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Booming Gambling Stocks May Face Dicey Future

"But in a town where too much is never enough, here comes the new Aladdin hotel-casino complex.

"…But the privately held resort, which will add 2,600 new rooms to an inventory that has already swollen by 12,000 in the past two years, may arrive just in time to catch the beginning of the end of the up cycle in the gambling business.

"… The city is still attracting enough tourists and gamblers to go around, even with the new Aladdin, analysts say.

"…Gambling revenue on the strip rose 9.5% in June to $353 million. For the year, revenue is up nearly 12% to almost $2.4 billion.

"…But some observers wonder if the industry is closing in on the end of a cycle, particularly if the economy runs out of gas. Although business held up fairly well during the last economic slump 10 years ago, jittery investors dumped casino shares.

"…Another threat to industry health is the expansion of Indian gambling in California.

"…There's also the specter of higher costs for Vegas operators. Nevada casinos currently pay a maximum state revenue tax of 6.25%, the lowest among 11 states with commercial casinos. A state senator is leading a move to raise it to 11.25%, but the industry is fighting it.

"…And then there's overexpansion. The Aladdin is the last big casino for at least three years, but at least five more major projects are in the works…"

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