This is the online home of David G. Schwartz, who Higher hold=less play?
As you may know, I’ve been immersed in a mammoth study of Nevada casino slots’ hold percentages. It’s driven by the question: “Does raising hold percentage actually decrease play?”
That would seem to be the intuitive answer. If people get less value for their dollar (assuming that value=time on device), then they will be less ready to play.
The revenue statistics, however, don’t seem to say so. Here’s a chart that shows the total number of slots, the win, the hold percentage, and the total amount played, or handle, for the Las Vegas Strip 2000-2008.
As you can see, both handle and win steadily rise after the 2000-3 decrease. The hold percentage increased during the slump, and continued to go up as the handle and win grew.
Here’s another chart that may make more sense visually. I’ve had to multiply the hold % by 10,000 to get it to show up.
It doesn’t seem that rising hold percentage has anything to do with the handle. If it did, you’d expect to see handle falling as hold percentages go up.
This is where it gets tricky. You can spin it just about any way you like. Those arguing for loose slots can say that in 2008 casinos reaped what they had sown as players finally got fed up with tighter slots. But the visitor numbers don’t bear that out: people who came to Las Vegas still played, tight-slots advocates might argue.
There doesn’t seem to be a direct correlation, and the fact that revenues grew most impressively during years with big jumps in hold suggest that something else is at work here.
It’s worth mentioning that, thanks to higher hold percentages, that in 2008 total handle fell to 2004 numbers, but slot win fell only to 2005 numbers. That’s an argument that most executives–and shareholders–would probably find persuasive.
Comparing 2008 to 2000, we see more than $800 million more in revenue and over $6 billion more in play, with an installed base that’s shrunk by about 18 percent.
This is why the slot hold study is taking a while–it seems like every time I look at a source of data that will conclusively prove a link between hold and revenue (one way or another), I’m back to square one. After analyzing revenues, I thought that hold might be a fruitful avenue, but I’m still back where I started.
It doesn’t seem possible to prove a connection between hold and handle, and higher holds have led to consistently higher revenues. It’s just possible that the bean counters are right. On the other hand, handle has been falling faster than win, so those who demand looser machines may have a point. On the third hand, a decrease in hold percentage did not figure in the 2004-2007 boom. There just doesn’t seem to be a correlation.
In the paper, I explore some theories for the climbing hold percentages that may suggest the true reasons for the increase have less to do with the dictates of slot managers than changes in technology and player preference.
Posted in business of gamblingon 11/12/2009 11:07 am by Dave
11/13/2009 at 1:27 am
> “Does raising hold percentage actually decrease play?”
This question seems to presuppose that a person playing a slot machine even knows what hold-percentage is. Slot players rarely have anything more than confusing impressions of rumors and myths coupled with a vague impression of how long their money now lasts and used to last.
Consider one casino’s former slogan “the odds are in your favor”. Okay. Did any of the players ever believe that? Consider the oft-repeated but virtually meaningless term about “loose”. Then ofcourse throw in actual comps versus recollections of comps. I’m not too certain a slot player really experiences any perception of “hold-percentage” when he is playing amidst rumors about slot machines that are more visible pay better or slot machines are “due to payoff” at various times.
There are often articles about “looseness” and then there are usually friends who return from Vegas and make comments about “tighter slots”. So what exactly is a player’s perception while at a slot machine? It seems that perceived payout and actual hold percentage would vary widely. Label something a “bonus spin” and its perceived as a payoff of some sort by the player. Award the player a free room or a free buffet and some players might consider that a payoff. So in what manner is an ignorant player’s perceptions altering the effect of actual slot hold percentages?
Players will play at a double-zero roulette wheel when a single-zero roulette wheel is but a few steps away. Players will play at a craps table with less than optimal field bets. Players often don’t even realize whether a blackjack dealer is hitting soft 17 or not, despite the large type letters on the layout. And I would suspect that the least sophisticated gamblers are the ones who even contemplate using a slot machine, so why should we expect rational behavior in relation to slot hold percentages.
11/13/2009 at 1:17 pm
FG–that’s what it looks like, doesn’t it. My favorite rationale for playing double-zero roulette is that “it gives you another chance to win.”
Since the more entertaining low-denom games also have higher holds, it seems that most players value entertainment over time on device. So maybe 6:5 blackjack and 10% hold slots are smart business. There’s absolutely no correlation that I can find between a rising hold and declining revenue or handle. In fact, rising hold has led to higher revenues.
11/14/2009 at 4:23 pm
>Rising hold has led to higher revenues…
There are notable incidents in the business world wherein raising prices of a product has been a higly successful step to take. The manufacturer of a home permanent could not sell his product at fifty cents but was able to do very well indeed when he raised the price to five dollars.
If you consider the hold to be the price of playing a slot machine, its likely that a fairly subtle increase would not be noticed given the fact that slot machines are played in a festive atmosphere that features free alcohol. A player might compare how long his bankroll lasts now with an impression of how long it lasted several years before, but I don’t know if a player could reasonably make a comparison for a shorter time interval such as a year. Perhaps some discerning soul would realize his bankroll is not lasting quite as long and would become upset enough to stop gambling but I doubt he would opt to go to a different casino since he really has no way of knowing if the Time At Play there is going to be better or worse. I could easily envision a gambler grumbling about an increased hold but being uncertain of it and uncertain as to his options. Under these circumstances, increasing the hold would generally tend to go unnoticed. A few discerning souls might realize what was happening and quit playing but those few gamblers can easily be replaced.