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How Does Casinos Make Money From Poker



Peter Chi
  1. How Does Make Money
  2. Do Casinos Make Money From Poker
  3. How Does A Casino Make Money From Poker

A Poker Pro tells you how much money you can make playing online poker in 2020, what your expectations are and how online poker has changed.

Peter Chi is an Assistant Professor of Statistics at California Polytechnic State University (Cal Poly) in San Luis Obispo, CA. While his professional interests lie mainly in biomedical research and genetics, he is an avid poker player and enjoys looking at applications of statistics to poker and gambling in general. He also enjoys teaching Probability Theory at Cal Poly by using numerous examples from poker and other games of chance. https://tiderace.tistory.com/8.

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As the 2014 World Series of Poker winds down with the Main Event right around the corner, it is hard to imagine that the game of poker might not be very profitable to a casino. Players have come from over 70 countries from across the world, to fill the Rio All-Suite Hotel and Casino for more than a month. Surrounding poker rooms have also benefitted from the additional traffic due to the sheer number of poker players currently in Las Vegas.

However, this is not the norm for the entire year. At many Las Vegas casinos, their poker room may not actually be profitable in and of itself, even with the uptick during the WSOP months. Indeed, the fact is that casinos, in Las Vegas or otherwise, tend to make the vast majority of their revenue through their slot machines and table games. These two types of games generally make more money for the casino than everything else combined.

So, if poker is unprofitable or not as profitable to a casino as its other games, then this leads us to the following question: does poker drive business to the real money slot machines and table games? This question actually has many possible facets to it, including the effect of the existence of poker in general, online poker in particular, and most specifically, the poker room at an individual casino and how its presence may or may not draw slot machine and table game traffic there. From a business standpoint, casinos certainly may be interested in this question, as the answer can help them decide whether to support online poker legislation, and/or whether to have a poker room in their property.

Anecdotally, many poker players would say that poker definitely does drive traffic to other games: a quick perusal of the online poker forums would reveal a number of posts from poker players stating that they never would have placed a bet on one of these house games if it were not for the fact that they played poker first, or that when they go to a casino primarily to play poker, they might also play some of the other games as well. Speaking for myself, I can say that I certainly have spent way more time at the blackjack and craps tables than I would if I had not first built a gambling bankroll through poker.

But, how about some actual data? Many casinos likely have done at least some sort of analysis on this question internally; however, for the sake of unbiased, scientifically rigorous answers, it would be preferable to turn to peer-reviewed research published in academic journals. A recent study published in the UNLV Gaming Research and Review Journal is actually the first instance of exactly that.

This study specifically examined the question of whether there is an association between an individual casino’s poker room traffic and its slot machine and table game revenue. Currently, a common assumption is that even if a poker room is not very profitable in and of itself, it still may be useful to have as it would in fact attract people to their property, and specifically to their slot machines and table games. However, the conclusions from this study were that there is actually no evidence that such a relationship exists.

Performed by Dr. Anthony Lucas, Professor of Hotel Administration at UNLV, this study examined data obtained from three Las Vegas resorts, which contained daily revenue statistics over the course of almost a year. On these data, Dr. Lucas executed six statistical tests: for each of the three properties, he tested whether its poker room rake was associated with its slot machine revenue, and also with its table game revenue. In only one of these six tests, he found statistically significant evidence in favor of an association. Thus, his overall conclusion was that five out of his six results question the notion that poker rooms drive business to the slot and table games, and that casinos might want to reconsider having a poker room if it is not profitable on its own. For those of us who like to play poker in a casino, this may come as dismal news. However, I would like to offer a different interpretation of these results.

The first reason for this is because of the distinction between statistical significance and meaningful effect sizes. To illustrate this, consider a poker player whose ability we would like to evaluate — perhaps if we are interested in staking him. So, to answer this question, it would be good to collect some data to see if he is truly a winning player in the long run.

To this end, imagine that we follow him for a few sessions, in which he plays for 30 hours and comes back with $3,000 in profit. Thus, with these data, we would have observed some evidence that he is a winning player. But, how strong is it? Those of us who have examined our own win rates rigorously will know that this is not very strong evidence, because of the enormous variance in poker. Indeed, if we were to do a formal statistical test, we would inevitably conclude from these data that we did not have statistically significant evidence in support of the notion that he is a winning player (to have “statistically significant evidence” that he is a winning player essentially means that the result we observed is sufficiently unlikely to have happened if the truth is that he is not a winning player). With only 30 hours of play in our records, it is not too unlikely that he simply went on a small heater to win $3,000 in that time, even if he is actually a losing or breakeven player in reality.

On the other hand, what if you were forced to “guess” his true win rate? You might object and say that we simply do not have enough data to do this, but suppose, hypothetically, that I give you no choice. What would your guess be? Well, a reasonable guess would just be straight from the data that we do have, or $100/hour. Of course, due to the high level of variability, it is more likely that this estimate is wrong than right, or even close. However, if these are the only data that we have, then this is the best that we can do.

Thus, in this example, our estimate of $100/hour is our “effect size,” or how much we would guess that this player wins per hour on average based on the data. Although we would not find statistically significant evidence to suggest that he is a winning player from a formal statistical test, this estimate of $100/hour would still be our best guess at his true win rate given the data that we have.

Now, let us look at the results from Dr. Lucas’ study. Recall that he did not find a statistically significant result in five out of six tests that he performed. However, what were the effect sizes? From his analysis, his model e.g. for Resort 1 shows that a 10 percent increase in poker room traffic is associated with an expected increase in profits from slot machines by approximately $965 in any given day (see addendum for details). While this result was not statistically significant, it seems to be a substantial amount of real dollars. If you are thinking that $965 does not sound like very much money for a casino, notice that this is $965 per day, and resulting from merely a 10 percent increase in poker room traffic.

Also, this figure of $965 accounts for the fact that a casino can only expect to keep approximately 7.5 percent of the money that goes into a slot machine (or “coin-in”), since players sometimes win; the associated increase in the raw coin-in from a 10 percent increase in poker room traffic is thus much greater, at just over $12,800 (or $965 divided by 0.075). Additionally, this particular poker room in Resort 1 only has eight tables, as stated in the original study. Thus, it is clear that a 10 percent increase can actually be no more than eight added people, on average over the course of a day. Considering this, I would say that a $965 increase in slot machine profits resulting from this is rather remarkable (although as a brief aside, this figure does not account for any possible operating expenses associated with running a slot machine).

Just like with our poker player, we may not have obtained a statistically significant result, but I would suggest that we do not ignore the real dollars that have been gained. In other words, if $100/hour is an amount that our poker player considers to be worth playing for, it would make little sense to conclude that he should not be playing, from the data that we have. Clearly, we just need to observe this player for longer, to obtain more data. Likewise, from Resort 1, the important question is this: does the casino consider $965 per day from a 10 percent increase in poker room traffic to be an effect size that would be worth caring about? If so, then we would not want to conclude that our evidence questions whether the casino should have a poker room; we would instead want to collect more data to see if this initial estimate stands or not.

In the addendum, I also examine each of the other five results. In each case, we have varying levels of associations in terms of real dollars, with some being greater than others. However, this leads me to my second reason for interpreting these results much less negatively than the original study does: for every single one of the six statistical tests, the estimated association between poker room rake and the outcome variable (either slot machine or table game revenue) is positive. That is, albeit being statistically significant in only one of the six tests, Dr. Lucas estimates from the data that an increase in poker room rake is associated with an increase in the outcome variable, in all six cases.

This observation is one that should not be ignored. The reason is simple: if there truly is no association between poker room traffic and each outcome variable, then it is equally likely that we should observe a negative association as it is that we should observe a positive association, due to chance and variability in the process. Thus, the chance that we would observe positive associations in all six tests, if the truth is that there really is no association, would be the same as flipping a coin six times and having it land on heads each time. Since this is fairly unlikely, then this provides some evidence that there actually is an association between poker room traffic and revenue from the other games (in statistics, this procedure is known as the “sign test”).

I want to point out that there were, however, many positive aspects to the study. It is an important question to examine through a rigorous, unbiased study that could be published in a peer-reviewed journal, so I was very pleased to see that one had been done. I feel that it was well performed overall, and in particular, the author is careful to note that his findings should not be extrapolated beyond the three resorts that he specifically studied. I also do not mean to suggest that his negative conclusions were necessarily “wrong.” The statistical methodology that he performed was largely correct, and he used standard acceptable criteria to assess statistical significance from his models. I am simply offering a different interpretation of the results obtained in this study. However, I believe that the points I have raised here are important to consider before any managerial decisions would be made by a casino, based on this study or any other like it.

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Sometime in the distant future, maybe the year 3225 or so, when historians are studying ancient Western society (or what will be ancient Western society by the time), they will marvel at one particular human enterprise perhaps more than any other: the epic, money-sucking efficiency of casinos.

The way casinos have turned the act of separating us from our money into such a marvel of precision and ingenuity is every bit as awe-inspiring as the Egyptian pyramids.

“I could give you a guaranteed method to go into a casino and come out with a small fortune: go in there with a large one,” laughs Sal Piacente, a former casino dealer and security staffer who now runs UniverSal Game Protection Development, a company that trains casino staff members. He and other casino insiders know that casinos exist to not only take our money, but to keep as much of theirs as possible — both by offering games that are tilted in the house’s favor and by having air-tight security measures designed to catch thieves and cheaters.

How do casinos make money on poker rooms

So Yahoo Travel talked to Sal and other casino experts with decades of experience in the industry to get some dirty little secrets of casinos. Not only are these secrets juicy — knowing them might help you keep a little bit more of your money during your next casino trip. But probably just a little bit.

1. Some games are way more of a ripoff than others — even by casino standards.

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It’s common knowledge that just about every game you’ll find in a casino is tilted in the house’s favor. But Sal says some games are worse than others. “A lot of these games are designed so that the player can’t win,” says Sal. “That’s why the players have to realize they need to stay away from certain games.”

The top of his list: so-called 'carnival games,” which are table games other than the traditional casino fare such as blackjack, craps, and baccarat. “Three-card poker, Let it Ride, Caribbean Stud — all these games have high house advantages where the casino has a strong edge,” Sal says. “People like these games because of the bigger payouts: They get paid 9-to-1, 8-to-1, 250-to-1. But you’re going to lose a lot more than you’re going to win in those games.”

Poker

Sal has particular disdain for Double Exposure Blackjack, which he considers a particular ripoff, thanks to strict rules on when you can double down and the fact that if you tie with the dealer without a blackjack, the dealer wins. “That’s over a 9 percent house advantage,” Sal says. “The dealer should be wearing a [robber’s] mask when he deals that game!”

2. Some games are “good” games — or at least better.

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“There are games tourists can play that they have better chances at,” says Derk Boss, a licensed Nevada private investigator and casino security surveillance expert. For one, he points to traditional blackjack. “You can reduce the house advantages by being a skilled player or studying the game,” he says. He also likes video poker. “That’s a game where there are strategies you can study,” he says. “It doesn’t guarantee you’re going to win, but it gives you a much better chance. It’s going to reduce the house advantage and put things a little bit more in your favor.”

3. Everything you see is designed to keep you in the casino.

Make

A couple of gamblers drinking a glass of champagne (iStock)

Anyone who’s spent time in a casino knows they are designed to make sure you’ll lose track of the time (and of the money you’re probably losing). That means no windows and no clocks. “Two in the morning is the exact same thing as two in the afternoon,” says Sal. Some casinos have gone to desperate, and sexy, measures to keep you there and gambling. “They have stripper poles, they have party pits,” Sal says. “You go to Vegas right now, it looks like a gentlemen’s club. You see girls dancing on the poles. It keeps the guys at the table.”

And don’t be fooled by the “free” food and drink offers you might get. Those have the same purpose. “I love when people say, ‘Sal, they gave me a $20 buffet for free!’” Sal says, laughing. “You sat at a blackjack table, you lost $200 and they gave you a $20 buffet.” That’s what you all a good return on investment.

4. Security is probably watching you… for your entire stay.

Security camera (iStock)

If you’re in a casino, you can assume you’re being watched. “Casinos are very well-covered with surveillance cameras,” says Derk. “Once someone arrives at our property, if we needed to put together their movements over their entire stay, we could easily do so. We would be able to track their movements on the property just about wherever they went — except for like the bathroom and into their hotel room.”

Casinos generally use surveillance to look out for criminals who prey on tourists and the cheaters. And, yes, Derk says they can actually zoom in on your cards if they wanted to. So somewhere in the casino, in a locked, high-tech room, a security guard you’ll never see might be telling you to “hit.”

5. And if you win big, they’re definitely watching you.

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You can bet on it: if you hit a big jackpot, or get on a major hot streak, security has its eyes on you. “When someone is winning a lot of money, they’re always going to get checked by us,” Derk says. “They’re not going to know it, of course. Say a guy wins $100,000 on a blackjack game. I just want to make sure that it’s legal, that he didn’t cheat, that he didn’t count cards or something like that.”

Derk says in that instance, security will do a player evaluation: They will review his/her play on video for signs of cheating or card counting. Then they’ll check out the player. “We have a database of bad guys that are out there and what kind of scams they pull, so we’re gonna check for that,” Derk says.

Slot winners get the same scrutiny. “Say someone wins $500,000 on a slot machine jackpot,” says Derk. “We’re going to review it but we’re just going to make sure everything’s okay — that they didn’t open the machine or do something to it.”

But don’t worry: Security isn’t out to harass winners. “As long as it’s legitimate, we’re okay and we move on,” Derk says. “We want people to win money or else they won’t play.”

6. If you’re cheating, security can tell — they know all the signs.

Gambling and cheating. Ace of hearts from the sleeve (iStock)

How Does Make Money

Poker players know all about “tells,” behaviors that give away a certain action or intention. Card counters and cheaters have tells, too, and security is on the lookout for all of them. “We look for cheating tells,” says Derk. “Those are just behaviors that, when you’re trained to spot them, they stand out a little bit.” While Derk didn’t want to give away too many of these tells, he did spill a few of them:

--Two guys sitting close together — Derk says two guys playing blackjack at the same table rarely sit close together, especially when there are empty seats. “Most guys just don’t sit like that,” he says. “Women will, most guys will not.” Derk says when you do see that, it’s a potential sign that the pair may be secretly switching cards. “They’re trying to make one strong hand — which, believe me, happens,” he says. “They sit close together and have their arms folded after they’re handed their cards. We suspect that [indicates] they’re switching cards, so that’ll get our attention.”

--Strange or extreme money management — Say someone is betting $100 for three or four hands, then from out of nowhere, bets $10,000. “That to us is an indicator that maybe they’re receiving information,” says Derk. “Maybe they can see the hole card, maybe they’re card counting, maybe they’re tracking a clump of cards. Best way to win at roulette machine. They’re waiting for a certain condition to arrive in the game, so they’re going to play minimally until that change happens and once that happens they’ll hit.” Derk says that’s a major red flag.

--“Rubber-necking” — A dead giveaway of a slot machine saboteur. “If somebody is cheating a slot machine, invariably, they’ll sit at it and they don’t really have to look at the machine because they know what they’re going to cause it to do,” says Derk. “So they’re usually looking around, from one side to the other, looking for security. That’s what we call 'rubber-necking.’ That’s a big tell for us because [normal] slot players don’t do that — they play their machine and they don’t want to be bothered. So if you look around like that, that’s going to get out attention and we’ll stop to figure out why.

7. One place the casino probably isn’t watching you too closely: the poker rooms.

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“Believe it or not, we don’t spend a whole lot of time on poker at all,” says Derk. For one, since poker players play against each other, and not the house, the casino doesn’t have much money at stake. The poker players themselves, do, however, and that’s the second reason why casino security staffers don’t need to monitor poker rooms that closely.

“The players really police themselves,” Derk says. “When you get people who play poker all the time, they know when someone is screwing off or trying to take advantage of something and they’ll say something. They pay attention to it better than anybody.”

8. Dealers would rather you bet your tips for them.

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It’s a basic bit of casino etiquette, but tip your dealers. Slots hit it rich. “Dealers make minimum wage or in some places might make a little bit more than minimum wage,” says Sal. “A dealer’s salary is all tips.”

Do Casinos Make Money From Poker

Sal’s wife and business partner, Dee — a former casino dealer herself — agrees. But she says that despite common casino policy, most dealers would prefer that, instead of handing them a chip or two as a tip, players just put the tip up as a bet. “If a player asks you if you want to bet it or if you just want to take the tip, you’re supposed to just take the tip,” Dee says. “But most of us want to bet it because you have chance of doubling your money.”

How Does A Casino Make Money From Poker

9. The dealers feel bad for you.

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When someone loses their shirt, you can expect some silent pity, but not much else. “I can feel sorry for the guy, but I can’t say, 'Sir, you’ve lost enough, you’d better walk away,’” Sal says. “It’s not my job. There’s nothing I can do.”

Still, Sal admits dealers do find themselves following the players’ success, or lack thereof. “If a guy’s tipping, you don’t want him to lose,” he says. “If a guy’s not tipping, you’re rooting for him to lose!”

10. Yes, dealers sometimes steal.

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There is no Federal law that makes playing poker online illegal. There is, however, a Federal law (UIGEA) that makes some financial transactions to and from an online poker site illegal - this law applies to the site itself, not the players. Jun 14, 2017  Gambling is legal for those who are 21 years of age or older at Eagle Pass in Texas (Kickapoo Lucky Eagle Casino). People in Texas can also legally participate in the Texas Lottery or make pari-mutuel wagers on greyhound and horse racing. Raffles, charitable bingo, and pull-tab bets are also considered legal in Texas. Free texas holdem poker games.

What’s the most common case of casino malfeasance Sal has dealt with? Hint: It’s not 11 tech-savvy scammers led by George Clooney. “This is not as Hollywood as you would think, but honestly, it’s dealers just reaching in, grabbing a chip and shoving it in their pocket,” Sal says. “Nothing sophisticated.” That’s the reason behind all those strange rituals you may see dealers do. “Everything the dealers do was put in place for a reason,” Sal says. For example, when a dealer leaves a table, they have to “clear their hands.” “They clap their hands and turn their hands palm up and palm down for the camera to show, 'I’m not stealing nothing,’” says Sal.

If a dealer is stealing, Sal says there are many different ways security will handle it, depending on where the casino is. “In Vegas, they’ll arrest you right at a table,” he says. “They’ll actually handcuff and walk you right out so everybody gets to see you. They call it 'The Walk of Shame.’ Some places, they don’t want the negative publicity. They’d rather do it off the game. So maybe they’ll call you to the manager’s office and arrest you there.”

Sure, it’s no secret that in a casino, the game is rigged, numerically, at least. “The longer you’re there, the more the numbers are going to take over and the casino’s going to make money,” says Dee. “Let’s be realistic; they’re in it to make money.” But even though we know the score, that doesn’t take away from how much fun casinos are. “People come there to have a good time,” says Dee. “So if you’re having a good time along the way and you win a few bucks or you lose a few bucks, great.”

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