A Vegas Problem
Last week I tweeted out a picture of MLB future odds available at the South Point Hotel and Casino (since tweeting the picture they’ve moved their odds considerably). Before I get into my more extended thoughts on the topic, I want to say that I unfairly singled out their race and sports book for offering a price on the Cubs to win the World Series that bordered on absolutely ridiculous. They aren’t the only shop in town with a number so low on the loveable losers that even Ronnie Woo Woo wouldn’t bet into after 100+ years of futility. However my thesis here isn’t to single out one specific book but rather share my own personal experiences at Caesars as a microcosm of a dangerous practice plaguing our industry in Vegas.
To anyone familiar with what the once iconic book at Caesars Palace (and the rest of the Caesars entertainment family) has become, this will come as no surprise: they don’t make it a priority to take big bets in the race and sports book. During my stint with the company, I spent time actively working to make our futures prices across all sports fair and competitive. However this task became exceedingly difficult operating under a stern initiative to keep theoretical hold at a minimum of 40%. To those unfamiliar with the terminology, this means that the market is created to keep $40 of every $100 wagered. The goal is to create a “greenhouse” with perfect equilibrium; an environment that invites the right amount of dollars on every team allowing the house to profit regardless of a heavy favorite or prohibitive longshot winning the title. The sharpest bookmakers use their opinions both before and during the season to shade the market accordingly, creating a financial scenario where a handful of teams yield better return than a few others.
The philosophy in a future book is simple: every reaction needs to create an equal and opposite reaction. AKA if you move the Patriots and Seahawks down, you then raise other middle of the pack teams up in an attempt to attract money cross the board creating perceived value to at least a handful of prospective bettors. Unfortunately the common practice taking place at many books here in town now is that prices will be lowered on public teams but none are raised, depressing theoretical hold. The end result is a market that started competitively before becoming so cost restrictive only recreational bettors would dare fire into ridiculous numbers. Last year one local casino went so far as to offer 8 NHL teams priced at odds of 10-1 or shorter and earlier this football season Caesars had 6 college football teams all trading at 4-1 or lower.
My challenge at Caesars was to constantly fight management on using a lower hold to create a more competitive product for one simple business reason: lower hold on higher volume is a hell of a lot better than higher hold on low volume. While this may be an oversimplified example, holding 20% of $1M ($200k) brings more to the bank than holding 40% of $400k ($160k) will do for a business. Hold % is great in theory but you turn a profit with cash, not hold. The unfortunate trend that’s emerged at a number of books around town is their future prices gouge customers. There’s a faction of oddsmakers that believe it’s a shame to let a sucker keep his money but that’s no reason to get lazy in your profession essentially robbing people without a gun. While my criticism is scathing of a few books in this piece there are a handful of operators including the Westgate Superbook, William Hill, and Wynn that give consistently give customers a good product. The smart bettor knows that all markets, even with similar theoretical hold, aren’t created equally since certain teams inevitably attract more action than others. Always spend time shopping around for the best prices when you come visit…although when you’re betting on the likes of the Chicago Cubs, Notre Dame football, Kentucky basketball, Toronto Maple Leafs, or the LA Lakers (even now) just to name a few rarely offer fair market value. Plain and simple the only way to stop predatory futures pricing in town is to stop betting into books that don’t allow players a fair fight.
