Gamblers Return to Las Vegas, But for How Long?

One could argue that lately you had better odds winning in Las Vegas than Wall Street. Sin City is coming back, but its economy remains fragile.

Friends playing in casino
B2M Productions | Digital Vision | Getty Images
Friends playing in casino

The Convention and Visitors Authority says gaming revenues on the Strip grew 28 percent in May, the latest month it has numbers. Public gaming companies have reported improving business at their Vegas properties, in some cases faster than expected. Lower gas prices are helping bring in carloads of gamblers from California.

But economic uncertainty is a dark cloud threatening to overwhelm any silver lining.

Citigroup cut MGM Resorts International's price target Tuesday on worries that consumers will pull back on discretionary spending.

"Business is improving," says Gary Loveman of Caesars Entertainment, which reported a narrower loss Tuesday. "We're certainly not at 2007 levels," Loveman tells CNBC, "We're probably working our way back to 2004, 2005."

He worries about the impact of the S&P downgrade of U.S. debt.

"I think borrowing money will be harder generally, and we are not a highly rated borrower."

While Loveman believes Fed Chairman Ben Bernanke has done everything he can, "the president, on the other hand, could do better."

Loveman says he is closely watching what may happen to consumers. His greatest fear? "That we have another substantial downturn in economic activity that causes our customers to feel that they cannot entertain themselves in a fashion that they are gradually restoring."

Up the Strip billionaire Phil Ruffin was watching the market tumble Monday from his offices at Treasure Island.

"We lost $8 million in the market today," he said at 9am local time.

Ruffin owns a lot of Bank of America stock, plus the S&P downgrade "hurt us badly on our fixed income."

As for Vegas, Ruffin says revenues at Treasure Island are up 28 percent this year—"We thought it was going to be maybe 5%."

He's looking to buy another casino in another state this year (he wouldn't reveal where), adding, "We're not going to buy any more stocks."

Ruffin is concerned about the federal debt, so much so he'd be willing to pay 1%-2% more in taxes, but only in exchange for spending cuts, especially in Medicare. Hear him explain the sort of fraud he says needs to be cut out of the system.

Finally, for both men, one economic "stimulus" they support would be the legalization of online gaming in the U.S.

Gary Loveman, whose company hosts the World Series of Poker, says it could mean billions to Caesars Entertainment. "We think Americans ought to be able to buy online services from American companies."