Nicholas G. Colon explains why being caught up with a casino game’s hold percentage is ultimately going to be bad for business
Although I am by no stretch of the imagination the pinnacle of human intelligence, I am dumbfounded by the perpetual failures of the gaming community when the adaptations that are necessary to sustain revenue growth are ignored by the major game design and development firms, as well as most casino operators.
While attending the 2016 World Gaming Conference (G2E) in Las Vegas, I was attempting to explain the difference between casino Hold, and casino Handle to a group of oblivious casino executives. For the mal-informed, casino Handle is how much money is wagered during a given time period, while the Hold is how much money the casino actually keeps. Consider a six player blackjack table where each player bets $100, and four players lose and two players win. The Handle for the round is $600 where the Hold is $200. Given the choice, which option would an executive be more inclined to increase, and why?
Somewhere in the past 70 years the Hold percentage was determined to be the standard that gaming executives measure how effective their games are. Max Rubin, the author of Comp City and a long-standing member of the Advisory Committee at the Global Gaming Conference, recently posed the following question to a highly respected Las Vegas Table Games executive: “Would you want to have a 10% Hold on a million dollar handle or would you want to handle $500k and Hold 15%?” Not surprisingly the executive said the 15% on the $500k. This validates James Grosjean’s, arguably the top gaming theoretician and practitioner of the current generation and perhaps ever, idea that the hold percentage is nothing more than a false idol that gaming executives blindly worship. For the mathematically challenged the 10% of $1m is $100k while 15% of $500k is $75k. In this case less is more.
Bringing this into focus on a more specific game, consider the two variations of Blackjack; first the 6:5 version. This puts the casino hold near 2%. Even a first-time casino visitor knows to stay at least ten feet away from the 6:5 games. The 6:5 “Blackjack” payout can’t technically even be called Blackjack. It’s really an abomination that it even exists. But this has been implemented by the geniuses who oversee the low limit blackjack games in Las Vegas.
These same folks have been losing hundreds of millions of dollars year after year since the real estate bubble burst in 2008. But no one ever calls them out on their foolish approaches. Some casinos even have the 6:5 versions on all the games on their main floor, regardless of the limits. Cosmopolitan and the Venetian in Las Vegas do this without apology. Their Blackjack tables are pretty sparse on the weekends; the dealers are being paid to stand there and not deal. 2% of low handle is a low number.
3:2 full pay Blackjack has a hold percentage of 0.5%, and is pretty standard on every game above a $25 minimum bet. MGM, Caesars and the Wynn properties all abide by this rule. It’s no coincidence that these properties have full Blackjack pits on the weekends. Perfect play blackjack on the 3:2 Blackjack games is at 0.5% hold for the casino. But as the alcohol flows with the more affluent player the actual hold is around 0.8-1%. On a semi-full table, with four players betting an average of $35 (some bet more than $25 but most stick to $25 a hand), the handle is $140 per round. The hold is 0.8% (low end), so this give a win rate for the casino $1.12 per round. And because they are at the higher levels it’s likely players come to the table with a decent amount of money and will play for at least an hour. This translates to about a $70 an hour win for the casino. Well beyond the minimum wage of the dealer and cost of the alcohol; and, far greater than the 2% hold ofthe two five dollar a hand, 21 year olds that yield the casinos a net of $12 an hour, if they even play for an hour.
In real world application we look to Jack Binion, who was one of the last casino owners who understood gamblers. A few months after Jack moved into the Tunica, Mississippi, market, his Horseshoe casino’s Blackjack games were winning more than the three top competitors' operations combined. This is public record, look it up. His Hold percentage was significantly lower than any of the nearby casinos (3:2 Blackjack was the standard game); but Jack knew, and still knows hold percentages do not pay the bills. He has often been quoted as having said: “I have never cared about how much I hold. It’s all about how much I win!” And he’s right. I’ll take it one step further and assert that in the glory days of Nevada gaming when Benny Binion and Bill Harrah were kings, I doubt very much that they thought about what the hold percentages of their games were. What these gaming pioneers looked at was: “How much money are we bringing in?”
You can apply these concepts to both online and land based slots machines. For land-based casinos, many slots have the Hold % printed right on them or it can be easily looked up on Michael Shackelford’s website Wizard of Odds, which gives par sheets for almost every casino game that exist. For the online domain there are watchdog sites that aggregate information on online casinos and their slot games.
Bryan Bailey founded one of the first websites for online casino reviews, casinomeister.com. It offers complete insight to games that can be played at online casinos, as well as an overall evaluation of how any number of online casino’s operate, good or bad. It has endured a number updates over the years and is in the process of launching a new redesign.
The derivations become more complex with slot games so I’ll just hit the highpoints. It is standard industry practice that when you go from a higher denomination slot machine ($0.25) to a lower denomination slot machine ($0.05), ($.01) the Hold percentage for the machine goes up. The efficiency ratings of the three lowest denomination slot machines are, in order: 0.08% for the penny slots, 4.5% for the nickel slot machines and 8% for the quarter slots. This means that 99.2%, 95.5% and 92% of the time respectively, and on average, the machines on a gaming floor of casino are empty. The penny slot games make up 79% of the games in this subset with approximately 49,500 units. The nickel slots make up around 6 % of the machines with 3,950 units, and the quarter machines make up the remaining 15% with approximately 10,000 units. 79% of the slot machines (pennies) are empty %99.02 of the time.
Idle machines and empty tables do not make casinos money. The high hold percentages that casinos have adopted have the opposite effect of what casinos are looking for, which is players. If operators continue along this path I do not see any change in the current revenue trend of year over year losses. It is pretty clear that current methodologies are not working. I don’t expect this to change anytime soon mostly because no one ever gets fired for saying no. But it needs to change, quickly.
Nicholas Colon is the Managing Director of Alea Consulting Group, a casino gaming consulting firm with a player centric philosophy.
It is staffed with world class players, gaming authors, mathematicians, top legal minds and a variety of industry professionals. He speaks in a personal capacity only.