Las Vegas Embraces New Realities: Can Racing Do The Same?

by | 02.05.2016 | 10:43am

After a few days in Sin City for the National Handicapping Championship last weekend, it became as obvious as doubling down on 11: Las Vegas is evolving — both physically and virtually — and horse racing, as a gambling industry subset, might want to pay attention to what's happening.

For starters, the new Vegas is far less dependent on gaming revenue than it was just a couple decades ago. According to the Nevada Gaming Control Board and research firm Spectrum Gaming Group, gambling in 1990 constituted 58 percent of the Strip's revenue. By 2014, that figure had plunged to 37 percent while non-gaming revenue climbed to 63 percent of the total.

The stats are manifested on Las Vegas Boulevard. Recent major additions to the scene have primarily been of the non-gambling variety — social experiences like shopping, dining, zip lines, and a Ferris wheel that lurks above 50-story skyscrapers. Caesars developed The LINQ, a $550 million promenade that invites visitors to stroll outdoors and enjoy activities that do not include inhaling second-hand smoke while pushing buttons or rolling dice. This April, MGM Resorts will open a similar fresh air venue featuring the Strip's first real park. With trees and everything.

“Today's consumer wants to sample, to experience, to discover — it's no longer about visiting one resort and staying there,” said Jim Murren, MGM chairman and CEO. “We've created a neighborhood environment that invites our guests to explore… collecting experiences along the way, with The Park serving as a central gathering place for people to relax, dine and be entertained.”


Previous Vegas projects had the goal of funneling visitors into and between the behemoth casinos, where sunlight and exits are visible strictly in the mind's eye. Sure, it remains alarmingly easy to become trapped in the casino labryinth, but more resorts have blown off the doors and embraced the trend that people want choices, social interaction, and oxygen produced by plant life.

The closest comparison in the racing world to this wholistic approach is probably The Village at Gulfstream Park, the complex the Stronach Group has built up around the South Florida track in recent years. By various measures, the company still shows a tangible committment to racing, like the one Vegas has to casino gambling, but it's no longer a “take it or leave it” proposition for visitors.

“It's not just about giving away a bunch of money in the purses. and then the game's going to come back. It's a new innovative way of thinking in that it's a cool entertainment place and oh, by the way, there's a horse track. Wow, let me go see that,” the Stronach Group's Tim Ritvo told me when I toured the ever expanding Village a couple years ago.

MGM's The Park is scheduled to open April 4 on the Strip. Check out the trees.

MGM's The Park is scheduled to open April 4 on the Strip. Check out the trees.

While a Village concept could be a fit for certain racing venues, the takeaway needn't be that all tracks construct grandiose entertainment districts (certainly not dozen-story Vegas-style Pegasus statues). Slot machines, anyone? Racing states like New York have seen a boon from casino revenues and struggling locations such as Illinois still pine for deals, but others have come damn close to collapsing when politicians threatened to repossess their “magic bullet.”

Rather, it seems more about paying attention to the customer — who they are, how they've changed, what they want — whether that be non-racing diversions for friends and family, lower takeout, or exchange wagering.

Vegas is adapting to its customers on a virtual level as well, targeting a younger generation that's displayed an aversion to some of the traditional casino trappings. According to Spectrum's research,  Millennials want experiences they can share on social media, options, and empowerment. They like gambling but prefer games of skill. They'll go to a nightclub instead of playing a boring old slot machine.

In response to such data, gaming companies are developing skill-based slots, the regulations for which Nevada approved last fall. The state has also okayed mobile wagering on sports, and casinos are taking off with it. Wynn, for one, plans to unveil its app later this month.

“Customers will be able to make wagers on their phone or iPad or whatever device they choose within the boundaries of the state of Nevada,” said Johnny Avello, executive director of Wynn's Race and Sports Operations. “Then, we're going to move forward and do the same with horse racing (pending state approval).”

While that's good news for racing, and the sport remains a strong presence at casino books like Wynn with a racing guy in charge, Avello admits it's become increasingly difficult to pull in new customers compared to other sports.

“There are not a lot of young people interested in the game anymore,” he said. “But we're always looking for new ideas, new contests, ways of doing things differently to appeal to the younger generation.”

Avello: Always looking for new "ways of doing things differently to appeal to the younger generation.”

Avello: Always looking for new “ways of doing things differently to appeal to the younger generation.”

Across the street at Treasure Island, host of the National Handicapping Championship, Race and Sports Operations Director Tony Nevill, also a longtime racing supporter, echoed a similar customer-centric approach.

“Is there a decline? Yes, I think it's just part of the industry, but we constantly talk about what we can do to improve the experience,” Nevill said. “We're doing everything we can in Las Vegas and the state of Nevada, and we can only hope that the management of some of these tracks will continue to implement new ways to get younger people into racing.”

That could mean further embracing NHC-style tournament play, a bright spot for the industry, and more entrepreneurial forms of wagering. It's a sensitive subject. Sites like DerbyWars that offer betting contests on horse races without feeding into the pari-mutuel pools loom as the enemy to some.

“They're stealing our product and they're not paying the tracks running the races. They're not paying the horsemen putting on the show,” the Stronach Group's Scott Daruty told the California Horse Racing Board in October, a few weeks before the company filed a lawsuit against DerbyWars.

Mark Midland, founder of the DerbyWars parent company, stood firm in response.

“With DerbyWars, we have seen first-hand the ability of contests to create new fans and re-engage old ones,” Midland said. “Horse Racing Labs… was founded to create new ways to grow horse racing.”

Ignoring the industry's record of stubborn self-interest conflicts — seriously, there's got to be middle ground. I met one of the new fans he's referring to at the NHC. He qualified on DerbyWars, having been encouraged to play by a friend. He hails from a state that has no legal racing, and I had the impression he hadn't even been to a racetrack yet. But he's a 20-something diving headfirst into the sport through contests, which might lead to lifelong participation. At the same time, there would be no betting contests on DerbyWars (for horses at least) if tracks and horsemen couldn't afford to run the races.

One word for anyone who's forgotten that an upstart company can cause a seismic shift in an entire industry's financial model — and go bankrupt in the process:

Napster.

It's in that same vein legal challenges in several states and potential compromises might determine the future of Daily Fantasy Sports (DFS). When it comes to the Wild West of DFS, the sports books are fairly mum, but both Avello and Nevill recognize the typical DFS player might make a beeline to their area when they come to Vegas.

“It's like a stepping stone to maybe understanding something like a point spread, or what's a money line,” said Nevill. “Whether we get a percentage of their market or they get a percentage of ours, we believe that once they are licensed by those states, we can have some sort of clear picture as to what's happening… much like regulation in the stock market.”

DFS doesn't appear poisonous to Vegas so far. Wagering at Nevada sports books has doubled since 2009, and it kept climbing at a significant rate last year when DFS ads dominated TV breaks. Still, researchers say Nevada's $5 billion volume is dwarfed by what could be 20, even 80 times more money bet illegally on sports in the U.S. That's one reason Avello and others predict legalized Internet sports gambling is only a matter of time. There's too much money out there for states – and perhaps the federal government – to ignore.

“I said five years ago that it wouldn't change,” said Avello, “and here we are five years later, and I'm saying that it will change.”

It's another external competition issue the racing industry must consider as it continues to battle within.

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