The Proverbial House’s Edge; The house always win in the end By May 1, 2013 at 12:20 am Lately, I have been thinking about some numbers in gaming; and casino gambling is all about numbers, the dollars wagered, won and lost and probability of each expressed numerically. Every casino game is designed to pay less than true odds. The difference between what the casino pays on each wager and the true odds creates the house advantage and that results in the truism: the house always wins. From an operational standpoint, it is just that simple; if the game is conducted fairly and according to the rules of play the house always wins in the long run. Of course, that long-run thing can get tricky and sometimes the long-run can be a long time. But if the casino bosses are patient and have a big enough bankroll to sustain the short term loses they win. That is the in the simple and theoretical sense; in reality, it is more complicated and complex than that. In the real world, an operator needs a place for the game (in Las Vegas that alone can cost billions of dollars), dealers, cards, dice and slot machines, carpets, lights, heat, bartenders, cocktail waitresses, security guards, accountants and bunch of other things and people. Given initial investment and expenses necessary for taking a bet, winning a bet does not translate directly into making a profit. Still even with all of those expenses a reasonably competent operator can make a profit, or could until the industry reached its current point of market penetration, or in some cases saturation. They still can, if they take enough bets and manage those expenses. Because the house has an edge on every bet, it is important to take as many bets as possible if you are going to make profit after paying the fixed expenses – the best way to do that is have access to as many customers as possible. Take the racino in New York City for example. It has access to all of the 8.3 million people that live in the city and the metro area which has 19 million people. The racino currently only has slot machines, but those machines generate over $50 million a month, $71.2 million in March, in gross gaming revenue – the revenue before all of the expenses have been paid. Those slot machines generate more revenue than any other slot machines in the country, a good foundation for making a profit. Resorts World Casino generated a record $71.2 million in revenue during March, pumping $31.3 million into the state’s coffers. The revenue easily eclipsed the state’s previous high for a racetrack casino, a $59.8 million mark set by the same racino in July.. Glenn Blain, New York Daily News, 4-8-13 Somewhere to the west of New York City is Cincinnati, Ohio; the metro Cincinnati population is only about 1/3 of New York City so it is no surprise that its new casino, the Horseshoe, generated less than Resort’s $70 million; the Horseshoe produced $21 million in gaming revenue in its first month. The Horseshoe might have produced more, but it shares its customers with other casinos in the state and in neighboring states – still that $21 million is a good start. And it is probably still enough to turn a profit. Regulators say Ohio’s newest casino raked in $21 million in revenue during its first month of operation…the report represents just under a full month of operation. The state’s three other casinos in Toledo, Cleveland and Columbus each topped $20 million in the first full month. Cleveland’s first-month revenues in June were the largest at $26.1 million. Monday’s revenue report also showed that the casinos in Toledo, Cleveland and Columbus saw increases in revenue from their February numbers. Statewide, casino revenues jumped from $55.5 million in February to $84.3 million in March. Amanda Lee Myers, Associated Press, 4-8-13 Still further west, in Chicago is the Rivers Casino. Like the Horseshoe, Rivers has some competition, but it is just a little bit closer to the city’s 2.7 million people and most of the metro area’s 9.5 million. That little bit closer makes a big difference, Rivers generated $38 million in March, that is 25 percent of the casino revenue in Illinois – the other nine casinos divided the remaining $101 million; Rivers brings in considerably more than the second place casino. Until Rivers came along the casinos in Illinois were doing fine, but now the are struggling to turn a profit; Rivers is riding high with the help of its competitors customers. Rivers Casino raked in more than $38 million in March, and the state’s top-grossing gaming venue cashed in approximately 10 percent more in adjusted gross receipts compared with the same month last year…The state’s newest casino generated $38,149,689 in adjusted gross receipts in March which was more than $3 million over last year…admissions slid slightly to 325,848, compared with March 2012 when 339,911 passed through Rivers Casino’s turnstiles… The Grand Victoria brought in $19,661,810 in March.[ The state’s 10 casinos generated $149.1 million – up 2 percent] Christopher Brinckerhoff, Des Plaines Patch, 4-29-13 Those numbers, the gross gaming revenue numbers and population numbers are beginning to give us a clear picture of the dynamics of the casino industry. It is a picture that we did not have before casino gaming reached its current level of market penetration. Resorts, Horseshoe and Rivers are relatively new and each has had a dramatic impact on existing casinos. They bested their competitors by moving into the heart of a major metropolitan area. That move guaranteed them the biggest slice of pie in the region. It also guaranteed that existing casinos lost revenue in some proportion to what the new casinos gained – maybe not dollar for dollar, but in a recognizable and quantifiable way. Three casinos in Southeast Indiana took a 21 percent hit last month after downtown Horseshoe Casino Cincinnati opened for business March 4. The region’s three riverboats raked in $47.6 million – $12.6 million less than in March 2012 when then collected $60.2 million in revenue. Alexander Coolidge, Cincinnati Enquirer, 4-9-13 Connecticut’s casinos reported the take from slot machines was down again in March compared with the same month in 2012 – the 15th straight month of year-over-year revenue declines. [Resorts opened 27th of October, 2011] Foxwoods Resort Casino reported slot revenue of $49.6 million in March, down 5.7 percent…called the slots’ handle, was $595.2 million, down 6.7 percent. At Mohegan Sun in Uncasville, slot revenue of $58.68 million was down 1 percent from March 2012. Mohegan’s handle was $700.7 million, down 1 percent. Matthew Sturdevant, Hartford Courant, 4-15-13 It is pretty easy principle to grasp, a bigger city with more people means more gambling dollars; and the closest casino to those people reaps the highest rewards. It may be easy to grasp, but it took 60 years for the gaming industry to reach this point of understanding. In 2013, we are starting to see clearly the true dynamics of commercial gambling. Finally we are no longer confused by the mystic of Las Vegas. Las Vegas is unique, it is truly a destination resort with a worldwide appeal. For years, regulators, analysts and operators have used Las Vegas as a model, predicting that the casinos they might propose would draw in customers from far and wide as the casinos on the Strip do. It is not true, those casinos will draw people who live close-by or ones farther away who have no other options. Electronic or virtual table games at the Resorts World Aqueduct racino in Queens are vastly outperforming live table games at top casinos in Atlantic City, Connecticut, Pennsylvania and Ohio. Aqueduct’s electronic games generate $3,943 in “net win” casino revenues per table per day. Live table games at Mohegan Sun in Connecticut grab $2,831 per table per day, and those at the Borgata in Atlantic City haul in $2,774. The Sands in Pennsylvania yields $2,861, and the Horseshoe casino in Ohio rakes in $2,293. Carl Campanile, New York Post, 4-15-13 Maryland Live officials often tout the Hanover facility’s standing as the highest-grossing casino in the Mid-Atlantic when only slots revenue is taken into account. In fact, the casino has been generating 25 percent more slots revenue than the second-place casino, Parx in Philadelphia. Maryland Live is situated amid some of the country’s wealthiest counties, and faces only far-flung competition: Hollywood Casino in Charles Town, W.Va., is 75 minutes away, while the much smaller Hollywood Casino in Perryville is an hour up Interstate 95… Maryland Live, with more than 4,000 slots, generates more than $300 per day, per machine…Maryland Live’s is on pace to bring in $450 million in its first full year; Casino slots revenues, February 2013: 1. Maryland Live, Maryland $38,335,309; 2. PARX, Pennsylvania $30,469,656; 3. Borgata, New Jersey $26,078,047; 4. Rivers, Pennsylvania $24,444,403; 5. Sands Bethlehem Pennsylvania $23,537,900; 6. Harrah’s Chester, Pennsylvania$20,360,153. Chris Korman, Baltimore Sun, 4-16-13 Every casino city or location place other than Las Vegas is a regional market with a market radius of 5 to 50 miles; unless there is another casino within that radius. In that case the casino closest to the people wins the game, think of it as the house’s advantage. Or we might call it the home field advantage; and that is a concept to bare in mind with the growth of online gambling.