How do casinos make money from players?
One thing is true about gambling: nothing is left to chance. In the end, the casino will always be a winner. A casino is a business, not a charity that gives someone free money. Like any other business, it has a certain business model designed to ensure its profitability.
Key findings
Casino games and machines are designed to ensure that the casino always wins, not the customers.
These advantages, known as the ‘house edge’, reflect the average gross profit that the casino expects from each game.
The longer you play, the more likely it is that your game will come close to the ‘house edge’ – and you will lose money.
“The ‘house edge’ varies considerably from one casino game to another – Blackjack has the lowest house edge and Keno the highest.
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Simply put, in the long run, casino players will lose money.
Whichever game you choose, the chances of the casino winning your money are higher than the chances of you winning the house’s money.
This is because all casino games are designed to provide a “house edge” by minimising the potential payout and the size of the payout.
For example, a roulette wheel is numbered from 1 to 36, so you might think that the odds of winning on a single number bet are 36 to one. However, roulette wheels also have a zero, and sometimes they have a double zero and even a triple zero. So the actual chance of winning is 37 to one, 38 to one or 39 to one, not 36 to one.1
The house edge, which is the odds advantage in favour of the casino, represents the average gross profit that the casino can safely expect from each game.
In games with the lowest house edge, casinos can make a negligible profit, ranging from around 0.5% to just over 2%. In other games it can make a profit of as much as 15% to 40%.
The house edge on an American roulette wheel containing a double zero is 5.26%. For every €1 million wagered on the roulette tables in the casino, the management expects to make a profit of just over €50 000. The remaining approximately EUR 950 000 is returned to the players. The aim of casinos is not to bankrupt players in one go – the aim of casino gaming is to ensure that, in the long run, players finish the game with less money than they came into the casino with, leaving money in the casino’s pocket.
Why do players lose more than they expected?
Many people who are aware of the benefits of casinos still don’t really grasp its impact on their money. They believe that a casino advantage of around 5% at the roulette table means that they can reasonably expect to start with €100 and only lose around €5 over a few hours of play. They do not understand that the house edge refers not to their starting pot, but to the total amount they make.
For example, suppose a person bets €5 on each spin of the roulette wheel, and the wheel is spun 50 times in an hour. Although the bettor may win some bets and lose others, he bets €250 in one hour. If the house edge works perfectly, after four hours of play he will have lost €50 or 5% of €1000 – an amount 10 times greater than he had expected.
Additional Casino Advantage
The longer you play, the more likely it is that your game result will come closer to the house edge calculated by the casino. The player may be a winner in the short term, but in the long term the house edge will cause him to lose money.
That’s why casinos do everything they can to keep you playing longer. For example, casinos almost never have windows with daylight and clocks. They are designed to keep players unaware of the passage of time.
Many first-time players are pleasantly surprised that the management offers them free drinks. However, you will usually cover the cost of these free drinks out of your own pocket, as being under the influence of alcohol does not usually improve your judgement when it comes to casino games and money.
Why do people gamble if the casino always wins?
People gamble for fun and because there is a chance of winning money. Most casino and betting players think that the casino or betting machine has an advantage. However, they often misunderstand how big these advantages actually are.
Casinos and sweepstakes are tricky, giving players enough hope to keep them playing. After all, the longer you play, the bigger the house edge becomes.
Which games have the highest house edge?
The house edge is there for all casino games, but it varies from game to game. Blackjack and video poker are the games where players usually have the best chance of success.
What percentage of players win?
The number of players who actually win in casinos is small, as casinos are a very lucrative business. In 2013, The Wall Street Journal gained access to a private gambling database which revealed that only 13.5% of players end up winning.
Findings
While all the laws of probability theory are in favour of casinos, the benefits of casinos vary considerably from game to game. The game with the smallest house edge is blackjack; if the player follows a perfect betting strategy, the house edge is only 0.5%. In some very liberal casinos, the house edge in blackjack can be as high as 0.28%. Craps offers the next lowest house edge at 0.8%, followed by baccarat with a house edge of 1.06%.
The lowest house edge is only valid if the player plays the game perfectly (textbook), which very few can do. The house edge increases as players bet chaotically. American Roulette is still one of the most popular casino games, but it has a high house edge of 5.26%.
What is the house edge on slot machines?
The house edge on slot machines is usually between 5% and 10%, and most machines offer payout percentages between 90% and 97%.
At 90%, the casino’s return and the player’s loss is 10% of every euro rolled.
Slot machines are particularly dangerous because they can turn over large sums of money in a very short period of time.
If you make 200 spins per hour on a casino machine with a bet of 50 cents per spin, you will turn over €100 per hour.
If the slot machine has a return or house edge of 90%, you will lose €10 every hour in the long run.
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Risk-free casino spins allow you to try your luck without risk – the casino will give you the money. After using the gift, withdraw your winnings to your account.