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Ask the Slot Expert: The difference between house hold and house edge12 October 2016
Answer: What you're missing is that there's a difference between edge and hold.
The house edge is the percentage of the players' action that the house expects to win. The hold, on the other hand, is the percentage of the players' buy-ins that the house expects to hold.
The edge and hold percentages are the same for slot and video poker machines. The only money that "stays in the machine" is money won from players.
The situation is more complicated at a table game because players exchange cash for chips and leave the table with chips, not cash. Let's look at an example from Don Catlin's article Hold Percentage, Can You Affect It? on this site.
On a particular roulette table near the buffet at the beginning of the swing shift, the dealer's rack is full with $15,000 in chips and the drop box is empty. Players come and go during the shift. Some buy chips with cash. Others arrive with chips. During the shift, the dealers request a $5,000 fill.
At the end of the shift, there is $12,000 in chips left in the rack and $11,000 in cash in the drop box. Also, the pit manager noted that players brought $3,000 in chips to the table.
The casino has $23,000 in cash and chips ($12,000 in the rack and $11,000 in the drop box). It put $20,000 in chips in the rack (the initial $15,000 plus the $5,000 fill), so its profit is $3,000 ($23,000 minus $20,000). The total of the buy-ins is $14,000 ($11,000 in the drop box plus the $3,000 in chips that players brought to the table). The hold percentage is the ratio of the profit over the buy-ins, $3,000/$14,000, or 21.43%. The house edge on roulette, though, is still 5.26%.
Don goes on to say that player behavior affects the hold percentage. Consider these three scenarios in which the table wins $5, but each scenario has a different hold percentage.
It's the graveyard shift at the El Dumpo casino. Visitation is way down because the casino is in dire need of renovation, so the three blackjack tables each had only one player that night.
At the first blackjack table, the player bought in for $1,000, played one hand for $5, lost and left. The hold percentage for the table is $5/$1,000, 0.5%.
Over at the second blackjack table, the player bought in for $5. He also left after losing $5. The hold percentage here is $5/$5, 100%.
At BJ-3, the player bought in for $10 and left after losing $5. The hold percentage is $5/$10, 50%.
Each table won $5, yet player behavior caused very different hold percentages.
Here is how Don sums up the usage of the hold percentage.
To sum up, the house edge is the percentage of the players' bets that the house keeps. The hold percentage is the percentage of the players' buy-ins that the house keeps.
One of the themes at the recent Global Gaming Expo was how to get millennials in the casino. One tactic is to have skill-based slot machines. I played a few of them. I got killed -- figuratively and financially -- at a first-person shooter game. I'll stick with video poker.
I would like to add another tactic that casinos, particularly in Nevada, should investigate. Go smoke-free.
Today's 20- and 30-somethings have never experienced smoking on airplanes or in restaurants or workplaces. A casino's air scrubbers may keep the atmosphere clear, but they're of no help when the player next to you lights up.
Casino smoking is already on the decline. According to this column by Howard Stutz in the Las Vegas Review-Journal, 18 states prohibit smoking in casinos while six (Nevada, Pennsylvania, New Jersey, Indiana, Louisiana and Mississippi -- the largest markets) allow it. Stutz does say, however, that 75% of Atlantic City casino floorspace is non-smoking.
I hope that Atlantic City's floorpeople are enforcing the non-smoking areas. Many, many years ago I was playing in the non-smoking area of an Atlantic City casino when another player came in to the area and started smoking. I pointed this out to a slot floorperson and she said that "no smoking" was just a request and not a ban.
Recently, though, I've seen smokers asked to leave the sportsbook area at the non-smoking Westgate Superbook. And a slot floorperson at the Suncoast told a smoker playing video poker in the non-smoking section where he could find the identical paytable where smoking was allowed. MGM Grand went completely non-smoking in its hotel rooms. Some of the casinos in which I play have good video poker paytables in their non-smoking sections. Some of the casino employees I've spoken with have said that their casinos are looking at expanding and improving their non-smoking sections.
I worked for Pan Am when smoking on airplanes was phased out. As employees traveling on a space-available basis, we had to sit wherever there was an empty seat. My non-smoking colleagues and I were relieved when smoking was banned onboard -- and when New York City banned smoking in workplaces and we no longer had to breath the second-hand smoke from Bob and Roger's Marlboros.
Going smoke-free on airplanes, in addition to being better for the passengers and crew, was better for the cleaners. It costs the airline much less to clean a smoke-free plane. I assume smoke-free casinos would have similar savings for cleaning. The only disadvantage to banning smoking on an airplane, according to one maintenance worker I sat next to once, was that maintenance could find all the pinholes on the fuselage by looking for the gray rings around the holes. I don't see any similar disadvantage for a casino.
The flight attendant's unions played a key role in getting smoking banned from airplanes -- and other workplaces. For the flight attendants, it was a health issue. At the recent G2E, the Las Vegas dealers' union demonstrated to raise awareness of the health issues of casino smoking for both dealers and gamblers.
Smoking bans work best when all casinos are subject to them. A decade or so in Canada, a casino that went smoke-free lost business to a nearby casino that did not ban smoking. (I'm sorry that I can't find the paper about this situation that I read many years ago so I could cite it). A more complicated scenario played out recently in New Orleans, according to the Stutz column.
Orleans Parrish banned smoking in public buildings, including Harrah's New Orleans, in April. The casino reported a 16% decline in revenue in May and a 31% decline in June.
Strangely, the two nearby casinos did not report an increase in revenue and Harrah's reported a 26% increase in revenue for July. It's hard to say what effect the smoking ban had. Still, I think it's best if all casinos in an area have to play by the same smoking rules.
The one gotcha in the universal ban plan is that Native American casinos, which are on sovereign land, are exempt from state laws, according to Stutz.
So, my advice to casinos is don't fight, embrace statewide smoking ban proposals. Millennials will have one less reason to stay away and your current non-smoking patrons will be grateful.
Send your slot and video poker questions to John Robison, Slot Expert™, at email@example.com. Because of the volume of mail I receive, I regret that I can't reply to every question.
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