The capital markets meltdown and plunging economy have conspired to kill the most prolific casino hotel expansion ever. Struggling with liquidity concerns and plummeting earnings, gaming and lodging companies are halting projects midway through construction and are suspending design and other pre-development work on others still on the drawing board.

Through mid-November, casino-hotel developers canceled 21 projects in the U.S., reports Portsmouth, N.H.-based Lodging Econometrics, a global hotel research firm. There are still 93 casino hotels containing some 51,400 rooms in the construction pipeline. Of those projects, 38 are under construction. Developers plan to start building another 15 casino hotels in the next 12 months.

But experts anticipate that more projects will drop out of the pipeline as the economy continues to deteriorate and financing remains virtually nonexistent. “There's no new development going on anywhere,” says Eugene Christiansen, chairman of New York-based Christiansen Capital Advisors, a gaming consultant and management firm. “With few exceptions, the only projects underway are ones where they threw the switch before the credit markets paused.”

Luck sours in Las Vegas

While casino hotel developers have reined in construction across the country, a third of the 21 stoppages have occurred in Las Vegas. Long considered recession-proof, Sin City nevertheless has witnessed waning tourism.

In September, the number of visitors dropped 10% from a year earlier to roughly 2.9 million, according to the Las Vegas Convention and Visitors Authority. Over that same time period, the average daily rate fell 21% to $112.58.

The Travel Industry Association, a Portland, Ore.-based trade organization, predicts that business travel nationwide will drop 3.7% this year and 2.7% next year. Leisure travel is expected to remain stable this year and fall 1.3% in 2009.

“The wave of casino hotel cancellations started out as a capital markets problem when lending shut down beginning last year,” says Patrick Ford, president of Lodging Econometrics. “Consumers and businesses have really ratcheted back spending, which has brought about a decline in occupancies and room rates.”

Among the more notable casino hotel cancellations, Boyd Gaming of Las Vegas suspended construction of its $4.8 billion Echelon casino resort late last summer. Echelon was the company's first project on the Las Vegas Strip. Plans call for it to span 87 acres and include nearly 5,000 rooms.

Executives with Boyd Gaming, which owns 16 gaming properties in six states, originally hoped to resume construction in 2009. But by the end of the third quarter, they had abandoned those aspirations. The company's net income of $8.7 million in the third quarter was down 73% from a year ago. Boyd Gaming blamed hurricanes that shut down two Louisiana casinos and the economy.

Boyd Gaming is now considering alternatives at Echelon, including shrinking the development, changing the capital structure or adding partners, CEO Keith Smith told analysts during the company's latest conference call. But he added that the company remained committed to building a presence on the Strip.