Why Alienate the Customer?
Three years ago, before the Resorts World Casino at Aqueduct racetrack opened, maiden 2-year-olds were running for purses of $45,000. Last Sunday, thanks to the revenue from the slot machines at the New York track and casino that began operations in December 2011, 2-year-old maidens competed for a $75,000 purse. The $45,000 winner's share was equal to what the entire purse was in 2010.
That 56 percent increase doesn't mean New York horsemen have an embarrassment of riches when it comes to purse money. Owners will continue to lose money. However, purses in some claiming races led to what one trainer said was a “feeding frenzy” at the claim box and was identified by a task force as a potential cause for the rash of breakdowns that occurred at Aqueduct during the first winter meeting in the slot machine era. Purses in claiming races were subsequently adjusted so that the potential rewards for running a horse of questionable soundness did not obscure the risk of endangering that horse's life for a quick payoff.
How long will this gravy train go on?
Owners and trainers (as well as breeders) in Canada were blindsided when the Ontario government pulled the plush casino carpeting out from under their feet. There is stirring in the Pennsylvania legislature to raid the Race Horse Development Fund in order to keep the racing commission afloat, as traditional funding from pari-mutuel wagering has plummeted.
The New York Racing Association executive team and board of trustees already are beginning to act as if revenue from the Aqueduct casino will be a short-term phenomenon. That's prudent thinking. A proposed 2014 budget separates the struggling racing operations from the gaming side of NYRA's business, projecting a modest operating surplus next year where there were losses in this and previous years.
There are cost reductions in some areas to offset unavoidable increases on such things as union labor, but NYRA's proposed budget also projects revenue growth on wagering through an ADW surcharge and a higher export simulcast signal fee, along with increases in parking, admission fees, and box seats.
Attendance at New York tracks is declining, and revenue from wagering on NYRA races is down for the first nine months of 2013. Conventional wisdom would say raising prices when sales are falling sends the wrong message to your customers.
John Hendrickson, a non-voting special advisor to the NYRA board, agrees.
“I understand the dilemma they're in,” Hendrickson told the Saratogian newspaper earlier this week. “I understand what they're trying to do. But NYRA should not be trying to balance the budget on the back of its patrons. We want to attract more fans, not alienate them.”
Hendrickson, husband of Saratoga icon Marylou Whitney, worked tirelessly last summer to promote the 150th Saratoga celebration, but even with that ongoing season-long promotion, attendance fell at the historic spa in upstate New York. Raising prices on those customers doesn't sound like a sure-fire strategy to increase attendance in 2014.
Nowhere in the proposed budget was a reduction in takeout discussed, something Hendrickson told the Saratogian he would like to see.
“That would give fans more money, so they'd bet more, which would make more money for NYRA,” Hendrickson said. “Let's reward our customers, not punish them.”
Admission to NYRA tracks is considered a bargain by some, including board member Charles Wait who said the proposed $5 grandstand and $8 clubhouse admission (up from $3 and $5, respectively) is far less than a ticket to Yankee Stadium. And there are other racetracks around the country that charge more for entry than NYRA does at Belmont and Saratoga. (Aqueduct has free admission now because of the casino.)
Even though purse levels have nothing to do with operations, the proposal to increase admission costs while purses are soaring seems particularly tone deaf.
The influx of casino revenue to purses is supposed to improve the racing product that fans bet on, yet the most recent numbers released by NYRA show a decline in average field size from 8.5 horses per races to 8.1. That means the product is getting worse, not better, even with the additional purse money.
There is so much upside to what New York racing can be. NYRA and the horsemen who supply the product have – at least for the short-term – a strong and predictable cash flow from the casino at Aqueduct. Next year, slot machines are expected to supply $58 million in purses and $55 million in net revenue to NYRA. In the face of those numbers, do NYRA and horsemen really want to risk alienating their customers by increasing the cost of going to the track and betting on horses?
It's not as if those customers don't have other options.