The gambling industry is booming and casinos have been able to thrive despite increasing regulatory hurdles. The glittering lights, free drinks and luxurious settings do not come for free though; casinos must employ intricate strategies to remain profitable. This article delves into how they manage to do so and what makes them a profit-making machine.
Casinos make money through a combination of gaming and non-gambling revenue streams. In addition to offering a variety of games, many casinos also offer restaurants, bars and entertainment shows to keep visitors on-site longer. These extra revenue streams can help offset losses from the game floor. In addition, casinos take advantage of the psychology of compulsive gambling behavior to increase profits. For example, players who chase their losses may be tempted to place larger wagers in an attempt to recover their initial investment. While this behavior is harmful to the player, it can generate significant profits for casinos.
The profitability of a casino can be measured in terms of gross operating profit, which includes income from gaming, rooms, food/beverage and other sources. The nine Atlantic City casinos collectively earned a gross operating profit of $146 million in the second quarter, which is down more than 20% from a year ago. However, gross operating profit from casino games accounted for more than half of the total profits, while net profit from other categories was less than a third of the amount.