Bets are off--casinos feel economic pinch

By Chris Reiter and Deena Beasley

NEW YORK/LOS ANGELES (Reuters) - Casinos, generally seen as recession-proof, are beginning to feel the pain of the slowing U.S. economy.

The gambling industry has expanded rapidly in recent years, as more U.S. states allowed casinos and existing gaming parlors expanded. Casino gambling revenue, the amount lost by players, doubled between 1995 and 2006 to $32 billion, according to the American Gaming Association.

But with the U.S. economy slowing, there are signs that Americans, especially those who frequent local casinos, are not in a betting mood.

"Competitive pressures in several markets do not appear likely to lessen in the near term," Oppenheimer analyst David Katz said in a report on Wednesday.

Harrah's Entertainment Inc, the world's largest casino company, and Boyd Gaming Corp (BYD.N: Quote, Profile, Research, Stock Buzz) both posted weaker quarterly earnings on Wednesday and both described the economic environment as "challenging."

Their weaker earnings come a day after Pinnacle Entertainment (PNK.N: Quote, Profile, Research, Stock Buzz), which operates casinos in regional U.S. markets, posted a wider fourth-quarter loss, due mainly to costs related to opening a new casino. The company said progress on other projects hinged on access to credit financing improving.

Harrah's, which operates Las Vegas Strip resorts like Caesars Palace and the Flamingo, posted a fourth-quarter loss, burdened by impairment charges and losses at its properties in Illinois and Indiana.

Gary Loveman, Harrah's chief executive, said on a conference call that results at regional casinos were "mixed," while in Las Vegas "the gaming business has held up well, but room rates are off a bit."