“I’m a huge race guy,” said Rood, vice president of race and sports for MGM properties in Las Vegas. “I grew up going to the track with my mom. I love horse racing.”
Which makes it that much harder to discuss the elephant in the horse racing room: the sport is struggling, and has been for years.
“Obviously, here in Las Vegas, it’s been suffering quite a bit. It’s suffering nationwide, but it’s amplified here,” Rood, who works out of The Mirage, told Covers. “In my particular book, three to four years ago, we flipped the footprint. It used to be an 80/20 split for race/sports. But that just didn’t make sense anymore. It was past time to make that change.”
The numbers more than tell the troubling truth. In 1998, horse racing hit a high-water mark at Nevada books, with a handle of $736.6 million. That year, Real Quiet literally missed the Triple Crown by a nose, losing to Victory Gallop in the Belmont Stakes. Just a year later, Nevada’s horse racing handle had a precipitous plunge to $568.5 million – a drop of 23 percent, even though Charismatic won the Kentucky Derby and the Preakness before taking third in the Belmont.
The handle dropped to $512.5 million by 2002 before posting modest gains the next three years, then getting a huge bump in 2006, up to $637.2 million, despite no Triple Crown threat. Kentucky Derby winner Barbaro broke a leg in the Preakness and was ultimately euthanized several months later. Since then, the handle has been on a rapid decline, bottoming out at $339.6 million in 2013, with only a slight gain to $344.2 million last year, despite California Chrome capturing the nation’s attention before falling short of the Triple Crown with a fourth-place Belmont finish.
So what happened that forced The Mirage sportsbook – and many others – to flip their scripts when it came to racing? Rood peeled off plenty of factors: Track takeouts cutting too much into the wager pool, Nevada no longer being allowed to offer rebates to race bettors (“We were the state that started rebates, and then we were outlawed from it,” Rood said), too many races at too many tracks which lead to smaller, weaker fields, and the dying out of the horse race bettor – figuratively and literally.
Several others in the Las Vegas sportsbook business echoed Rood’s opinions, particularly with regard to takeouts – the percentage a track is guaranteed from the wagering pool for each specific race. Rood explains:
“It’s the whole concept of pari-mutuel wagering,” he said. “All the (win/place/show) money goes in to a pool. Let’s say there’s $10,000 in the pool. The track takes $1,700 (17 percent), and whoever wins the race, the people who hold winning tickets share in the remaining $8,300.”
And those takeouts are higher for exactas, trifectas and the like, ranging from 19 percent to as much as 25 percent.
“I think there are a few reasons why horse racing continues to struggle, but the main reason is bettors haven’t been able to win enough,” said Jay Kornegay , executive vice president of race and sports for the Westgate Las Vegas Superbook. “The takeouts are too high, and the fields are way too small. That combination makes it difficult for a horse handicapper to win.”
Jason Simbal, CG Technology’s vice president of risk management, agrees with the wagering pool issue, though he’s not quite as miffed by the takeouts.
“I’m not as anti-takeout, because I’ve seen every casino up its hold on slots, and the handle stays the same,” Simbal said. “But I definitely agree that the size of the pool is an issue.”
Rebates factor into takeouts, which actually are used to pay a few different costs, as Simbal explained.
“Say you’ve got a $100 bet with a $16 takeout. A track, we’ll say Churchill Downs, gets $5. The state of Nevada, the Gaming Control Board, gets $3. And there’s operating costs of $1,” Simbal said. “I have $7 left. A rebate is me giving a piece of my profit margin back to the customer making the bet.”
The idea was that the rebate would incentivize the customer to make more bets. As Rood pointed out, the idea originated in Nevada, and it was really only used at a few books, but it ultimately drew the ire of California tracks and was legislated out by Nevada lawmakers in the late 1990s.
“Every other jurisdiction in the country does (rebates), but you can’t do that here,” Simbal said.
Perhaps just as key is the number of tracks – far too many – and the size of the fields – often too small.
“For Las Vegas customers, it sucks, as is shown by the decreasing handle figures,” Simbal said. “You get reduced fields, purses spread out. You’ll have a whole day where you have six to seven races, all below average. Over time, it dilutes the product. You’ve got small purses, not a lot of money in those pools, so there’s not a lot of incentive.
“There’s no reason for people to become interested, because the product isn’t good.”
Simbal then hit on a suggestion that he was hardly alone on – closing some tracks.
“If I could, I would consolidate tracks and consolidate the money, and get the best horses from all those (closed) tracks,” he said. “You make the pool bigger, which gives the bettor more of a return for their bet.”
Rood concurred: “There’s saturation. … So many tracks shouldn’t be operating. We need to contract 25 to 30 percent and send those horses to other tracks, to fill those fields.”
With too many tracks comes too many racing days. Kornegay pointed out that overseas, particularly in Asian horse racing markets, dates are much more limited. So when race day arrives, the product is solid.
“They get huge fields and huge excitement over there. They can have better quality fields and give the players a better chance of winning,” Kornegay said.
“They have racing twice a week,” Rood said of the Asian market. “You get the biggest pools, the biggest fields, and the sport is thriving over there.”
To mimic that, Kornegay suggests tracks lower their takeout percentage and cut back on racing days, which would create bigger, better fields.
“I know that’s easier said than done, but if we want to see this sport survive, they’re going to have to make some drastic changes, to make the sport appeal to a younger crowd.”
Which naturally segues into another big problem for horse racing: a dying betting demographic.
“Some old players are not playing anymore,” said John Avello, director of race and sports for The Wynn. “Their bankroll is depleted, they’re retired or whatever. The younger generation is not picking up that slack.”
There’s a couple of reasons for that. First, all the aforementioned issues make it much harder for horse players to win money. Second, handicapping horse racing is much more difficult than handicapping, say, an NFL game. The younger generation of sports bettors has been groomed on almost instant gratification, and isn’t interested in devoting the time or the patience required to win in a tight horse racing game.
“It takes a long time, and I don’t think they want to spend the time to learn it,” Avello said. “I could teach my wife to make the line on an NFL game. Then it comes down to handicapping. There’s statistics on two teams – that’s all the work you need to do.
“With horse racing, you have similar stats, but it could be eight to 10 horses.”
Furthering the lack of horse racing interest from younger bettors is the lack of visibility.
“It’s not on TV, it’s not in the forefront of any media,” Rood said. “It’s not like the old days, when it was one of the only games in town. Now, within 80 miles of almost anywhere, there’s bingo, slot parlors.
“Horse racing was the main gambling component. Now, there’s such a competitive environment for that dollar that it’s hard for horse racing to compete, because it does take time to study and a little patience. It’s not like slots or table games.”
Despite all the aforementioned issues and shortcomings, sportsbooks are far from considering throwing in the towel. Days like Saturday are a big reason why. Places around town will be packed for the Kentucky Derby, and the atmosphere will be electric.
“At the Venetian, from 2 to 3 p.m. Saturday, your mind will be blown,” Simbal said. “You’ll say, ‘Holy cow, this place is packed just as much as it is for the NCAA tournament.’ Horse racing is very important to us. We’re not like any of those big casinos. Race is a huge part of our business. We are trying to do everything possible.”
Kornegay and Rood both noted that there have been some positive moves of late from the industry.
“There’s been some improvement in some exotic wagering,” Kornegay said. “But they’re going to have to lower the takeout so players do win more when they do pick winners.”
Rood has taken pleasure in seeing tracks ditch synthetic surfaces, noting those made it more difficult for bettors and handicappers. But proclaiming a self-help mantra, Rood said there’s more work to do, and that sportsbooks alone can’t resurrect the sport’s fortunes.
“I’m willing to do anything to keep it vital. But horse racing has got to want to help itself,” he said.
Not surprisingly, Avello perhaps said it best as he looked to horse racing’s future.
“The sign outside my door says ‘race and sports book,’” Avello said. “I’m gonna continue to try to do what I can to make sure it stays that way.”
Colin Kelly is a Las Vegas-based contributor for Covers. Follow him on Twitter: @ColinPKelly29.
