85th International Atlantic Economic Conference

March 14 - 17, 2018 | London, United Kingdom

Changes in slot machine performance when 'slot parlor' casinos add table games

Friday, 16 March 2018: 9:30 AM
Will E. Cummings, MS , Culinary Dept, Cummings Associates, Arlington, MA
Thirteen of the U.S. states that have authorized casino-style gambling since the 1990s initially limited some or all of their gaming facilities to slot machines or similar video lottery terminals (VLTs), i.e., offered no table games. Eight of these states have since relented and allowed such casinos to add table games; roughly 24 gaming facilities have done so. Conventional wisdom in the casino industry holds that slot machines and table games are complementary products, so the addition of table games to these initially “slot-only” facilities should have improved the performance of their electronic gaming devices. Time-series analysis of the entire sample provides little to no support for this proposition. This data is gathered from the Gross Gaming Revenue (GGR) data from the state lotteries and/or gaming regulatory commissions of the states in which the relevant gaming facilities are located. These post such data on their web sites, and include the Cross-sectional analyses of the contemporary performance of otherwise-comparable casinos with and without table games come to the same conclusion. Many of the casinos in the sample universe, however, experienced confounding circumstances at or near the same time as their transition: they expanded in size, added other features, had neighboring casinos expand in size and/or features, and/or had entirely-new casinos open nearby. (For example, a series of casinos opened in Maryland at about the same time as the VLT facilities of nearby Delaware added table games, and that new competition depressed Delaware’s VLT revenues substantially.) More detailed analysis of the “cleanest” examples, however, supports/reverses that finding as to complementary. I propose a hypothesis to explain this phenomenon: in most parts of the United States, the demand for slot-machine-type products so far exceeds that for table games that the presence of the latter is almost irrelevant to the performance of the former.