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How do poker rooms make money?

Oakville, Ontario
Level Contributor
170 posts
7 reviews
10 helpful votes
How do poker rooms make money?

I've been thinking about this and for the life of me I can't imagine how poker rooms can be profitable. This analysis is based on my experience at Aria.

Revenue: They make a rake of maximum $4 per hand. They deal on average one hand every 1.5 to 2 minutes. Take the most advantageous number and you get revenues of $160 per hour (even though not all hands generate the maximum rake). With 9 players per table that's just under $18 an hour.

Expenses - 1) Beverages. Each player (and their guests who aren't even playing) get free drinks. Drink twice in an hour you're saving anywhere from$10 - $30 per hour.

2) each player makes $ 2/ hour for comps.

3) Employee salaries for dealers, chip runners, the cage and the floor men.

4) the other costs (i.e. eqipment, electricity, insurance, etc, )

Am I missing something? Why do they house them

London, United...
Level Contributor
276 posts
3 reviews
1 helpful vote
1. Re: How do poker rooms make money?

They don't make money per se.

They bring customers in to spend money on other things ..ie food sports books.Having all bases covered in the casino industry is important

Leeds England
Level Contributor
852 posts
4 reviews
2 helpful votes
2. Re: How do poker rooms make money?

The tournaments can help them make money.

Aria has two daily tournaments, with a $125 entry fee, of which $25 is kept by the house as an admin fee.

Assuming say 70 people enter each tournament on average, then that's $3500 a day in fees. On top of that they withhold a further 3% of the prize pool for the staff-another $420 per day to help cover staff wages. Some of the weekend tournaments have even higher admin fees-$45 for the Saturday $240 entry tournament for example.

Some of the smaller room's tournaments charge over 25% of the entry fee as an admin fee (Mirage 11am for example) which helps their costs considerably.

Aria is unusual though (in my experience) in that it has very well attended daily tournaments compared to most. The reality is most poker rooms don't justify their floor space which is why you see many of them reduce in size (Venetian, Mirage) or close completely (Luxor).

Omaha, Nebraska
Destination Expert
for Las Vegas
Level Contributor
9,694 posts
27 reviews
11 helpful votes
3. Re: How do poker rooms make money?

OK--free drinks. Not all players drink 2/hr, nor do they necessarily drink booze. AND the cost of providing those drinks is VERY VERY low. Fountain drinks are about .05. Booze is more but remember, actual cost is cents. Literally.

$2 in comps is at most $1 cost to casino.

And yes, casinos will take no income for an area if they believe they can make it up by those customers being there & spending elsewhere.

Poker rooms have been a mainstay in Vegas for years--and tournaments are a fairly new beast, comparatively speaking. So why did poker rooms exist before tournaments? Customers wanted it. Yes, casinos get rid of things they don't feel benefit the bottom line. BUT if they will lose to many customers by closing the poker room, they won't close it. So not surprising that slow poker rooms close & busy ones don't. But I get the shrinking size of some, certainly.

Edited: 6 years ago
Penrith, United...
Level Contributor
6,127 posts
5 reviews
6 helpful votes
4. Re: How do poker rooms make money?

The high rake.

Florida
Level Contributor
1,502 posts
6 reviews
1 helpful vote
5. Re: How do poker rooms make money?

If they deal 30 hands per hour and average $3 rake, that's $90. Why are you dividing that number by the number of players? It's $90 per hour.

Take that and extrapolate it by, say, 15 tables (just to bring some numbers down a bit since every table isn't filled at every moment of the day) and they're averaging $32,400 per day in gross revenue.

Add in whatever additional money they make by converting tables to tournaments where they take anywhere from 10-20+%.

Ottawa
Level Contributor
1,634 posts
47 reviews
43 helpful votes
6. Re: How do poker rooms make money?

I know some folks who have run poker rooms in other cities, and they explain it as that a poker room is thought of by a hotel as a gym. How does a hotel make money on a gym? They don't. But lots of people wouldn't stay at a hotel unless it had a gym. It's table stakes to a full resort experience.

And as other pointed out, your math isn't quite right. A well run room will easily break even or manage a small profit at least. But you're right that a couple banks of slots instead could easily have better ROI on the space.

Florida
Level Contributor
1,502 posts
6 reviews
1 helpful vote
7. Re: How do poker rooms make money?

As with most businesses, a poker room's efficiency increases with more revenues. A large room with lots of tables is more likely to be profitable than a small room averaging 4-5 tables because their costs per player are lower. A room running 40 tables may only have 2-3 floor managers while a small room with 4-5 tables still requires 1. Those managers and the costs of renting automatic shufflers are the two largest expenses of a poker room. Chip runners at most poker rooms have disappeared. It's a perk that's not worth the cost for the poker rooms in general. Nowadays most rooms send you to the casino cage or poker desk to buy your starting chips.

Poker rooms in South Florida are not loss leaders or hotel gyms. They're quite profitable, actually. Other poker rooms in other cities may operate differently but down here our poker rooms are gold mines. The only reason there aren't more is because they're only legal at parimutuel sites and Indian casinos. In a way that's a good thing because they probably wouldn't be profitable if that barrier of entry didn't exist.

California
Destination Expert
for Las Vegas
Level Contributor
52,694 posts
3 reviews
5 helpful votes
8. Re: How do poker rooms make money?

You are right. Many of them do not make a profit. And even those that do usually don't make enough as filling the space with slot machines would generate.

And it is no coincidence that a few smaller poker rooms have closed within the last year, and a few of the larger ones have cut down the number of tables. I fully expect this trend to continue, and that we will see more closures.

Poker popularity has always run in cycles. There was a big bump in popularity with internet usage and TV exposure. But that popularity has started to wane, and this is reflected in Las Vegas.

As mentioned, the poker room is often thought of as a guest amenity by the casinos. This is also true for the smaller sports books. Let's hope they continue to see it that way.

Dallas, Texas
Level Contributor
6,622 posts
14 reviews
30 helpful votes
9. Re: How do poker rooms make money?

Good question and nice topic of conversation.

13

United States
Level Contributor
88,645 posts
25 reviews
85 helpful votes
10. Re: How do poker rooms make money?

I believe the rake is more than $4 max. I know they cap the rake for each hand but can't remember how much but it's more than $4. Also can't remember the rake percentage.

I've noticed that some or maybe all CET poker rooms have steadily increased their buy-in for tournaments. The Flamingo daily tournaments are now up to $70. It wasn't that long ago the buy-ins were $50. Harrah's tournaments have gone up a lot too. PH daily tournaments are now $80.

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