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EXCERPT FROM CASINO-OLOGY 2

by Bill Zender

Note: This new book by Zender is written for casino management but there is much that players can glean from the book to see what Ďthe other side thinks and does" regarding the casino games they offer the public. The following excerpt is from Chapter 31, "Side Bets in Blackjack: Everything You Wanted to Know But Were Afraid to Ask." The book is available at http://www.shoplva.com/products/casino-ology-2.

 

Side Bets in Blackjack: Everything You Wanted to Know, But Were Afraid to Ask

 

Up until 10 years ago, I didnít believe in putting side bets on the blackjack layout. I was a casino purist and thought side bets added zero benefit to the basic game. Times have changed and so have my thoughts on the subject. Side bets have become popular, primarily because customers have grown bored with the basic game and intrigued by alternative table games. Players are looking for a better entertainment experience. They want more gamble than is presently provided by blackjack alone.

Blackjack side bets provide the 1st century casino executive two distinct benefits. First, when managed properly, side bets create an important additional revenue flow for the casino. Second, as a diverse wagering attraction, they add additional value to the games.

As a proactive table-games manager, you probably realize the importance of using a side bet on your main 21 game. Now you need to do the following: Decide what type of side bet best suits your operation and the customers who frequent the table games; understand the rules, objectives, and procedures; have a grasp of the edge and how much additional revenue the investment in time and proprietary cost will produce; and have a guideline for determining the performance and life cycle of the side bet, so you can gauge when itís time to shop for a new alternative.

 

Profitability of Blackjack Side Bets

One question the casino executive should be asking himself is, "How much revenue can I realistically expect a side bet to produce?" The answer is based on several factors.

ē How much bet utilization can I expect on each table?

ē What is the mathematical house advantage of the side bet?

ē What will the amount of the average bet be per side-bet wager?

Letís establish a few assumptions: 5% of players will wager on the side bet and the average bet will be $5.

Other metrics to consider are:

ē The house advantage on this side bet. For this example, the H/A is 2.7% (Lucky Lucky option).

ē The number of rounds a dealer will achieve per hour (60 rounds per hour).

ē The average number of blackjack players per table (four players).

ē The average number of blackjack tables open during the 24-hour period (eight open tables).

Table 28 illustrates the advantage of using a side bet. Based on the metrics, the side bet will create approximately $114,000 in additional revenue. It will also increase the gameís hold percentage, since a greater portion of the playerís buy-in will be won by the casino. Side bets could raise the hold percentage by a half of one percent or better.

Table 28

Calculating Side-Bet Revenue

Metrics

 

Return

 

Tables open

8

Hourly revenue

$12.96

Players per table

4

Daily revenue

$311.04

Utilization in %

5%

Monthly revenue

$9,487

Average side bet

$5.00

Annual revenue

$113,841

Rounds per hour

60

   

House advantage

2.7%

   

Things to Consider

When Selecting Side Bets at Blackjack

Now that you understand the advantages of using a side bet, which one should you use? There are a number of factors you need to consider before ironing a side-bet decal on your blackjack tablecloth.

Following is a list of considerations for deciding on a specific side-bet format. The smart executive will evaluate each of these areas and weight each oneís importance based on the need and expectation of his or her casino.

Customer appeal of the side bet: Find out if your customers are interested in a side-bet option. This might require you to organize focus groups. Another avenue for research is, "What does the other guy have?" Check other regional casinos to see what side bets they offer and note the average amount wagered. Other casinos are always good testing grounds. This way you can see what problems occur during play, such as dealer errors and time-and-motion problems resulting from the side-bet procedures.

Cost to lease side-bet rights: Not many side bets are public domain. Plan on paying a proprietary cost for the use of side bets, especially the more popular ones. Be sure you understand the terms, conditions, and length of obligation before signing on the dotted line. Itís important that you establish some contractual relief in case the trial period is unsuccessful, as well as a reasonable out clause when the side bet loses customer appeal, which all side bets do eventually.

Use of the side bet: Youíll need a benchmark for average side-bet use by your customers. It could be based on use as a percentage of the customers at the table or a percentage of total money wagered. When a new side bet is placed on the tables, it will gain immediate play due to the curiosity factor alone, but once the side bet is established as a regular option, this is the time use should be measured as baseline play. When use falls below a pre-established mark, it might be time to look for another more appealing side-bet option.

Average amount wagered on the side bet: All side-bet structures limit the players to a specific amount that can be wagered. This is done to limit the casinoís exposure during the occasional jackpot payoffs. In some instances, the players are limited to a specific dollar amount they can wager. Other side bets allow the customer to wager within a bet range, usually restricted to a percentage of the customerís original wager. Be sure to take this structure into consideration when making your decision.

The side betís expected return to the game: Donít take the vendorís word on how much additional win his side bet will produce. The knowledgeable casino executive will determine the expected value of the proposed side bet before entering into an agreement with the owner of the side bet. This can be accomplished by multiplying the average amount wagered by the use percentage and the wagerís mathematical advantage (see Table 28). If the calculations donít add up to an acceptable return, donít purchase the rights to that side bet.

Side-bet advantage: Side bets vary by advantage, as do the methods the side bets use to determine winners. Some side bets have house advantages as low as 2%-3%; some are as high as 25%. Sometimes the higher advantages, which look inviting, are detrimental to long-term success. Customers wonít make side wagers if they donít see a reasonable chance to walk away an occasional winner. The higher house advantage needs to be supported by larger top payouts. The occasional big payout will attract players looking for that pie-in-the-sky big win.

This theory is also related to the frequency in which the side bets hit or win. If the side bet with smaller payout multiples doesnít hit on regular basis, the customers wonít place their dollars in the smaller betting circle. A side bet with a lower payoff, but a higher hit frequency, might be more appealing to your customers.

Payout exposure: How much is your casino willing to pay out for a single winning player? For example, the Super Sevens side bet has a maximum payout of 5000-to-1 if the side bettor receives three suited 7s. What if the bettor is allowed to wager up to $25? Receiving the three suited 7s would give the player a $125,000 windfall. Does upper management have the tolerance to book a $125,000 loser?

Regulatory approval: One more factor to consider is whether or not the side bet youíre interested in using has been approved by your local regulatory authority. You might want a side bet thatís available for immediate use, instead of waiting for approval from the state board or commission.

Also, donít be too quick to go for a beta side bet. Field-trialing can result in losses due to poor mathematical analysis, game slowing, and low player-acceptance rates. Personally, I prefer a side bet that has been tested, approved, and shows indications of high player appeal.

Other areas to consider are the complexity of the side bet and the degree of support and training youíll receive from the side-bet vendor. How easy will it be for my dealers to learn the procedures? Are the winning combinations and the payoffs structured so my dealers will keep the errors down to a minimum? Does the vendor provide the training? Will the vendor provide future training after the initial training is completed?

To be continued next month.

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