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Casinos Get Greedy

By Jeff Hwang - Updated Nov 16, 2016 at 5:14PM

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They may no longer market strictly to losers, but some still do.

In You Say Gambling, I Say Gaming, we discussed how the gaming industry has evolved. Today, casinos tend to market themselves as entertainment, rather than strictly to "losers." Unfortunately, some casinos still treat their guests like suckers.

On April 1, over three months after federal agents raided and shut down Binion's Horseshoe in downtown Las Vegas, Harrah's Entertainment (NYSE:HET) reopened the casino to fanfare on behalf of former TMF Select (now Motley Fool Hidden Gems) pick MTR Gaming (NASDAQ:MNTG). In keeping with the Horseshoe tradition, the casino maintained the popular single-deck blackjack games -- sort of.

The problem
If you've been to Las Vegas in the past few years, you may have noticed signs from casinos proclaiming that "single deck" blackjack is back by popular demand. But in virtually every case, the game brought back is not the game in demand at all.

In the new single-deck version, a player blackjack now pays 6:5 rather than the usual 3:2. In other words, if you bet $10, make blackjack, and win, you get only $12, not $15. Thus, where the house edge against the perfect basic strategy player in the typical single-deck game is a paltry 0.15%, the house edge is now 1.45% -- about three times that of a six-deck game.

Here's the problem: Under the guise of giving gamblers the classic game that they want, these casinos are offering a game that's almost 10 times worse. And this is no innocent mistake, nor is Harrah's the only culprit.

Why the marketing works
The average low-limit gambler knows that single-deck is better than multiple-deck. What he doesn't realize is that 6:5 blackjack isn't the game he actually wanted to play, or he doesn't know just how much worse the game really is.

That this is no oversight is clear. After all, like the other alternative blackjack games, the newer 6:5 single-deck blackjack is almost exclusively offered and marketed to the unsophisticated low-limit gambler. Moreover, the advertising never trumpets the fact that the casino is "Now Offering 6:5 Single-Deck Blackjack!"

You can't blame the casinos for removing the classic 3:2 single-deck games. The house edge is low, and the game is extremely easy for card counters to beat for low stakes (assuming they get away with it). The fact that they are using only a single 52-card deck also means the dealer spends as much time shuffling as dealing, resulting in further loss of casino profit.

That's why double-deck and multideck games have become so prevalent. That's good business. But casinos offering 6:5 blackjack and using the term "single-deck" as a marketing tool are making suckers out of their guests.

The game should go
The funny thing about it is that the culprits aren't like the casino in New Mexico that preached gambling as a financial solution. They are financially healthy and otherwise reputable casino operators like Harrah's, Boyd Gaming (NYSE:BYD), Station Casinos (NYSE:STN), Mandalay Resort Group (NYSE:MBG), MGM Mirage (NYSE:MGG), and Caesars Entertainment (NYSE:CZR), among others.

Already, the game has spread to casinos (the same culprits) in Mississippi. The marketing needs to be altered, or these casinos had better revert to the double-deck replacements. Gamblers will eventually wise up, and when they do, I can't see how these companies won't be hurting their brands with this tactic.

If you're not in the mood for gambling, try Motley Fool Hidden Gems . The trial is free -- gotta love those odds.

Fool contributor Jeff Hwang owns none of the companies mentioned above.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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