House Advantage

We can’t understand what a gaming casino is if we don’t know beforehand what the term “house advantage” (or “house edge”) means.

Surely, you have heard once before the saying “the house always wins”, such a popular saying concerns the fact that all the gambling games that are played in the casino owe an advantage to the house. In some games, this advantage can be greater than in others, but basically, it is what allows the casino to survive.

The house advantage varies depending on each game and is always to be understood long term. To better understand the concept, we can analyze the roulette’s house advantage.

 

Example of house advantage with the roulette:

The roulette, in its European version, is the most popular version of this game and has a house advantage of 2,7%, which is generated by the fact that the casino pays 35 times the winning bet to one of the 36 numbers. But, in reality, there are 37 numbers, also counting zero.

In the American roulette, there are 38 numbers, since it also has the double zero, that is why the advantage rises to 5,26%.

In both cases, it happens when one bets to only one number out of the 37 or 38 possible ones.

If the game is carried out based on another kind of betting such as red/black, even/odd, columns, squares, etc. the advantage varies.

It is then clear that the casino always has an advantage in the different games, and that is why, long term, it always makes profits.

From this point, it needs to be understood that the house has a different advantage over the different types of games in a casino. In a lot of these games, the advantage is calculated employing analysis, simulations, and mathematical models.

In the University of Nevada in Las Vegas, you can find a table with the house advantage over the different games.

The theoretical revenue of a casino would be, long term, the quantity played by the house advantage.

 

Example of theoretical revenue:

In a hypothetical case, in a casino, 100 million euros are spent throughout the entire year, only in the European roulette. In this case, the theoretical revenue would be 2.700.000 euros.

It would be complicated and would make no sense to constantly try to calculate the amounts played in the roulette, that is why we need metrics such as the drop, win, hold, and their ratios to analyze each game’s behavior.

But there is a true reality in the fact that the casino’s theoretical revenue is a result of multiplying the amount played by the house advantage.

 

The 4Ps of Casinos Marketing

Traditionally, the marketing of casinos consisted of organizing events to liven up Friday and Saturday nights, usually with concerts or small to medium orchestras, and with no ambition other than simply creating the right atmosphere that would accompany the crowd that the casino held those days.

Promotions, raffles and lotteries for casinos

The next phase happens when we have our competition close to us. It consists of organizing promotions, usually tombolas, raffles and lotteries, from which the players get coupons and tickets to participate, either because they stay in the casino for several hours and every now and then an employee gives out the ticket per person, or because they are worthy of so many coupons per won play. The latter gives the advantage to those who play the most, those who have more winning combinations, and thus, the more coupons they receive for the tombola. This way, a loyalty program is generated in an informal and non-scientific manner.

Over time, casinos continued to add layers or levels of spending to the marketing budget and began to be more aggressive with courtesies. Traditional courtesies consisted of drinks, but contrary to what people believe, 60 percent of courtesy spending is made up of water, coffee and soda, not alcoholic beverages (beer, whiskey, gin and tonics, etc.).

Competition forces casinos to be more aggressive and start giving out food, cigarettes, popcorn, cakes, etc. This led to courtesy spending rising to 2 percent in very efficient casinos, and easily to 12 percent over the sales in not very productive casinos.

As we listed before, events, promotions and courtesies. To all the aforementioned, we need to add advertising.

Casinos finally learned, through trial-and-error, that advertising can’t be carried out in the same way that conventional brands do it. It doesn’t make sense to use a sledgehammer to crack a nut and advertise on television, since these adds are very expensive and appropriate to high consumption brands, furthermore, the percentage of the population that plays in the casino is negligible. It happens similarly with press advertising and, to a lesser extent, with radio.

The more focused the medium to reach the client can be, the better it is. That is why, over time, casinos started to learn that direct mailing and direct marketing are the most effective strategies. Back in the day, it was straight mailing campaigns. In countries where gambling is highly developed and the industry is also totally developed, it is common to have a complete good database, where, not only can we find the name of the customer, but also their address. Traditional correspondence can be sent to them and, in it, add invitations, coupons, and any other hook to attract the player to the casino.

Over time, traditional mail gave up the way to SMS campaigns and, eventually, to email campaigns. Nowadays, the latest way to reach the players is via mobile and cellphone apps, through push notifications i.e. messages that the app sends to the player and show up directly on their mobile or cellphone’s screen.

 

 

A personalized marketing campaign is developed for those players, since a high standard player is not the same as, let’s say, a common player, who spends less per visit and settles for less.

If we continue with the evolution of Casinos’ marketing, we have to talk about the loyalty programs (also called, in gaming argot, player tracking). They were a novelty during the 90s and were then still very expensive. However, nowadays, casinos do have the opportunity to acquire or rent management programs that include affordable loyalty programs.

The basic premise of these consist of: for each coin in dollar or bet that the machine records, points are awarded to the client. In the beginning, those points would be exchanged for gifts, but when casinos realized that cashback was way more effective, they were eventually exchanged for money. The competition and the boredom that the loyalty programs caused in customers led to more aggressive strategies consisting of redemption and collection of points.

 

TTH Gaming at the International Gaming and Gambling Trade Show, Madrid 2019

On 9th and 10th of April, we attended to FIJMA, which in Spanish stands for the International Gaming Fair, in 2019 in IFEMA, Madrid (Spain), and which in English is known as the International Gaming and Gambling Trade Show.

FIJMA is an event where businessmen and managers from all over Spain related to the recreational and gaming industry gather and meet. It is also a center for some manufacturers and exhibitors, both national and international, who take advantage of the fair to present a selection of some of their new products.

Once again, the Gaming and Gambling Fair of Madrid has become the place to gather to exchange opinions, situation status, talk about new projects and, all in all, networking.

Comparing with previous years, we can see how online proposals and betting are increasingly gaining importance, due to the fact that it is a subsector with great growth prospects.

We were surprised by the fact that there were several manufacturers with solutions for coin teller machines, cash management, ATMs, prize ticket redemption machines, payment of betting prizes (both outside and inside the cash register), as well as incorporation with loyalty systems.

Another surprise was the fact that there were barely any exhibitors with online solutions focused on B2B. We also did not see any gaming aggregator (whether they were their own or from various designers and providers), payment gateways, network security nor betting surveillance.

We could find providers for B2C, like Sportium, Luckia, ViveLaSuerte, Enracha, Pastón, Kirolbet, etc., ultimately, all the operators for the Spanish gambling market.

Crypto technologies were not present in the fair, nor anything from blockchain, which is something we could indeed see at the ICE Fair in London, where we saw exhibitors and conferences dedicated to crypto coins and the processing of Internet payments for the gaming sector.

Thanks to this event, we could confirm the fact that a lot of Spain’s autonomous communities are required to perform entry controls in their establishments, mostly in betting houses and rooms. In what this issue concerns, some manufacturers have presented products for facial recognition, which allow them to detect features such as being of age and monitoring the “list of forbidden ones” (individuals who are not authorized to access the establishment).

Thanks to the International Gaming and Gambling Trade Show 2019, we were able to share with senior executives from the sector, some of them acquaintances from years ago, others, new incorporations.

Next FIJMA will be in two years, probably in Madrid in 2021, but, before that, we have the Global Gaming Expo G2E fair in Las Vegas (USA) from 15th to 17th of October 2019. Should we see you there?

 

TTH Gaming in ICE London 2019

At ICE London fair of the 5th to the 7th of February 2019, we found some novelties and many friends and acquaintances.

Firstly: the unstoppable online tendency, for some years now, affects the fair when it comes to the number and size of the stalls. We could say that from 75% to 80% of the fair was occupied by companies related to online gaming. Most of these companies are linked to sports betting, both the sale of physical terminals and betting management web services.

Secondly, the great gaming aggregators -as Microgaming, Playthech and others not so well-known would be- also had big spaces and presented a lot of novelties.

Thirdly, stalls related to transaction security. And finally, payment solutions.

These would be the 4 big chapters of companies with an online presence. Although, obviously, there were others related to bingo, such as Evolution of online casinos.

The other 20% were stalls owned by companies and providers that are usually in fairs, as land-based or on-site casinos would be. In other words, from brands such as IGT, which we have to remember is the merge of IGT, Gtech and Spielo; as well as Scientific Games, which is the result of the Shufflemaster, Bally and Williams merge; as well as Aristocrat, etc. Nonetheless, the biggest spaces, in this case, were three European companies: Novomatic from Austria, EGT from Bulgaria and Merkur from Germany. There were, obviously, a lot more international companies, and mostly European, but these last six were perhaps the ones that stood out the most, for their size and, aside, their relevance.

My personal opinion, aside from the novelties presented by IGT, Scientific Games and Novomatis, is that the one that keeps shining for its innovation is Aristocrat. Aristocrat keeps presenting their progressive Lighting Link, which, in the last years, has been copied by all the other manufacturers that have called it different names such as Easy Link, Storm Link, Thunder Link, Lock it Link, etc. Moreover, Aristocrat presented evolutions or novelties based on their games, and also royalties games based in famous HBO TV series such as Game of Thrones or Westworld. The novelty, in this case, resides in the new S-shaped gambling cabinet Flame.

Novomatic also presented some interesting novelties, but at the technological level, it seemed to follow the screen format that Aristocrat popularized, the one named arch, with big 70-inch to the 84-inch curved screen.

As stated before, this year, Aristocrat went a bit further, and instead of using the curved screen, they used S-shaped screens, a unique screen that you can fold creating the effect that the upper part of the screen falls over the player and the main game falls in the lower part, making it even easier for the player that is sitting to see the whole game. Without any doubt, a fine piece of machinery. They call it Flame.

The skill games manufacturers, in contrast with the Las Vegas G2E Fair, in London they passed unnoticed. The only stall we could find, although there were perhaps some others, was the Blue Synergy one, which attracted a lot of attention and interest. But brands such as Gablit and GameCo were missed.

Out of the four known brands that we could find at G2E, in London we only saw the Blue Synergy one. So it is worth highlighting the fact that there is a developing niche that still has to mature to arrive at its inflection point.

In conclusion, and even though it is not our intention to compare both fairs, in London, there was way more offer of companies related to online gaming and of European companies. While at G2E, traditional slots manufacturers are still dominant, as well as furniture and equipment manufacturers. Furthermore, both American and Australian or Japanese companies presented more novelties.

The next ICE London will be hosted at Excel, London, UK (United Kingdom), from the 4th to the 6t of February of 2020. But, before that, we have the Global Gaming Expo G2E fair in Las Vegas (USA) from 15th to 17th of October 2019. Should we see you there?

 

Why go to gaming fairs such as SAGSE, G2E, ICE…

During the times that I was an executive director for Cirsa in Colombia, Peru, Argentina and Panama, I had to argue to the CEO why was it convenient that both me, as Country Manager, and the Operations Director, were able to attend the gaming fair, particularly, the one in Las Vegas, the Global Gaming Expo (G2E). If attending to that one failed, the best alternative option was to go to Sagse (South American Gaming and Suppliers Expo) that is hosted at the Conventions Centre of Costa Salguero, in Buenos Aires, Argentina.

For the corporation, it seemed to be an expense, but for me, it was an investment. Nowadays, I still think the same.

 

The convenience of attending expositions of the gaming sector

 

I have already 20 years of experience working in the gaming sector, and I keep on learning new things every time I attend a fair. Every time I visit Las Vegas, or every time I go into a big casino (or smaller ones but well managed).

At that time, those visits allowed me to clearly realize that, even though having the last generation of machines is extremely important and can be relevant against casinos operators that are not updated; what will really differentiate you from your competitors is having the whole package, which necessarily includes the interior design and layout, the marketing perimeter, and the management of, what is called in some countries, the supplementary services, i.e. the bar and the entertainment. Some will say that the service (the quality of the staff) is fundamental, but that is stating the obvious. This very logical conclusion is perhaps not applicable when you do not have a lot of competition or the location of your casino is the best. Nonetheless, it is still very valuable to maintain high revenues in the long term.

 

How to make the most of the events in the gaming world to improve your business?

 

In conclusion, we must attend the fairs to be able to learn, so we can later transform our business back home.

Currently working as a Casino consultant, I buy less machinery, and the fair is the place to be, it is the place where networking and, especially, innovation, happen.

By innovation, I am not talking about the latest manufacturers’ platform, the one that allows graphics and sound improvements, faster computing, interconnected jackpots, curved and 3D screens. I am talking about those innovations that will allow us to optimize the operation, marketing software, CRM, bar and restaurant management, that link the different areas of the casino to improve the surveillance and avoid internal fraud. I also hope to see new variations of table live games that will allow us to revive this department.

At London’s gaming fair, ICE, Online Gaming already has a bigger presence than the on-site ones: there are more exhibitors that offer games design, platforms, payment gateways, auditing and compliance, fraud surveillance, etc. When will there be a convergence between virtual and material gaming? The truth is, they still seem two different worlds today, perhaps with some common aspects, such as games that are successful in both sectors, or very few global companies that are feasible both on the online as well as the on-site. But we must be there to witness it, because, at some point, the convergence will cease to be theoretical.

Not always it is possible to go to Las Vegas, whether it is for its cost, dates or distance. But regional fairs tend to be good alternatives. In the pre-Kirsher era, the SAGSE Exposition in Buenos Aires was the best fair in Latinamerica, to the extent that they created a subsidiary in Panama, Sagse-one. We hope that this next edition, which will be the 26th, and the 3rd of the Macri era, will host as many visitors as the ones before 2010. They were quite an event and the party, organized by Giorgio and his team, was a must. Remember the dates: 11th, 12th and 13th of September of 2018.

We (TTH Gaming) will attend the upcoming events.

If you wish so, we can talk about how to increment your casino’s sales through changing the marketing strategies: going from traditional player tracking and promotions to clienting and one-to-one marketing.