How Does Casinos Make Money?

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Casino’s high-profit business model and huge tax figures are causing many Southeast Asian countries to invest heavily in this activity. Stretching from Myanmar through Cambodia and Laos, then across the sea to the Philippines, the casino system is expanding in the region.

So how do casinos work and how do casino make money? What methods do they use to retain players and squeeze out every penny? Join Jilievo to learn how casinos make profits through both legal and illegal methods.

Casino make money from slot machines

Casino make money from slot machines

A traditional slot machine will have a screen with rows of different symbols and a lever. The player pushes the lever, the symbols on the screen run, and depending on the last row of symbols that appears, the player determines whether he wins or loses. Each swipe will cost from 1 to about 7 dollars depending on the type of machine the player uses.

Each machine will have a pay-out percentage, and this number is regulated by law. For example, casino in Las Vegas, Nevada must have a payout ratio of at least 75%, which means that for every $10 a player spends, they will “win” $7.50. In fact, casinos often set payouts at 90-92% or even 95% to attract players.

If a slot machine has a payout of 90%, then the remaining 10% is the casino’s profit. For example, when a player spends $10 each time and comes back $9, the remaining $1 stays in the slot machine – which is what the casino takes.

It sounds small, but imagine on a larger scale: one player can spend hundreds of dollars each time they play, and every day there can be hundreds of players at one machine. And large casinos have hundreds or even more than a thousand slot machines.

But that’s just theoretical profit. The actual 90% payout rate is not calculated per play as in the example above, but rather 90% of the total amount a player spends over multiple plays. This leads to players losing continuously, but still continuing to play with the desire to reach that 90% moment.

Casino make money from poker (rake)

Rake is a fee that the casino will take from players in a poker game. Simply put, when a player wins a round of poker, the house will take a small portion of that winnings. The number ranges from 3% to 10%, depending on the different house and the amount of money the player wins. Each house will also have a maximum rake level (from 3 to 5 dollars) for each player’s win.

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When a turn ends, the dealer will directly take the fee from the chips the player won and keep it separate. A maximum fee of $3 to $5 is fine for mid-sized poker tables, with minimum bets around $25.

However, at poker tournaments, where the minimum bet is tens of thousands of dollars, the house will apply a different fee calculation method. In addition, some casinos will charge a fee based on the hour of play and not touch the player’s winnings.

Money from the “house edge”

Money from the "house edge"

The reason why poker and slot games are presented separately is because casinos do not play with players in these games. Playing slot machines is playing against the machine, while playing poker is playing with other players’ money. Therefore, the house must have other ways to collect money in these two games.

With games where the casino can directly participate in betting with players such as roulette or blackjack, profits come from the amount of money the house can win from the players. And the house always wins because they have a “house edge” – a term that refers to the probability advantage that the house has over the players.

Let’s take the traditional game of roulette for example. Experts say that the house holds a 5.26% advantage over the player in roulette, which means that for every $100 a player bets in this game, they will lose $5.26 to the house. With blackjack, the number is about 2%.

The game with the biggest house edge at the casino is a lottery-style game called “keno.” In some casinos and with certain game modes, the house edge can be up to 40%.

Pay to keep players

To be profitable, the prerequisite is to have players. Casino profits largely do not depend on how much you win or lose, but on how long you play, and how much you bet each time on average. The longer a customer plays, the more money the casino has.

Therefore, all casinos are willing to spend a lot of money to keep players staying as long as possible. At the most basic level is free buffet, and especially free alcoholic drinks, because a drunk gambler cannot be a good gambler.

For VIP customers, those who play for a long time and spend a lot of money, casinos will provide very luxurious services: rooms at 5-star hotels, meals at prestigious restaurants, Pick up by yacht or limousine, etc. The amount of money that casinos have to spend on these items is much less than the amount of money VIP guests are willing to spend on the house.

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Organize tournaments

Casinos can organize tournaments themselves, or rent out venues and make profits from collecting fees from players, selling souvenir products, and live broadcast sources. Selling tickets to spectators to watch the tournament is sometimes also a source of profit, but not as much and as permanent as the above sources.

Tournament fees are charged as soon as the player pays the entry fee. Most of that fee will go into the prize fund for the winners, but some will go back to the casino and organizers to cover event costs as well as make a profit.

For example, the WPT Five Diamond World Poker Classic tournament of the World Poker Tour series of events has a fee of $10,000 + $400 = $10,400. The reason why we have to write it out separately in the calculation is because the $10,000 part is the fee, and the $400 part is the rake that the casino collects. The higher the participation fee in a tournament, the lower the rake rate will be.

In addition, selling live streaming rights and selling souvenirs at events is also a source of revenue from tournaments.

Money laundering

Money laundering

Suppose you corrupt 50 thousand dollars, and you need to legalize that money. You can take that $50,000 to the casino and exchange it all for chips – a unit of money in the casino.

You hang around the casino with chips equivalent to $50,000 and only play a few rounds of cards, intentionally losing to give some money to the casino. Then, you exchange the above chips for cash or check.

The entire above process is a simple money laundering process at the casino. The amount of money that the player intentionally loses can be considered a kind of “washing fee” that the player sends back to the casino as a thank you. Casino can completely recognize and prevent such phenomena, but whether they want to do it or not is another story.

Conclude

Casino make money with a commodity that everyone has: greed. This is what drives gamblers to splurge on cards, levers, or roulette wheels. Many people see casinos as an opportunity to change their lives, but it is difficult to predict whether they will change their lives or change their lives.

On an economic level, casinos are truly an industry that makes money for both itself and the state through very high taxes. Besides, the casino business can also stimulate tourism demand, while indirectly controlling and minimizing illegal gambling activities. That is if there is close control and supervision by state agencies.

As for individuals, casino is a game of chance. Therefore, if you really intend to make money from the casino, remember carefully that the house always wins for the reasons stated above.

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