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.