Economic fallout at the Preakness

Sponsors cutting back

impact expected to be small

May 09, 2008|By Tricia Bishop | Tricia Bishop,Sun reporter

You probably won't miss what you don't see at Pimlico Race Course on Preakness Stakes day this year. A few sponsors are gone, along with some corporate tent buyers. There could be slightly fewer fans.

They are small differences, ones that are not likely to have major impact on the May 17 event's bottom line. But at a time when Pimlico and its parent company are struggling to remain viable, anything that threatens the success of the Preakness is worth watching, economists say.

With shareholders and taxpayers keeping a close watch on company and organization spending, lavish sponsorship parties can be hard to justify - particularly when it's hard to judge their return on investment.

"Businesses are watching their pennies and they're pulling back," said Dwayne Yuzik, who's overseeing Preakness preparations for the Maryland Jockey Club, which operates Pimlico. He had hoped to attract a national title sponsor for the event, but couldn't swing it this year. "Money's tight in the advertising world," Yuzik said.

Sponsorship for the event is down about 10 percent and ticket sales are off about 1.5 percent from the same period last year, he said.

Still, Preakness organizers say alcohol sales are expected to rise because patrons are no longer allowed to bring their own to the grandstand or clubhouse. And corporate tent spending is up, even though the number of tents will be the same as last year, in large part because of rising prices for printing and catering.

The Preakness, the second leg of racing's Triple Crown, brings thousands of people and millions of dollars to Pimlico - enough to keep it profitable despite a huge falloff in track attendance. Last year, average daily attendance fell to its lowest point in 25 years.

It's the same story the country over: With gambling revenue increasingly being diverted to casinos and slots, most horse racing tracks are losing money unless they're small and niche and popular in their communities, like Keeneland racetrack in Lexington, Ky., where it's tradition for local residents to attend. Pimlico thrives because it's one of the few tracks lucky enough to get a big race.

The Preakness drew a record 121,000 people last year and pushed Pimlico's annual profit up 35 percent. Still, the track's Canadian owner, Magna Entertainment Corp, which also owns Laurel Park, reported an overall loss of $114 million.

"It's fair to say in Maryland's case that the Preakness is the difference between somebody deciding to keep those tracks open and operating and not doing so," said Tim Capps, a former Jockey Club executive who's now an equine industry expert at the University of Louisville.

"It's a very big part of their bottom line for the year," he said. "Clearly, they need to have a day commensurate with days they've had in the recent past."

Some sponsors and tent purchasers have left Preakness this year, but they've been replaced by others, Yuzik said, though he declined to identify those who have left. New sponsors and tent renters include financial services company Old Mutual, which has a division headquarters in Baltimore; Caesars Atlantic City Casino and local newspaper The Examiner.

Sponsorship dollars are down, however, largely because Claritin, which sponsored a $100,000 race last year, did not participate this year.

After years of growth, the corporate party side of Preakness began shrinking in 2002. There were 39 tents then, down from 45 a year earlier. This year, like last, will have 29. Each tent costs an average $35,000.

The State of Maryland has pared back its party, from 800 invitees in 2000 to 400 people for the past four years. In 2006, its Preakness party, which comprises multiple tents, cost about $100,000. This year, it will cost $135,000, primarily because catering costs have risen as have printing costs for brochures and banners.

Such increases have made it tough for some companies to participate.

The Sun, a longtime tent sponsor, is forgoing its Preakness party this year because of "challenging economic issues" within the media industry, said Tim Thomas, vice president of business development for the Baltimore Sun Media Group.

He's been with the paper for nearly nine years; this is the first year he can remember The Sun not having a tent.

Other businesses, like Edgewood's Nutrimax Laboratories, say they can't afford to miss it. Nutrimax makes joint health supplements for people and animals, and needs access to trainers to sell more of its product.

The weather is still a bigger threat to Preakness revenue than the economy, Capps acknowledged. But if the talked-about recession becomes a reality, that could change in the long term.

"If we're still in a slump a year from now, it may be different," he said. But he's optimistic. "It's a business that's honestly built on hopes and dreams," he said.

tricia.bishop@baltsun.com

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