How Do Casinos Make Money?
Casinos are a business just like all other businesses whose primary goal is to make money. But casinos function slightly different from most other business. In other businesses you are paying money in exchange for goods. At casinos, you are wagering money on casino games for a chance to win real money back. So, if casinos have to make payouts to every player who is lucky enough to win while playing, how do they ensure that they continuously make money in order to afford these payouts? Let’s find out.
How Casinos Make Money
Most games offered at casinos are based on chance, and the average payout to players for those games is often significantly lower than the money collected by the casino through bets. This means that the casino gets more money in than it lets out. There are various ways in which casinos produce an income. We’ll get into that next.
Casino House Edge
Casinos have an inherent advantage over players in any game. This advantage is called the house edge and is essentially what makes the entire ordeal gambling and not a normal business transaction – casinos will always get some money out of every bet that you make and players may or may not win money back. It all depends on how lucky you are that day. Its all a gamble.
Hold Percentage vs Casino Win
On this topic its worth making a distinction between casino win and percentage hold as these are the two ways in which the money a casino makes is calculated.
The casino win refers to the total amount of dollars that a casino makes from bets on any given day/week. But the casino win can be a negative amount because its possible for casinos to run at a loss. A loss occurs anytime players win more money than what the casino has or holds or has available at that time. The hold percentage refers to the casino win /drop ratio.
Consider this example:
If $100 was put into a slot machine during the course of a day through bets, and it pays out $80 then the casino win would be $20. That’s how casino win is calculated. The hold percentage is worked out differently though – this is calculated based on total bets.
So, lets imagine that the machine has a minimum bet amount of $1 and that 1000 spins were made on the machine that day. That would mean that a total of $1000 was wagered that day. But, if only $20 was paid out then the hold percentage is just $20/$1000, or 2/100 which comes down to 2%. This supports the claim that casinos receive more money than what they pay out.