We all know that Las Vegas' megaresorts are built on the back of billions of dollars in gambling losses. But do you know where those losses come from?
Blackjack, craps, and poker are commonly played table games in the U.S., but they're not even close to taking the top spot for revenue generators in the casino. Here's where casinos really make their money.
The table game you've never heard of
Baccarat may not be a table game you've ever heard of, but more than one out of every three dollars bet at gaming tables are put on baccarat. In the past 12 months, $1.38 billion was lost at baccarat tables on the Las Vegas Strip, easily outpacing $831.0 million lost on blackjack and $258.0 million lost on craps.
The reason you may not know about baccarat is that it's often played in hidden VIP rooms where high rollers gamble privately. But when they play, they bet big. High-end casinos such as Wynn Las Vegas, Bellagio, and MGM Grand's Mansion area will take bets of $250,000 per hand, or more. That can lead to big wins and big losses, but long-term the house always wins.
Those bets are impressive, but they also make casinos susceptible to a big loss in revenue if players stop betting. In the past twelve months, baccarat play in Las Vegas is down 23% and mini-baccarat (lower stakes) has fallen 34%. The drop is likely due to the same challenges facing Macau -- a crackdown on corruption in China and a weak Chinese economy -- because most players are from Asia.
Even with the recent drop in play, baccarat is by far the biggest table game in Las Vegas. And the bets are being made by players you'll probably never see.
The game everyone knows how to play
Baccarat is the biggest table game in Las Vegas, but slots are big business as well. In the past 12 months, $3.0 billion of $6.3 billion in gaming revenue was from slots. And the most popular slot games are the ones with the lowest stakes.
Penny slots generated $1.14 billion of revenue in the past year, the largest of any denomination. One of the reasons 1-cent slots made so much money is that they have some of the worst odds in the casino. With each dollar bet, the casino won 11.71 cents over the past year, compared with 7.96 cents for 5-cent slots and as little as 4.81 cents per dollar bet at 25-dollar slots.
Low-stakes games are so accessible that thousands of people play them every day, even simply passing by the slot machines at the entrance of the casino. So they drive a large percentage of a casino's revenue, especially beyond the high-roller baccarat rooms.
Casinos depend on more than the games you know and love
The games you may know and love at a casino may not provide the kind of revenue casinos need to survive. Baccarat and penny slots generate a large chunk of a casino's revenue, something to consider next time you're in Las Vegas.
But a warning if you're thinking about betting on penny slots: The odds of winning are some of the worst in the casino, so you may want to take a 5-cent machine or learn how to play a table game to increase your odds.
Travis Hoium owns shares of Wynn Resorts, Limited. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.