HORSE SENSE - Improving the racing product
Friday | February 22, 2008
Quite a bit has been written about the dynamics of wagering. Historical evidence is abundant with the fact that reduced takeout, and hence higher payout, results in increased revenue.
One study of 24 racing jurisdictions done over 15 years shows conclusively that the profitability of track operations varies inversely with the takeout rate, because a lower takeout rate "stimulates a larger handle of which the track retains a fixed proportion".
That study concluded that at the average takeout rate of 15 per cent track revenues would be 60 per cent greater than if the take out were 20 per cent.
Other studies have shown that a decrease in the price of wagering tends to increase race track attendance and, therefore, "the total amount of dollars available for distribution for purses, etc"
Having looked at the factors that determine a patron's decision to purchase a bet, it is important to realise that the race track has no control over the development and availability of alternative wagering and recreational products.
What they have to do is to find ways to make race track wagering more competitive. The most effective methods of dealing with the competition are to:
Improve the quality of the products offered.
Increase the value received by the patron.
These two methods are complementary in nature, as an improvement in product quality entails increased value received.
We have already looked at the value of reduced payout and hence increased value to the patron. It is also important to look at the quality of product being offered.
The quality of the product can only be enhanced by paying attention to the quality of the horse.
Claiming races are not product-enhancing. They do not represent an attractive alternative to other forms of gaming and/or recreation, nor do they enhance patron interest.
The integrity of the activity must be of the highest level - consistent and firm stewardship, stringent drug testing accompanied by prompt judgement - not the six to 12-month delay that seems to be the norm now.
The promoters, regulators and horsemen must undertake education programmes specifically directed at attracting new patrons.
They must enhance the race track ambience by improving the physical plant and the quality of service provided.
The two elements that must be at the centre of any revitalising of the industry are the PATRON and the HORSE. The horse is often ignored and we do so at the peril of the industry.
We must attract better-quality horses and this can only be done through attractive purses. Better-quality horses means enhanced patron interest, which translates into even higher increases in the handle.
Growth in the industry is made possible not only because racing's existing patrons would have the incentive to bet larger amounts, but also because racing would now become attractive to new patrons.
The increased value received would change in horse racing's favour the expected relative payoffs between race track wagering and its competing products. This would attract more persons to racing and the wagering activity would increase even more.
It should be obvious that the enhancement of value received by the patron is fundamental to the growth of the industry. To increase the patron's value means a decrease in the takeout rate which means that someone else's percentage share of the takeout must be lowered.
This decrease in percentage shares in the takeout does not necessarily mean that the claimants' total take will decrease.
The increase in wagering activity triggered by increased value received by the patron should be sufficiently large so that even with decrease percentage shares, conceivably all takeout claimants can reap larger dollar amounts than before the takeout rate was lowered.
In summary, if the takeout rate is lowered and the resultant internal growth is harnessed properly, the increased value received by the patron would also mean increased value received by the race track and the horseman.
The increased value received by the horseman would spill over to the breeders via the market for horses.
We need some radical changes in how we are going to deal with the racing industry - it cannot be business as usual. Who will 'bell this cat' and restore racing to its previous position within the gaming industry?
Howard L. Hamilton is a former chairman of Caymanas Track Limited and is currently president of The Thoroughbred Owners' and Breeders' Association. He can be contacted at email@example.com.