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Slot Hold vs. Slot Revenue

Making sense of the slot hold debate

Slot Hold vs. Slot Revenue

There have been many articles published in recent months, and indeed over the last several years, about slot hold, with many at least partially attributing the industry’s woes to rising hold.

“Hold” is the expected amount of each wager that the slot machine “holds” over time. A slot machine with 5 percent hold is expected to produce $5 revenue for the casino for every $100 in wagers. The same machine may be described as having 95 percent “RTP” or return-to-player.

Over the past two decades, we’ve seen average slot holds rise considerably, largely due to the proliferation of higher-hold penny video slots. See Nevada’s hold, for example, in the figure below.

To contextualize this increase, betting $1 per spin at eight spins per minute, a $100 budget would last on average 249 minutes at the 5.02 percent hold we saw in 1993, but only 187 minutes at the 6.7 percent hold we saw in 2018. If we were instead to look at the effect of moving from 9 percent hold to 10.68 percent hold (the same 1.68-point increase, more indicative of penny slot hold), time on device for that $100 budget would decrease on average from 138.9 minutes to 117 minutes, a decline of more than 15 percent or nearly 22 minutes of play.

Increased hold is decreasing the average time of slot sessions. This isn’t a controversial viewpoint; it’s just math—if the machine holds more per spin, players with a fixed budget necessarily spend less time on machines.

The question, “Can players ‘feel’ the effect of hold changes?” has been studied by academics, and they’ve concluded that players cannot. Industry experts have countered this research by arguing that increased hold is nonetheless degrading the experience of the slot player, for example by decreasing time on device. These critics argue that a player-centric rather than a machine-centric review is necessary.

These views may seem irreconcilable, and intuitively, how could players not feel a decrease of 20 minutes on device? This article is intended to bring together these views. I’ve spent a lot of time studying these questions with slot operators, finance teams, economists, and data scientists, and as such, have a unique perspective on the problem.


Players Can’t Feel Hold Changes

Anthony Lucas, a professor at the University of Nevada, Las Vegas, has published several articles with various co-authors on how players can’t “feel” the effects of a hold change. The evidence has been several-fold, with the most compelling arguments being that:

  • A computer (let alone a human) can’t accurately distinguish between two different return-to-player (RTP) settings in a number of observations that mimic a human slot session on a reel machine; and,
  • Lucas and his co-authors have run a number of live experiments in casinos with side-by-side machines of the same theme, one with low hold and one with high hold, and observed empirically that the high-hold machines perform better financially.

Both of these findings are sound. That is, in nearly all cases, a player cannot accurately tell the difference if a machine’s hold is changed, sometimes even dramatically. Though, I should note there are several ways of going from hold A to hold B, and some of these may be easier for players to “feel” than others. We’ll discuss why hold changes are not all created equal later on.

In the cases studied, using variants of actual paytables from reel slot machines, Lucas and co-author A.K. Singh argue (correctly) that players can’t possibly tell the difference between hold settings, because even computers cannot tell the difference with any degree of certainty across 500 spins (representing approximately an hour of continuous slot play) or even across longer sessions. Certainly, players may guess, as can computers, but they are wrong nearly as often as they are right.

Players can’t “feel” the time decrease because slot machine outcomes are volatile. As a wise man once said, “you never know what you’re gonna get.”

This effect is born out on slot floors, as described in Lucas’ recent work with Kate Spilde, where they measure the performance of high-hold and low-hold versions of the same slot machines placed next to each other on the floor, finding that the high-hold machines outperform the low-hold machines empirically.

My own experiences echo these results. In nearly every example I’ve ever seen—including the dozens of tests I’ve run with slot teams on real, live casino floors—the higher-hold machine of a pair of like machines generates higher win than the lower-hold machine. That is, slot patrons don’t shift their play to the lower-hold device. Players truly can’t feel hold changes.


How Can Player Behavior Be Impacted If a Player Can’t Feel Hold Changes?

It would be easy to conclude, as Lucas does in several of his articles, that casinos can perhaps increase their revenues by increasing slot hold. But upon reflection this is far from clear.

First, the side-by-side machine comparison fails to ask about the rest of the slot floor, about the rest of the player’s wallet. Is the increased financial performance of the high-hold machine simply displaced win from the rest of the floor? Or, asked differently, do the players that lose less on the lower-hold machine exhibit increased play elsewhere on the floor? In other words, do players generally lose the same amount on the visit, but those experiencing lower hold just lose slower and on more machines, getting more time in the casino?

Second, even if we were able to measure the overall wallet impact of experiencing lower or higher hold on a single visit, how does this experience impact likelihood to return, or frequency of visitation? Is it possible that a lower-hold experience today means that a player will return to the casino sooner, producing the same amount of revenue or more over more visits?

As an extreme thought experiment, consider that a machine that holds 100 percent—never returning a dime to a player—will perform financially better in the short term, for some definition of “short term.” But as a player, if you walked into a casino with $100 and lost on every spin of your machine, would you consider yourself unlucky on that trip? Would you hesitate before returning? How would you feel if it happened again on your next trip?

This thought experiment—even if 100 percent hold is extreme—provides a useful way of thinking about how players can be impacted by hold changes even if they don’t know that the hold is higher. Players don’t experience theoretical hold. Players experience the random sequence of outcomes that the machine produces in the short amount of time that they play on the machine. They experience “Did I have a good time while I was at the casino?”

This question will have different criteria for different players: How long did my budget last me? Did I get to experience fun bonus games on the machine? Did I have positive staff interactions? Was my restaurant or valet experience good? And the answer to “Did I have a good time while I was at the casino?” influences player behavior related to return trips: Will the player return, and how soon?

A player who has a bad session at low theoretical hold has the same negative experience as a player who has a bad session at high theoretical hold. Tying this all together, increased hold leads to a higher proportion of players experiencing losing sessions, short sessions, and therefore, overall negative experiences.

We know that actual loss correlates to overall experience, and you can validate this with your own guest survey results. Players who have “winning experiences” as measured by the duration of play that their budget allows or as measured by the experience of low actual hold (including those who win on the trip) tend to report better satisfaction with staff interactions, beverage service, and several other areas of guest experience. And we all believe that experience matters in choosing whether entertainment budget should be spent at a casino, and furthermore when choosing which casino to visit.

By increasing theoretical hold, even if any individual player can’t tell that we’ve done so, we increase the number of players whose random sequence of slot outcomes leads them to have poor overall experiences at the casino, and this can have downstream effects in terms of visitation and spend.


So, What’s an Operator to Do?

It’s important to stress that I don’t think there’s a one-size-fits-all solution to hold changes. For large commercial properties on the Las Vegas Strip, where revenue is shifting rapidly to non-gaming predominance, where casual visitors to Las Vegas have small gambling budgets relative to their overall vacation budgets, where the overall trip experience has many components beyond their experience on the casino floor, and where the time between trips is lengthy, it may make sense to push hold high and capture the tourist gambling dollar before the competitor down the street can capture it.

Next year, when planning their annual Las Vegas trip, the thought of how quickly their $100 budget was captured by the slots will be dwarfed by their pool, dining, nightclub and hotel experiences, and by the “sin” in Sin City.

In regional markets, by contrast, casinos may have large segments of patrons visiting upwards of 30 or 40 days per year. Gambling is the main concern at these properties, and markets are quite competitive, with many having four or more easily accessible casinos, not to mention the regional or national destination markets—Las Vegas, Atlantic City, Biloxi, and so on—that are also competing heavily for these guests. Here, hold is a more subtle concern.

Casinos in these markets must carefully assess the impact that hold has on their businesses, but understanding the tradeoff between short-term financial gain (take the money quickly) and long-term business stability (Do we alienate our guests and cause them to reduce or cease visitation?) is not an easy task. In contrast to the Las Vegas market, the gambling experience at regional casinos by-and-large is the customer experience, so operators should approach the gambling experience with caution.


Macro Considerations For a Slot Hold Strategy

In assessing the impact of a changing slot hold strategy, we must understand the balance between guests who are time-constrained, those who will leave the casino before they’ve exhausted their gambling budget, and guests who are wallet-constrained, those who will exhaust their monetary budget before they exhaust their allotment of time. If a guest is time-constrained, a reduction in slot hold will reduce the rate at which they lose (on average), and the casino will capture less of their gaming budget on their (fixed-length) trip. In order to make this decision profitable, the casino would need to increase the visitation of those guests to compensate for the reduced revenue.

If a guest is wallet-constrained, however, a reduction in slot hold will simply increase the time that the guest’s budget lasts, providing more time in the casino and more positive experiences, i.e., more “bang for their buck.” Of course, if we increase the duration of the guest’s wallet too much, the guest may become time-constrained, and we run the risk of losing the guest’s available budget. It seems natural to argue that a perfect balance would be struck if we could have each guest expend their monetary and time budgets simultaneously.

Quantifying time-constrained versus wallet-constrained guests is difficult to do scientifically. But as an example of this thinking, in a market like Biloxi—where many patrons are lodgers and as such are a relatively captive audience—guests are likely more wallet-constrained than time-constrained, and a lower slot hold environment may increase player satisfaction (and ultimately visitation, etc.) while effecting a very limited impact on gaming spend.

And besides making the casino experience more fun, which we would hope leads to increased visitation, the limited revenue loss from the gaming floor on that visit may be recuperated by retail and dining outlets, albeit at a different margin.

My own experience in the Louisiana and Mississippi markets suggests that Biloxi casinos tend to provide richer-than-typical free-play offers. Increased free play and reduced slot hold have a similar effect, increasing time on device, which is low cost to the casino so long as the patrons are wallet-constrained and not time-constrained.

Of course, many of these arguments can be applied to Las Vegas as well, but Las Vegas visitors are more time-constrained than one might imagine. The allure of other amenities, or even other casino properties, limits the amount of vacation time allocated to gambling in any one location. And with the proliferation of regional gaming, this makes sense. Most visitors come to Las Vegas for the party, for the pools, for the weather, for the food. The gambling is a nice-to-have, as opposed to Biloxi, where the gambling may be a primary focus of the visit.

Additional considerations when developing an overall hold strategy for a property may include:

  • The floor’s utilization: Higher utilization suggests a higher hold strategy, as reduction of time on device can alleviate any periods of prohibitive utilization, which itself degrades the guest experience.
  • The quality and diversity of a property’s amenity set: The more opportunities a property has to provide great experiences to a guest suggests a higher hold strategy, as the slot experience may contribute less to the overall guest experience.
  • The frequency of visitation of the patron database: Higher-frequency properties might consider a lower-hold approach, since there is a high dependence on return visitation.
  • The competitiveness of the local market: Properties in highly competitive markets might consider a lower-hold approach as a way to improve guest experience.

Micro Considerations For a Slot Hold Strategy

I mentioned before that moving from one hold to another isn’t a universal concept. That is because there are many ways to change a pay table. As an example, consider the following simple mock game:

In this game, we wager $1, and we either lose our $1, or we win $1, $2, $10, or $10,000. The bonus game that produces a win of $10 is triggered on average every 40 spins, and the $10,000 jackpot is triggered on average every 100,000 spins.

Now let’s say our aim is to increase the hold to 13 percent. One way to do this is to decrease the frequency of the bonus game to 1 in 50:

Could a player “feel” this difference? How quickly? At eight spins per minute, this represents a loss of approximately 2.4 bonus games per hour. This is a question we can answer with science, but keeping this concept in mind, consider this alternative version of the simple game that also achieves 13 percent hold:

In this variation, we’ve returned the bonus game to a 1-in-40 proposition but reduced the frequency of the top award to 1-in-220,000. This pay table should provide identical game play as the 7.5 percent pay table, to nearly everyone who plays the game. No one will be able to detect with any certainty that the top award has become less frequent, as no one expects to hit the top award anyway. Given the option, we would certainly put the “fewer jackpots” version on the floor before the “fewer bonus games” version.

In other words, there are ways to raise hold without impacting the player experience, and there are ways to raise hold while lowering the occurrence of relatively frequent events that the player celebrates. To the extent that we can accomplish the former, we should do so enthusiastically. With the latter, we should proceed cautiously.

Only a careful review of PAR sheets, which detail pay tables and frequencies of game awards, can give a clear indication of how hold changes will affect player experience, and these can be cumbersome (I’ll say, politely) to read and interpret. A broad-based hold increase without regard to how hold is increased will certainly affect player experience.

An ideal hold strategy would be designed at the game level. Operators and manufacturers would work together on how to provide the best player experience while achieving operator financial goals.

Another consideration pointed out to me by savvy slot operators is the speed of the processors in newer games. They keenly note that players don’t necessarily experience hold as a percentage of slot handle, but rather as a loss-per-hour. We are seeing max bets and cost-to-cover on penny games increase, processor speeds producing more spins per hour, and holds rising, resulting in even more substantial increases in loss per hour.


I’ve worked with several properties on their slot hold strategy as an operator and as a consultant. While there is no one overarching method for measuring the impact of slot changes, I’ve been fortunate in my roles to work with talented teams of slot operators, economists, statisticians and data scientists to develop methodologies to evaluate the performance of slot hold changes.

We’ve developed benchmarks and metrics to look at player behavior, machine performance, and overall property performance, each providing a different lens into the effects of these changes. With forward-thinking operations teams, we’ve run tests as aggressive as altering the hold on more than 30 percent (!) of the machines on a casino floor. As expected, higher hold approaches have produced more revenue on average in the short term, though at a mildly diminishing rate.

Most of the studies were run for only six to 12 months, so I don’t know if in two, three, five or 10 years we’d conclude that a lower hold strategy would produce the loyalty and guest experience effects needed to outweigh the short-term effects of raising hold. Or whether we’d find in the end that cranking up the hold produces stronger financial outcomes across the board.

Casinos continue to navigate the tradeoffs of immediate gains at the risk of degrading guest experience in many areas—resort fees in hotels, outlet fees in bars, ATM fees approaching $10, and even parking fees. Regardless of the enterprise’s overall strategy, taking a tactical, property-specific and game-specific approach can help achieve the desired short-term financial outcomes while managing the guest experience impacts and mitigating some of the potential long-term effects on the business.

Brian Wyman, data scientist and senior vice president of operations and data analytics at The Innovation Group, holds a doctorate in mathematics from the University of Michigan. Wyman works with clients to transform their data into actionable insights and bottom-line financial results. Along with The Innovation Group’s analytics efforts, Wyman oversees the group’s sports betting advisory services and its Las Vegas office.