Does Allowing Dealers to Keep Their Own Tips Lead to Higher Casino Profits?
As our casino partners continue to see increased player demand, they have been unable to open more tables due to staffing constraints. The time has come to seriously consider changing a 30+ year old policy in most jurisdictions: allowing dealers to keep their own tips. Giving dealers this opportunity will entice more workers off the couch and back into the pits.
Why was the policy changed in the first place? In response to IRS crackdowns of tipped casino workers first in 1981 and again in 1989, operators largely made the decision to eliminate the issue altogether by having dealers pool their tips first on a shift-for-shift basis and, finally, into the 24-hour pooled model that most North American casinos employ today. This was a tidy solution to an urgent problem.
Unfortunately, the downstream consequences of the decision have diminished the table games experience for both gamblers and dealers over time while creating different staffing problems for management. Allowing dealers the opportunity to keep their own tips again will not be a singular win for the casino operator but a trifecta; happier customers who will play at the table longer, dealers who are more engaged and thus better paid, and most importantly games dealt at a faster pace leading to a more profitable Table Games Department.
Let’s first address how our customers will adapt to this change. Regardless of whether a property is in a regional location or a major tourist destination, we can sometimes lose sight of the fact that gambling enthusiasts are buying entertainment. Most of our customers visit our tables for fun, excitement and the escapism that gambling action provides.
On a recent visit to one of our partners in Southern California that allows dealers to keep their own tips, I was amazed at the level of service. I was observing the action of a few tables from 10 feet away when I was called in by a dealer whose dice game was dead on her end of the table. She politely asked if I had any questions or if she could help. She casually asked my name and proceeded to use it six times in a 20 minute interaction. In that same time span, she greeted two known incoming players by their first names as well.
I was transported back to my first trip to Las Vegas in the mid-1980’s when every dealer called my father either Mr. V or his given name. I thought at the time that he must have been a pretty big deal (he was not). But he would speak at length of how much he enjoyed the experience and how special it made him feel.
We would venture out in the extreme summer heat to play with a particularly friendly crew at a competing property. Watching this dealer ply her trade, I was reminded of how much fun the table games experience can be when done right. The case can be made that the more players enjoy their experience, the longer they will play. Happy gamblers equal longer playing sessions.
As I continued to walk the floor, I couldn’t help but notice the pace of the action on the tables. The vast majority of dealers were speedy and efficient, all while maintaining conversations with seated guests and offering eye contact to anyone close to them. This was a stark contrast to so many dealers that have worked for me over the years, who would happily enjoy their dead game while inspecting the intricacies of the chandelier overhead as a potential player approached the table.
A change in tipping policy forces dealers to effectively engage with guests or they will starve. They will no longer be able to rely on their co-workers to carry the load. Self-reliance can lead to annual income of over $125,000 a year for the best dealers. The opportunity to earn this level of income will surely lead to an increase in applications from qualified candidates.
The Las Vegas market specifically would see a reduction in zombie dealers juggling multiple shifts at different properties just to make ends meet. On-call or extra board dealers may be more willing to hold on without benefits as their paychecks see significant increases. Additionally, Casino Administrators will see their shift change waitlists shrink as more staff is happy to work the busier night shifts.
How does this policy translate to greater profits for the casino operator? “Time is money” is a saying as old as Capitalism itself. While our aforementioned customers are buying entertainment, we can never forget that we in fact are in the business of selling decisions. With your dealing staff keeping their own tips, it is in each of their best interests to deal as quickly as possible. The more rounds they deal, the greater potential for earned income.
As we have discussed in previous videos and posts, table games operators have only so many controllable levers they can use to impact profitability of their games. The basic theoretical win formula is defined as RPH × House Edge x Wagers Per Round x Time Played. More rounds per hour on each table equates to a greater theoretical win and greater net contribution per player visit. Considering the improved player experience we can also assume an incremental increase in time played further increasing net contribution.
As operators we are under continued pressure to maximize profitability. Why then haven’t more casinos adopted this policy? For most operators the opportunity has not been explored as it is simply considered a relic from a bygone era. Others have legitimate concerns of dealer/player collusion, hustling, complaints of fairness, and the tax reporting issues that led to the policy change in the first place.
Technology, security, and surveillance innovations have grown by leaps and bounds in the last 30 years that make collusion far less likely. A strict no tolerance policy for hustling tips must be implemented. There will always be staff members that will go too far and need to be disciplined and/or terminated. The overwhelming majority of dealers however, would not risk a now high paying job asking for a bet when simple guest service will do the trick.
Game rotation must be fair and equitable, and dealers should eventually be required to know how to deal all game types (a logistical bonus for management). Finally, the tax compliance issue is handled in the jurisdictions that allow the policy by requiring each dealer to carry their own locked toke boxes which can only be unlocked by Cage personnel at the end of each shift. Each dealers’ earnings are recorded daily and a weekly report is sent to the Payroll and Casino Administration departments.
Allowing dealers to keep their own tips is not a cure-all. Changing the policy will no doubt lead to different managerial challenges; but taking into account the improved customer experience, increase in dealer morale and engagement, and increased profit potential, the opportunity cost of the change is an overall net positive.
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As the Director of Operations & Casino Strategy, Lee Vinocur has 20 years of experience in casino management with an in-depth knowledge of all table games, including poker. At Tangam, he helps clients all over the world implement data-driven management of table games spreads and pricing on the gaming floor to achieve their revenue management objectives.