Exploring the relationship between race and sports book wagering activity and daily slot and table game play.

(2008). (2005). For more on the

differences in race and sports book operations, see Lucas and Kilby


Times series regression analysis was used in the formal analysis of

the data, given its many effective applications to similar gaming data

sets (Abarbanel et al., 2011; Lucas, 2013a: Ollstein, 2006; Suh

Tsai, 2013). Retrieved from


The model advanced here stems from the one used by Lucas

Bowen (2002), which has been improved upon, revised according to

specific purpose, and redeployed in the previously reviewed race and

sports book studies (Abarbanel et al., 2011; Kalargyrou et al., 2012),

live poker research (Lucas, 2013a; Ollstein, 2006; Suh Tsai,

2013), and bingo room studies (Lucas et al., 2006). Global Gaming Business,

(5(9), 34-39.


Ollstein, B. A structural equations

analysis of the impact of price promotion. Further, use of the double-log model

facilitates theory development by producing results in a common metric

(an elasticity), which can be compared across gaming properties of all


Over the decade ended December 31, 2012, gross gaming win in Nevada

race and sports books peaked in 2006 at $97M and $191M, respectively

(Nevada Gaming Control Board (NGCB), 2013). (1998). Examining the relationship between

poker and the gaming volumes of Las Vegas hotel casinos. For

example, one senior executive from a prominent tribal casino is on

record discussing several forms of what he refers to as spillover from

poker rooms to slots and table games (Kirdahy, 2008).

Coin-in Model:


Stutz, H. Given the marked difference in the scale of operations

across the three donor properties, both the dependent variables and the

key independent variables were converted to their natural log form. With only the

direct profits from book operations to consider, decisions related to

the use of this space may have become a little less complex. Drop is the most commonly

employed business volume measure for table games (Lucas Kilby,

2012). Lower profits in the books often lead to claims

of contributions to other more critical gaming areas such as slot and

tables, to stave-off possible reductions in floor space, or worse yet,

elimination of the books (Lucas, 2013b). Despite limited profits, casinos

repackaging poker as attraction. These successive extremes

create problems when fitting the data to a times series model.

Managerial Implications

Limitations Future Research

Property B’s sports book was another story, posting more

encouraging results. This

allowed for more meaningful comparisons of the critical results. Regression Basics, 2nd ed. For more on the operating protocol of race and sports

books see Lucas and Kilby (2012).


This study directly extends the work of Abarbanel, Lucas and Singh

(2011), in an effort to better understand the relationship between race

and sports book business volumes and slot and table game play. Further, the findings

offered support for the general notion of cherry picking, as described

in the retail literature. Specifically, it avoids the

protracted lull in business in November and most of December, the spike

in gaming activity during the ensuing holiday period, and the second

lull in business, beginning in mid-January. Vegas race books buck trend: Millions of dollars in

upgrades prompt increase in pari-mutual wagering. For Nevada casinos, Lucas and Kilby (2012) describe drop by way

of the following formula:

The overall results of this work were consistent with the majority

of findings from others who have empirically tested the effect of gaming

amenities within the Full Service Theory (Abarbanel et al., 2011; Lucas,

2013a; Lucas et al., 2006; Suh Tsai, 2013). By the end of 2013, Nevada

sports books had rebounded from the post-peak decline with a record-high

annual win of $203M, while race books continued their steady decline to

end at $52M in annual win (NGCB, 2013). Of course,

this is an abridged list. Journal of

Hospitality Tourism Research, 25(3), 289-301.



In exchange for access to actual performance data, the management

of the donor properties requested that the names of the hotel-casinos be

omitted from the study. In

step with this idea, the same model was used to explain the day-to-day

variation in the tribal casino’s low-denomination coin-in, but the

result was the same. AR terms are added to address

correlation between lagged values of the dependent variable, while MA

terms address serial correlation among the error terms. (1993, October 15). These same results

offered little support for the spillover effect. A second model examined the relationship

between daily poker room rake and daily coin-in, using data from the

second property. forbes.com/2008/04/24/casino-poker-gaming-lead-manage-cx_mk_0424mohegan. (2009). Sports books accept wagers on a wide

variety of sporting events. This difference was evident in

the quality and price-points of the onsite restaurants, hotel rooms,

entertainment venues, and other amenities. MacKenzie, S.B. Results from only one other study are available (Abarbanel et

al., 2011), and it did not include a table game component. As a result, a linear trend

variable was added to both models. While understanding the

relationship between racing days and slot machine wagering volume was

not their primary mission, the related result is certainly relevant to

the current study.

Data Sources


Overall, the models were effective predictors of COIN-IN and DROP,

as evidenced by the [R.sup.2] values. “n/a” represents not applicable, i.e., the variable did

not appear in the final model. Lucas, A.F. Given that

Property C is an integrated resort, there are many potential uses of

this floor space, ranging from restaurants to retail. Finally, the following variables were dropped from

Property C’s final DROP model for failing to post statistically

significant results: TUE, MEMDAY, and NCAA.

Table 1 lists the descriptive statistics for all continuous

variables appearing in the final models. Although the DROP models were slightly

better, Abarbanel et al. Once again, the bingo headcount variable failed to

produce a statistically significant effect.

The two key predictor variables were RACE and SPORTS, with the

former representing the natural log of the total dollar amount of wagers

placed in the race book on each gaming day, and the latter representing

the natural log of the total dollar amount of wagers placed in the

sports book during each gaming day. The

data were screened in SPSS, v. While the continued operation of the

poker rooms located at Properties 2 and 3 was questioned, Lucas was

unable to comment on the magnitude of positive results for Property 1.

Additional proprietary data were needed to determine whether the

magnitude of either coefficient was indicative of a sufficient indirect


Suganuma, A. 264), the line plots shown in

Figures 3, 4, and 5 were visually examined to assess the extent of the

first and second order stationarity, or the presence of a constant mean

and variance, respectively.

Smith, H. (1998). Aside from RACE and SPORTS, the greatest VIF of any

other predictor variable was 2.6 in the COININ models and 3.3 in the

DROP models.

Walters, R. In grocery/retail settings, the sales of full-priced items have

failed to increase, even when complementary items have been priced below

cost (Walters Rinne, 1986; Walters MacKenzie, 1988). Likewise, a 1.0% increase in

SPORTS generated a 0.0225% increase in DROP (B = 0.0225, p = 0.0483).

Lastly, the Resort C model recorded an R: of 64.5% and an F-statistic of

30.02 (df= 11,200, p 0.00005). Managing the slot operations

of a hotel casino in the Las Vegas locals’ market. 20, and the time series regression

analysis was conducted in E Views, v. Perron, P. The

failure to find a statistically significant relationship between the

book variables and daily coin-in was certainly cause for concern, and

grounds for further study.

Lucas (2013a) also examined the effect of daily poker room rake on

slot and table game business volumes, analyzing data from three Las

Vegas hotel-casinos identified as Properties 1, 2, and 3. Kharitonova, A. 67.50 0.0000 174.93 0.0000 30.02 0.0000

Notes. In the battle for floor space at Property A, these

results will certainly help the race book, quite possibly at the expense

of the adjacent sports book.

Although not part of the theoretical model per se, correction

variables were also employed. Daily performance data were gathered over a 250-day

period, beginning on January 1, 2009 and ending on September 7, 2009.

With an [R.sup.2] of 89.6% and an F-statistic of 117.8 (df = 17; 232, p

0.001), their initial theoretical model was well-specified. Although often

collectively referred to as a race and sports book, these two operations

are unique, catering to very different customer bases. (2008). (2006). Specifically, the

majority of outcomes were not consistent with the idea that race and

sports players are initially attracted to the casino by the books, but

eventually become slot and table game players.

Within the gaming literature, Lucas and Brewer (2001) have cited

cherry picking as a possible explanation for a finding that failed to

support a positive relationship between the number of daily diners in

casino operated restaurants and slot play. found variables representing the

wagering activity in both the race book and the sports book to have no

effect on the dollar-value of daily slot machine wagers. With parimutuel betting, a fraction of the total

amount wagered (known as the pool) is withheld for the operator, making

it a very steady business in terms of gaming win. For example, given the

importance of profits from hotel operations, any research aimed at the

relationship between book and hotel business volumes would be valuable.

This approach would at least partially address the argument that the

opportunity to wager on major sporting events brings guests to the

hotel, especially in destination markets such as Las Vegas.

Property C executives may want to revisit their book operations, to

the extent that they rely on assumed indirect contributions. These results included a statistically significant

effect for the poker rake variable for Property 2 (B = $157, p

0.01). For instance, on Saturdays, SAT was set to

a value of one, with all other day-of-the-week variables assigned a

value of zero for that day. Duxbury Press, New York.

Increased competition, declining bingo sales, and falling operating

profits gave rise to more targeted research into the relationship

between the bingo business and slot play. The ACF relates to correlation among

lagged values of the dependent variable, while the PACF relates to

correlation among the error terms. “n/a” represents not applicable, i.e., the variable did

not appear in the final model. The variance

of the model errors was also assessed via scatter plots. Forbes. Others may choose to invest in

the ailing areas, in an effort to improve indirect contributions.

Email; anthony.lucas@unlv.edu


Individual date variables like JUN 10, which appeared in Resort

A’s model represented the effect of outliers.. In

his view, the ability to draw customers to the property has always been

behind the proliferation of Las Vegas sports books.

COIN-IN and DROP were predicted for the ith day at the jth

hotel-casino, where i ranged from 1 to 212, and j ranged from 1 to 3.

Both equations represent the full model, which was applied to the data

from all three resorts. (2007). did not examine the effect of the books on the

table game business.

Time Series Plots

William F. The day-of-the-week variable system included

MON, TUE, THU, FRI, SAT and SUN, with WED serving as the base period.

The holiday variables were set to a value of one on the holiday itself,

and in some cases, on the surrounding days. In

their study, neither the race book nor the sports book write produced a

statistically significant impact on daily aggregate coin-in. UNLV Gaming Research Review Journal, 75(2), 77-90.

Putting it all together, the following equations represent the base

template used to test the overall theoretical model and the individual

hypotheses advanced in the Literature Review.

Time Series Regression Diagnostics

Any replication of this study would be helpful in gaining a broader

understanding of the relationships between books and critical gaming

volumes. Consistent with Lucas (2013a), no unit root tests

were performed, as such tests have been repeatedly found to lack

statistical power, and the presence or absence of a unit root has been

found inconsequential in the analysis of time series data (Campbell

Perron, 1991; Cochrane, 1991).

Campbell, J.Y. D. Like the COIN-IN model, SPORTS failed to generate a

statistically significant result, but a 1.0% increase in RACE was

associated with a 0.0059% increase in DROP (B = 0.0535, p = 0.0059). This

expression mitigates considerable differences in the scale of operation

between integrated resorts on the Las Vegas Strip (Property C) and

off-Strip resorts (Property A), which generate business volumes well

below those of Strip properties. Exact hotel capacities are not provided to preserve the

anonymity of the properties.

Marker Issue Slips represents the dollar value of credit granted to

players, while Marker Redemption Slips represents the dollar value of

credit retired on the table games. More specifically,

the Q-statistics associated with the correlograms revealed no

statistically significant correlations in the error process, across 30


Key words: Race book operations; sports book operations; casino

management; slot operations; table game operations; casino operations


Lucas, A.F., Dunn, W.T. Examining

data from this period could influence results associated with a variable

representing a sports book’s wagering volume, as wagers on football

comprise a meaningful portion of annual wagering volume in most sports

books. Using time

series regression analysis, only Property 1 produced results that

included a statistically significant relationship between daily poker

rake and the dependent variables: daily coin-in and daily table game

drop. Introduction to Casino Management.

Gamma, San Diego.

Regardless of the specific outcomes, property executives can use

this business intelligence to make more informed space allocation and

development decisions related to share of the gaming floor. California casinos install controversial

lottery-style games. Know when to hold ‘em. Aside from RACE and SPORTS,

predictor variables that failed to produce a statistically significant

effect are not shown in any of the tables appearing in the Results


Poker Rooms

Descriptive Statistics

In Eng (2008), one prominent gaming executive claims that a

state-of-the-art race and sports book will bring customers to other

parts of the resort. (2010). Los

Angeles Times. For example, by having a

poker room, the casino is able to attract patrons that would otherwise

not visit the property. Similarly, a 1.0% increase in RACE also generated a 0.0535%

increase in DROP. Developers of new gaming

properties would clearly benefit from such knowledge when considering

which gaming amenities to offer, and to what extent each will be

offered. This study addresses this issue by examining

performance data from such resorts.

Results of this work also help casino developers frame the design

of new gaming properties. html

Manteris, A. The only special event variables were KDERBY (Kentucky

Derby) and NCAA (The 1st and 2nd rounds of the Collegiate Men’s

Basketball Tournament).

Kalargyrou, Singh, and Lucas (2012) designed a theoretical model to

identify the effect of dining sales on slot machine wagering activity,

using daily performance data gathered from a Midwestern racino. (1986). (1996). This variable produced

a statistically significant and positive effect on the dependent

variable, daily coin-in (B = $563.97, p 0.05). Casino

Answer Man. (1991, March 8-9). These results

certainly support claims of indirect contributions, within the broader

conversation of the book’s overall profit per square foot. These two

books must attempt to maximize direct operating profits to avoid a

reduction in space, or worse yet, total displacement.

Kennedy, P. However, their study

only estimated the impact of the books on slot machine wagering volume.

No study has attempted to measure and/or quantify the relationship

between wagering volume in the books and table games. Except for TREND, all values are expressed

as the natural log of the original metric.

Table 2

Correlation Matrices for Continuous Model Variables: Resorts A, B, and

C (n = 212)


Resort A Variables:


DROP 0.83 * –

RACE 0.68 * 0.61 * –

SPORTS 0.37 * 0.35 * 0.36 * –

TREND -0.32 * -0.32 * -0.01 -0.25 * –

Resort B Variables:


DROP 0.80 * –

RACE 0.46 * 0.59 * –

SPORTS 0.51 * 0.60 * 0.31 * –

TREND n/a n/a n/a n/a –

Resort C Variables:


DROP 0.56 * –

RACE 0.48 * 0.45 * –

SPORTS 0.40 * 0.37 * 0.57 * –

TREND n/a n/a n/a n/a –

Notes. Additionally, the results cannot be

generalized beyond the sample period of this study, which did not

include the National Football League’s (NFL) regular season and

playoffs, and the majority of the collegiate football season. Next, the Full Service Theory is examined, including

a review of the studies that have empirically tested related portions of

it. ‘B’ is for ‘bingo,’ as

well as the billions of bucks the centuries-old game continues to

generate. This result held for the model that examined the

relationship between daily poker room headcount and daily cash drop on

the table games. For example, Bontempo (2007) reports that Las Vegas

casino executives are making their books larger and more elaborate, in

an attempt to lure more patrons to the properties.

Theoretical Model

[H.sub.0]4. When the

overloaded side wins, the book can experience a loss on that betting

line. A p-value

of 0.0000 indicates a value less than 0.00005.

Table 4

Results of Double-log Time Series Regression Analyses Dependent

Variable: Natural Log of Aggregate Daily Table Game Drop

Resort A Resort B Resort C

Variable B P B P B P

Constant 11.3275 12.0624 14.2277

RACE 0.0535 0.0059 0.0396 0.0047 0.0513 0.7343

SPORTS 0.0006 0.9731 0.0225 0.0483 -0.0322 0.3804

TUE 0.0603 0.0105 -0.0675 0.0001 n/a n/a

THU 0.0591 0.0165 0.1454 0.0000 0.2410 0.0004

FRI 0.4597 0.0000 0.5082 0.0000 0.6775 0.0000

SAT 0.4158 0.0000 0.6958 0.0000 0.7615 0.0000

SUN 0.1191 0.0006 0.3480 0.0000 0.5111 0.0000

MEMDAY n/a n/a 0.3021 0.0006 n/a n/a

NCAA 0.3448 0.0000 n/a n/a n/a n/a

KDERBY n/a n/a 0.2141 0.0210 0.9162 0.0001

TREND -0.0012 0.0000 n/a n/a n/a n/a

FEB 04 n/a n/a n/a n/a -0.5447 0.0408

MAR 10 0.4478 0.0000 n/a n/a n/a n/a

APR 08 n/a n/a n/a n/a -0.7640 0.0079

APR 25 0.4067 0.0001 n/a n/a n/a n/a

MAY 15 n/a n/a n/a n/a -0.8994 0.0026

JUN 01 0.4149 0.0001 n/a n/a n/a n/a

JUN 16 -0.3548 0.0009 n/a n/a n/a n/a

JUN 17 n/a n/a n/a n/a 0.5989 0.0369

JUN 30 n/a n/a 0.6472 0.0000 n/a n/a

AUG 23 -0.2282 0.0308 n/a n/a n/a n/a

AR (1) 0.3765 0.0000 0.7268 0.0000 0.5510 0.0000

[R.sup.2] 83.85% 90.63% 64.53%

Model F-Stat. Existing operators would also benefit by applying this

knowledge to decisions related to (1) expansion of book space; or (2)

conversion of book space into alternative uses. The

results will also add to the battery of findings related to similar

propositions couched within the Full Service Theory examined in Lucas

(2013b). Although his results supported a

statistically significant and positive relationship between daily poker

rake and coin-in levels on slot machines, the magnitude of the positive

effect was deemed insufficient to sustain poker operations. 31, 2003-2013). Poker rooms ride high with TV boom. Sports books lose some juice. These same departments often survive by claiming to drive business

to the casino’s primary profit centers. (2006). Harrah College of Hotel Administration

For many years, gaming executives have claimed that unprofitable

bingo rooms attract highly valuable slot play (Smith, 1997; Stutz, 2004;

Suganuma, 2003; Tosh, 1998). The Cromwell on Las Vegas Strip now officially open to

the public. Their

model included a binary variable representing live racing days. In the gaming industry, these

wagering volumes are referred to as write, hence the use of Daily Race

Book Write and Daily Sports Book Write in Figure 2. A 1.0% increase in RACE produced a 0.0396%

increase in DROP (B = 0.0396. The term write is used

to describe the aggregate daily dollar-value of all wagers placed in a

book. Therefore, its mean and standard deviation were meaningless,

hence their omission from Table 1. This

double-log form is common in econometric modeling (Dielman, 1996),

featuring regression coefficients which are expressed as elasticities,

as in the elasticity of Y with respect to X (Kahane, 2008, p. As listed in the notes of

Tables 3 and 4, the VIFs for RACE ranged from 1.6 to 4.5 in the COIN-IN

models, and from 1.6 to 4.3 in the DROP models. As noted in the Methodology Section,

these periods are often omitted from casino samples for this reason.

However, given the potential importance of this period to the sports

books, future researchers should attempt to study the relationship

between sports books and critical gaming volumes during all or part of

the football season.

In this study, the primary aim was to examine the relationship

between race and sports book write and critical gaming volumes. (2008, April 24). Table games experience growth in all quarters.

International Gaming Wagering Business, Oct., 74.

The opinions that crowd the trade literature are not accompanied by

empirical research. In deference to this request, the three

properties are hereafter referred to as Property A, Property B, and

Property C. Oddsmakers set an opening line on the

contest, which is subsequently adjusted by the bookmaker, if necessary.

Sports books can have losing days, as contests often receive

disproportionate amounts of money wagered on one side. Gaming Revenue Report (calendar

years ended Dec. Property A featured close to

500 hotel rooms, while Properties B and C both offered in excess of

3,500 rooms. Property B targeted a clientele

characterized by its management team as low- to mid-rollers, while

Property C pursued mid- to high-rollers. Max.

Resort A Variables:

COIN-IN 15.31 0.24 14.90 15.96

DROP 11.92 0.26 11.28 12.72

RACE 10.12 0.82 6.70 12.08

SPORTS 10.79 0.57 7.11 13.47

TREND n/a n/a 1.00 212.00

Resort B Variables:

COIN-IN 14.56 0.22 14.11 15.22

DROP 12.86 0.35 12.16 13.78

RACE 8.35 0.74 6.30 11.13

SPORTS 9.66 0.91 7.01 13.66

Resort C Variables:

COIN-IN 15.67 0.35 14.99 16.65

DROP 14.75 0.53 13.67 16.43

RACE 10.53 0.26 9.96 12.21

SPORTS 11.01 0.89 7.06 14.96

Notes. The VIFs for SPORTS were 1.3, 1.4, and 1.6 for the

Resort A, Resort B, and Resort C models, respectively. Estimating

the indirect gaming contribution of bingo rooms. RACE fared better than SPORTS, posting

positive and significant effects in one of the three COIN-IN models and

two of the three DROP models. Finally, the Resort C model recorded an [R.sup.2]

of 80.5%, posting an F-statistic of 74.43 (df = 10, 201, p

0.00005). However, not all of the final COIN-IN and DROP

models for each property included all of the control variables listed in

the previous equations. The VIFs for RACE were 4.3, 1.6,

and 2.3 for the Resort A, Resort B, and Resort C models,

respectively. Of course, these views suggest that the book is

a critical element in the patronage decisions of casino customers.

McCarthy and Perez (2009) describe similar viewpoints regarding the

relative attractiveness of casinos that offer sports wagering over those

that do not.

In the table game models, the natural log of the daily aggregate

drop served as the dependent variable. Executives

may wish to water the green spots by investing in new systems and

infrastructure for the areas that are producing the most value. Unlike Ollstein (2006), the authors did not

weighin on whether the magnitude of this indirect contribution was

sufficient to sustain poker room operations.

Grochowski, J. (2003). So, COIN-IN was the natural log

of the aggregate daily dollar-amount of wagers placed in electronic

gaming devices.

Spillover Effect

The following variables from Property A’s full COIN-IN model

failed to produce statistically significant effects: SUN, PRESDAY,

STPATS, INDDAY, NCAA, and KDERBY. The same executive highlights the importance of the

sports book’s contributions to other areas of the casino, given its

less noteworthy direct profits (Manteris, 1993). Many in

the industry tout such contributions (Bontempo, 2007; Manteris, 1993;

Pugmire, 2009). Within the context

of their model, Abarbanel et al. [B.sub.Sports] = 0

Table Game Drop = Dollar-value of Currency in the Drop Box +

Dollar-value of Gaming Cheques in the Drop Box + Dollar-value of Marker

Issue Slips in the Drop Box – Dollar-value of Marker Redemption Slips in

the Drop Box

The Full Service Theory


Las Vegas, NV 89154

Legato, F. (1988). University of Nevada, Las Vegas.

Table 3 lists the results of the COIN-IN model time series

regression for all three properties. (2013b). Retrieved from


Cosmopolitan (2014). (2011) is the only existing study to have directly

addressed the effects of the race and sports books on primary casino

business volumes such as slots and table games. Further,

the marginal performance of each of these areas is often justified by

the belief that each makes considerable contributions to the primary

profit centers in the casino, e.g., slots and table games. That is,

given the magnitude of the indirect contribution to slots and the floor

space dedicated to the poker room, Ollstein concluded that the poker

space would be better utilized to accommodate additional slot machines.

Because of the heavy reliance on slot win at the property studied by

Ollstein, he did not examine the effect of the poker room on table game


Cosgrove-Mather, B. In the Resort C model neither RACE nor SPORTS produced a

statistically significant effect on COIN-IN.

Lucas and Bowen (2002) created a model designed to measure the

effect of lottery promotions in casinos, which included a variable that

represented the daily aggregate bingo headcount. (2010). This result was

produced from data gathered from a single off-Strip Las Vegas

hotel-casino. This is assessed by way

of correlograms depicting the ACF (autocorrelation function) and PACF

(partial autocorrelation function). Measuring the effectiveness

of casino promotions. Retrieved

from http://www. Casino operators and developers gain valuable insight

related to the contribution of books to primary casino profit centers,

and the methodological approach is readily adaptable to other leisure

service businesses interested in estimating the contributions of one

profit center to another.

Wiser. As RACE and

SPORTS were the key variables in this study, the VIFs associated with

these variables were the primary concern. Other factors could have influenced the

individual results. casinos these claims of

indirect contributions center around slots, as the operating profit

margins are generally much greater than those posted by table games.

Table Game Drop Model:

Anthony F. What went wrong at Sport of Kings:

The Sports Book is primarily to bring business to the casino. Journal of Retailing, 62(2), 237-266.

Regarding the gaming research reviewed thus far, only a few results

have fully supported the basic idea of the spillover effect (Lucas

Bowen, 2002; Ollstein, 2006). He went on to note

that many of the events that draw guests to Las Vegas revolve around

major sporting contests, such as the Super Bowl and Kentucky Derby. Global Gaming Business, 2(5), 22-24.

Dielman, T.E. Only NCAA

failed to produce a statistically significant effect in Property

B’s DROP model. After multiplying the $157 by the average house edge, it was

estimated that Property 2′s slot win increased by $10.68, for every

$l-increase in poker rake. These were the

dates for which all three properties were able to supply a common data

set. 116.16 0.0000 52.51 0.0000 74.43 0.0000

Notes. Lucas

Nevada Gaming Control Board (2013). Differences in the results across resorts were not

surprising, as no two casinos are alike.

Others have taken different paths, ranging from greatly reducing

the dedicated footprint of the race and sports book to replacing it with

nothing more than a wagering kiosk. (2013a). J. Retrieved from


Multicollinearity was assessed by examining variance inflation

factors (VIFs) for each model’s predictor variables. MIT Press,


Race and Sports Books

Within the existing literature, the results of the current study

are most directly comparable to those of Abarbanel et al., (2011). The results directly extend

the work of Abarbanel, Lucas and Singh (2011) by examining the

relationship between book wagering levels and table game play, and

provide additional empirical tests of the Full Service Theory examined

in Lucas (2013b). The Cromwell, for example, opened on

the Las Vegas Strip in 2014 with a kiosk in lieu of a race and sports

book (KNTV, 2014). Back to the pit? Global Gaming Business, 9(8),


When working with time series data the most pressing concern is

usually the independence of the error process. While further research is advised, these

results certainly do not support expansion of the book, nor do they bode

well for the book’s profit-per-square foot estimates, which almost

always include an indirect contribution component.

The day-of-the-week, holiday, and special events variables were all

expressed in a binary format. For

Property A, this would be the race book. (1995). The specific expression of each model variable will be described

in the forthcoming Methodology Section.

SLS (2014). G. Resort A’s DROP model produced

an [R.sup.2] of 83.9%, with an F-statistic of 67.50 (df = 14, 197,p

0.00005). Only the loss-leader item (the hamburger)

would experience an increase in sales.

4505 Maryland Parkway, Box 456037


Taucer, V. It is certainly possible that race and sports book patrons

have insufficient interest in critical profit centers such as slots and

table games, failing to support the protection of these departments

under the Full Service Theory.

Working from Property A’s full DROP model, both MEMDAY and

KDERBY failed to produce statistically significant effects. Ante up! Casino Player, 15(9), 85-88, 90.

Lucas, A.F. Variables representing both race and sports book

wagering volumes failed to produce statistically significant effects in

seven of twelve hypothesis tests, within models designed to explain the

daily variation in slot and table game play. In general, coin-in represents the

total amount of money wagered in some number of electronic gaming

devices, over a specified period of time such as a day, month, or year.

In this study, slots or slot machines refers to any coin- or

ticket-operated gaming device, including but not limited to reels, video

poker games, and electronic table games. p = 0.0047). It was

theorized that the low-denomination slots represented a price point that

was more in line with the bingo customer, possibly improving the chances

of identifying a positive relationship between bingo and slot play. While the annual gross gaming win for all three of these

properties was in excess of the Nevada Gaming Control Board’s top

reporting tier, there were critical differences in the resorts. International Journal of Hospitality Management,

21(2), 189-202.

Lucas, A.F. Despite the paucity of empirical research, these claims have

gained traction. For

Property A, a 1.0% increase in RACE produced a 0.0399% increase in

COIN-IN. Applied Regression Analysis for Business and

Economics, 2nd ed. Pro leagues, NCAA resist

push by states to legalize betting. Shilling, J. (2012). Estimating the indirect gaming contribution of

poker rooms: Is poker room volume a peripheral driver of slot revenue?

(Unpublished master’s thesis). The increased standard deviation in

Property C’s DROP variable was due to its high-end table game

clientele. The data set from the

tribal casino included daily coin-in for slot machines with wagering

units less than $1, also known as low-denomination slots. (2003). Large-scale shopping

center development opportunities. However, if these views are on target, one would

expect to see support for them in the data of casino resorts that offer

race and sports books. (2001). Las Vegas Review

Journal, pp. Future

researchers may also want to consider adding dependent variables that

represent hyper-profitable non-gaming operations. R. A requirement for time series regression, a stationary

series is characterized by a constant mean and constant variance

overtime. Land Economics, 71(1), 35-41.

Walters, R. Ollstein (2006) was the first study to challenge the

assumption of indirect profit contributions from poker rooms. Gaming Research

Review Journal, 10(2), 39-54.

Expression of Dependent Variables

Cochrane, J.H. Tsai, H. In the current study, the critical issue

is whether evidence exists in support of race and sports book patrons

spilling over into the slot and table games areas of the casino.

Eng, R. The poker boom: Can casinos cash-in on

low-stakes Texas Hold’Em? Gaming Law Review and Economics, 14(1),


Lucas, A.F. Similar studies and ideas from the retail literature follow, and

finally, a theoretical model and hypotheses are advanced.

While none of these plots provided cause for concern, Property

A’s COIN-IN and DROP data reflected the possibility of a mild

linear decline over the sample terms. Retrieved from



Property A has what could be considered a hyper-dependency on slot

win, making the RACE result from the COIN-IN model most critical. An empirical

investigation into the impact of price promotions on retail store

performance. Within U.S. The special event variables were set to a

value of one on the special event day(s), and a value of zero on all

other days. The

following model from Lucas (2013b) illustrates the assumed relationships

described in this paragraph.

Abarbanel, B.L.L., Lucas, A.F., Singh, A.K. This

variable was set to 1 on the days that featured live horse racing. For

Properties A and C, SPORTS failed to impact both COIN-IN and DROP. . Bingo blueprint. At a minimum, results from such

a study would provide a valuable comparison against those produced by

the current work.


Suh, E. (2004). Finally, binary

variables were also added to reflect the effects of valid outliers.

Kalargyrou, V., Singh, A.K. (2012). The

results indicated a statistically significant decrease in slot machine

wagering on the racing days, suggesting that the slot business suffered

from the competition of live horse racing. (2005). Las Vegas Review

Journal. (1991). While

the majority of findings related to the Gaming Amenities Section of

Figure 1 have failed to support the Full Service Theory, the overall

body of results remains mixed. The Resort B model posted an

[R.sup.2] of 80.2%, with an F-statistic of 52.51 (df = 14, 197, p

0.00005). Mohegan Sun rises. (2011) and any future

studies. Rinne, H. Retrieved from http:// www.lvrj.com/sports/14309912.html

As shown in Figure 1, race and sports books, poker rooms, bingo

rooms, and keno lounges are all examples of gaming amenities. Retrieved from


Eppli, M. A Guide to Econometrics, 4th ed. However, for Resort A, RACE posted a greater standard

deviation than SPORTS, making this an unusual result. Specifically, these findings provide

developers with a better understanding of what they can expect from the

books when they hear arguments from various parties related to the

necessary components of the casino.

Trade Literature

Retail Literature

Suh and Tsai (2013) studied data gathered from two prominent Las

Vegas Strip resorts to examine the link between the poker room and the

casino floor. This outcome held for both properties. Using a time series model very similar to Ollstein’s,

Suh and Tsai failed to identify a statistically significant relationship

between the daily poker room headcount and the daily coin-in level in

slot machines. In this case,

studentized deleted residuals were plotted against corresponding

predicted values. The VIFs for RACE were 4.5, 1.6,

and 2.2 for the Resort A, Resort B, and Resort C models,

respectively. SPORTS only produced a positive and

significant effect in Property B’s COIN-IN and DROP models. His time

series model analyzed daily data from a sample that began on February 1,

2005 and ended on August 31, 2005, a period that represented the height

of the recent live poker craze. (1997, October 16). Advocates for the books are quick to claim contributions to

other profit centers (Bontempo, 2007; Eng, 2008; Manteris, 1993;

Pugmire, 2009), but offer no rigorous empirical support for these

claims. The data

were sequentially ordered by day, over a 212-day sample period, which

began on February 1, 2009 and ended on August 31, 2009. Gaming

Wagering Business, 63.

KNTV (2014). Figure 2 illustrates this established model.

As noted in the ensuing section, the results varied by property.

This is likely due to differences in factors such as (1) clientele; (2)

proximity of the books to primary gaming areas; and (3) management and

marketing activities related to the books, slots, and tables. Initially all

six models exhibited problematic correlation in the error process.

However, after the addition of the appropriate AR and MA terms each of

the six models produced an independent error process. For Property B, the following

variables were eliminated from the COIN-IN model for failing to produce

statistically significant results: TUE, PRESDAY, NCAA, and KDERBY.

Finally, the following variables in Property C’s COIN-IN model

failed to post statistically significant effects: TUE, STPATS, MEMDAY,


[H.sub.0]1: [B.sub.Race] = 0

Also with origins in the retail literature, the spillover effect

describes the idea that one store’s sales can affect sales at other

nearby stores. With respect to second order

stationarity, the graphs failed to indicate a problematic departure from

a constant variance. Two hypotheses

were tested (RACE and SPORTS) in each of two models (COIN-IN and DROP),

at three different properties (Properties A, B, and C). As endorsed by Kennedy (1998, p. The profits that result from the poker room

itself are known as direct profits, while the estimated contributions to

the primary profit centers of the casino are considered indirect

profits. Finally, histograms of the

model errors revealed no problematic departures from the normal


Expression of Predictor Variables

The lean years following the global financial crisis prompted

gaming executives to question whether the books represented the best use

of finite floor space. TREND was not

present in the final models for Resorts B and C, hence the “n/a” for not


Table 3

Results of Double-log Time Series Regression Analyses

Dependent Variable: Natural Log of Aggregate Daily Coin-in

Resort A Resort B Resort C

Variable B p B p B p

Constant 15.0056 14.0223 14.7836

RACE 0.0399 0.0082 0.0194 0.1402 0.0493 0.4517

SPORTS 0.0050 0.7135 0.0229 0.0309 0.0076 0.6306

MON -0.1096 0.0001 0.0672 0.0008 0.0920 0.0049

TUE -0.1167 0.0000 n/a n/a n/a n/a

THU -0.0460 0.0201 0.0584 0.0064 0.2220 0.0000

FRI 0.3721 0.0000 0.2713 0.0000 0.5125 0.0000

SAT 0.3051 0.0000 0.3657 0.0000 0.6795 0.0000

SUN n/a n/a 0.1922 0.0000 0.3892 0.0000

PRESDAY n/a n/a n/a n/a 0.6721 0.0000

STPATS n/a n/a 0.2920 0.0008 n/a n/a

MEMDAY 0.2557 0.0017 0.2484 0.0018 n/a n/a

INDDAY n/a n/a 0.1868 0.0260 n/a n/a

TREND -0.0014 0.0000 n/a n/a n/a n/a

MAR 12 n/a n/a 0.2262 0.0096 n/a n/a

APR 25 n/a n/a 0.3280 0.0001 n/a n/a

APR 30 n/a n/a -0.2944 0.0008 n/a n/a

JUN 10 0.3159 0.0001 n/a n/a n/a n/a

JUN 19 n/a n/a 0.2618 0.0028 n/a n/a

AUG 12 n/a n/a n/a n/a 0.4490 0.0002

AR (1) 0.2787 0.0001 0.6660 0.0000 0.5900 0.0000

AR (2) 0.1522 0.0342 n/a n/a n/a n/a

AR (7) 0.1339 0.0443 n/a n/a n/a n/a

MA(1) n/a n/a n/a n/a 0.3416 0.0001

[R.sup.2] 88.77% 80.16% 80.45%

Model F-Stat. Examining the link between poker room business

volume and gaming activity in slots and table games: A closer look at a

key assumption in the full service theory. The advance of online offshore

wagering in the 1990s and the 2008 global financial crisis dealt

successive blows to the business volumes of land-based books. The holiday variables included Presidents’

Day (PRESDAY), Saint Patrick’s Day (STPATS), Memorial Day (MEMDAY),

and Independence Day (INDDAY). Retrieved from


The linearity assumption was examined by reviewing scatter plots of

the model residuals against the predictor variable values. These results indicated reasonable levels of

multicollinearity. In spite of this underwhelming support,

the term spillover has made its way into the gaming lexicon. Flowever, the data

set was gathered in 1998, from a property that catered primarily to Las

Vegas Valley residents. (2004). Such beliefs

are collectively referred to as the Full Service Theory (FST), which

holds that the indirect contributions from these gaming amenities are

sufficient to justify the otherwise marginal profits (Lucas, 2013b).

While the FST may be popular among casino operators, the next three

subsections describe studies that have empirically tested the underlying

assumptions, within the Casino Block of the model shown in Figure 1.

Pugmire, L. Pitfalls and

Opportunities: What Macroeconomists Should Know about Unit Roots.

Proceedings, NBER Macroeconomics Conference, Cambridge, MA.


The industry is headed in multiple directions and improved

knowledge of the relationship between book and casino business volumes

would be most helpful in making capital investment and floor space

decisions related to book operations. The

[B.sub.Race] and [B.sub.Sports] terms represent the coefficients for the

model variables expressing daily race book write and daily sports book

write. For instance, the term cherry

picking has been used in this literature to describe consumer behavior

characterized by purchasing only one of two or more supposedly related

items. (2013). Although SPORTS failed to generate a statistically significant

result, a 1.0% increase in RACE was associated with a 0.0399% increase

in COIN-IN (B = 0.0399, p = 0.0082). All of these

researchers have employed effective versions of this model, substituting

different variables of interest into its basic form, such as poker rake,

bingo headcount, and both race and sports write. While both of these books can be profitable, their existence often

relies on supposed contributions to the casino’s primary profit

centers, such as slot and table games (Lucas Kilby, 2012). Regarding linearity and nonconstant variance, the

scatter plots revealed no cause for concern. A p-value

of 0.0000 indicates a value less than 0.00005.

Lucas, A.F. Boom at the books. For example, AR (autoregressive) and MA

(moving average) terms were added as needed, to produce an independent

error process, and trend variables were added to correct for

non-constant means in dependent variable values. Journal of Marketing, 25(1),


TREND was assigned a value of 1 on the first day of the sample and

increased by a value of 1 on each day, until reaching its maximum value

of 212. The sports

books seem to have recovered in recent years, but the race books have


As described in Lucas (2013b), there are revenue-producing

departments in the casino that often post marginal profits, if any at

all. RACE failed to produce a statistically significant result, but

a 1.0% increase in SPORTS generated a 0.0229% increase in COIN-IN (B =

0.0229, p = 0.0309). When a control variable failed to produce a

statistically significant effect in a given model, it was dropped from

the final model.

There is a dearth of research directly related to the effect of

race and sports books on primary casino profit centers; however, similar

issues have been examined. (2004). Finally, the standard deviation of SPORTS was expected to be

greater than that of RACE, given the well-known volatility of sports

wagering. The

impact on COIN-IN is most critical for Property B executives, as this

property relies heavily on profit from slot operations.

Operations Background

Abarbanel et al. These variables were set to

zero on all other days. However, data from only one of the two properties was

examined via this approach. Property C’s DROP model was

the least effective, due to its reliance on high-roller table game play,

which is well known for its random volatility. Bowen, J.T. With respect to the general

impact of race and sports books, the robustness of the results must be

determined by the level of the agreement in the individual findings from

this study along with those from Abarbanel et al. (2009, November 22). This review is divided into several

subsections, beginning with a brief overview of race and sports book

operations, followed by a summary’ of the viewpoints held by

industry insiders. 3.1.

The results produced in this work cannot be generalized beyond the

three donor hotel-casinos. For

example, if hamburger were priced below cost, no increase would occur in

the sales of complementary items such as hamburger buns, ketchup,

mustard, and other condiments. Casino bingo makes strides. In spite of the popular view,

the bulk of the findings related to the relationship between critical

gaming volumes and race and sports books, poker rooms, and bingo rooms

would also support the idea of cherry picking (Abarbanel et al., 2011;

Kalargyrou et al., 2012; Lucas, 2013a; Lucas et al., 2006; Suh

Tsai, 2013). This, combined with the broad support for

the Full Service Theory within the gaming industry, served as the basis

for the following null hypotheses:

[H.sub.0]2: [B.sub.Sports] = 0

Another popular opinion is nicely summarized in Bontempo (2007),

which holds that properties without books are perceived as second rate.

Bontempo also mentions the importance of including the book in any

casino expansion plans. Journal of Economic Dynamics and Control 15, 275-284.

Table 1

Descriptive Statistics for Continuous Model Variables:

Resorts A, B, and C (n = 212)

Mean Std. Estimating

the effect of racino restaurant sales on slot wagering volume.

International Journal of Contemporary Hospitality Management, 24(1),


McGowan, R.A. Unfortunately, a good portion of the football season coincides

with year-end and early-year periods, which are notorious for volatile

wagering volumes in the casino. Simultaneously entry of the predictor variables was

employed and all hypothesis tests were two-tailed, at 0.05 alpha. International Gaming Wagering Business,

25(12), 26, 30-31.

COIN-IN Models

Kahane, L.H. The VIFs for SPORTS

ranged from 1.3 to 1.6 in the COIN-IN models, and from 1.3 to 1.6 in the

DROP models. J. Lucas, Dunn, and Kharitonova

(2006) answered this call by examining data from both an off-Strip

property that catered to Las Vegas residents and a tribal casino

targeting a similar repeater/locals’ market in Southern California.

Using a model designed to explain the variation in daily coin-in, the

bingo headcount variable failed to produce a statistically significant

result. The

Resort B model posted an [R.sup.2] of 90.6% and an F-statistic of 174.93

(df= 10, 201, p 0.00005). Outliers were days

with studentized deleted residuals in excess of 3.0 that also appeared

distant from the mass of points on a scatter plot of the model errors.

Given the sample sizes, outliers were expected in all six models.

The sample period was identical for all three properties. Table 2 lists the

bivariate correlation coefficients for the continuous model variables.

Race and sports books are often referred to as a single entity

(i.e., the race and sports book), but they are actually separate

entities and quite different from one another in many important ways.

Race books predominantly cater to horserace bettors and employ

parimutuel betting. In Nevada, when players pay-off a

marker on the game itself, a marker redemption slip is completed and

placed in the game’s drop box, as evidence of the player’s




Literature Review

Kirdahy, M. In the Resort C model neither RACE

nor SPORTS produced a statistically significant effect on DROP.

Lucas, A.F., Kilby, J. Ultimately, both

developers and operators seek to optimize the profit per square foot of

casino floor space.

The basic idea of the indirect contribution has been examined

within the retail sector in various forms. 84). This general period is often selected for time series analysis of

Las Vegas properties, as it avoids the volatility associated with the

yearend and new-year months (Lucas, 2013b). A critique of the application of unit root

tests. Unfortunately, little is known

about the relationship between race and sports books and slot and table

game play.

McCarthy, M. Therefore, the results

of seven of the 12 hypothesis tests related to the effects of RACE and

SPORTS failed to support the associated portion of the Full Service

Theory described in Figure 1. International Gaming

Wagering Business, 19(2), 1, 33-34.

Model Specification

The hypotheses are separated by model here to acknowledge that

Figure 1 displays two separate models within one figure. Perez, A.J. Such results

may also be helpful for use in capital expenditure decisions. While the estimated indirect profit is not recorded on the

poker room’s income statement, the belief that it exists is enough

to justify the poker department’s marginal direct profits. Retrieved from


Using performance data from three Las Vegas hotel-casinos, time

series regression models were employed to better understand the

relationship between race and sports book wagering volumes, and slot and

table game play. Property

A was located off of the Las Vegas Strip and catered to a local

clientele, while Properties B and C were located on the Strip, with

tourist-dominated customer bases. A $1-increase in rake produced a $45-increase in coin-in and a

$7.45-increase in table game drop. The competitive conditions of today’s Las

Vegas locals’ market are very different from those in place in


[H.sub.0]3: [B.sub.Race] = 0

Similar to the case of the race and sports book, it is a widely

held opinion that poker rooms drive business to primary casino profit

centers such as slots and table games (Cosgrove-Mather, 2005;

Grochowski, 2005; Legato, 2010; McGowan, 2010; Taucer, 2004; Walters,

2003; Wiser, 2004). (2002). Min. G. The Cosmopolitan’s book is relegated to the second floor of

the property alongside several nongaming outlets (Cosmopolitan, 2014),

while the SLS book is configured in a multi-use capacity, embedded

within a restaurant (SLS, 2014), similar to that of Legasse’s

Stadium in the Palazzo.

On the slot side, the dependent variable was the natural log of

daily aggregate coin-in (COIN-IN). Another senior

executive at one of Las Vegas’ high-end casinos lauded the sports

books for helping the industry through the recent recession by

attracting guests to the resorts (Pugmire, 2009). The Resort A model produced an

[R.sup.2] of 88.8% and an F-statistic of 116.16 (df = 12, 199, p

0.00005). The VIFs for SPORTS were 1.3, 1.3, and 1.6 for the

Resort A, Resort B, and Resort C models, respectively. UNLVGaming Research

Review Journal, 77(1), 43-63.

Prior to the formal data analysis, time series plots of all

dependent variables were reviewed to determine whether each series was

stationary. (2011).

Estimating the indirect effect of sports books on other in-house gaming

volumes. Brewer, K.P. That is, failure to reject the null hypothesis

in seven of 12 opportunities suggested that many race and sports patrons

were in the casino to make race and sports bets, with little or no

interest in making slot and table game wagers. For the

most part, the findings of this study supported those of Abarbanel et

al, with only two of the six book variables posting a significant and

positive effect on COIN-IN. As a result, there are

no losing days in the race book. Anchor stores in shopping centers are often credited with

some form of spillover effect on the smaller surrounding retail outlets

(Eppli Schilling, 1995). Estimating the Impact of Las Vegas Poker Rooms

on Slot and Table Game Business Volumes: Does Poker Really Carry its

Weight? Cornell Hospitality Quarterly, doi: 10.1177/1938965513483921

Table 4 contains the results of the DROP model time series

regression for all three properties. Retrieved from

http://www.cbsnews.com/stories/2005/04/11/ entertainment


Tosh, M. At the individual resort level, the results are immediately


Given the results of Properties A and C, operating assumptions

related to the sports book’s indirect contribution may be reframed

by the results of this study. Dl.

Alternatively, an observation study of patron migration from the

books may yield valuable results related to the broader issue of

crossover from the books to the casino. Global Gaming

Business, 2(16), 40-43.

DROP Models


With slot and table game data from three properties there were six

dependent variables, as each property supplied both a coin-in series and

a drop series. A 1.0% increase in SPORTS produced 0.0229% and

0.0225% increases in COIN-IN and DROP, respectively. Journal of

Business Research, 66(9), 1651-1658.


Walters, R. Regarding the key

variables RACE and SPORTS, twelve hypotheses were tested. Sage, Thousand

Oaks, CA.

Bingo Rooms

Bontempo, D. Other newer Strip properties such as the Cosmopolitan

and SLS offer books that occupy a minimal amount of dedicated floor

space. The null

hypothesis was rejected in only five instances. Dev. * indicates significant at 0.05 alpha (2-tailed)

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