mgmt 471 - gaming entertainment

Gambling in the US

• Many levels of government have authorized multiple forms of gambling

• Each state is free to regulate or prohibit the practice within its borders

• Now only two states (Hawaii & Utah) do not permit some form of gambling

Charging for services provided (less common):

e.g., Imposing a charge for participating in a poker game.

Arranging for players to play against the casino (more common):

• The odds favor the House

• Casino customers pay for the pleasure they get from playing by

  losing money (in the long run)

• Key Players in the Industry: MGM Resorts International, Caesars Entertainment, Boyd

Key Terminology: Drop (handle)

• Money the casino collects from all gambling activities (total

  amount of cash + markers) during a given time frame

  • Keno = Write

  • Sportsbook = Handle

  • Bingo = Take

Key Terminology: Paid out

• Money given to a player for a winning bet

• Payouts, Paidout, Paid Out

Key Terminology: Hold (win or house win):

• Difference between money wagered and the amount of winning bets

• Money the casino holds onto when gambling activity ceases

• Formula: Drop – Paid Outs = Hold

Issuing credit: How does it work?

• High rollers do not typically bring money/cash with them

• They establish accounts with the casino

• Casinos set a credit limit based on the player’s ability to repay

• An account for the player is created

• The player must sign a marker to withdraw from his/her account

  • Marker: a signed document that is essentially a loan from the casino to the customer

Offering comps - definition

the complimentary goods & services that casinos provide to their players.

Why offer comps?

• Motivate the players to gamble longer

• Motivate the players to return as loyal customers

• Highly valued by players

• Players even include them in their personal calculations when determining their overall experience/value.

Types of Comps

• Drinks (cocktail servers), meals, rooms, airfare/limousine service, show tickets

***Comps will appear as “cost” on P/L statement. Research shows comps do

not help the company’s cash flow.

Casino Financial Control - Using the HOLD PERCENTAGE (financial report) as a control:

• The actual hold % should match the theoretical hold %.

• If it does not match, an investigation is conducted to determine the cause.

Casino Financial Control - POSSIBLE CAUSES?

• Slots: Perhaps the equipment is malfunctioning.

• Roulette: Perhaps roulette wheels need maintenance.

• Table games: Perhaps employees are stealing.

• CHEATING is always a possibility and usually the first to be investigate:

• 1960s example: scratching her scalp —> Lodging a gaming chip?

Using the hold percentage as a control

• In reality, casino managers look at the summary first before looking at the results of individual tables.

• When they notice something is wrong, they go through subordinate figures.

• They will discover those tables with hold% outside the acceptable range of fluctuation

When considering floor layout, what is the most important factor?

Profit Margin

• The best use of casino floor space: Which game generates the maximum profit?

  • SLOTS 60-70%

  • KENO 25-30%

  • RACE AND SPORT 15-25%

  • TABLE GAMES 15-20%

4 key elements of slot management:

1. Machine types

2. Hit frequency

3. Floor configuration

4. Service scape (design, color, sound, music etc.)

Floor Layout/configuration

• Popular machines near entrances

• High earners in high traffic areas

• Test machines in high traffic areas

  • (e.g., S*x and the City Slot Machine)

Floor Layout/configuration; Some other features that influence

players?

• No windows

• Smoking (pumping air)

• Sound effects (coins dropping)

Gaming entertainment

• Offers gambling as part of a total package of entertainment

• Serves as a customer base of “social gamblers”

• Social gamblers: combine gambling with many other activities during their visit.

  • F&B (restaurants, bars, buffets), Nightclubs, Swimming pools, Events, Shows