Slot machines are tighter but casino revenue isn’t much higher

Apparently, slot machine players were onto something.

The games have gotten tighter.

A study commissioned by the gambling equipment industry's largest trade association found slot machine hold percentages have increased a combined 14.5 percent across the nation over the last 10 years while the revenue from the games has grown just 1.1 percent.

Slot hold — the percentage of wagers held by the casino — could be associated with the amount of money gamblers bet on the games, or lack of it.

"If players have a bad experience, they might not come back," said Marcus Prater, executive director of the Association of Gaming Equipment Manufacturers, which hired Las Vegas-based advisory firm Applied Analysis to compile the statistics.

According to the study, tighter slot machines have not meant increased gaming revenue. Actually, the hold percentages could be a reason for the declines.

Prater said casino operators and slot machines makers have heard complaints over the years from loyal customers that the games have grown "too tight." Those concerns gave the trade group the idea to investigate.

"It's a topic that we've chatted about informally for literally 15 years," Prater said.

Casino operators select the hold percentage for slot machines when they purchase certain games from manufacturers. The games come with a range of hold percentages. Slot machines in which the casino operators share revenue with the manufacturers and wide-area progressive game, come with a pre-set hold percentage.

The report found the nationwide slot machine hold was a low of 5.96 percent in 1990, when there were just three gaming states. Last year, the figure hit an all-time high of 7.7 percent when factoring the numbers from 12 states, including Nevada, New Jersey, Louisiana, Mississippi, Pennsylvania, Ohio, and Florida. Ten of the 12 states listed in the report showed increased slot machine hold percentages over the 10-year period.

In Nevada, slot machine hold percentage was 5.72 percent in 2004 and 6.4 percent last year. Nevada's hold percentage was the lowest in the nation. Iowa casinos had the highest slot machine hold percentage in 2014, at 9.37 percent, a tightening of almost 33 percent in the past 10 years.

Slot machine revenue in Nevada has declined 5 percent during that same period, from $7.09 billion in 2004 to $6.74 billion in 2014.

Analysts, who view slot machine wagering totals in a Nevada as a gauge into the health of the middle market customer, said the recession could also be blamed for slot machine revenue and wagering declines. Nevada slot machine revenue hit an all-time high of $8.4 billion in 2007, the year before the economy began to tank.

Meanwhile, gamblers are clearly not playing slot machines as much they did in the past. In Nevada, slot machine wagering of $105.4 billion in 2014 is down 23 percent from the all-time high of $138 billion in 2006.

Applied Analysis said in the report economic conditions "appear to be a material factor in slot performance trends." However, other factors since the recession have hurt the gaming industry's slot machine performance.

"Consumer spending has improved in most major gaming markets throughout the United States in recent years, while gaming volumes continue to contract," the firm wrote.

Konami Gaming Senior Vice President Tom Jingoli, who is chairman of the trade association's board, said the study was done "to open a dialogue" between the manufacturers and casino operators concerning slot machine hold.

The study is one of several tools the group is using in an effort to restore slot machine performance. The association sponsored legislative changes that were approved this year to allow skill-based elements found arcade style video games to be added to slot machines. The regulations covering skill-based slot machines are currently being drafted by state gaming regulators.

Casino operators contacted about the slot machine hold report declined comment.

"This is meant as a talking piece and not a broad brush stroke for the gaming industry," Jingoli said.

Contact reporter Howard Stutz at hstutz@reviewjournal.com or 702-477-3871. Find @howardstutz on Twitter.