How Casinos Make Money?
Casinos are businesses, and it’s obvious their every intention is to make a profit. And they do it legally, unlike the general notion claiming casinos cheat players out of their money. One of the most common methods used by casinos involves an average payout lower than overall wagers. In this post, I try and explain a few common money-making strategies these businesses have in place.
- House Edge – Casinos have a statistical advantage in each bet and every game, called the house edge. And this probability qualifies casino games as gambling. Results are unknown, and the outcome can swing either way irrespective of who has an advantage.
Finally, if the casino wins, it holds on to the net dollars invested in the stake. The amount can be negative if players win a sum greater than what the casino holds. The hold percentage defines the casino’s edge vs. the drop.
For instance, if a slot machine earns $100 a day and returns $80, $20 is the casino’s share. However, the hold percentage depends on the total bets placed. If the minimum bet is $1 per 1000 spins, the machine wagers $1000 at the end of the day. Therefore, the casino’s hold percentage is $20/$1000 or 2%.
- The Handle – The Handle is the most important term for every iGaming operator regardless of the games being offered. In laymen’s terms, the Handle defines the entire amount wagered in a day. For a game like craps, the total bet on the table contributes to the Handle. The calculations don’t depend on whether bets are made in cash or chip, or if players win or lose.
Players commonly confuse the Handle with the Drop, which is the money exchanged for chips. For games like blackjack, the Drop is the total amount found inside the metal box attached to each table, including all bills and markers. In certain cases, however, the terms Handle and Drop can be interchanged.
What Factors Commonly Influence the Handle?
The most common influence is the time on the device. If players don’t show up, the Handle is insignificant even if the bets are large. The most effective way for casinos to maximize earnings is by increasing the house edge along with the average time on the device.
For example, a casino with over a thousand slots will only generate a profit with the machines in constant use. However, game space utilization and betting minimums at the table are equally critical factors. That’s why you’ll hardly ever find blackjack tables with $2 to $5 buy-ins even if players are interested in investing. At the same time, countless $25 tables lie vacant.
So, how do casinos make money? The answer is simple. By offering payouts lower than the odds of winning! While players might secure a huge payout in a short while, the casinos always win over extended periods. The disparity between the odds of winning and payouts is the house edge, which is like a tax that casinos charge players for every bet.
