The Casino Business Model



Modern casinos are like indoor amusement parks for adults. They boast lavish hotels, musical shows, lighted fountains and shopping centers. But casinos would not exist (or bring in billions in profits for their owners) without the games of chance that provide patrons the thrill and possibility of winning big money. Slot machines, blackjack, roulette, craps and keno are the casino’s lifeblood.

Gambling was illegal for much of the United States’ history, but that didn’t stop it from happening. It took decades before Nevada legalized gambling, and even longer for Atlantic City and New Jersey to get their start. Iowa was a pioneer in riverboat gambling, and Native American casinos also proliferated during this time.

Casinos’ business model relies on the fact that every game has a built-in house edge, usually no more than two percent. This advantage makes it very difficult for a casino to lose money on any given day. To make this possible, the casino takes a commission on all bets placed in its establishment, known as the vig or rake.

Casinos make a great deal of their money from high-stakes gamblers, who are referred to as “high rollers.” These people spend huge sums, and casinos offer them special perks to keep them coming back. These include free and reduced-fare transportation, luxury living quarters in the casino’s hotel, and a variety of other “comps.” Low-stakes gamblers are offered comps too, but they are less expensive because their gambling doesn’t generate as large a profit for the casino.