All bets are off around the track

Casinos, lotteries are giving gamblers choice, better return

May 24, 2007|By Bill Ordine | Bill Ordine,Sun Reporter

In the day when places like Pimlico, Hialeah and Santa Anita bustled with the sporting crowd, the racetrack was where gamblers opened their wallets to flirt with Lady Luck.

But no more.

Over the course of a generation and especially the past decade, casinos and lotteries have rocketed past horse racing in wagering popularity. The most recent statistics for those industries indicate that revenue for casinos and lotteries is more than 20 times greater than that of horse racing, both thoroughbred and standardbred.

And though a record crowd of 121,263 packed Pimlico Race Course for the Preakness on Saturday and $87.2 million was wagered across the country on the entire card held at Old Hilltop, those heady numbers are very much the exception as most gamblers prefer to take their chances on slot machines, table games and lottery tickets than at the track.

Total revenue for casinos (commercial and Native American) plus lotteries was $75.2 billion last year. In contrast, the most recent estimated hold for all U.S. tracks was an estimated $3.4 billion, based on a 20 percent hold of track handle (the hold is the money retained for the tracks, horsemen and taxing jurisdictions after bettors are paid).

The net result is that racetracks have struggled, horsemen have a tougher time making a living and the sport of kings is often a beggar at the doorstep of state legislatures asking for subsidies or slots gambling, as has been the case in Maryland.

"We have reached the point with technology that Baby Boomers and especially young people, who have grown up with computers, find horse racing to be boring because of its pace," said Frank Fahrenkopf, the president of the American Gaming Association, which represents much of the commercial gaming world, including some companies that operate slots casinos at racetracks.

"You go to the races, you watch a race for two minutes, then you wait for 20 minutes for the next one. Simulcasting has helped that a little, but for a lot of young people, it remains boring and [horse racing's] customers have gotten older. There's no young crowd coming in and taking the place of those older people."

The numbers tell an unmistakable story of flat or even declining wagering in racing, both thoroughbred and trotters, while other gambling revenues have taken off.

In 2006, thoroughbred pari-mutuel handle (total money bet) in the United States, both at the actual tracks and off-site, was about $14.8 billion, according to national Jockey Club figures. After bettors were paid, the hold was a little less than $3 billion. For trotters, the handle in 2005 (the most recent available from the U.S. Trotting Association), was $2.2 billion for a hold of about $440 million.

In contrast, the American Gaming Association reported that 2006 revenues for commercial casinos (the financial number that compares to track hold) was $32.4 billion. Revenues for Native American casinos last year were another $25.7 billion, according to the National Indian Gaming Association.

And lottery revenues totaled $17.1 billion, according to the North American Association of State and Provincial Lotteries.

The continuing trends are just as ominous for racing. Since 2000, thoroughbred handle has been almost flat, increasing just 1.6 percent.

Richard Thalheimer, a Louisville-based economist who is an expert on pari-mutuel horse racing, racino and casino gaming, said there are several fundamental reasons horse racing is struggling: value, convenience and ease of wagering.

"For one thing, the takeout rate in horse racing [the amount of money not returned to bettors] is about 20 percent," Thalheimer said. "The comparable takeout rate for casino gambling is about 6 percent.

"That's a huge difference, and people now have choices, so they're going to go where they get the better return - even though it's a negative [return] in both cases."

The proliferation of casino gambling, spurred in part by a tough national economy in the early 1990s when states looked to gaming as a fix for their budget problems, has made casino gambling much more accessible, Thalheimer said.

"In the 1960s and '70s and even into the late '80s, if you wanted to gamble in a casino, you had to go to Las Vegas or Atlantic City," he said. "Now, you have over 30 states with casino gambling and if it's not in your own state, it may be in a bordering state."

And then there's the enormous difference in the expertise required of a gambler in order to participate. Betting on races involves handicapping, being able to weigh the relative merits of the horses by taking into account numerous variables. A slots player need only know where to put the money.

Bettors who prefer games that require skill can find those in casinos as well - say, blackjack and poker - and they offer better paybacks than horse racing.

Lotteries have far worse odds than horse racing, but they have the advantage of low minimum wagers, huge prizes, no skill required and enormous convenience.

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