Casinos are associated with luxury and wealth, however, these establishments are functional businesses that need to make money to operate. What sets casinos apart from other businesses is that the clients are also attempting to make money, at the casino’s expense.
The question is thus: How do casinos convince clients to give up their money so that the casino can operate, while keeping clients coming back?
Where Casinos Make Their Money
Casinos have several income streams, but the most significant source of money is the gamblers on the casino floor. Online casinos, like FastSlots Casino, rely predominantly on platform users, along with ad revenue, to earn an income.
Physical casinos also earn additional revenue from restaurants, drink sales, entertainment events, shops, and hotels. This diversifies the casino’s revenue stream, which is beneficial if there is a drop in the amount of gamblers during a specific time.
Casino games have a house edge, and when patrons place bets on games, including slots, poker, roulette, or blackjack, the edge ensures that the casino profits over the long run.
Many may ask why casinos don’t turn the odds even more in their favor to increase their profits. The reason for mostly favorable odds is that casinos want patrons to keep playing. If the odds are poor, the person will stop playing. But, with good odds, a player will keep at it, and over the long term, the casino will benefit financially.
Another trick up a casino’s sleeve to drive profits is to have gamblers play with chips and not cash. When people play with chips they psychologically don’t feel like they’re spending real money. This allows them to gamble more, for longer, and make riskier bets. This, in turn, benefits the casino’s bottom line.
Using the Expected Value
Casinos use what is called “expected value” of a bet to ensure the house wins. The expected value is a mathematical equation where the odds of success are multiplied by how much can be won, and subtracting that total from the buy-in. This equals the average amount of money that the house can make on a bet.
Let’s take roulette as an example to see how casinos use the expected value to make a profit.
A roulette wheel has 37 or 38 pockets (depending if you’re playing American or European roulette). These pockets have 36 black and red numbers, and either one or two zeros. What that means is that the odds of a specific number coming up are 1/37 or 1/38.
When you guess a correct number, the payout is 35 times your bet amount, which is called n in this example. The expected value of the casino for a roulette wheel with 37 pockets is therefore n-(35/37)n which comes to (2/37)n. All bets are positive, so the value will also be positive. So, each time a gambler bets $37, they expect to get back $35, and the casino makes $2 profit.
So, when it comes to casino profits, it is not about taking major losses from the patrons, but instead making an average profit over a long time.
Casino Expenses And Investments
Casinos also have several expenses to cover which must be considered against income earned to ensure they make a profit.
Some of the biggest expenses to operate a casino include staff salaries, utilities, marketing costs, maintenance of gaming equipment and the building itself, security costs, and regulatory fees. Casinos are also constantly investing in new technology, from security systems to slot machines to ensure they offer the best possible experience to visitors.
All these expenses must total less than the income generated for a casino to operate profitably.
Protecting The Bottom Line
Casinos need to adopt systems that will protect the bottom line. There are plenty of risks associated with gambling, like fraud, money laundering, and theft. For that reason, casinos need to have top-notch security systems in place, including ID verification of patrons, cameras, personnel on the floor, fraud experts, money-counting machines, and X-ray scanners.
All these elements need to work together to ensure the casino is safely managing its money and not losing profits.
Final Thoughts
Casinos operate in a complex economic situation, where there must be a balance between earning revenue, managing costs, and keeping patrons coming back to the tables. Despite all these challenges, casinos remain popular throughout the world, with many traveling between countries to play at the world’s top casinos.
