The economic downturn has slowed the growth of Indian gaming in the U.S., but the industry is faring better than traditional casinos, according to a report released Thursday.

Revenues climbed by 1.5 percent last year — the smallest increase since a federal law regulating the industry was passed in 1988, according to the Indian Gaming Industry Report by economist Alan Meister.

That was down from a growth rate of 5 percent in 2007 and an average rate of about 15 percent from 2001 through 2006.

The $26.8 billion industry outperformed the commercial casino sector, where revenue dropped about 7 percent to $30 billion in 2008, according to Meister's report.

Experts say Indian casinos have the advantage of being dispersed across the nation, making them more easily accessible than casinos in Las Vegas and Atlantic City.

"Indian gaming is in people's backyards," said David Schwartz, director of the Center for Gaming Research at the University of Nevada, Las Vegas. "A person from Southern California is not going to Vegas, but to a California Indian casino where they can spend a couple of hours. That's what you're seeing.

Despite declines in the number of visitors and the amount of money they spent in some locations, the industry as a whole was helped by expansions, new casinos and new games, Meister said.

"Some states were down while others were up," he said during a telephone interview.

In 2008, tribes operated 442 casinos in 28 states, up from 429 the previous year.

Much of the revenue increase came from Oklahoma, which added nine new gambling halls. That state's $2.9 billion in revenue allowed it to surpass Connecticut to become the second largest Indian gaming state behind California.

Another state posting significant revenue growth was Florida, where the report said the Seminole Tribe added different machines and table games such as blackjack to its existing casinos.

California was among about nine states, including Connecticut and Minnesota, that saw revenues fall although it continued to lead the nation in Indian gaming revenue at $7.3 billion. California experienced a decline of nearly 6 percent from $7.8 billion in 2007.

"It's definitely been a challenging environment," said David Gutierrez, a spokesman for Red Hawk Casino in Placerville, Calif., which opened last year. "We're near Sacramento, so we have a lot of people with government jobs who have been furloughed."

Gamblers are still coming through the doors, but spending less, he said.

The Buffalo Thunder Resort & Casino in Santa Fe, N.M., which also opened in 2008, has seen a drop in out-of-town travelers, particularly business groups, said Allen Mosley, CEO of the Pueblo of Pojoaque, which manages the facility.

So Mosley said the tribe has refocused its marketing efforts on the local area.

"We've shown increases every quarter, although we're not where we projected we would be three years ago," he said.