Casino Looses 5%

Factual Questions
1

Over here is a story about an Indian casino in the general New York City area that lost* about 5% on its gambling operation in the quarter that just passed.

They blamed the missed income on lucky gamblers.

Am I right in saying this cannot be true? While a single player may be lucky, whole bunches of thousands of gamblers would almost certainly reach a number a few tenths of a percent of the projected norm. Is this not the “Law of Large Numbers?”

I suspect fraud. Your thoughts?

*That is to say the rake was about 5% less than would be expected on the total handle.

2

Mohegan Sun is in the general New York City area in roughly the same way that Lancaster, Pennsylvania is.

3

Mohegan Sun is 10 minutes from my house in CT. We are 2 hours from NYC. I like the casino they have great shows amazing restaurants and that’s about it. I don’t gamble. It’s also visually appealing.

And let’s not forget Foxwoods the largest single casino on the planet…tucked neatly in the CT woods. It’s weird driving up to it because it is actually hidden from view until you finally bust through the pines and see it. Again, nice casino for food and fun…

4

I guess it would depend on things how much of thier income comes from a comparatively small group of high rollers, or low chance high payout issues, eg ‘win 5 million dollar’ slot machines or the like?

Does sound a bit odd, but you’d need more detail to know either way.

Otara

5

It has happened before. A few high stakes gamblers get lucky, and it can really hurt the bottom line of a casino.

6

The only way I can think of it happening is for several people to hit very high jackpots. I still don’t buy it though. There are only two games that you can win at regularly. One is black-jack. We all know the story about the MIT guys and card counting. That is carefully watched now and should not happen anymore although they don’t mind people that think they can card card count and can’t. They generate revenue. Poker is the other and the casinos don’t care who wins or loses because you just play against other people and they get their fee no matter what.

I could just walk in with a wad of cash into a high stakes table of any game, lay it all down and maybe walk out a big winner. If I dole it out bet after bet over long periods of time, I will certainly lose.

The fact there there thousands upon thousands of people placing different bets does not matter. It is just trials and it wouldn’t matter if a single monkey placed all of them because they are not games of skill. If people placed millions of bets during that period, the casino is going to win. That is just basic statistics. The only way out of that is to have several people hit some very large and improbable jackpots at say, slot machines, but I doubt that is the case too.

7

In a sufficiently large number of trials, the range of outcomes will consist of outliers on both ends.

If a casino got an extra 5% in winnings nobody would think twice about it. But it’s exactly as likely as a casino losing 5%. Casino winning margins are rarely over 5% to begin with, so a variance of this magnitude is not huge.

Now I have no idea about the circumstances in this particular case. But to blithely dismiss the possibility of an unusual run of luck in one quarter at one casino - one of hundreds of casinos over hundreds of quarters - is not mathematically sound.

8

“Casino Looses”

It’s because you stole the double-O from their roulette wheel.

9

I don’t think some of you realize how big some of the real high rollers can bet.

For example, a single high roller, Kerry Packer, seriously hurt the quarterly results of the MGM Grand in Vegas in 1995, because he won 20 million dollars playing blackjack, betting $250,000 per hand.

These high rollers are very profitable, but they add a lot of variance to the Casino’s bottom line. One $250,000 bet can eat up all the profits from all the slot machines in the place that day, easily. Or double it.

The Mohegan Sun is very aggressive about courting high rollers, and has a correspondingly high risk of having a bad quarter.

10

I’ve heard that smart casinos love losing big money. Seriously. It’s great publicity. If I pay out $10,000,000 at my casino, it’s the same cost as four 30 second slots during the Superbowl. Which of those strategies is going to get more gamblers coming through my door?

11

[QUOTE=DanBlather]
“Casino Looses”

It’s because you stole the double-O from their roulette wheel.
[/QUOTE]

Lemme see.

One green zero in Europe.
Two zeros in the Caribbean.
Two zeros plus the eagle in the US.

I hope I got at least that right.

12

[QUOTE=Paul in Saudi]
Lemme see.

One green zero in Europe.
Two zeros in the Caribbean.
Two zeros plus the eagle in the US.

I hope I got at least that right.
[/QUOTE]
And one O in “lose”.

13

Yeah. Eye no.

14

[QUOTE=Exapno Mapcase]
IIf a casino got an extra 5% in winnings nobody would think twice about it. But it’s exactly as likely as a casino losing 5%. Casino winning margins are rarely over 5% to begin with, so a variance of this magnitude is not huge.
[/QUOTE]

That is not correct at all.

It would be if you are doing coin tosses but casino games do not work like that. They are designed for a positive sum for the casino and, over many trials, they will converge on that outcome. There would be no purpose in having a casino to be exactly at the top of a normal curve. They would earn $0 overall and they could not exist. They make the odds and reap the profits off of people that don’t understand statistics.

15

You seem to be totally misreading what I said.

The normal house edge on an American roulette wheel is 5.26% over the long term. Payoffs on other games vary all over the place, and can vary from casino to casino or even in spots inside a casino. “Loose” slots are those rumored to have higher player advantage (lower house edge.) The only reason the term exists is that bettors have the belief that some slot locations are better than others. This is almost certainly true, in that less favored locations in Vegas have to provide slightly better payoffs than the big casinos in order to ensure customers. Most slots return more than 5% to a casino, but blackjack normally returns less than that, and a good card counter can make the house playoff negative, which is why why they are banned everywhere.

The average edge of a casino is likely to run somewhere around 5%. I never said or implied that it would be zero.

But an average of 5% can vary over the short term, especially if a few abnormally large results screw up the normal betting curve. A return of 10% wouldn’t be thought off as fraudulent for this reason, neither would a negative return. Over the short term, in fact, you would so expect this variation that a consistent payoff of exactly 5% would be prima facie proof of fraud.

16

[QUOTE=Exapno Mapcase]
You seem to be totally misreading what I said.
But an average of 5% can vary over the short term, especially if a few abnormally large results screw up the normal betting curve. A return of 10% wouldn’t be thought off as fraudulent for this reason, neither would a negative return. Over the short term, in fact, you would so expect this variation that a consistent payoff of exactly 5% would be prima facie proof of fraud.
[/QUOTE]

My impression is that there’s another factor which tends to push the house profit in gambling in favor of the casino, above the mathematical house edge. This factor is the tendency of gamblers to continue playing until they run out of money.

If gamblers continued playing indefinitely, the house would, on the long run, make a profit approaching the theoretical house edge (which, in double-zero roulette is 2/38 or about 5.26 % and in blackjack is between 0.5 and 1 %, depending on the rules and disregarding card counting). But that’s not the way gamblers behave, at least not the majority of them. As long as they’re winning on an evening out at the tables, many of them keep on playing. Some of them who have been winning before stop playing when they’re down to their initial capital, but almost all of them have either a limited amount of cash with them or have set a loss limit for themselves and stop playing when they exceed this limit. In these cases, a streak of playing is interrupted and comes to and end, and it does so at a point at which the casino is ahead. The streak ends, OTOH, less frequently at a point at which the player is ahead, and this allows the casino to make more profits than the theoretical house edge which assumes an indefinite series of games.

I’m very well aware that this is an over-simplified generalization, especially the premise that players keep on playing as long as they’re winning. More often than once, I left a casino with more money in my wallet than I had come in with myself. Yet, I think that this phenomenon exists, and that it works in favor of the house.

17

[QUOTE=Sam Stone]
I don’t think some of you realize how big some of the real high rollers can bet.

For example, a single high roller, Kerry Packer, seriously hurt the quarterly results of the MGM Grand in Vegas in 1995, because he won 20 million dollars playing blackjack, betting $250,000 per hand.

These high rollers are very profitable, but they add a lot of variance to the Casino’s bottom line. One $250,000 bet can eat up all the profits from all the slot machines in the place that day, easily. Or double it.

The Mohegan Sun is very aggressive about courting high rollers, and has a correspondingly high risk of having a bad quarter.
[/QUOTE]

Sam got it. While the payout from pissant slots and the like is pretty easy to model, high rollers playing baccarat is another matter. The house edge on bac is about 1%, so it’s not that odd for the casino to lose over a relatively few trials. I’m not going to build the spreadsheet right now, but imagine a casino’s “normal” profit is 10 million bucks a month. Now imagine on the last day of the month some guy comes in from Hong Kong and starts betting 250,000 a hand. It’s not too hard to see how some times that profit will evaporate in short order.

18

[QUOTE=Schnitte]
My impression is that there’s another factor which tends to push the house profit in gambling in favor of the casino, above the mathematical house edge. This factor is the tendency of gamblers to continue playing until they run out of money.

If gamblers continued playing indefinitely, the house would, on the long run, make a profit approaching the theoretical house edge (which, in double-zero roulette is 2/38 or about 5.26 % and in blackjack is between 0.5 and 1 %, depending on the rules and disregarding card counting). But that’s not the way gamblers behave, at least not the majority of them. As long as they’re winning on an evening out at the tables, many of them keep on playing. Some of them who have been winning before stop playing when they’re down to their initial capital, but almost all of them have either a limited amount of cash with them or have set a loss limit for themselves and stop playing when they exceed this limit. In these cases, a streak of playing is interrupted and comes to and end, and it does so at a point at which the casino is ahead. The streak ends, OTOH, less frequently at a point at which the player is ahead, and this allows the casino to make more profits than the theoretical house edge which assumes an indefinite series of games.

I’m very well aware that this is an over-simplified generalization, especially the premise that players keep on playing as long as they’re winning. More often than once, I left a casino with more money in my wallet than I had come in with myself. Yet, I think that this phenomenon exists, and that it works in favor of the house.
[/QUOTE]

It’s not just oversimplified, it’s completely wrong. You’re talking about ‘gambler’s ruin’, and the fact that a finite bankroll will crash to zero if you overbet it. Even winning gamblers like card counters and poker players face gambler’s ruin if they overbet their bankrolls.

However, while this affects the individual gambler, it does nothing to the casino. As far as the casino is concerned, there could be 10,000 gamblers in the place, each playing 1000 spins of roulette, or one gambler playing 10 million spins. It just doesn’t matter. The house’s profit will converge on 5.26% X the total amount of money bet, regardless of whether some places bust their bankrolls or not. In fact, ‘gambler’s ruin’ actually hurts the casino, in the sense that they’d rather see you mortgage your house and continue playing than lose your smaller bankroll and leave.

This is one of the more pernicious gambler’s fallacies (along with ‘locking in’ your winnings, and quitting while ahead to increase your profits). It sounds logical, but is completely irrelevant.

19

[QUOTE=Paul in Saudi]
Lemme see.

One green zero in Europe.
Two zeros in the Caribbean.
Two zeros plus the eagle in the US.

I hope I got at least that right.
[/QUOTE]

And your odds of winning drop dramatically as you move from location to location.

20

[QUOTE=Paul in Saudi]

Two zeros plus the eagle in the US.
[/QUOTE]

The eagle? What century you living in?