Tell me if this casino is crazy

Where I gamble on this casino ship, they have offered free complimentary cabins for their Slot Tournament.
I have never played slots before so I was not invited but my friend who plays slot sometimes have been invited. He goes on the ship about 5 times a year and has accumulated about 50 points on his players card. According to my estimation that would translate into a loss of about $2000.
What was his invitation? He gets a free cabin for up to 3 pax for a 3N/4D cruise on the Superstar Virgo, sister ship of the NCL Spirit presently sailing out from NY. No other payments required except for seaport tax.
What is the tournament like. In groups of 20, each person has to feed $100 into the slot machine and the top 5 players would go into the next round. The total prize money put up by the casino is $100,000. Unfortunately he was knock out in the first round and lost his $100.
Why would any casino give away Comps like that. All they could hope for is for my friend to come back and gamble some more.
Does not make any business sense to me and I think this casino ship management is crazy.

 

In order to fully analyze this, some key pieces of information are missing.

1. How many people did they invite to this tournament?

2. Do the players have to feed a live $100 bill into their tournament machine for each round?

3. Do they get to keep their winnings from the tournament machine play itself?

Let's guess at some answers and analyze. Assume 200 players are invited. Each puts in a $100 bill for the first round. 200 players x $100 each is $20,000. 1/4 of them advance to the 2nd round and each feeds another $100 in. 50 x $100 is another $5,000, so that's $25,000 to the casino so far. We really don't need to know how many advance to round 3 and beyond because the $100 feeds are small change for purposes of this calculation. We'll also assume that credits won during tournament play have no cash value.

Mr. T's friend lost $2,000 while earning this comp. If 200 people are there and each lost the same amount, that's $400,000 realized by the casino during "qualification" for this tournament. Now the casino is ahead by a total of $425,000 and that doesn't include what was lost by those players and their friends while gambling during the trip, outside of the tournament itself. The prize fund paid out $100,000. I'd say the casino has a pretty sharp promotions manager!

 

Let me answer you questions first.
1 400 players were invited. Not sure exactly how many participated in the tournament
2 Yes they feed live $100 in each round
3 Yes they get to keep whatever balance is left at the end of the round.

I find your math fancinating to put it politely. You throwing the fiqure of $400,000 into this mix. This money is part of the upkeep money and maybe profit for the casino and cruise ship for 1 whole year.

Have you ever seen such similar tournament offering elsewhere previously. Beats me when you said
"I'd say the casino has a pretty sharp promotions manager!"
So the casino is far from crazy in your reckoning

 

Yes, I'd certainly say that the shipboard casino management is far from crazy, especially with the revelation that they invited 400 folks to that tournament instead of the 200 that I'd guessed - which doubles my original $400K guesstimate. It's almost impossible to figure out what they made during that cruise without inside info that they'd never reveal. For example, we'd need to know the payback percentages for their tournament slot machines and I'd bet my last dollar that those machines were not set in "tournament mode" since the players got to cash in the credits left over after each round of play. Not unlike a live-money BJT, except that BJ has a much better return for the player than slots.

Look at it this way. They invited 400 known gamblers, who apparently have an affinity for playing games (slots) which are nearly always negative expectation - sometimes severely negative. These gamblers are captives in an enclosed environment since there's nowhere to go once the ship sails. It cost the cruise company $100K for the prize money plus minor expenses to run the tournament. In return, 400 mostly clueless gamblers were tickled pink to receive such a perk. This fosters loyalty from the gamblers. The ship's casino likely lost money on that trip, but they'll get it back in the long run - bigtime.

 

I just want to run your last 2 sentences here again

"In return, 400 mostly clueless gamblers were tickled pink to receive such a perk. This fosters loyalty from the gamblers. The ship's casino likely lost money on that trip, but they'll get it back in the long run - bigtime. "

I agree with your statement above.

But have you ever come across such a huge give away by the casinos before. I don't think you or anyone else have seen anything like this by the casinos in the USA.

If I am correct then my point is that this huge give away is crazy.

Casinos give Comps based on the existing players volume and I bet you haven't seen casinos give away Comps and hoping and praying that the players will come back to play.

 

Really Ken, "Promotions of this size are run every month at most casinos."

Such give away is so common in the USA. I don't know if you will go back and play some more slots in that casino. Probably not. So how does it make sense for the casino. How do the casino make more money by giving away this upfront Comps. Maybe such give away is available only for the select few big time slot players in the USA.

You are right on the $2000 loss being the low end. What I am really saying is that even people who only play some slots sometimes get the invite.

 

Large prize pool slot tournaments are indeed very common in the USA - particularly in Las Vegas. They often draw 500 to 1,000 players and sometimes more. The larger the prize pool, the larger the draw. Slot tournaments are more common than any other type of tournament (except maybe poker). Most are by invite only and many are free to the invitee. Not only that but rooms are usually comped if you get invited. How do you get invited? By having a history of play, for enough money, at the casino sponsoring the slot tournament. So how do they make money?

Casinos LOVE slot players - and not just high rollers. They pour money into the casino's coffers at a huge rate while the casino's cost is relatively minimal. Depending on the machine, the casino's edge for a "reel" slot machine (as opposed to video poker) is generally 5% to 20% and that is huge. Compare that to Blackjack where the house advantage is 0.5% for a good player. The players come with X amount of money and play until they lose it all then they go home. So the casinos want to keep them happy and loyal so they run the slot tournaments. The cost of running the tournament with the prize money is only a small percent of the net losses sustained by the players. Not only that, but running a tournament brings in the players and a slot player cannot resist playing the machines while in a casino. So it's very possible that the losses by the players, during the 2 or 3 days of the tournament, will pay for the tournament with cash to spare.

Are the casino's "giving away" money. Hardly!!! Slot tournaments are good business and make all the sense in the world. They build customer loyalty, keep their players happy, and make money.

 

Quote from Ken, " Most promos are geared to give back half or more of the expected win as prizes."

I cannot see how they can make money from this promo or tournament.

Assuming all 400 players attended and all lost almost $100 each then the casino will make $40,000. 100 players goes into the next round and has to feed $200 each into the slot machine. The casino then make another $20,000. The final round 25 players feed $300 each into the machine. The casino makes another $7500. Total, the casino makes $67,500.

This is far short of the $100,000 in prize money paid out, and assuming the players lose almost all the money they feed into the machine.

 

Ken, you have mis-read my opening post.

The participants don't lose an average of $2,000 for the tournament. Most, about 300 paticipants would lose a grand total of $100 each for the tournament.

 

Posts #8 (thank you, Ken) and #9 (thank you, Toolman) make the points I was trying to express earlier, and do it quite a bit more elegantly.

Mr T, perhaps you're not looking beyond the invitational slot tournament itself. The casino knows it will likely lose money on these players during the tournament, but that's not why they're offering it. The casino wants to generate loyalty and repeat visits from those players because they know that the group as a whole will eventually lose enough $$$ to cover the tournament cost, many times over.