Despite the anticipation over the new high-stakes gaming salons, there may not be enough whales or high-rollers to fill the silk-lined, velvet brocade seats.
That’s the message of former gaming executive Jim Kilby, who now works as a consultant and Boyd Professor of Gaming at UNLV.
Kilby believes whales ”” players capable of betting $100,000 per hand or dropping $1 million in a session ”” are fast-becoming an endangered species.
The problem, according to Kilby, is two-fold: High-stakes gamblers have learned to tailor their play to maximize benefits and minimize losses; and casinos themselves throw away profitability by “overfeeding” whales with excessive perks and rebates.
“Players have become very sophisticated,” Kilby told GamingToday. “Once he has milked a casino for all the comps, rebates and discounts he’s entitled to, he moves on to another casino and starts the process again.”
Kilby said the lack of loyalty, among other things, led to the demise of high-stakes gaming at The Rio. “Over the past four years, the amount of time a premium player spent at a gaming session declined by about 40 percent,” he said.
Compounding the problem is the fierce competition among casinos, which have driven discounts and rebates to levels that are dangerously close to wiping out profitability.
“The competition has either limited or eliminated the profit associated with the lucrative premium player,” Kilby said. “And casino executives seem unable to see the error of their ways.”
The result, he added, is that casinos that offer, say, a 20 percent rebate of a player’s losses, can swing the advantage to the player.
While it may sound like fuzzy math for a 20 percent rebate to dissolve 100 percent of the house edge, Kilby cites a sampling of baccarat bets, where the casino advantage is 1.06 percent, tracked against several player discounts.
“Casinos get into trouble when they start rebating and comping the player who has a single $100,000 loss the same way they do the player who loses $100,000 over 300 hands,” he said. “It won’t work ”” the win for the casino associated with a single hand scenario is only $1,060, which is nowhere near enough to pay for discounts, airfare or other comps.”
Throw into the equation the fact that there’s no refund when the player wins, and you have the situation where the effect of the player’s rebate is greater than the face value of the discount itself.
“What you then have is a casino’s baffling rebate policy that’s capable of converting losing players into winners,” Kilby said.
So, what’s a casino to do, stop rebating player’s losses? Not at all, he said.
Kilby suggested player tracking systems that ensure a “true average bet” that allows for a profitable discount on losses.
One casino host, when asked about the system, said it could work for mid-level players, but the highest of high rollers may not embrace it.
“The bigger whales probably won’t take the bait,” he said.