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Why Does the House Always Win? A Look at Casino Profitability
In gambling, there's one certainty�one thing not left to chance: The house always comes out the winner in the end. A casino is a business, not a charitable organization throwing free money away. Like any other business, it has a business model in place designed to ensure its profitability.
KEY TAKEAWAYS
A casino has a number of built-in advantages that insure it, and not the players overall, will always come out a winner in the end.
- These advantages, known as the "house edge," represent the average goss profit the casino expects to make from each game.
- The longer you play, the greater the odds are that the result of your play will match up with the house edge�and that you will lose money.
- The house edge varies significantly among the different casino games, with blackjack the lowest and keno the highest.
The House Edge
No matter what game you choose to play, the odds of the casino winning your money are greater than the odds of you winning the casino's money. That's because all casino games are designed to provide the house with a built-in edge, diminishing the chances and the size of potential payouts.
For example, in roulette, the highest payout for a single number bet is 36 to 1. However, roulette wheels, besides having the numbers 1 to 36, also have a 0 and sometimes a 00 as well. The true odds of winning are 37 to 1 or 38 to 1, not the 36 to 1 that is the most the player can get paid on a winning bet.
The house edge, the odds advantage in its favor, represents the average gross profit the casino can reliably expect to make from each game. On the games with the lowest house edge, the smallest advantage, a casino might only be generating about a 1% to 2% profit. On other games, it may make profits of up to 15 %to 25% or more.
The house edge on a 00 roulette wheel is 5.26%. For every $1 million that's bet at the roulette tables in a casino, the management expects to pocket a profit of slightly more than $50,000. The other approximately $950,000 is returned to the bettors. The casino isn't aiming to bankrupt a player in one sitting � it just wants to make sure that in the long run, the players walk out with a little less money than they came in with, leaving money in the casino's pocket.
How Players Lose More Than They Expect
Many people who are aware of the house edge still don't really grasp its implications for their bankrolls. They believe that the roughly 5% edge the house has at the roulette table means that they can reasonably expect to sit down with $100, gamble for a few hours, and the odds are that they will only lose about $5. They fail to understand that the house edge doesn't apply to their starting bankroll, but to the total amount they wager.
For example, assume a person is making $5 bets on every spin of the roulette wheel, and the wheel spins 50 times an hour. While he may be winning some bets and losing some bets, he is wagering $250 an hour. If the house edge plays out perfectly, at the end of four hours of play, he loses $50, or 5% of $1,000�an amount 10 times greater than what he had expected from his misunderstanding of the house edge.
The Extra House Edge
The longer you play, the greater the odds are that the result of your play will match up with the house edge. In the short term, a player may well be ahead; over the long haul, the house edge will eventually grind the player down into unprofitability.
Knowing this, casinos do all they can to keep you playing longer. Casinos are famous for lacking clocks and windows. They're designed that way to keep players unaware of the passage of time. Many first-time players are pleasantly surprised at being offered free drinks by the management. Those complimentary libations will cost you, though: being inebriated doesn't usually improve their judgment when it comes to betting.
The Best and Worst Casino Games
Although all the laws of probability are in the casino's favor, the house edge varies significantly among the different casino games. The game with the lowest advantage to the casino is blackjack; if a player follows a perfect betting strategy, the house edge is only 0.5%. At some very liberal casinos, the house edge at blackjack may even be as low as 0.28%. Craps offers the next lowest edge, 0.8%, followed by baccarat with a 1.06% house advantage.
The smallest edge only applies if the player is playing the odds perfectly, which few people do. The house edge increases as players wager less expertly. Roulette remains one of the most popular casino games, but it carries a high 5.26% edge for the house. The house edge on slot machines goes as high as 17%; for keno, it is a massive 25%.
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