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How Do Casinos Make Money?

North America leads the way for having the most casinos, which was 1,623 the last time someone counted in 2011. The U.S. casino gaming industry itself is huge, with a revenue in 2016 of $73.1 billion. There are far fewer casinos in the East, but Macau, China, is home to the biggest casino in the world in ‘The Venetian’. It’s mind boggling how big this place is.

Over 10,500,000 square feet (550,000 square feet for just the casino) you’ll find 4200 slots and gaming tables, 53 bars and restaurants, private rooms, butlers to follow you about, shops, gyms, 4 swimming pools, 3,000 guest-rooms, and of course canals running through the place. It’s actually owned by the USA’s Las Vegas Sands Corporation. How do they afford to ensconce you in such luxury? That’s what we’ll find out today, in this episode of the Infographics Show, How Do Casinos Make Money?

The simple answer to this question is they take your money. They do that by hoping you will gamble, because in the end, the house always wins. In 2015, CNN reported that some casinos weren’t doing as well as expected, only because fewer people were gambling and going to places such as Las Vegas just to have a good time. But let’s forget for now about all the cash you might spend on food, drinks, shows, rooms and whatever else is on offer and just concentrate on the gambling. The casino always has a statistical edge, otherwise you wouldn’t be gambling. This is called The House Edge.

If you look at something like a slot machine, while one person might win big and only place a small bet, the machine in the end has a rate of what it pays out. This is often a pay-out rate of about 90 percent. It will always keep some money for itself. It’s quite simple.

What is happening to our brains is less simple. It’s proven that gamblers play faster when they’ve been losing, because they are expecting that one big win to come. What these slot machines do to make us keep playing is keep offering us what are called “near misses”.

While it’s irrational, the player sees this as almost winning. They get a dopamine rush and play on. Science tells us that what happens in our brains with these near misses is almost the same as what happens when we actually win. It’s exciting after all, until it’s depressing, and your pockets are empty. We are also told that these machines are designed in a way to give small wins often and this makes the player feel as though they are winning.

Lights will flash during these wins, music will play, and the player ends up thinking something good has happened. The machine payouts are based on thousands if not millions of spins, so don’t go thinking just because some poor dude lost a fortune you will do any better. Conclusion: Slot machines like cell phones are made to addict you and they always get their percentage…if you haven’t hacked them that is, something that has happened numerous times in the past.

Let’s move on to roulette. Ok, so you’ve taken advantage of the free buffet and your inhibitions are not what they used to be after you were plied with those free drinks that the casino was hoping you’d take. So, all that money exchanged for chips goes into the drop box. This is called the drop. The casino has an edge on the players of 5.26 percent on the roulette table. There are even and odd numbers and black and red colors, but there is also a green 0 and sometimes another green 00.

As the casino always has this advantage, it will win. It doesn’t want to bankrupt you too quickly, though, so it takes its time. If you take that aforementioned percentage, it means that for every one million dollars bet, the casino will take about $50,000. It gets trickier, though. You might be thinking, ok, 5 percent loss, that’s not so bad. So, if you sit down with 100 bucks you will likely leave with about 95 if the law of averages come into effect.

Not at all. Let’s say you’re making $5 bets every spin of the wheel, and the wheel spins about 50 times an hour. That means in an hour, you bet $250. You didn’t lose every time of course.

After four hours, you bet around $1000. The casino takes 5 percent of all the money bet, meaning you didn’t lose $5 but $50. The more you play, the more you lose. Keep betting and you’ll have nothing eventually, and that is the way it has to go. You might get ahead and leave, and well done to you, but with those drinks around, and the dopamine highs you are getting, you stay. That’s what the casino hopes, anyway.

If you win big, get out, as fast as you can. The House Edge on roulette is pretty high, so while it’s fun, it’s maybe not the best game to play. The House Edge on slot machine is very, very high (about 17 percent), so you should stay away from them as well.

There’s a reason they were once known as “One armed bandits.” Kino is terrible too, for the gambler at least, with a house edge of 25 percent. We are told that your best chance of winning is playing Blackjack or Craps (0.8 percent house edge) and baccarat (1.06 percent house edge). If you learn the correct strategies to play these games – all of which are online and easy enough to follow – that will be the house edge. If you are not the brightest gambler out there and follow no strategy at all, the house edge increases commensurate to the brain cells functioning properly in your head. We should say that because of the house edge existing at all, in the end if you kept on playing, the casino will take everything.

But let’s talk about Blackjack. The House Edge with this game is only 0.5 percent, and aint that much better than 5 percent? The problem here though is that some players are just bad players, and that poor strategy as we just said can be costly. It often puts the house edge up at 2 to 3 percent, and that’s not uncommon.

So, know your strategy. With a good strategy and lady luck on your side, as well as a 0.5 percent house edge, playing Blackjack is a good bet. With Poker it’s a bit different of course.

In this case, the casino takes what is called a Rake. This is quite simple, in that the casino takes a percent of the pot, somewhere between five to twenty percent of the pot, with sometimes a cap on the amount. You might also just pay for your seat at the game, or pay by the hour or every 30 minutes. There are other more nefarious ways casinos make money, perhaps having beautiful women milling around which a lot of male players want to impress. Then as we said before, there is sometimes free alcohol.

It can’t be understated what a dozen gin and tonics does to a person’s strategy, while people just forget about the consequences of losing when they are in the midst of a Jack and Coke high. The casinos are even arranged at times so the exits aren’t easy to find, and even if you do spot the sign, there will be tables or something in your way before you get to that exit that might induce you to think you can win some cash back. And to top it off, many casinos won’t have any clocks around. This is to keep you focused on the game and not on the time. A former dealer writing online who once worked at Harrah’s at Lake Tahoe in Nevada also said he was trained to exploit the weaknesses in players, psychologically that is.

He wrote, “I chose to leave, because gaming exploits the negative characteristics of human nature to extract as much money from each customer as fast and as frequently as possible.”

Because, as we said at the start, fewer people are gambling and just going to places like Las Vegas for the experience, some casinos now charge a fortune for once free drinks. They also do things like hold conventions, charge more for food, rooms or even parking spaces. So, do you enjoy gambling? Do you find that you most often win or lose?

Share some of your experiences in the comments!

See you next time!