The Kentucky Horse Racing Commission on Friday is expected to award a new harness racing license to one of three applicants: Kentucky Downs, a joint venture of Churchill Downs Inc. and Keeneland, or Caesars Entertainment.
The first two groups are pretty well known in the Bluegrass State. Kentucky Downs has built a highly successful year-round historical horse racing operation on the Kentucky-Tennessee border just north of Nashville. Its short, European-style turf meet each fall is a favorite of horsemen and horseplayers alike. Churchill Downs and Keeneland are iconic brands in Kentucky Thoroughbred racing and Churchill has become a big player in the casino industry. Keeneland and Churchill both operate historical horse racing facilities, Keeneland in partnership with the Red Mile harness track in Lexington and Churchill at its new Derby City Gaming in Louisville.
The third applicant, Caesars, is less known in horse racing but an industry leader among casino companies.
Last month, all three presented plans to the commission for a harness track in Oak Grove, located in Christian County about an hour northwest of Nashville along Interstate 24. All plan to offer a short harness racing meet in 2019 and year-round wagering on historical horse racing, which a Kentucky judge recently defined as legal pari-mutuel betting, based on the type of machines currently being used at Kentucky Downs.
Kentucky Downs proposed a $45 million facility that would include a racetrack, grandstand/casino area and stabling. The $150-million Churchill Downs/Keeneland proposal (in the name of WKY Development) includes a racetrack, grandstand/casino area and hotel but not stabling. The $140-million Caesars proposal, in the name of its Harrah's brand, included a racetrack, grandstand/casino area and stabling.
As of the October meeting, Kentucky Downs and Caesars have agreements in place with the Kentucky Harness Horsemen's Association.
Caesars is by far the most bullish on the potential of the market, projecting in their presentation over $1.7 billion in historical horse racing wagering in the first year of operations. The WKY Development proposal has $800 million in wagering and Kentucky Downs estimates $232 million in wagering.
“We have a high degree of confidence in our ability to project revenue,” Dan Real, regional president-south for Caesars, told the Paulick Report. Real said Caesars believes the Nashville market is currently “underserved” and the presence of a new facility in Oak Grove would not necessarily impact the current business at Kentucky Downs. “It could actually help,” he said.
“We typically outperform our competitors,” Real added, “and that gives us the confidence that ours is the superior project of the three.”
Real said Caesars has the No. 1 loyalty rewards program in the casino business, with 57 million names in its Total Rewards database. In the presentation to the commission, Caesars said 140,000 of those individuals are within 50 miles of Oak Grove, 800,000 are within 100 miles and 1.8 million are within 150 miles.
Earlier this year, Caesars completed its acquisition of the Indiana Grand Thoroughbred and Hoosier Park harness tracks in Indiana for $1.7 billion from Centaur. Both tracks have casinos. The company also operates Harrah's Philadelphia harness track and casino in Pennsylvania and Harrah's Louisiana Downs, which has Quarter Horse and Thoroughbred racing, in Louisiana, as well as slot machines.
“We have a good track record on horse racing,” said Real, adding that Louisiana Downs in particular has had to operate at a competitive disadvantage relative to other tracks in the region that offer table games in their casinos.
After years of decline, handle during the last couple of meetings at Lousiana Downs near Shreveport has improved by double digits, Real said. “The horsemen are happy and we are trying to do everything we can to improve things,” he said. “We moved our race dates to not compete against larger tracks and spent time working with TVG and Daily Racing Form.
“The Centaur properties are going to be used as our model,” added Real. “Hoosier Park is one of the best run harness tracks in U.S. Indiana Grand was also very well run by Centaur. We bought those properties because we thought they were best in class. Indiana Grand and Hoosier Park are only going to get better through the Total Rewards program and through our commitment to horse racing. At the end of the day, those will be our models.”
“If there's any question about our commitment to horse racing, we just wrote a $1.7 billion check (for the two Indiana properties),” said Mathew Knipp, vice president of Development for Caesars. “There's a long-term view from our company that racing is an important part of the gaming industry.”
“Our No. 1 priority right now at Caesars is to increase the health and well-being of the racing industry in conjunction with the gaming devices,” said Real. “It's hard to look at our submission and argue that we are doing anything other than build something special in Kentucky.”
Both Real and Knipp said their biggest challenge was the demanding timeline imposed by the Kentucky Horse Racing Commission to file an application and then put together a proposal. The process was compressed into about six weeks from mid-September until the end of October.
“We've moved very quickly with a short window,” said Real. “I have zero doubt about the quality of our product and submission. The timeline was not ideal and it definitely favored some more than others, but we think it's the best proposal of the three.”
While Caesars is the largest company of the three seeking the Kentucky harness license, its stock price has fallen by 25 percent over the last year and the company has been the focus of a possible merger or acquisition. Caesars recently rejected a merger attempt by Tilman Fertitta's wholly owned Golden Nugget casino company and there is current speculation about a merger with MGM. During a third quarter earnings report, Caesars announced that president and CEO Mark Frissora would be leaving the company in February 2019.
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