The Importance of Live Game Player Tracking Systems Variables

By Bill Zender

There are several good computerized systems for tracking live game players available today in the gaming industry. Years ago computerized tracking systems were very inaccurate, some what inflexible, and operated from truncated entities separate from slot tracking systems and other systems of the resort/casino handling hospitality and point-of-purchase requirements. In many instances a customer’s playing history was separate from systems accounting for complementary management, with “integrated systems” relying on information input through a keyboard interface. Many player tracking accounts were updated hours later, if not days later, leaving complementary decisions to educated guess work based on old playing history.

Today this situation has changed drastically. Information is now available in real time and usually incorporates all departments involved in the customers “play and stay”. Most systems allow the casino executive to view the customer’s entire casino play regardless to the physical location of his or her wagering, as well as the location of non-gaming purchases and expenditures. Some of the major gaming industry leaders have established enterprise-wide systems that cull information between all host properties located in different areas of the country.

Even though player tracking systems have made decision making easy and practically flawless, there still remain every system's "Achilles heel" which is the quality of input information and the correctness of the calculation variables. Following are some thoughts about live gaming player tracking that needs to be reevaluated to determine if these factors have been taken into consideration and whether or not these factors have been correctly established by the creators and end-users of the player tracking and reinvestment systems.

Player Rating System Needs to be Flexible

Flexibility of variables is as important in live games as it is in slot/video player tracking. In the real world, amount of wagers, the different mathematical advantage the house experiences base on the different wagers, and in strategy related games such as blackjack, require the establishment of accurate metric variables. Without accurate variables, tracking systems will produce incorrect player theoretical earning value that will lead to unnecessary reinvestment costs effecting bottom-line results. A 10% error in the player's favor while calculating reinvestment could cost an average size casino in Nevada as much as $160,000 annually (Nevada Gaming Abstract, 2005). That's $160,000 in player reinvestment that could be eliminated or utilized more wisely!

The following rating factors need to be taken into consideration and/or reexamined to guarantee that your system is not providing over inflated theoretical player win information. Remember, a variable error of 10% or a combination of variable errors equaling 10% in favor of the customer will contribute to the $160,000 figure (or more) as described previously.

All games need to be rated for speed; i.e., rounds of play per hour

It's important that you establish an accurate default for the number of rounds dealt per hour. If you program your system to use 60 rounds an hour as the default and the actual number of rounds dealt are 54, then the system will produce a 10% error in theoretical win. As you would assume, a 10% error in theoretical win results in a pass-through error of 10% in player reinvestment calculations.

Each game type needs to be analyzed and assigned a realistic number for rounds per hour. For example; the game of pai gow poker is a much slower game than blackjack. While a standard hand shuffled blackjack game with an average of four to five players may reasonably obtain a total of 60 rounds per hour, a dealer at pai gow poker may only deal 30 to 40 rounds per hour. Using a default of 60 rounds an hour across the board on all card games will cost your casino unnecessary reinvestment expense.

In addition, your system needs to have the flexibility to evaluate game speed based on the number of average players on the game. Games with 1 or 2 players are much faster while full tables of 6 to 7 players will slow down to a grind. In order to optimize your player rating system you need to be able to input fast and slow games situations.

Average rounds per hour need to be quantified through empirical data

The number of rounds per hour of an average game, as well as any variation such as slow or fast games, needs to be supported by empirical data which is collected from actual observations of games on your casino's floor. It's important that you use real case numbers glean from observations of your casino games, and not from gaming articles or someone else's casino numbers. The calculation of rounds per hour is not complicated. You need to conduct observation of several of your average dealers and track the number of actual rounds they deal to an average of 3 to 4 players during an hour period. Normal table play is what you looking for. Reject any samples that have extensive fills or games stoppages from unusual occurrences such as drink spills. A more detail description for calculating rounds per hour can be found in my CEM April 2006 article titled, "Metrics of Live Game Speed".

Accurate house advantage for the different games needs to be established

Establishing the house advantage for specific games is fairly easy to establish. Take the game of roulette for example; other that one exception all bets placed on the layout are subject to 5.26% house advantage. In this situation you would establish the house advantage default multiplier at 0.0526.

House advantages for most other games are fairly easy to determine as well. Even games that require player strategy decisions like Caribbean stud poker can be established at a specific house advantage percentage since the strategy is basically the same for ever hand. This is also noted in the game of baccarat. Due to the third card rule and the closeness of house advantage between the two primary wagers - player and banker - the house advantage can be defaulted to 1.2% (0.012).

Some game types may require a second house advantage level. Three card poker has a base bet (ante) and a bonus bet (pairs plus) that have an approximate 1% house advantage difference. A player who only wagers on the (ante/player) using a "queen-ten" or better play strategy can be calculated as a 3.37% (0.337) house advantage player, however if their original wagering includes the "pair plus" bonus option (see Table 1) for the same wager amount, the average house advantage is pulled down to approximately 2.85% (0.0285). It may also be prudent to establish a third level of advantage calculation if it is noted that some TCP players wager the ante, the pair plus, and blindly wager the "player bet" prior to receiving their cards.

Other tiered games are craps (based on wagering variations) and blackjack (based on the basic house advantage and the effect of the player's skill level). Blackjack might require several separate game designations because of the diversity of game types. The rule of "6 to 5" blackjack comes to mind. Since the rule change adds 1.4% to the basic game house advantage, has management changed their game default percentage to reflect this severe change? By readjusting the house advantage to reflect this rule the casino can more accurately market to players wishing to play against a blackjack game with a true house advantage on the same par as pai gow poker or three card poker.

Table 1 – Casino Game House Advantage (Practical Casino Math, 2005)

[Note: I recommend using the reference text, Practical Casino Math: Second Edition, by Hannum and Cabot (2005), as a baseline for establishing different game house advantage. IBSN:0-942828-53-4].

Blackjack needs the flexibility to rate skill level of the player

One of the biggest mistakes the gaming industry makes in regards to reinvestment waste is to establish a generic house advantage for blackjack. How many systems are defaulted at 1.5% for all the casinos blackjack games? This inflexible number fails to take into account not only game variation, but the skill level of the player. If you have a poor player who takes insurance on whims and fails to double on soft hands while always standing short on "busting" hands, should you reward him or her as you would your average player that plays a much better strategy? What about the customer who plays close to perfect basic strategy? Is this customer worth the reinvestment you expend on the average blackjack player?

Although a basic strategy player will never have a long-term positive expectation over the house, an inflexible tracking system may be creating an overall positive player expectation. In some cases the advantage player can achieve a long-term return of 0.25% to 0.5% on his or her dollar while flying below the casino's game protection radar because the system is too generous with the estimate house advantage.

Table 2 – Example Calculation of True House Advantage

Accurate ratings need to be stressed

If you use a multi-level rating system to more accurately determine the effect of game speed and varying true house advantage, be sure you're not shooting yourselves in the foot by not giving the floor supervisors rating the play the knowledge to make these decisions. All personnel rating pit customer play need to be on the same page or the system will not work. Be sure to hold meetings for your floor staff explaining the parameters of the different game speed and play skill levels. The evaluators need to know when a player should be rated as a basic strategy player or poor player, and when the game pace dictates a deviation from an "average" or standard rating category.

Also, I used to instruct my floor staff that every players starts play under the assumption they are all subject to an average game pace and playing at an average house. Everybody is "mister or ms" average unless there is an indication otherwise. Using this thought process any mistakes made during player rating will have a minimal negative effect. Also, you need to stress to your pit and shift managers that it is their responsibility that the correct rating levels are applied. By occasionally spot checking customer ratings management can detect the poor rating and correct the discrepancies in a timely manner.

Test the system against actual win

After you have established your new metrics and rating levels be sure to check the system's accuracy by comparing theoretical win to actual win in your database. This will verify the system's effectiveness in determining optimal player reinvestment. Several years ago while I was at the Aladdin Hotel and Casino we introduced a multi-tier evaluation system. At the end of the year I compared the theoretical win with the actual win, and noted that the theoretical win was somewhat higher then the actual. After investigating different possible reasons it was determined that I had used too high a house advantage when determining the average blackjack player's win value. After adjusting my average house advantage from 1.5% to 1.2% the system correctly reflex the theoretical win as compared to the actual win. After the second year the positive effect of my adjustment was confirmed when the two figures were within an acceptable comparative range.

Additional thoughts

It goes without say that the most important game rating metrics involve the games types that provide the majority of the revenue and effect the level of player reinvestment the most. Since blackjack is the live game "King" of the casino it is extremely important that you establish accurate game speed and house advantage for each blackjack game variation. The number of decks used as well as the different game rules need to be calculated to determine each blackjack game basic house advantage. If two or more blackjack game types, such as double deck and six deck games, have a calculated basic house advantage within 0.02% or less, it should be alright to group them together. Combining a double deck game with a basic house advantage of 0.4% with a single deck game that offers 6 to 5 on blackjack with a basic house advantage of 1.6% would not be wise unless the combine game house advantage is set low and the casino is not interested in properly rewarding the "6 to 5' customer.

It's also extremely important that management correctly establish a house advantage percentage effect for the players who misplay their hands. This can be establish through the use of software used to detect card counters and advantage players, or can be obtained through random player observations. In most cases the average player will misplay enough hands to give the casino an additional 0.5% to 0.8% over basic house advantage (see Table 2).

One final though: Don't turn a blind eye to increasing player reinvestment

One of the arguments I get concerning creating a better live game player tracking system is the anticipated increase in player reinvestment that will be realized by players who haven't received full awarding do to a lacking system. If you look at this from a contrarian viewpoint it is easy to see that an improved player rating system can increase expenses from properly tracking customers who play on fast games and/or possess poor playing strategy skills. The big player who plays alone on a table will be credited with more hands played and a greater theoretical win, won't he? Doesn't this factor drive other unrecorded costs upward that limit, if not eliminate the gains created by the purpose of the more accurate system?

While these last two statements serve as a basis for is a good argument they are not valid in a real business world situation. First, there is an overwhelming opportunity to save reinvestment money. Because most present systems use a much higher house advantage then necessary the saves will be unbelievable once that metric is brought back to earth. Second, correct calculation of player reinvestment is the optimal goal. Knowing your true cost and knowing how you can reinvest or saving wisely is the key. What about the big player who asks to play alone on a table? Does he or she have to be penalized? What happens when they find another casino that rewards them correctly for their win potential? Management doesn't need to spend additional perks, but in the meantime have they lost a good player? How often has this happened due to improper reinvestment metrics? Would management really know if losing inadequately "comped" players is a bona fide negative factor in their player reinvestment strategy?

Third, a more accurate player tracking system will provide management with the information they need when establishing reinvestment limits. Maybe it's more operationally sound to adjust reinvestment percentage down from 35% to 30%. It might even be beneficial for management to consider tiered reward system if one hasn't been established already. In this manner they can reward their better players with a higher reinvestment percentage while parrying additional cost of lower limit players who just happen to prefer playing with limited number of other players during slow hours of operation.

Don't become myopic with the advantage of cost cut. There are advantages from better allocation of reinvestments which will help retain your better players. These same advantages will also help attract other quality players that are not familiar with your casino.

Side Bar – Effect of Variable Mistakes

A mistake in the rating system by 10% in anyone of the rating variables (rounds dealt per hour, average wager, or house advantage) will lead to a 10% increase or decrease in the cost of customer reinvestment (comps). Although mistakes made when determining average wager have just as much effect as the other two variables, average wager mistakes affect ratings on an individual basis. Errors establishing rounds dealt per hour or house advantage are "system-wide" and affect every rating equally. The effect of a 10% error in anyone of these variables is noted in the following example.

Table 3 – Effect of Variable Mistakes

By using column (I) as the baseline for a standard player tracking system one can see that a true rounds per hour of 54 rounds production indicates a true reinvest to the player in this situation of $14.18. This amount is about $1.57 or 10% less then the system has been programmed to award. The same 10% affect is seen when the house advantage variable has been established too high at 0.15% then the actual house advantage used in column III. The above table takes into consideration the effect of only one variable being off by 10%.

This effect becomes magnified when several variables error to the high side at the same time. This is due to the fact that the different variables are multiple together to calculate theoretical win. It was previously stated that the annual cost of over rewarding live game players in a medium size casino could arguably be as high as $160,000. I would imagine that there are several larger or "mega" resorts that, are wasting millions of dollars in unnecessary customer reinvestment due to improperly established rating variables.