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Casinos deal with tension in perceptions about payouts

  • The Wichita Eagle
  • Published Tuesday, Jan. 7, 2014, at 7:45 p.m.
  • Updated Wednesday, Jan. 8, 2014, at 10:01 a.m.

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This story was reported with the help of the Public Insight Network, a partnership between journalists and readers. To join the network or to tell us about your experiences at the Kansas Star for future stories, go to Kansas.com/publicinsight and look for the Kansas Star link.

Alice Ballard of Augusta thinks the slot machines at the Kansas Star Casino are too tight. And she once hit a jackpot there.

Ballard said she won about $2,280 on a quarter slot when the Mulvane casino was operating in its temporary facility. It was a big night for her. She shared the winnings with others who were with her. When the machine hit, they screamed and laughed.

“It was cool the night I hit the jackpot, but that was quite awhile ago and we haven’t hit anything since,” Ballard said.

“Now, you barely get your car parked in valet parking and you have to go back out and get it.”

Scott Cooper, the Kansas Star’s general manager, has opened 10 casinos around the country. He said the complaint that a casino’s slot machines are too tight – and therefore don’t pay out enough – is always the first he hears.

“Every place, every state, every time,” Cooper said.

Slot machines provide the largest amount of gambling revenue at any casino. Of the $14.8 million the Kansas Star earned in November, $12.7 million came out of slot machines, according to the most recent figures reported to the Kansas Racing and Gaming Commission.

Casinos have to deal with a tension in customer perceptions about their slot machines, said David Schwartz, director of the Center for Gaming Research at the University of Nevada, Las Vegas.

“If they’re seen as too loose, a casino doesn’t make as much money. If players have a perception they’re too tight, they might stop playing,” he said.

Casinos try to resolve the tension by programming a mix of holds – the percentage of money kept by the casino – into their machines. Machines with higher holds, or “tight” machines, tend to be penny slots and high progressive slots that offer large jackpots, he said.

Some markets tend to have tighter slots than others. In Nevada, the average hold from 2004 to 2012 was 6.8 percent. On the Las Vegas Strip, the hold was 7 percent, while in Reno it was 5.04 percent, Schwartz said.

Reno’s gaming revenue and slot revenue have been declining, he said.

“So it doesn’t seem that people are saying, ‘Hey, in Reno we have a higher statistical chance of winning, so let’s to go to Reno, not Vegas.’ That isn’t happening,” Schwartz said.

Random payoffs

Kansas law says its casinos can hold up to 13 percent from slot machines. Payout rates are programmed into each machine’s computer chips and are set by the manufacturer to the specifications requested by the casino.

Cooper said the machines at Kansas Star pay off much better than the law requires and that none holds the maximum 13 percent.

But he would not say what the hold percentages are at the Kansas Star. He did say that the hold percentage typically drops, meaning the gambler’s odds improve, as the machine denominations rise from penny to quarter to dollar and up.

Each of the Kansas Star’s 1,850 slot machines operates on a random number generator chip, meaning payoffs are random, Cooper said.

“We don’t control that,” he said.

The casino requests that the manufacturer set a certain hold percentage over the life of the machine, which is usually about 100 million pulls. The machine will pay exactly the amount it is programmed to pay out over its life, but within that life cycle the hold percentage can swing wildly, so a customer might hit a jackpot in the morning and another in the afternoon on the same machine. Or the customer might play the machine for a week and win nothing.

Cooper said some Kansas Star customers complain that the slots got tighter when the permanent casino building opened in December 2012.

He said that is not true.

“When we moved into this new facility, we didn’t raise the hold percentages on any machines,” he said. “We lowered the hold on some higher denomination machines so our players could have better results.”

Changes in payouts must be approved

Like cellphones, TVs and computers, new slot machines are built every day, and the Kansas Star buys new ones or converts old ones to keep its product fresh and current, Cooper said.

During a conversion, the casino can change a machine’s denomination and theme – switching an Elvis theme to a Michael Jackson theme, for example – as well as its hold percentage, Cooper said. It does a couple of hundred conversions a year, because converting an old machine is cheaper than buying a new one.

But it is a myth that the casino makes changes just because a machine is paying off or has hit a jackpot, Cooper said. The casino knows a machine will pay out exactly what it is programmed to pay out over its life.

Each change, as well as every new machine, has to be approved by the Kansas Lottery, which owns and operates the games, and the Kansas Racing and Gaming Commission, which regulates them.

The Lottery must approve any change in payouts in advance, said Keith Kocher, the Lottery’s director of gaming facilities. Changing the computer, documenting the change and testing the machine involves the casino and both state agencies, he said. A typical conversion can take one to three days.

“One of the things people want to believe is that at any given moment, someone can just flip a switch and change payouts or shut down a machine,” Kocher said. “It doesn’t work that way.”

The state has final say on every machine in a state-owned casino, Kocher said, but it takes suggestions from the casinos.

“For the vast majority of the time, we’re on the same page,” he said. “We approve what they suggest. But we don’t have to.”

The racing and gaming commission performs monthly audits on the payout percentages of each machine to make sure it meets the mandated 87 percent threshold. It also has a contract with an outside auditing firm, RubinBrown LLP, which has offices in Kansas City and St. Louis, to come in if the commission suspects any foul play.

Oklahoma competition

Kenny Patterson, a pilot at Beechcraft, has been to casinos in Iowa, Las Vegas, California and elsewhere. The casino closest to him frustrated him so much he stopped going.

So he drives past the Star to Oklahoma, where the bingo-style gambling machines in the Native American casinos just across the border seem to offer more spins, more fun, more chances to win, he said. Patterson said he’d lose $100 in 30 minutes at the Star, while it takes about two hours to lose it in Oklahoma.

“I’ve gone there four times,” he said of the Kansas Star, “and I’ve never won a thing.”

Patterson said he has been gambling at Oklahoma casinos for 10 years and he still goes there every two or three weeks. He said the Class II bingo-based video terminals there, as opposed to Vegas-like Class III slot machines at the Kansas Star, feature the popular red screens that can pop up whenever a player hits any kind of return to offer free re-spins. Patterson said he has received as many as seven free spins at one time. The red screens help his money last longer than it does at the Kansas Star, he said.

“I wish we could go to the one closer, but we never, ever win anything,” Patterson said.

Cooper knows the long history of area gamblers going to Oklahoma and of their attachment to Class II machines. The Star even looked into including a couple dozen or more of them in the beginning, he said. But those machines aren’t as good a product as the Class III machines, which play a little faster and offer a greater variety of themes, he said.

“They could pay off better, but again, you could also configure them so they hold more,” Cooper said.

The casinos in Oklahoma aren’t required to have minimum payouts, nor are they required to report their payout percentages to the public.

Stopping the flow of gambling money to Oklahoma is one of the reasons the state, which gets 22 percent of the gambling revenue, approved a casino for south-central Kansas. Cooper said the Kansas Star is “very sensitive” to that.

“We’re partners with the state in that. They get their money off the revenue, and we get our money based on people coming and playing the machines,” he said. “If nobody comes in and plays the machines, we’re not making any revenue and the state is not making any revenue.”

“People have said, ‘You don’t care if I lose my paycheck,’ ” Cooper said. “It doesn’t do us any good to have people lose their shirt and they can’t feed their families. We’re not looking for that. It does us no good to try and get people to spend more than they can afford.”

“We try to be fair and competitive,” he said. “To be selfish and greedy just hurts your business.”

Reach Fred Mann at 316-268-6310 or fmann@wichitaeagle.com.

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