Outlook For Bigger Casinos No Mirage Industry’s High Rollers Will Thrive

By the end of this year, it seemed appropriate that the most powerful company in one of the wealthiest industries in the country gambling was called Mirage Resorts.

After gambling grew rapidly in the early 1990s, the industry’s success started to vaporize in 1995. The spread of casinos to new towns screeched to a halt because popular resistance intensified, Congress threatened new regulations, gambling stocks got clobbered and Harrah’s Jazz Co., which was building a big new casino in New Orleans, filed for Chapter 11 bankruptcy in November. The stock market seemed like the only place left for an honest wager.

But those who study the proclivities of gamblers, at the slots as well as in the market, say the odds for 1996 look good.

In a way, analysts see the political environment - in which some conservative politicians have called for a halt to the spread of casinos - as a blessing in disguise.

The growth of gambling in the last five years has created enormous competition along the Mississippi River, on Native American tribal lands and in small towns across the country. The costs of running casinos have risen sharply and management at the companies has been stretched thin.

A lull in the opening of new jurisdictions will allow the better-managed companies to improve existing operations, particularly in Las Vegas and Atlantic City, N.J.

“The healthy part is that this will be the time to regroup,” said Lee Isgur, an analyst at Jeffries & Co. “In the major markets - Las Vegas, Atlantic City and Mississippi - there are few regulations and a good operating environment. They won’t be affected by a rollback.”

Salomon Brothers estimates that gambling revenues at casinos will rise to $18 billion next year, from $16.1 billion in 1995 and $14.1 billion in 1994.

But most analysts predict that because of the peculiar economics of the business, the more moderate growth will help only the biggest companies, not the dozens of smaller gambling concerns that have gone public in recent years. Gamblers need a new thrill, and so the companies will have to erect ever larger casinos, even at the old gambling sites, to increase the crowds.

Only the wealthiest companies can make such hefty investments. In other words, the iron rule of gambling will hold: the house, in the form of the biggest casino operations, will win.

“Nineteen ninety-six,” said Scott M. Renner, an analyst at Salomon Brothers, “is going to be the year when the rich get richer.”