Sin stocks, the wisdom goes, are a smart buy when times get tough. Investors have long flocked to companies offering indulgences such as alcohol, tobacco, and gambling during broader downturns, betting that such habit-forming products are relatively recession-proof.

But for the last of these categories, "that's obviously not the case any more," said Howard Blank, vice-president of media and entertainment at Great Canadian Gaming Corp., a Vancouver-based casino operator.

Casinos in Canada and the United States are, with a few notable exceptions, getting hammered.

On the Las Vegas strip, home to iconic casinos like the Bellagio and Caesars Palace, gambling revenue dropped by about 3 per cent year on year in June, to $486-million (U.S.), and is expected to keep falling, according to the Nevada Gaming Commission. And at the beginning of August, Deutsche Bank AG suddenly found itself in the gambling business after foreclosing on the $3.5-billion Cosmopolitan Resort & Casino, when developer Ian Bruce Eichner defaulted on a $760-million loan.

In Atlantic City, N.J., the July take was down almost 7 per cent compared with last summer, to $438.7-million, said the New Jersey Casino Control Commission.

Unsurprisingly, some American gambling stocks are through the floor. MGM Mirage, the owner of New York-New York and The Bellagio in Las Vegas has seen its share price drop to $31.30 this week from $81.60 at the beginning of the year. Shares in Las Vegas Sands Corp., owner of The Venetian, have lost almost half their value in the same period, plummeting to $50.93 from $100.32.

Closer to home, big casinos have not fared much better. Revenue at Ontario's three major casinos, in Windsor, Niagara Falls, and Orillia, which are owned by the provincial government, has declined about 4 per cent, or $62-million, since last year.

Joseph Weinert, senior vice-president of Spectrum Gaming Group, an analysis firm, said the sector is "getting rocked by a confluence of economic conditions" that have firmly disproved the theory that "the gaming industry was resistant to recessions."

The primary difference from past downturns, he said, is fuel prices, which have "really put a damper" on the large, destination casinos, which rely heavily on drive-in traffic. That's compounded in remote Las Vegas by soaring airline ticket prices. At the city's McCarran International Airport, June traffic fell 7 per cent over 2007.

The high price of fuel, however, isn't necessarily bad news for all casino operators. At Ontario's smaller casinos - in places such as Brantford, Gananoque, and Sudbury, aggregate revenue is actually up 4 per cent over last year, although visitor numbers have declined slightly.

Great Canadian, which operates small casinos in British Columbia and Nova Scotia, reported strong second-quarter results this week, with revenue up 4 per cent, and earnings before interest, taxes, depreciation and amortization (EBITDA) up 3 per cent, over the same quarter last year.

Gary Thomson, a spokesman for privately owned Harrah's Entertainment Inc., which runs the Caesars casinos in Las Vegas and Atlantic City as well as a network of dozens of smaller properties in the American hinterland, said that "people are not travelling to destination resorts," but still spending some of their gambling dollars closer to home, offering the company some shelter. But it was not enough. Revenue at Harrah's was still down 3.7 per cent in the second quarter compared with 2007, and EBITDA declined 11.1 per cent.

The big American casino operators are looking farther afield to improve sagging performance while they wait out tough conditions at home.

Las Vegas Sands, MGM, and high-end Wynn Resorts Ltd. (which has so far seen its share price decline only slightly in 2008, to $104.70 from $109.38) have all bet heavily on the Chinese gambling hub of Macau, opening Vegas-sized resort casinos.

Mr. Weinert called operations in the former Portuguese colony, where the gambling market grew by 48 per cent in the second quarter, "a licence to print money," although there are no sure bets, even there. New visa restrictions for visitors to Macau take full effect this month, and could make the good times roll more slowly.