GGB is committed to providing updated news and analysis on our weekly news site, GGBNews.com.

Baccarat and Darwin

The evolution of one of the oldest games in gaming

Baccarat and Darwin

On a recent trip to Macau, Jason Ader, one of the key banking executives responsible for funding the casino expansion that took place during the Golden Years of U.S. casino expansion, reported seeing “a crowd of 250 Filipino and Thai women playing, screaming, fighting, and yelling around a table. In short, they were going nuts, and a security guard told him that this kind of stuff happens all the time.”

The game they were playing was, of course, baccarat. However, if we did not know that in advance, few would guess that this heretofore sophisticated, quiet and staid game of baccarat has been numerically supplanted by new formats of baccarat that have morphed to more effectively cater to moneyed Asians playing in the new gaming capitals of the world, Macau and Singapore.

Going in the other direction, new mass marketing-oriented versions of baccarat have also evolved to cater to the hoi polloi in Las Vegas and other venues around the world where gaming has spread. With the game of baccarat generating some US$35 billion in annual gaming revenue in Macau in 2012 alone, it is easy to speculate that baccarat now ranks as the single largest source of table game revenue in the gaming industry today.

So how did this happen? Let’s examine the evolution of baccarat but also focus on new developments in the hope that doing so might provide those not taking full advantage of this phenomenon to do so. And, for those who might not be aware of the potential of baccarat, we’ll review some catalytic ideas to probe the depth of this wonderful game in any market area.

The Physical And Formality

While its roots in North America are not well documented, baccarat was brought “as is” some time ago from Europe to North America—specifically the casinos in Cuba—to serve wealthy Latin Americans and the occasional Middle East and European traveler. Later, the game migrated to the U.S., and has been evolving in the high limit/VIP rooms of the Las Vegas Strip and other North American casinos for some time.

The traditional game held 12 to 14 seated players, three tuxedo-clad dealers and two supervisors who watched the games from elevated platforms (“ladders”). This “big game” of baccarat is operated by the shoe being passed from player to player. The dealer (on the “stick”) calls the game standing up, while the other two dealers take and pay bets. This game was first replicated in small upscale semi-private high-limit rooms often named Salon Prives to instantly manufacture the elite-ness that Europe took centuries to develop.

Over time, several casinos experimented with offering a limited number of baccarat tables on the mass-market casino floor. The core game was compressed and transposed onto seven-spot, blackjack-sized mini-baccarat tables and the slightly larger nine-seat midi-sized version, primarily by letting one dealer exclusively handle the cards, and take and pay bets. Thereby, the mass-market baccarat game became faster and more informal, with no tuxedos worn by the dealing staff.

The greater game speed allowed minimum bet limits to drop to levels affordable to mass-market players and, while the game did not catch on like wildfire, it was certainly becoming more widely appealing.

Asian Introduction

While the above changes were occurring in Las Vegas on the other side of the world, Macau’s role as the progenitor of Asian gaming had already begun long ago, in the mid-1800s. It took until 1960, however, when the monopoly gaming license was granted to Dr. Stanley Ho and his gaming company—today known by its acronym SJM—for Macau to offer modern casinos and begin its march to supremacy.

With demand exceeding supply, it was here that Ho quickly recognized that the name of the owner’s game was to provide the maximum capacity to the marketplace. Rather cleverly, Ho allowed two players in addition to the one that was seated, and making the betting decisions to bet in two additional bet circles behind the traditional bet area. Hence the term “back betting.” This changed a 12-seat baccarat table to a 36-position table, and created additional game capacity, player compression and game intensity—at times, barely controlled pandemonium.

No doubt the pent-up demand of some 1.3 billion Chinese just across the Macau border in the People’s Republic of China (PRC), not to forget the 700 million more in nearby Hong Kong, coupled with the natural Asian cultural proclivity toward gaming to drive the world pace-setting demand, but Ho found a way to harvest it faster.

Steve Karoul, longtime international casino marketing executive and president of Euro-Asia Consulting, has lived and worked extensively in Asia, and comments that back betting in Macau was “probably one of the greatest examples of creativity in the history of gaming, resulting in millions of dollars in incremental revenue for casinos at no additional expense.”

Fast-forwarding to the turn of this century, soon after the handover of the Portuguese enclave back to the PRC came the breakup of Ho’s monopoly and the eventual awarding of gaming concessions and sub-concessions to five new casino owner/developers in addition to Ho, who unsurprisingly was also awarded one of the new gaming licenses. With gaming demand still seemingly insatiable, now six CEOs and their executive staffs focused on increasing capacity.

The owners realized early on that they could not build new casinos fast enough or big enough. Consequently, the new casino executives fiddled with game dimensions to try to fit more games into a finite amount of already-constructed casino space. But this optimization effort soon ran its course, and focus shifted to game speed as another way of increasing capacity.

In this regard, automatic shufflers were first employed by Western operators both in the search of the highly valued increase in game speed and for control purposes as well, given the high average bets taking place. But, an unexpected backlash to these automated devices arose from the Asian players whom Asian operators probably saw coming while the Western operators did not.

For most Asians, gambling is not so much a leisure/entertainment activity as it is an event where Asians test their “luck” or “fate.” The luck thing and fate are inextricably linked to Asian life, as expressed in the concept of “joss,” the practice of feng shui, use of symbology, and countless other aspects of Asian culture and life. First-time Westerners—including me—at first pooh-poohed the role of luck and fate, but after standing in a Macau baccarat pit for 30 minutes soon realized it was real.

It should have been no surprise that the luck that Asians were trying to determine was now perceived to be ordained by a machine, not fate, when the cards were shuffled by an automatic shuffler. It did not take long for these zippy, efficient, and control-oriented machines to be replaced by the old plastic shoes, and responsibility for the shuffle to be returned to humans once again.

But, to keep the shuffle time of a cycle as close to the automatic shuffler as possible, the return to the plastic shoe was accompanied by cards pre-shuffled before being delivered to the table, first by a crew of dealers whose sole job was to shuffle cards, and later predominantly by cards pre-shuffled at the card factory far out of view.

Additional Bets And The Statistical Advantage

Additional bets add capacity as well.

Besides the traditional “Banker” and “Player” bets, there has always been a “Tie” bet in baccarat. Casino owners some time ago decided that it might be a good idea to psychologically compensate for the possibility of a push when the final numerical value of both the Player’s and Banker’s hands is equal.

So, they allowed players to make a side bet on each hand that a tie will occur which, if it does, is paid 8-to-1 but if it does not, the bet loses. The Tie bet has a casino statistical advantage of 14.4 percent when eight decks are being played, but offers the player the only way to win when a tie occurs.

But, I believe it was in Asia where a “Pair” bet was added to the game. In this instance, a Pair bet wins for a player betting on the Player hand if the first two cards dealt to the Player hand are a pair. The same holds true for a player betting on the Banker hand if the first two cards dealt to the Banker hand are a pair. The Pair bet typically pays 11-to-1 and gives the casino a statistical advantage of 10.4 percent with an eight-deck shoe.

The addition of the Pair bet was not an attempt to offset a non-payment situation; rather, it was only a means to offer players another way to test their luck. It worked.

Tinkering with the casino statistical advantage of the core Banker and Player bets to my knowledge first occurred in North America with some brief and sporadic experimentation with lowering the traditional 5 percent commission on Banker bets to 4 percent. This lowered the casino statistical advantage on the Banker bet from 1.058 percent to 0.599 percent. This was a significant drop; luckily for casino owners this option never caught on.

Counting on the Commission

Attention shifted to trying to find a way to remove the awkward, time-consuming and dispute-provoking collection of the 5 percent commission paid on winning Banker hands. Worse, the determination and collection of the commission really, really, really slowed the game down. Casino executives turned to those to whom math is music, and who can make it sing, to find a way to remove the commission but replace the casino’s revenue earned from it by increasing the natural statistical advantage via changes in the win-loss and payout rules.

Even though there were multiple win-loss and payout changes that could have accomplished this objective, the two no-commission baccarat games that have survived and proven popular are EZ Baccarat, a proprietary game, and Super Six. In a no-commission baccarat game, by definition, the casino’s statistical advantage for wagers on the Player bet remains at 1.235 percent because the commission does not apply to this wager.

On the Banker bet, however, in the traditional baccarat game the casino’s statistical advantage is 1.058 percent. But, with the Super Six baccarat version of no-commission, it increases to 1.458 percent to the player’s disadvantage versus EZ Baccarat, where the casino statistical advantage is less than the traditional game at 1.016 percent to the player’s advantage.

With EZ Baccarat, the change to the casino statistical advantage is achieved by retaining the 1-to-1 payouts for all winning Banker bets except when the Banker wins with a three-card total of 7. In this single instance in EZ Baccarat, the bet is a push; no amount is paid to the bettor on the Banker hand.

EZ Baccarat attempts to psychologically compensate for the introduction of a second “push” situation into the traditional baccarat game by offering a “Dragon 7” proposition bet that pays 40-to-1 when a three-card total of 7 occurs. The Dragon 7 bet has a casino statistical advantage of approximately 7.6 percent.

EZ Baccarat also offers a Panda 8 bet, a proposition bet on the Player bet side: when the Player wins with a three-card score of 8, the Panda 8 bet pays 25-to-1 with a casino statistical advantage of approximately 10.2 percent.

In Super Six Baccarat, the rules are the same as traditional baccarat, except that a winning Banker bet pays half, or one unit for two units on a winning total of 6.

In both EZ Baccarat and Super Six Baccarat, the presumption is that the real or perceived negatives as felt by the player will be offset by other positives. Besides those already mentioned, the driving advantage to the player is that the greater game speed allows the casino to offer lower minimum bets that heretofore were not available. This opens the game up to an entire new range of players.

Balancing Act

But, to some Asian players, changes to the win-loss and payout rules can be meaningful regardless of the impact on the casino statistical advantage. With EZ Baccarat, whereas before the players wagering on the Banker won in a three-card total of 7, now there is a push. In Super Six, instead of a winning Banker bet with a winning total of 6 paying one-to-one, it pays half. In both instances, if you are Asian you might question whether the modified game is the same test of “fate” as the traditional game, or has casino management become an interloper forcing itself into the laws of fate?

As a result of this concern, in the Asian VIP rooms the traditional commission-based baccarat game that allows the players to handle the cards is still dominant. The huge average bets made at these tables make up for the slow game speed. No casino operator wants to cram down a no-commission baccarat game on this level of player and risk losing them to another casino that would simply continue to offer the traditional game to acquire their play.

Some no-commission baccarat games may be found in the high-limit area of the main casino floor, a step down from the level of play in the VIP rooms. Some of the higher-limit players appreciate the faster game pace, and have adapted/accepted the changes necessary in order to get the liberalized (read “lower”) minimum table limits.

Thus, no-commission baccarat is most typically found in the mass-market gaming area with lower table minimums as the additional motivation to get players to play. With back betting allowed in Macau and with mass-market demand still exceeding supply, the potential revenue gains from a mass-market-oriented baccarat game are significant.

By way of illustration of the popularity, acceptance and usage of no-commission baccarat in Macau, only 1 percent of one major casino’s VIP/junket-driven games are no-commission, whereas in their high-limit area off the casino floor, almost half of the games are non-commission. On the mass-market casino floor, almost all are non-commission.

Into The Tech Age

Borrowing a term from Silicon Valley, the gaming industry in Asia introduced “disruptive technology” to the game of baccarat in order to take the game to its next stage of evolution.

LT Game, a gaming vendor, essentially found a way to terminal-ize baccarat, i.e., convert the game into a hybrid dealer/machine-operated game.

LT Game retained the dealer and the “human element” to keep the luck thing and fate intact, but allowing players to sit in front of terminals to buy in, make their bets, receive payoffs when they win, and cash out quickly without human intervention. Essentially, a single dealer deals the cards following the same face-up procedures as used in mini- or midi-baccarat. Since the players do not touch the cards, they need not sit at the table; they can sit at a bet terminal.

However, LT Game films the dealing taking place and projects the image via a live video stream that is displayed on each player terminal. The beauty of this approach is that the number of betting terminals can presumably be infinite. In practice, the terminals typically surround the dealer in half or full circles or some other such promotional configuration.

Players can make bets on their terminals quickly. To make sure this happens, there is a count-down clock built into the system so the players must bet within a certain time frame or be frozen out, thus achieving the target game speed set by the casino. Large terminal seating areas, a faster game and lowered labor costs allowed the casinos to drop their minimum bets well below those required in their traditional live mass-market baccarat tables of approximately $35 to $60 (HKD$300 to HKD$500).

Soon, some casinos were building replicas of stadiums affording greater visual appeal, socialization and group excitement. Multiple dealer/games were offered “in the center” to those seated in the betting stadium so that a player at one terminal could be betting on more than one game at a time.

Table outcomes, statistics and trends are prominently displayed overhead and around the stadium seating to promote the games to those playing as well as those watching. At one casino, players can wager on up to 14 different games taking place at one time via one terminal, picking or choosing the ones they feel are most lucky.

Stadium betting on multiple games also allows Asian players to chase a perceived run, known as “chasing the dragon,” something that is physically impossible to find in large casinos with any certainty except through the coincidence of being in the area where a run is occurring. And, even if the player knew where a run is occurring, they may not be able to reach it in time and, when they can, they still may not find an open betting position at the table when they get there. None of these restrictions occur with a terminal-ized, stadium baccarat game setup.

All of these efforts and more turned a quiet, staid game into a more democratic, participatory, fun, interesting, social, and sometimes epic game.

Optimization Via Reverse Engineering

I cannot say for certain how the latest derivation of baccarat occurred, but it smells, tastes and looks like reverse engineering to overcome obstacles to greater profitability. Sands China Limited (SCL) introduced a game recently in Macau they call Fast Action Baccarat. It has 28 betting positions and can accommodate up to 60 standing players. In Macau, SCL offers four of these tables close together, and this area was the frenetic and fun betting scene that Jason Ader witnessed and described in the opening paragraph of this article.

As with the stadium LT Game baccarat games, SCL kept the one-live-dealer concept with the action displayed on multiple overhead screens to promote the game to players and onlookers alike. But, with Fast Action Baccarat, the player is still betting real chips at a table close to where the dealer is turning the cards and determining the outcome of the game, albeit a much larger one.

At each player position, the player can make a bet on Player, Banker, Tie or Pair. To increase the game speed to get to the target minimum bet SCL wanted to offer, they put the dealer float on rails so the dealer could be quickly moved from position to position down the long row of players. Further, notices automatically appear at each betting position to avoid late betting but also to “train” the players to bet at the pace set by SCL.

Winning positions are lit from underneath, and oversize cards are utilized so everyone can see the cards more clearly—both steps to avoid player disputes that otherwise slow the game down. But, perhaps the most clever aspect of this game is that the space under the betting areas falls open if they lose, and the chips drop to a conveyor that whisks them to an automatic chip sorter and stacker such as used in roulette.

In combination, this allows minimum bets in the $12 range (or $100 in Hong Kong or Macau currency), a target that makes a live baccarat game affordable and fun to a much broader range of players, just like the LT Game stadium approach was able to do via terminals.

An added benefit for SCL is that one Fast Action Baccarat table counts as one table, a critical factor because the government of Macau has announced policies that limit the maximum number of tables it will allow to be operated in the SAR at any one time. The more betting positions per table, the more capacity a concessionaire can create within a given table limit.

Lessons Learned. Lessons Applied.

Clearly, the rest of the world is not Macau, but it is just as clear that you do not have to be Asian to enjoy baccarat. The morphing of baccarat has made it more available and appealing to a wider range of target market segments as well as more profitable for the casinos in almost every venue.

Creative minds coupled with the technology will continue to provide the next solution to the last challenge to broaden game appeal and improve efficiency. It is, indeed, a great time for thinkers and doers in the gaming industry.

Dean Macomber is president of Macomber International, Inc. With 35 years of diversified experience in the gaming industry ranging from dealer to president, development to operations involving mega-destination resorts to locals-oriented casinos in numerous domestic and international venues, Macomber provides executive-level consulting in the areas of strategic and business planning, feasibility and all other project development phases, and pre- and post-opening management and profit improvement engagements. He can be reached at [email protected].

    GGB Podcasts

  • Stephanie Goodman

    Executive Director, Dr. Robert Hunter International Problem Gambling Center

  • JJ Woods

    Managing Director, Atlantic Casino Consulting

  • Joe Lupo

    President, The Mirage Hotel Casino

  • Randy Taylor

    President and CEO, Everi

  • David Forman

    Vice President, Research, American Gaming Association

    Recent Feature Articles

  • Always Bet on Engagement

    Social media strategies for gaming in 2023 and beyond

  • Free Play Rules

    Free play has been a primary player reward for casinos, but does it make sense?

  • Old Scams, New Twists

    Can casino operators stay one step ahead of cheaters who use technology to become successful?

  • Shiny New Objects

    Why are electronic table games the hottest target for cheats?

  • Gun Crazy

    With liberalized gun laws, casinos need to be more diligent in detecting weapons.