The past few years have been unforgettable for those of us
who love great horse racing. Stars like Zenyatta, Rachel Alexandra, Blame
and Curlin have given us some great memories on the racetrack. And an explosion
of new media has resulted in the engagement of racing fans in ways we could not
have imagined just a few short years ago. Unfortunately, none of these
recent, great stories or innovations seemed to translate into business
growth. And then, out of the blue, just as we are saying good bye to a
year when pundits and bloggers, alike, decried the lack of star power on track,
we learn that from an economic perspective, 2011 ended with a bang.
That’s right. December
and Year End Economic Indicators published yesterday by Equibase
show strong growth for the first time in years.
Last month, handle jumped almost 18% over figures from
December 2010, and purses for the month rose an astounding 24% year-over-year
while race days jumped a surprising 10.2%. For the year, we were still
down about 5.5% in handle but the fourth quarter of 2011 showed
across-the-board gains in handle (1.37%), purses (10%) and race days (4.4%)
compared to the fourth quarter of 2010.
Increases like these have been scarce in the Thoroughbred
racing business for a long time. Toss out the anomaly of a small
year-over-year increase in November of 2009, when the Breeders’ Cup was run in
October of the prior year, and it’s been almost four years since we have seen a
year-over-year monthly increase. Similarly, it’s been 17 quarters since we have
seen year-over-year quarterly increases.
It’s hard to say with certainty what happened in December to
cause this turnaround. Truth is, there are probably several factors that
contributed to these increases.
First, December was the only month in 2011 that we were not
comparing to a month in 2010 when the New York City OTB system was fully
functioning and generating about $750 Million in handle annually (about 8% of
the national total). We knew that some of the lost NYCOTB handle was not
being recaptured by NYRA or the other OTBs in New York, we just didn’t know how
much. These December numbers suggest that we lost a sizable
percentage of handle due to the closing of NYCOTB. While NYRA was quick to
create new opportunities for displaced NYCOTB players, the loss of such a major
distribution outlet undoubtedly hurt out-of-state track operators. Many
tracks around the country experienced sizable declines in simulcast handle
after the demise of NYCOTB. So some of the increased handle in December
may well have been occurring all year but was being disguised by the effects of
lost NYCOTB handle.
December also probably benefited from the early opening of
Gulfstream Park in December rather than the traditional January opening of its
much-anticipated winter meet. You can be certain that both handle
and purses rose substantially in Florida in December of 2011 vs. the
corresponding period in 2010.
Race days in December of 2011 rose by 10% for reasons that
aren’t clear but I suspect it’s related to a rash of track closures in December
of 2010 due to inclement weather on the Eastern seaboard during that
time. Whatever the reason, more race days generally will generate more
handle.
And then there are the effects of the overall economy.
This morning’s job numbers show a jobless rate nationally at about 8.5% and
trending in the right direction. Housing prices are stabilizing.
Mortgage rates are as low as they have been in decades. Corporate profits
are strong. Even the equity and bond markets seem to be less unpredictable.
Finally, the national economy seems to be in a gradual recovery.
It is too soon to call these developments a trend or to
declare an end to the economic malaise that beset our industry along with the
rest of the U.S. economy four years ago. I am going to keep my optimism guarded
for now. Given all the economic travails of the past four years, caution
seems like the prudent course. But you have to admit that December’s numbers
are good news.
