A year ago, we discussed the 5 Yielding Questions operators need to ask themselves in the wake of covid-19 and discussed reopening best practices to maximize table games yield with dramatically restricted operating conditions - including lower capacity, open hours, and fewer betting positions.

In December 2020, we posted an infographic that surveyed 19 properties across North America and how they managed their business with the restrictions. Despite lower overall revenues, Hold % and profit margins were significantly higher. Inadvertently, operators realized that with higher table minimums and fewer players per table, they were observing some of the highest Hold % numbers ever recorded at their property. This was expected and change in Hold % varied based on the game segment. CDC Gaming Reports also published an article on this topic: Table-game hold percentages on the rise, Tangam study shows.

Fast forward to today - in many jurisdictions across the country, social distancing restrictions are either easing or being completely lifted and operators are again faced with a new challenge - should we go back to the pre-covid strategy by lowering the table minimums and unlocking all the betting positions? This time around, at least operators are better equipped to help design a better strategy with data from both time periods. The real question is: do you know the expected impact of your strategy on financial performance? 

It’s fair to assume that most operators will not be able to go back to the pre-covid table open hours due to staffing constraints and that's consistent across almost all jurisdictions. Player demand is also on the rise and is expected to continue over the coming months which is also a common trend. 

Under these assumptions, the key decisions that operators have to make are the pricing/table minimum strategy and whether to revert the table minimums and the number of betting positions to pre-covid levels.

We examine the relationship between both these levers and the impact to overall table games profit for a $25 and $15 BJ segment.

Table Minimum Impact to Profitability

In this first chart, we compare the Net Contribution Per Open Hour of a $25 BJ Segment compared to a $15 BJ Segment for each table occupancy. It’s no surprise that the $25 BJ segment is almost ~2x more profitable than the $15 segment and dropping limits could have a dramatic impact on profitability with all other factors being equal. 

In addition, considering that operators may not be able to increase open hours right away, the question then becomes: do you want to sacrifice the game experience of your high-value patrons to allow lower average wagers? We have ignored scenarios where the $15 table is full and new $25 patrons walk in and can't find a seat. The obvious impact to the business is a loss of revenue but how easy is it to persuade those patrons to come back?

Number of Betting Positions Impact to Profitability

In this second chart, we analyze the change in profitability for each segment as we increase the occupancy or number of betting positions. As we increase the number of betting positions for BJ games, the expected increase in overall revenues diminishes and is marginal when we go to the last few positions. Furthermore, we’re significantly better off with fewer $25 positions than increasing the number of spots in a labor-constrained environment. 

It’s important to analyze this for all segments. Certain games, like poker derivatives, will have an immediate positive impact on revenues with more betting positions because the increase in turnover is significantly higher than the reduction in game pace with each extra position. Also, players in this category are more sensitive to table minimums given that they are wagering anywhere from 3x - 5x the table minimum for each round. The next chart illustrates an example for a $15 Ultimate Texas Hold’em poker derivative segment.

For other segments, like Roulette and Craps, there is a point of diminishing returns, where the increase in the number of betting positions doesn’t make up for the reduction in the game pace and going to the full number of betting positions may hurt revenues if all the positions fill up. As an example, here’s the Net Contribution chart for a $25 Single Zero Roulette chart where the last few positions hurt the profitability of this segment.

Conclusion

There are several considerations when determining the strategy as the restrictions are lifted. The primary consideration is the open hour strategy and if the property will be able to meet the expected demand. 

Assuming that demand will continue to rise in the near term and staffing is still going to remain a constraint, then it’s imperative to maintain a higher table open pricing strategy. 

And finally, while increasing the number of betting positions will help for some segments, the increase may be marginal for others and hurt some segments. 

There are variables that we haven’t considered in this post for simplicity. For example, the players’ time-on-device and how that varies with occupancy. As the table reaches capacity, not only do the existing players face a slower game, they also tend to spend less time since it’s a poor guest experience, especially for the higher limit players.

We have previously published a post that delves into more detail on time-on-device, optimal utilization and number of positions on the table. 

The most important take-away would be to increase the frequency of assessing and refining your strategy based on operational and financial performance for each segment of the business. 

‍

Footnotes:

The net profit or net contribution per patron visit is calculated as follows:

Net Contribution per Open Hr = Theo Revenue per Open Hr – Gaming Taxes – Comps – Labor Cost per Hr

Theo Revenue per Open Hr = Rounds per Hour (RPH) x Average Wager x House Edge x Occupancy

We use the following assumptions for this post: