won't be making the two-hour drive this summer.

"Gas prices are the main reason," says the 32-year-old father of three children who works for a utility company and also is canceling the family's annual vacation to the Dominican Republic. "The economy is harsh right now, and the little money saved for vacation will have to be spent on fuel for our vehicle."

Bueno says he spent about $1,500 on his casino trips last year, and it costs about $70 a week to fill the gas tank of his Nissan Altima.

The pressures of a weak economy — concerns about job security and rising prices for gas, food, home heating oil and other goods and services — are causing many gamblers to cancel or reduce the number of casino trips. Those who go are gambling less money than in the past: At the traditional gambling Meccas of Atlantic City and Las Vegas, and in other states, casino revenue is down. Employees are being laid off, and there's concern about future growth.

It's quite a jolt for a gaming industry that has experienced unprecedented growth. Only one state had casinos in 1970 with revenue of $540 million. Now there are casinos in 37 states, with revenue reaching nearly $58 billion in 2006.

"People have been saying for years that the gaming industry is recession-proof, but that's not a valid statement," says Frank Fahrenkopf, CEO of the American Gaming Association, which represents casinos and manufacturers. "Anything that hurts consumer spending will have an impact on us."

Gaming operators are also being hurt by public smoking bans that discourage smokers from going to casinos or cause them to spend less time gambling there. And some casinos are facing increased competition from new competitors in nearby states.

"Everybody is in at least a little bit of pain," says Robert LaFleur, a gaming/lodging analyst for Susquehanna Financial Group.

•In Las Vegas, several gaming companies report that first-quarter revenue declined. Occupancy at hotels and motels dropped slightly, and room rates have fallen.

•In Atlantic City, casino revenue last year fell for the first time since the first casino opened in 1978. Revenue dropped 5.7% last year and is down 6.4% in the first quarter this year, says Linda Kassekert, chair of the New Jersey Casino Control Commission.

•At Mohegan Sun, the Native American casino in Connecticut that brings in more revenue than any other casino in the USA, slots revenue during this year's first three months was down compared with the same months last year.

•In Colorado, the state gaming division said last month that revenue at casinos took its biggest hit since a statewide smoking ban was implemented in January. March revenue fell 10%, compared with March 2007.

•A smoking ban also affected gaming operators in Illinois, where business declined for the first two months of 2008. The economy and bad winter weather were other contributing factors.

Bill Lerner, senior gaming and lodging analyst at Deutsche Bank Securities, says the weak economy has affected gaming industry revenue and profits more than anticipated. Las Vegas gaming and hotel revenues "are seemingly worsening," and regional casino markets "are faring a bit worse," he says.

No casino "has been immune," but upscale ones such as Wynn, wynn Bellagio and the Venetian in Las Vegas have been less affected, Lerner says.

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