A Quadratic Model for Optimizing Slot Win Revenue: A Case of Las Vegas Strip

The purpose of this study is to analyze the operational efficiency of penny slots on the Strip and attempts to identify the optimal win percentage or hold for these slots. Game win refers to the amount retained by the casino operator from the total amount wagered. For a slot game, hold also referred to as win percentage is the ratio of what is actually won by the casino (game win) to coin-in, which is the total amount wagered by the player. Coin-in is a commonly used performance measure representing the total dollar amount of wagers accumulated by each machine. In this study, optimal win percentage refers to the rate at which the slot win is maximized. Based on the relationship between game win and its two determinants, coin-in and hold, this study developed a quadratic model for optimizing penny slot win revenue for Las Vegas Strip casinos. The model was empirically tested with aggregate monthly data of penny slots the most popular type of slots on the Strip. Using the quadratic function,this study found the optimal hold to be at 16.41%. Comparisons were made between the calculated optimal hold and the actual average holds. The findings of these comparisons indicate that the average holds of penny slots on the Strip were substantially lower than the optimal level. The resulting model and its coefficients suggest Strip casinos increase penny slots hold to maximize slot revenue. The study showed that adjusting the actual hold to the calculated optimal hold should improve the operational efficiency of slot games and optimize the game win from the casino’s existing customers.