Here’s How Casinos Make Money

Here’s How Casinos Make Money

Although online casinos are considered to be completely different versions of casinos, they are still casinos and they have the same objective: offer a platform where players can make their wagers, after which a casino will eventually win, at least in the long term. A casino, whether it’s online or offline, has a number of built-in benefits to ensure that it, and not its customers, has more chance of winning. You can’t really blame the house for having a slight advantage as they’re the ones facilitating all the games, dealers, and other materials to make a wager.

The key question remains among a lot of players in New Zealand: how do casinos actually make money? Well, fellow Kiwis, it’s time to find out how. In this guide you’ll learn more about how casinos earn their money and there’s nothing really upsetting about it. You still have lots of chances to win. This is especially true for online casinos as you’ll find out in this guide about how casinos make money and how you should increase your own chances and get the most out of every wager.

The handle

The most important way casino operators make money is to be found in what is called the handle. Whatever casino game is played, the handle is the most important part of the operator when it comes to its income. The handle is the total amount of money visitors put in bets. In a game of roulette, for instance, all the players put their bets in the handle, and in this case the handle is typically made up of chips. The money in stake can go two ways; either the casino wins the bet or loses it. The handle is not to be confused with the drop which is money that has been traded for chips. Taking a look at the blackjack table, the metal drop box at the edge of the table is what is known as the drop. Players drop the bills or credit slips into this box. In some casinos and in some games, the two terms, drop and handle, are used interchangeably. In order to specify it we’ll stick to the original definition of a handle.

Criteria that affect the handle

The handle clearly has its ways of affecting the revenue for casinos and there are a few factors that have a direct impact as casinos earn more money when they find a method to increase:

  1. Increase their house edge (which we’ll touch upon later on).
  2. The amount of time played on each game.
  3. The average bet.

If there are few bets or if the players are few, then the handle is a lot lower and the profit also turns out less. This is because the casino always wins in the long term, but short term deviations are still possible. If few bets are made, either due to a limited time spent on gaming, or because of a low number of bets made within a certain period of time. Taking a look at the casino’s business model, the overall handle is derived through a combination of the average bet, time spent, and capacity utilisation. This explains why most casino games place a lot more importance on a player’s average bet and the hours he or she has spent playing, and less on the amount of money won or lost by that particular player. Online casinos that offer 500 online slots real money NZ will only be profitable if these pokies are in use. This is why capacity utilisation plays a major role. The more pokies being used, the more money being gained by the casino.

Average bet

The average bet of most casino games tends to be rather stable as a lot of them require a minimum bet. A minimum amount is required in most games to make a wager and is typically higher for table games. This is why it’s not very common to find a blackjack game that has as low minimum bets as online pokies. This is due to a simple reason as the house is expected to get a certain revenue for each round of blackjack. By setting high limits, the casino attracts high rollers, which are wealthy customers, therefore boosting the average bet size. At the same time table games tend to have a relatively low house edge.

House Edge explained

This brings us to our next topic. In each wager made, the casino has a statistical advantage over the player which is called the house edge. Some might argue that having a house edge over the visitor isn’t fair, but let’s not forget that it’s thanks to the house that players can get together and have a fun time at the venue. This makes it rather logical that the house has an advantage over its visitors as they wouldn’t have the chance to bet if it weren’t for the casino. The theoretical advantage that the house holds in any game of chance is what makes the casino game a gamble. The outcome is unknown and either party has a chance of winning at any time, but over a larger number of wagers the house’s average changes are expected to increase while the player’s chances will decrease.

Example

The casino win is the total amount of money that the casino is left with after all the users have paid their bets. This clearly can be a negative sum if the players win more than what the house is holding, or it can also be a positive amount of money if the casino makes money. Let’s say that a pokie has NZ$100 that has been wagered by the players. At the end of the day, it may only pay out a sum of NZ$20 to its players. The casino, therefore, makes a total amount of NZ$80. The hold percentage is what is obtained from the total number of bets made by all visitors. Let’s say a spin costs NZ$1 per spin. During the day, the pokie records 1000 spins, which makes it end up at NZ$1000. While the players win NZ$20, the hold percentage sums up to NZ$20/NZ$1,000, which gives us a percentage of 2%.

Return to Player (RTP)

The payout percentage, also referred to as the Return to Player or RTP, is a percentage between 1% and 100% that represents how much percent the player earns back from the investment made in the long term. The closer the RTP is to 100%, the greater the chance the player will get his or her money back on the bet. This is a percentage where the payouts are assessed in the long term and short time differences can occur.

Example:

An online pokie has an RTP of 97,1% and that would get you back on average for every NZ$100, you would get NZ$97,10 back in the long run. That is, if you would make 1000 spins with a bet of NZ$1 per spin. As mentioned above, short time differences and this is what makes gambling so much fun as players are indeed able to beat the house every now and then. In the long term, this percentage is levelled out. The remaining NZ$2,90 is for the house, which brings us to our next point.

Difference between RTP and house edge

The concepts of RTP and House Edge often cause confusion among players which is clearly understable as the two are closely related. Return To Player and House Edge represent the same concept and they are basically the same things with one major difference: their perspective. Return to Player represents what return is expected from the player’s point of view, while the House Edge represents what the house is expected to gain. Both statistics can be derived from one another as they both work with a percentage from 1 to 100%. The Return to Player can never exceed the 100% as this would mean the house would lose and the house edge can never drop below 0% as this would mean the same thing. If the house edge is 2,7% in a game of roulette, the RTP is 97,3% and if an online pokie has an RTP of 96,4%, the house edge is 3,6%. The lower the house edge, the higher the RTP, and the higher the RTP, the lower the house edge.

Higher winning chances in online casinos

As you’ll get by now, paying close attention to the house edge and RTP of a game can be very useful during your casino experience, especially if you make frequent bets. Looking for specific games that offer high Return to Player’s are a way to lower the casino’s house edge and thus letting them earn less money. Adding an RTP check to your own selection criteria should be as basic as playing a certain game for its volatility, game theme, minimum bet or potential maximum win. RTP’s tend to be a lot higher for online games (and thus offer lower house edges) as operators have to deal with a lot more competition than brick and mortar casinos that are only limited to competitors within the same geographical region. This is exactly why online players get casino bonuses to join them and offline players don’t. Let’s face it, you get heaps of free spins in online casinos, but you’ll never get a free spin if you would stick to one of the land based casinos in New Zealand.

Last note

As more and more players have switched to online casinos, online operators have boosted their prize pools which is notably true for poker, pokie games, and jackpot pokies. In fact, it’s rather impressive to see how casino games that can be played on a computer or via mobile casinos pay out more than games that are found in the world’s most top notch brick and mortar casinos. Ultimately, casinos will continue making big money whether it’s online or offline, as long as players are willing to keep playing. It’s just that short term wins can always occur and that wisely picking your next casino game can make a difference as well.

Gabrielle Hills

I'm Gabrielle Hills and I have more than 3 years of experience in the gambling industry, As a senior editor, I aspire hard to analyze different online gambling clubs and rewards and distinguish the best ones for the players. I would like to show you, how new players begin their journey with online gambling very easily without prior knowledge. Regarding this context, you can find out which online casino bonuses and NZ casinos are worthwhile for novices as well as experienced players. I believe in constructive criticism so readers can approach me anytime to provide their feedback.

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