If you were to ask random strangers what makes a casino a casino I’m sure most would say that is where people go to gamble for money. The truth is less simple than that. There is no legal definition of a “casino”.
Gambling laws apply to gambling, not so much places designed for gambling. If a casino rented out its game floor space for a conference exhibit hall – and that’s really only a matter of haggling over price in my opinion – it would still be a “casino” but there would be no gambling games.
But when people ask if casinos can make money without the gambling, they probably mean could a casino run games where people don’t risk money. It’s tempting to say “let me count the ways”.
Anyone who has attended a fundraiser or charity “casino night” event knows you can play blackjack, craps, and roulette without real money. At most you might buy a ticket to the event to support some worthy cause.
And then there are gaming arcades where kids and grownups happily while away the hours playing for tickets they exchange for cheap prizes. I submit that a typical kids arcade is more like gambling than a charity casino night.
The question is, could a hypothetical casino make a profit without real money?
1 – Do Gaming Arcades Make Big Profits?
If you’ve ever played games in an arcade then you know that’s not much of a cheap date night. You can spend hours dropping quarters into games until you win that big fluffy pink elephant for the girl of your high school dreams.
Gaming arcades aren’t the kind of big business that would attract mobsters and Wall Street investors.
Or are they?
Warren Buffett’s first business – which he started when he was a teenager – was a pinball business. He saved up his allowance until he could buy a pinball machine. He used the profits from that machine to buy another machine. He kept going for several years until he sold his pinball business for about $100,000.
That was over 50 years ago.
Dave & Buster’s, the arcade chain for adults, has earned about $330 million in quarterly revenues for years. They don’t offer craps, roulette, and blackjack but they provide a gaming experience for grownups that is considered a less risky alternative to gambling.
The arcade industry has died and come back several times over the years. It’s still a viable business but not as popular as gambling for money.
There is money to be made in arcade-style gaming but it’s not generating the revenues that Wall Street investors want. Maybe that is why Warren Buffett is no longer in the pinball business.
2 – Non-profit Casino Games are Not Tax Deductible
If you’re thinking no one wants to run a casino with free games because they only benefit untaxed charities, think again.
If the company or organization running the casino night event charges admission or sells tickets to be used in the games, the revenue is taxable according to U.S. law. Other countries may have different laws but in America it’s not a tax-deductible contribution.
That means – hypothetically – anyone could run a business where they sell admissions to a “fake” casino that allows players to enjoy craps, blackjack, roulette, and even slot machines all night long. The players would never put money on the table but they could win prizes.
According to tax law experts comparable businesses already exist. They are called bingo halls and raffle games. You pay for the privilege of playing rather than risk your money directly in the game.
So if you don’t want to go up against Sheldon Adelson and his friends in Las Vegas, you could probably find a nice big city in a non-gambling state and set up a casino where no one gambles. And it might be legal, considering local zoning regulations.
3 – Casinos Can Make Money via Other Activities
No modern casino resort exists without a hotel. The hotelier industry is very profitable these days. Hotel construction is booming around the world.
Any resort can build a theme park or a massive arena. All they need do is make the experience entertaining to their guests and people will come for thousands of miles to enjoy it.
Large hotels and many casinos count on the convention industry to bring in big bucks. In fact, there is an urban legend that Las Vegas casinos don’t want to host one type of convention any more.
Given how many conventions are held around the world every week, it seems like you could make a nice profit just hosting conventions with a no-money casino. Even probability-calculating mathematicians and physicians should be tempted to partake of the games if they don’t have to risk their money.
If anything the convention hosting and management industry makes more money than the casino industry.
So why aren’t more companies doing this?
Maybe it’s the lack of risk that makes free casino games so unappealing.
4 – Casinos Can Always Put on a Good Show
Las Vegas-style resorts around the world are famous for their amazing theater experiences. They have dancing dolphins, flying trapeze artists, incredible magicians, acrobats, the most advanced lighting and technical effects, and more.
People don’t flock to Las Vegas just to see these shows but they expect to see at least one in-between losing their money on the slot machines and relaxing in the spas.
If gambling is just a form of entertainment then a no-money gaming experience could be coupled with a theatrical venue. Theater and concerts are very profitable industries.
In fact, New York City has a place called Broadway that offers all the shows without any type of games. This is an opportunity waiting to be exploited by the right investors.
5 – A Non-profit Casino Can Sell Lots of Stuff
They can install a 5-star restaurant, sell exclusive designer merchandise, offer a $1000-a-day spa, and otherwise keep the guests entertained and happy.
A resort doesn’t need to attract the whales aka the high rollers who lose hundreds of thousands or millions of dollars to make millions of dollars per month. All they need do is sell the right services and stuff and people will pay top dollar for them.
Maybe you’ll have paid $1000 for 3 hours of fake gaming. You know, I think I’d rather do that than sit in a $1000-per-plate political fundraising dinner.
I’d rather clip a hangnail than listen to another politician tell bad jokes. Non-profit casinos just need to find the right hook to bring in the people with money. They’re already dropping hundreds of thousands of dollars on rubber chicken.
There’s no denying that if you take the gambling out of gaming people are less likely to want to play in your casino. But given how much gaming goes on outside the casino, and how much non-gaming revenue casinos can generate, it doesn’t follow that you need to offer gambling for money to run a successful casino business.
What the non-profit gambling industry lacks is a proper marketing strategy. People are happy to part with their money for almost any reason whatsoever. A company that offers a gambling-like experience without breaking local gambling laws can be very successful.
The question is whether such an industry could be as successful as the world-wide gambling industry, which generates hundreds of billions of dollars in revenue every year. Gambling is the one industry where people walk in the door ready to hand over cash without getting anything in return.
So, yes, a casino can make a profit without gambling. Many do.
But – honestly – why should they give up the cash cow where they risk virtually nothing and their customers pay all their expenses?
That’s a hard business model to compete with.