It's no secret that the Great Recession has put an enormous dent on the income statements of gaming companies worldwide. Once upon a time, the entertainment industry was a "first in, first out" position when a recession hit; this time around it's more like "first in, last out." Hotels have seen their occupancy rates plummet, while the average gambling budget has sunk from $627 in 2005 to just $482 today. In and around the strip, unemployment hangs wearily at 14.7% while Nevada just saw the 44th consecutive month of having the most U.S. housing foreclosures.

Needless to say, things are not looking too dazzling in the city of bright lights.

Not returning anytime soon
Yet somehow despite all the aforementioned obstacles, companies like Las Vegas Sands (NYSE: LVS), MGM (NYSE: MGM), and Wynn Resorts (Nasdaq: WYNN) have all managed to see 25%-plus gains in their share price so far this year. And even with all the currents of competition in Macau, the world's hottest gambling hub, Hong Kong-based Melco Crown Entertainment (Nasdaq: MPEL) has managed a solid 60% spike in 2010.

There's no doubt that investors have had some reason to celebrate; however, this does not disguise the fact that most gaming stocks have tremendously high valuations and are crippled with debt. Las Vegas Sands debt/equity ratio is 165%, MGM's is 458%, and Wynn's is 105%. Capital-intensive projects have to be paid for years in advance with the anticipation that demand awaits and consumer spending will be adequate. But who's to say that once the recession ends (I know, I know -- it's already over), gaming will see the spark that we're accustomed to?

Recently, Keith Foley, a senior vice president at Moody's Investors Service, said "although gaming dropped with this economy, don't automatically assume that when the economy comes back people will start gaming at the same level."

This industry, for sure, is not for the faint of heart.

One silver lining?
Las Vegas Sands is currently trading for 32 times next year's earnings; it's certainly not cheap, but it's also expected to grow by 85% over the next five years. Unlike heavily indebted MGM, Las Vegas Sands is managing to deleverage, as it announced in August that it would be paying down more than $1 billion in outstanding debt.

Unlike competitor Boyd Gaming (NYSE: BYD), which has no international exposure and is seeing both revenues and earnings decline, Las Vegas Sands has multiple complexes in Macau and operates one of the two big facilities in newly minted Singapore. Neither Wynn nor MGM has broken into the Singapore market, which gives Las Vegas Sands a great first mover advantage.

In fact, Las Vegas Sands was recently upgraded by KeyBanc Capital Markets, partly in reference to its increasingly successful operations in Singapore. Some industry insiders are saying that Singapore could be the most profitable gaming market in the world, as it has lax regulations and low taxes. Already, earnings for Las Vegas Sands rival Genting Singapore have exceeded second-quarter market expectations, illustrating the massive opportunity there is on the Asian state-island. Gaming equipment providers like Shuffle Master (Nasdaq: SHFL) and International Game Technology (NYSE: IGT) are already banking on growth in Singapore, as both are expecting new installments to boost revenue. By some figures, tourist arrivals in Singapore could pop from 11.5 million in 2010 to 17 million by 2015 -- an ambitious target but one that could easily be met with help from a government eager for tax revenues and a diversified economy.

It's no secret that the appetite for gambling is greater in Asia than it is outside of Asia; if companies like Las Vegas Sands can continue to grow their empires, pay down debt, and control their costs, we could just see a bright future after all -- at least for this company.