Casino Win Rate
Gambling is good business, or at least a profitable one. According to the American Gaming Association, in 2012 the 464 commercial casinos in the U.S. served 76.1 million patrons and grossed $37.34 billion.
Each year gaming revenues in the U.S. yield more profits than the theatrical movie industry ($10.9 billion) and the recorded music industry ($7 billion) combined. Even the $22.5 billion combined revenue of the four major U.S. sports leagues is dwarfed by earnings from the commercial casinos industry.
Australian casino operator The Star Entertainment Group (SGR) saw its fiscal H1 profits cut in half after reporting its lowest VIP gambling win rate in over a decade. On Thursday, SGR reported. Many online casino operators are aware of the potential for losing money while giving out bonuses. As such, there is often a minimum wagering requirement for cashing out. Some casinos will limit the payout in case of a win. Also, they may restrict players from playing certain games, often those games with a low house advantage.
Gambling is such good business that despite reported negative impacts — such as increased poverty and unemployment, higher crime rates, and decreased property value in nearby neighborhoods — the state of Illinois early this year passed a law to allow slot machines in all establishments that sell alcohol.
Gambling is not just common, it's also accepted. Despite the fact that for an estimated 4 percent of the population gambling represents a problematic and even pathological addiction, 85 percent of Americans feel that gambling is either perfectly acceptable for themselves or if not themselves for others in a country where more than 20 states now allow some form of commercial casino.
It's not too hard to see why casino lobbyists believe casinos make a positive contribution to the communities in which they operate.
It's far less easy to understand why so many Americans enjoy gambling even though it tends to result in the loss of money.
You lose, the casino wins
As a general rule, we tend to repeat behavior that produces desirable results and avoid behaviors that result in loss. We repeat jokes that people laughed at, choose jobs that we enjoy and that pay the most money, and avoid behaviors that produce fines. Following this logic, one would expect a gambler to only play as long as they are winning and then cut their losses when they begin to lose.
Yet gambling appears to operate differently; players play faster after losses and bet persistently regardless of the percentage of payback, magnitude of return, or the lack of winning entirely. So what encourages gambling behavior if losing occurs more frequently, and payouts do not exceed buy-ins?
One explanation is that gamblers poorly judge the actual probability of winning, even as their pile of tokens and coins dwindles before them.
Some examples of this phenomenon can easily be seen in the language of gamblers. 'My luck is going to turn,' 'A win is coming,' or 'I am on a hot streak,' are all statements that speak to an over-confidence in one's ability to predict functionally random events.
Gamblers will often say these things after an unusual series of outcomes, for example, ten straight losses on red at roulette. The gambler may then proceed to bet more on red, in the false hope that the next spin is more likely to come up red due to the overall probability of the game (50 percent chance of red).
This flawed logic is called 'The Gambler's Fallacy.' It stems from a misunderstanding of how probabilities are assessed; in fact the outcome of the previous spin of the roulette wheel has no influence on the outcome of the next spin. The probability of red remains stubbornly fixed at 50 percent.
Missed it by that much
Another example of how gamblers misjudge losing outcomes can be seen when individuals respond to losses that are similar in appearance to a win. Receiving two out of three symbols necessary to win on a slot machine is a loss but players often respond to this 'near miss' with excitement, increased betting and more persistent play.
Winning and almost winning are such similar events to many people that they respond in the same way to both. People pause, for example, for longer after a win than a loss. This is known as a 'post-reinforcement pause.' People often pause for longer after a near-miss.
It's no accident near misses are pretty common on slot machines.Mark/Flickr, CC BY-SA
Winning and almost winning are so alike in gamblers' brains that research on the dopamine-transmitting pathways of anticipation and reward show remarkably similar activation patterns for a near-miss and a win.
Near-miss effects are not limited to outcomes that look similar to win. Outcomes that are closer to a win in a more abstract sense also cause a similar response.
For instance, the near-miss effect has been demonstrated in games where 'nearly winning' might relate to scoring a number that is close to a winning number, such as in blackjack.
Near-miss outcomes are not the only form of almost winning that contributes to the behavioral confusion faced by gamblers. Modern slot machines also present a myriad of features that are designed to confuse outcomes.
Slot confusion
One feature present in almost every modern slot machine is the partial win or 'loss disguised as a win.'
Since slot machines have gone from the traditional 3-reel 1-line slot machine to the modern 5-reel video slot, often with 25 or more winning lines, near-miss outcomes have become almost unidentifiable from other losing outcomes.
By encouraging individuals to play on more than one line, casinos have created a scenario where players are awarded a win on almost every spin.
Despite the increased frequency of winning, the proportion of money returned is often far less than the entire bet, such as winning 10 cents on a 50 cent bet. This 80 percent loss is accompanied by the same sounds on the machine as a real win and occupies the same area of the screen that wins are reported in.
Since noticing near-misses on modern slot machines is difficult, game makers have incorporated other game features such as free-spin symbols, mini-games, and progressive awards, which create new near miss situations while often not guaranteeing any increased value of a win themselves.
For example, special symbols might be placed on the reels that provide 10 free spins whenever three appear anywhere within the game screen. These symbols will often make a special sound, such as a loud thud when they land; and if two symbols land, many games will begin to play fast tempo music, display flashing lights around the remaining reels, and accelerate the rate of spin to enhance the saliency of the event.
When you win these sorts of outcomes you feel as though you have won a jackpot; after all, 10 free spins is 10 times the chances to win big money right? The reality is that those 10 free spins do not change the already small probability of winning on any given spin and are still likely to result in a loss of money. For many games, features such as this have entirely replaced standard jackpots.
These features share one important characteristic: they allow the casinos the ability to provide more outcomes that feel like a win while not increasing the actual payout. The effect of these features is so significant that in 1989 the Nevada Gaming Commission banned algorithms that purposefully increased the prevalence of near-miss outcomes. Of course, this only applied to the intentional increasing of near misses when a loss is already determined, i.e. artificially producing a near miss instead of what the reels would have normally landed on.
Unfortunately, these laws do not preclude the intentional design of reel layouts that, without additional manipulation, produce frequent near misses and losses disguised as wins. These laws also do not apply to the newer game features which either highlight the near miss, such as accelerating reels, or create entirely new topographies of outcomes, as is the case with free-spins or mini-games.
While the question of how to best manage artificial manipulations of near misses may be a topic of future regulatory discussion, the decision to play games with these illusions will ultimately fall upon the end user.
As long as you are willing to expose yourself to the game in the first place, the casino need only sit back and wait. And with increasing availability of casinos across the U.S., they won't need to wait long.
The authors do not work for, consult to, own shares in or receive funding from any company or organisation that would benefit from this article. They also have no relevant affiliations.
More from The Conversation US...
The word “comp” is short for “complimentary.” In the gambling industry, comps are free stuff you get from casinos and other gambling companies to incentivize you to gamble with them. Generally, you get more comps based on how much you’re gambling.
When discussing comps, it helps to understand the expression “action.” Being “in action” just means that you have money riding on a bet of any kind.
But “action” also refers to the amount of money you have wagered. It can refer to the amount of money you wager over a period of time, too.
For example, if you’re playing slot machines and betting $1 every time you spin the reels, you’re putting $1 into action every time you spin. If you make 600 spins per hour, then you’ve put $600/hour into action.
Based on the odds behind the game and the payout odds, casinos can estimate the long-term expected losses based on your hourly action. They can then calculate a percentage of that to return to you in the form of comps.
When you’re dealing with traditional land casinos, if you bring much action to the casino at all, you’ll be assigned a casino host. This is the person at the casino responsible for keeping you happy so that you don’t take your action elsewhere. Comps are the main tool a host uses to keep you happy.
Of course, not everyone has a host. You can also get comps almost automatically by signing up for the players’ club and inserting the card into the machines as you play. Pit bosses also have the authority to reward you with comps when you’re playing table games. In fact, the simplest and most common type of comp is the free drink. As long as you look like you’re playing a slot machine, a cocktail waitress will bring you free drinks all night. (She’ll be more attentive if you tip her well, though.)
This post explains the different kinds of gambling comps and what they mean to you as a gambler.
The Different Kinds of Comps Available
Comps are awarded in a hierarchy based on your value to the casino. The most basic comp is the free drink. Casinos have multiple motivations for gving you free drinks.
For one thing, a gambler who’s inebriated has lower inhibitions. He’s more likely to gamble more money longer. And the #1 factor affecting how much profit a casino makes from a gambler is the amount of time he spends playing.
That’s because casino games have an innate mathematical edge. This edge doesn’t have a huge effect in the short term, because in the short term, anything can happen. But the law of large numbers suggests that the more bets you make, the closer your actual results become to the theoretical results.
Here’s an example:
The mathematical expectation at blackjack is for you to lose roughly 1% of each bet you make on average over time. (This assumes you’re using basic strategy while you play.) That means the casino expects you to lose an average of $1 every time you place a $100 bet.
In the short run, that’s impossible. If you place a single bet at blackjack—which is the ultimate example of the short term—it’s impossible to lose $1 on a single $100 bet. You’ll lose $100, win $100, or win $150 most of the time. If you double down or split, you might win more–$200, $300, or even $400 wins are possible. You might also face a “push,” which is a tie. Your bet is returned, but you don’t win any money… that’s a loss or win of $0.
None of those outcomes come even close to a loss of $1.
That $1 loss is an average over time–over a huge number of bets. If you make 10,000 bets at $100 each, you’re likely to lose close to $10,000. Even with that many bets, it’s possible to deviate wildly from the mathematical expectation.
If you’re the casino, you want to get into the large number range as soon and as often as possible. This ensures your profit. The way to do this is to get players to make lots of bets for lots of money.
And providing free alcohol helps with that. In fact, it’s a small price to pay for the extra action they see.
You can expect more than just free drinks, though. Free food is a small step up from free drinks. At a casino of any respectable size, you’ll find multiple restaurants on site. The 2nd most common type of comp is free food at one of the on-site restaurants.
The free food comp is usually awarded in the form of a coupon. You might have to put more money into action than you think to be awarded free food, but it sometimes depends on the generosity of the pit boss. It can also depend on what kind of rapport you have with the casino staff.
I once got into a spirited conversation with the cardroom manager at Planet Hollywood Casino in Las Vegas. They had a hot dog joint there called Pinks—I guess it’s popular on the West Coast. Anyway, I was trying to convince the cardroom manager that he should buy everyone at the table hot dogs.
Apparently, at the limits I play, you don’t get free hot dogs.
If you qualify for free food and free drinks, you’re not far from qualifying for free lodging, too. Most casinos are also hotels, but even casinos which don’t have attached hotels will get you lodging nearby—if you’re gambling enough.
You can also get upgraded to a nicer room by virtue of the action you bring the casino. (You might also be able to get upgraded to a suite or a nicer room by tipping the desk person $20 when you check in, but that’s not really related to comps.)
In fact, these 3 comps—room, food, and beverage—are so common that they have an abbreviation for it. Bettors who qualify for all 3 are called “RFB” customers.
Notice something about all these comps, too. You’re getting comps that seem to have a certain value. A drink is probably $5 at the bar at a casino. A meal is usually $15 or $20. A room can vary wildly in price, but is often at least $50, $100, or more.
But those are the retail prices for these comps. The casino doesn’t pay $5 when they mix you a drink. Their cost for that shot of Crown on the rocks is probably closer to $1. The meal at the buffet that the public pays $15 for probably only cost the restaurant $5 to make.
And a hotel room that’s sitting empty generates no money for the casino at all, so they might as well give it away. In fact, the Winstar in Oklahoma has such low occupancy rates during the week that almost anybody can get a comped room. You don’t have to bring them much action at all, really.
Those are just the standard comps for regular down-to-earth players like you and me. High rollers, or “whales,” as the industry calls them, are eligible for all kinds of free stuff. Many of these comps are customized based on what the host knows about the gambler’s interests.
It’s not unusual for a casino to pay for airfare and transportation to and from the airport for a big player. In fact, that’s expected for any high roller.
But entertainment is another popular comp. If you like golf, shows, or sporting events, you can usually get a “free” ride from the casino to go to those outings, too.
Rebates are common, too, even if you’re not a high roller. For low rollers, rebates are often awarded in the form of coupons or free play. High rollers can receive cash or a check as part of their rebate.
The comps program is part of the casino’s marketing plan. Most casinos make heavy use of direct mail to entice gamblers to return to their casino and play. If you’re a member of the players’ club at the casino, you’ll inevitably receive standard comps in the mail.
Based on your interests and betting tendencies, you’ll also get free offers for other perks in the mail, too.
Even low rollers can get free transport to and from the casino. I see buses taking groups of gamblers to the Winstar all the time. Many of the people riding those buses pay nothing for the ride, although they lose enough money at the casino to more than make up for that cost.
But calling these comps “free” is inaccurate. You pay for these comps in the form of gambling losses, even when you’re winning.
How Gambling Companies Do the Math That Makes Their Comps Program Profitable
Other than the free drinks and occasional free coupons sent in the mail, most casinos award comps based on your actual time spent playing. They account for how many bets per hour you make and at what amount when deciding how much to award you and when.
But comps aren’t based on how much you actually lose. Instead, casinos calculate your comps based on your theoretical expected loss. This is a function of the house edge for the games you’re playing, the time you spend playing, and how many bets per hour you’re making.
Over the long run—and casinos serve thousands of customers per day—the casino has an excellent idea of how much your play is worth. If you’re on a winning streak, you still get comps based on your action. The calculations are based on your expected losses, not your actual losses.
Here’s how the casino calculates this:
You play slots exclusively, but you bet $3 per spin. You’re an average player, so you’re making 600 spins per hour. That’s $1800 per hour you’re putting into action.
If the casino knows you like the machines with a 95% payback percentage, they figure that in the long run they’re going to make 5% of your hourly action—or $90 per hour. (5% of $1800 is $90.)
If you spend an average of 4 hours a day playing slots, the casino assumes you’re going to lose $360 a day while you’re there.
They then award you comps based on a percentage of that $360 per day.
How Can You Best Take Advantage of the Casinos’ Comps Programs?
If you’ve heard of the books The Frugal Gambler by Jean Scott or Comp City by Max Rubin, you probably already know a little bit about becoming a “comp hustler” or “comp wizard.” These are players who learn to maximize the amount of comps they receive in exchange for their action.
One way to maximize the comps you get for the money you lose is to play a game with a tiny house edge. If you can play blackjack with perfect basic strategy, you can get the edge in the game down to 0.5%. The average player loses about 4% at blackjack, because the average player doesn’t know perfect basic strategy.
When the casinos calculate your expected loss at the blackjack table, they assume you’re an average player losing 3% or 4%. Since you’re only expected to lose 0.5%, you’re getting comps based on a theoretical loss that’s actually overstated by a factor of between 5 and 10.
Another way to maximize the comps you get is to bet big when you’re being rated by the dealer and the pit boss. “Rating” players is how they estimate your hourly action. Fooling the pit boss is harder than you think.
I was playing blackjack in Kansas City for between $10 and $100 per hand, depending on the count. They rated me as a $10/hand player, even though I was betting more than that on a lot of hands. I complained, but I’m sure they realized I was counting. The last thing they were going to do is rate me higher when they knew I was counting cards.
(I was also a little drunk, so I didn’t notice immediately when they started shuffling the deck after every hand. Counting cards does you no good if the dealers shuffle after every hand.)
Taking lots of breaks can result in fewer hands per hour than the casino estimates, which reduces your expected hourly loss by a lot. If you’re at a blackjack table dealing 60 hands per hour, you could realistically only play 45 hands per hour by taking frequent bathroom breaks.
What effect does that have on your expected hourly loss?
It reduces it by another 25% or so. Instead of losing $10/hour, you might only be losing $7.50/hour. The casino might be estimating that you’ll be losing an average of $40/hour and base your comps on that.
Expert video poker play can also result in smaller expected losses per hour. In fact, with certain video poker games, the combinations of comps with the tiny house edge can result in an overall positive expected value for the player. That’s an advantage gambling technique, but it’s not one you can realistically make a living at. The edge is too small, and games with those pay tables are usually only available for small stakes. You’d be lucky to make minimum wage playing video poker for comps.
How much of your expected losses can you expect back in comps?
It varies, but the casino calculates that they can afford to give you back 40% of your expected loss in the form of comps. You’ll more often see 20% through the players’ program if you’re a low roller, but you can even increase that amount by taking advantage of coupons and “happy hour” type promotions where you get 2X or 3X your standard comp rate.
How Do Online Casino Bonuses Work? Isn’t That Another Form of Comp?
Online casinos can’t serve you drinks or free food. They can’t really provide you with a free room for the night, either. And since you’re playing from home, they’re unlikely to offer you free show tickets, either.
Instead, online casinos offer you sign up bonuses and ongoing deposit bonuses. These amount to free amounts of money awarded to your account just for making a deposit—either as a new player or as an existing player.
Bonus hustlers used to take advantage of these offers to generate almost guaranteed profits. A friend of mine once bought a jukebox by taking advantage of casino bonuses at a dozen different casinos and cashing out his winnings.
Online casinos have responded to this by instituting wagering requirements that make it almost mathematically impossible to come out ahead when taking advantage of a bonus. They also watch player behavior closely, and if that behavior resembles that of known bonus hustlers, the casino might refuse to pay you based on “bonus abuse.”
The concept of wagering requirement seems more complicated than it is. Here’s how it works:
You sign up at a casino that offers you a 200% matching bonus on your first deposit of $1000. You deposit $1000, input your bonus code, and the casino adds $2000 to your balance.
You now have $3000 to play with.
But the casino requires you to wager this amount 35 times before cashing out. They also restrict your play to slot machines. You can play blackjack, too, but only 10% of your blackjack wagers count toward fulfilling your wagering requirements.
And you can’t cash out before fulfilling these wagering requirements.
Let’s assume you want to play the slots. A good ballpark estimate for the house edge on a slot machine game is 6%, but who knows? (The casino does, but you don’t.)
To wager $3000 35 times means you must put $105,000 into action.
Online Casino Win Rate
The expected loss on that much action is 6% multiplied by $105,000, which is $6300.
Since you started with $3000, the mathematical expectation is for you to go broke before fulfilling your wagering requirements.
On the other hand, if you play blackjack, the house edge is only 0.5%. But since the casino only counts 10% of those wagers toward your wagering requirements, you need to make $1,050,000 in wagers before cashing out.
0.5% of $1,050,000 is still over $5000.
Again, that’s more than your starting bankroll, so it’s unlikely that you’ll have money left over after fulfilling your wagering requirement.
You can, of course, get lucky and win more than you’re expected to. I claimed a bonus at an online casino once for $1000, and I hit a $6000 jackpot on my 5th spin of the reels on a slot machine game.
I was able to fulfill my wagering requirements and still have $2000 in profits.
But that’s because I got lucky—not because I took advantage of a mathematical edge given me by the bonus.
In fact, had I eschewed the signup bonus, I could have cashed out the entire $6000. I wouldn’t have been required to finish fulfilling the wagering requirements.
Conclusion
Casino Success Rate
Casino and gambling comps are really cool, but they’re also a tool that casinos use to get you to lose more money than you’d otherwise lose. Understanding how those comps work is the first step in making sure you don’t get taken advantage of.
Some people learn how to take advantage of the comps system in such a way that they gamble practically for free. It’s even theoretically possible to come out ahead because of the comps program. That’s too much work for most people, but it’s nice to know that it’s possible.
The bottom line about comps is that the casino doesn’t have your best interest at heart. They want your money.