The Hidden Costs of Freebie Comps

topics gambling seniors fixed income gambling industry casinos ...If you’ve been living under a rock, or been stuck on a remote island. Gambling is at a fever pitch. No, not that gooey-love-story chic flick. The fast paced world of gaming is growing outside of the box, and I don’t think we’ll ever get it back inside. I have had the pleasure of speaking with racing handicappers over the years and the million dollar question is “Do the tracks want us to lose our money so they can get rich?” Not so fast there Quick Draw. After all said and done, take in the whole story and decide for yourself.

Casinos have been around since the glory days of the Rat Pack in Vegas, and Atlantic City offered up the first volleys of junkets to get you fed, drinking, and gambling for days and then jet you back home with a significant weight loss. You don’t have to go very far these days, and within 40 miles of my home there are four casinos, two racinos, three race tracks, and the lottery. Oh, and toss in charitable bingo and church festivals who look to keep the coffers filled. Here’s an idea we could employ to stop civil wars, and terroristic warfare. Let’s drop mobile casinos complete with restaurants and top notch games of chance. I’ll bet dollars to donuts that its hard to shoot a gun while pulling the one-arm bandit, or filling your plate at the all-you-can-eat.

According to Al Moe gambling expert for About Home:

The most important influence on casino handle is what is referred to as “time on device.” Regardless of what is bet, if there are no players, there is no handle and no profit. Casinos maximize their income when they find ways to increase not just their house edge, but the average bet AND the amount of time each gaming device (table spot or slot machine) is in action.

As a business model, the overall handle is a product of capacity of use, game speed, and average bet. This is why all club comps are based on your average bet and the hours played, not on how much you win or lose!

A casino with 1000 slot machines is only successful if they are in constant use. However, the utilization of game space and betting minimums at table games can be deceiving. This is why it is rare to see a blackjack game with a low $2 or $5 minimum, even if players are wandering around wanting to play that amount while there are several $25 tables with no players.

This phenomenon is best explained by the math produced for expected win per hour at a blackjack table. With six players betting $2 per hand, a dealer can get out 375 hands to the players. The total wagers (excluding double downs and splits) will equal $750 and the house expects to win 2 percent, or $15. However, just a single player at a $25 table will produce $4,125 in bets per hour where the house expects to win 2 percent and a total of $82.

Obviously the $25 game will be dead at times, but that single player easily makes up the difference, and if all the tables have low limits and there are no seats available for the big better then the house is losing out.

So, some decisions at your local casino are made for player comfort to extend the amount of time played, and some decisions are made simply based on casino income, as with any business. The above example also probably illustrates pretty well why a $5 blackjack player can only expect to earn about 30-cents per hour in comp value from their play.

The casino expects the player to get 60 hands per hour, so their total bets per hour equals $120. Using the same 2 percent house edge, the casino will retain about $2.40 from their play. Giving back 30-cents equals a comp value of 12.5 percent, which is pretty good. Most casinos hold the line between 10 and 15 percent.

This takes me back to the movie where Bugsy Siegel brings back a sign from a Nevada gas station that has slot machines inside. It read, “You can play longer.” Translation, you’ll lose your shirt, but it will only be when your butt is getting numb from sitting on the seat.

One of my favorite beliefs of casino slot players is the 98% payback. Now, that is not 98% payback in the form of jackpots, but you’ll get a coin or two at an overall 98% rate. Just think, you wager $5 and get back 75-cents. They lived up to the bill, and you did get paid, but it was not in the form you had in mind.

According to Frank Legato of Casino Center: “Payback percentage” is one of the most misunderstood terms in the casino industry. Many players think it means how much of the money they put in a game that will come back to them in jackpots. Others think that the casino has a switch somewhere that officials can throw to lower the payback percentage on the machine they are playing, to cut down on winnings. Both of these assumptions are incorrect, and both are part of the circle of myth and misinformation that surrounds the slot machine. For the record, “payback percentage” refers to the portion of all wagers placed into a slot machine or group of slot machines that is returned to any and all players—not just you—who enter money into the machine or machines. In the case of the “Loosest Slots” issue, the payback percentages are based on actual statistics reported to regulatory agencies by the casinos. They represent the total amount of wagers placed in slot machines over a year that was returned to the players in the form of jackpots, segmented into various denominations.

Thoroughbred Racing, Harness Racing, Greyhound Racing, and Jai-Alai want you to win. Yes, you heard it correctly. They want you to win, and win big! Pari-mutuel wagering is set up a bit differently. Tracks are set up with a takeout rate. This fluctuates from state-to-state, and the exotic wagers have a different percentage than win, place, and show. In Ohio, the WPS percentage is 18%. That means there is 18 cents taken from every dollar wagered, and the rest is paid back to the players. No random numbers, lucky rolls, or hidden jackpots. The monies collected are split in half. 9 cents of every dollar goes to purse money for the horsemen, and the other 9 cents goes to the tracks for taxes, wagers, improvements, promotions, and salaries. That is a pretty slim margin, and now you know why tracks have needed the casino industry. Casinos offer glitz, glamour, and free comps. This allows racing to stay afloat in the meantime, and hopefully catch its breath.

According to Bill Burton, Casino Gambling Expert: Pari-mutuel betting is credited to Pierre Oller a French perfume shop keeper who in 1865 had the idea in to sell tickets on a horse race and keep all the proceeds in a common prize pool to be split amongst the winners. (Pari-mutuel means betting between ourselves) After the race was over Pierre would take a five percent handling charge and then distribute the rest to bettors based on the odds established by the bets made on each horse. Pierre set up his wagering system in the racing parks and by 1887 pari-mutuel wagering became the legalized form of betting in France.

Around 40 years later in 1927 after proposals led by Sir Winston Churchill, the English Parliament passed legislation establishing pari-mutuel wagering as the legal betting system at all tracks in the country. Around the same time pari-mutuel wagering was adopted at race track in the United States.
Around that time a young engineer name Henry Straus left a Maryland racetrack angry over the payoff he received during a race. He bet a horse with posted odds of 12-1 but only collected 4-1 on his winning ticket. At the time there was much corruption at track around the country as odds were calculated by hand. Straus along with some fellow engineers founded the American Totalisator company (AmTote) and invented an electro-mechanical device which would accurately calculate the odds of a race and assure an honest payout while displaying the odds on a lager electronic board. The first machine was installed at Pimlico race track in 1930.

Today the odds are calculated by faster computers and the tracks may take a slightly bigger percentage of the pool but pari-mutuel betting remains the same as it was over 100 years ago.

Time is of the essence. Racing has always allowed time in-between races, and you can catch your breath. I have always liked to relish a win and have a little time to decide which race I would play next. Time allows you to take it in and enjoy, and it is more of a cerebral game. I would like to think we have a little thought in our wagers. Whether you’re betting #5 in the 5th, the old grey nag, or the one who takes a dump on the track. You have time, and it can be on your side. You may decide to make a good wager a little later and grab a hot dog and a beer. Gab with some buddies and keep your head. The old saying of “bet with your head and not over it” echoes in the back of my noggin when I want to pick up the pace and follow the casino chase. The takeout alone allows you to see where the money is going and there is nothing random about how the track makes their money. – So, the next time you and the little lady want to spend the evening out enjoying a little “gaming.” – Think about betting the races. The beauty and pageantry is second to none, and I’ll bet you have never heard a player scream at the top of their lungs for two minutes straight at a slot machine. Unless they are begging for their kids college money back, and asking the machine for gas money for the ride home.