CASINO OPTIMIZATION MODEL

Introduction

 

Casino floor is a complex operation with multiple variables and significant volatility. To maximize profits, you need a model that explores a multitude of possibilities in order to discover the best outcome. 

Table profit is given by the formula:

"Table Revenue - Table Cost"

where Table Revenue is a product of House Advantage, Game Speed, Table Utilization and Average Bet. 

 

Since Game Speed decreases non-linearly as utilization increases, OPTIMAL patrons per table is a trade-off between Game Speed and Head Count per table.

 

Optimization Model Process

 

  • Update variables from ongoing surveys
  • Calculate optimal utilization
  • Forecast players' headcount every 2 or 4 weeks
  • If there are table/labor constrains, use an optimization engine
  • Provide table opening guidance every 2 or 4 weeks

Trade-off illustration: low cost vs highest profit

 

Let’s assume the following scenario:

Game type: Non-Commission Baccarat squeeze game

Max number of players: 8

House Edge: 1.45%

Table costs: USD 15/Hr

Tax rate: 20%

Table min: USD 200

 

Through observations have been identified the following relationship between game speed and number of players:

Game Speed decreases non-linearly as utilization increases

The most obvious question casino operators have is: shall I keep eight players at one table to reduce costs or open eight tables to achieve higher game speed?


Option 1: One table with eight players

Labor cost / Hr = 15

Profit / Hr = Average Bet * Game Speed * Number of Players * House Edge * Number of Tables – Gaming Tax – Table Cost * Number of Tables


Profit / Table / Hr = (200 * 47 * 8 * 1.45% * 1) * (1-20%) – 15 * 1 = 857

Profit / Player / Hr = 857 / 8 = 107


Option 2: One player / table, on eight tables

Labor cost = 120

Profit / Table / Hr = (200 * 70 * 1 * 1.45% * 8) * (1-20%) – 15 * 8 = 1,179

Profit / Player / Hr = 1,179 / 8 = 147


Profitability is maximized by ensuring the optimal trade off between game speed and headcount for each table.

The results reveal that while the most cost-efficient option is to keep all players at one table, it is more profitable to spread them across eight tables.

Profitability is maximized by ensuring the optimal trade off between game speed and headcount for each table.

However, it doesn’t mean that this rule is applicable for all game types and table minimums/average bets.

 

In the next section we’ll compare two scenarios:

(1) Table Minimum = Average Bet

and

(2) Table Min ≠ Average Bet.

Why accurate data is important? 

 

Scenario 1: Assumption Table Min = Average Bet.

Right hand side table calculates the maximum profit / player / hour when table minimum is $25.

 

When average bet = table minimum = $25, the highest player contribution is achieved at 4 players / table.

Similarly, you can calculate the optimal occupancy for every game type and price point.

 

However, in real life the average bet is higher than table minimum and the impact on optimization model and profit could be significant.

Scenario 1

Scenario 2

Scenario 2: Empirical observations determined that Average Bet = 2.5 *Table Min.

In this scenario we re-calculate profitability when average bet is 2.5 times higher than table minimum.

The table shows that under these circumstances optimal utilization is now 2 players/table.

 

Financial Impact 

 

If management assumes that average bet = table minimum, table profit is reduced by $109 / Hr.

 

In conclusion, it is vitally important to correctly determine the game speed and average bet before beginning optimization process.



Optimization Modeling Process


Step 1: 

Update input variables from on-going observations.

Use EasySurvey apps to efficiently and accurately collect all relevant information.




Step 2

Using above described methodology, calculate average bet and optimal headcount for each game type and price point taking into consideration average bet size.


Step 3

Forecast player visitation by game type, day and table minimum

Step 4

If there are table / labor constraints, use an optimization engine to optimize the open table hours and table minimums.

 

Step 5

Provide scheduling / casino ops with detailed information by day, hour, game type and table minimum.

Grey and pink hours represent the main and mid shifts respectivelly.

If necessary, add more shifts to open more tables as headcount increases.

 

Conclusion

 

Since casino floor is a complex system and optimal floor state is constantly changing, do regular observations to update game speed and average bet values.

 

Please note this is a sample and the above figures may not reflect reality.

 

Use EasySurvey apps to efficiently and accurately collect all relevant information. 

Do you need help?


Our casino profesional team will guide you step by step through the optimization process.


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