05/18/2016 10:40AM

Maryland racing, breeding industries enjoy resurgence


For the embattled racing industry in Maryland five years ago, there was probably nowhere to go but up.

Still, the recent resurgence in numbers posted by both the racing and breeding industries in Maryland, the site of this weekend’s Preakness Stakes, is leading to talk that the state might regain its standing on the national racing and breeding landscape, only five years after the industry was nearly given up for dead amid plummeting metrics and bitter infighting among the state’s racing factions.

Behind the growth are tens of millions of dollars in annual subsidies being provided by the state’s first crop of casinos. But unlike in some states, where casino dollars have merely meant more money for horsemen in the form of larger purses and breeder awards without an accompanying increase in betting on the racing product or interest in the sport, wagering on Maryland races has surged over the past two years, and bettors appear to be returning to racing, often to new upscale offtrack betting locations.

“The numbers are real,” said Alan Foreman, the general counsel to the Maryland Thoroughbred Horsemen’s Association who has been heavily involved in Thoroughbred racing in the state for three sometimes rough-and-tumble decades. “It’s been a complete turnaround over the past five years. For me, Maryland racing has become fun again.”

In 2015, according to the owner of Maryland’s two Thoroughbred tracks, betting on live races at suburban Laurel Park and Pimlico Race Course in Baltimore was $404 million, a jump of 20 percent from the 2014 number of $335 million, with average handle per race day jumping 22.2 percent to $2.66 million. This year, total handle on Laurel’s just-concluded winter-spring-meet races extended the trend, with average handle on a reduced number of race cards up 34.5 percent and total handle up 9 percent.

Sal Sinatra, the director of racing for the Maryland Jockey Club, a subsidiary of The Stronach Group that owns and operates Laurel and Pimlico, said the surge in handle is relatively easy to explain: an increase in field size and the thoughtful expansion of the state’s offtrack betting network, along with some changes to the racing schedule.

“It’s a lot of little things, but mostly, it’s putting out a good product and letting people bet on it,” Sinatra said.

According to figures from The Jockey Club, the average field size in Maryland jumped 10.4 percent from 2014 to 2015, from 7.7 horses per race to 8.5 horses. Part of that increase can be attributed to a greater reliance on turf races, which typically draw much larger fields than dirt races. The two tracks carded 234 turf races in 2015 vs. 103 in 2014.

Another lure is the subsidy-fueled purses. In 2015, the average purse at Laurel and Pimlico was $34,960, up 74.5 percent over the average purse in 2010, before purse subsidies kicked in. That has made Maryland races far more competitive with subsidized purses in neighboring states such as Pennsylvania, Delaware, and West Virginia.

The Maryland Jockey Club has opened three new offtrack betting parlors in the past year, including one inside the Horseshoe Casino in downtown Baltimore and another at the Timonium Fairgrounds. The Horseshoe OTB is designed like a small Las Vegas sports book, with a wall of televisions and individual betting carrels, while the Timonium location was built inside the existing grandstand to resemble a sports bar.

Also, just this week, the Maryland Jockey Club’s parent, The Stronach Group, announced that it had purchased Rosecroft Raceway, a beleaguered harness track just south of the Washington metropolitan area on the Maryland side of the Potomac River. The company’s plans for the track include the construction of an upscale simulcast parlor at the property, perhaps in a remodeled version of its aging, deteriorating grandstand, according to officials. The purchase will also open up new sites for OTBs in the state because under state regulations, the owner of Rosecroft is the only entity capable of building an OTB within 35 miles of the track. The previous owner, Penn National Gaming Inc., did not build any OTBs.

In an industry in which handle has been stagnant and is migrating to account-wagering platforms, it seems odd that the Maryland Jockey Club is focusing so resolutely on OTBs. But company officials stress that the OTB locations are performing well beyond expectations and easily justifying their costs of operation. The Maryland Jockey Club also has renovated the Laurel grandstand to create a sports-bar-type simulcast area, and that is attracting more people to the track, according to Sinatra.

“The renovations have been extremely well received,” Sinatra said. “A lot of people have been telling their friends, and they are coming back with them.”

Still, the resurgence in ontrack and offtrack business remains anecdotal. Sinatra said the Maryland Jockey Club no longer tracks attendance figures since the company last year waived general admission at its tracks on regular race days. “That may be another reason people are coming back,” he said.

Much of the money for the renovations and OTB construction is being provided by the casino subsidies, which were designed to prop up purses and breeder awards and to get racetracks to invest in their facilities. In fiscal year 2015, which ended in June, the total outlay to Maryland’s Thoroughbred and harness racing industries from casino subsidies was $53.1 million, according to the Maryland Lottery and Gaming Control Agency, up from $48.5 million in 2014.

The outlay is only expected to grow after a new casino opens in Maryland in the National Harbor section of the District of Columbia area later this year (the location falls inside the 35-mile Rosecroft radius, allowing the Maryland Jockey Club to partner with the casino on an on-site race book similar to the Baltimore casino race book).

While breeding numbers have rebounded slightly in the state since the subsidies began flowing to the industry, the Maryland breeding industry is still a shadow of its former self. In the 1980s and 1990s, the state annually produced approximately 5 percent of the U.S. foal crop. That number dipped as low as 1.6 percent in 2011 and 2012, but it has since rebounded to 2.4 percent, according to the latest Jockey Club figures, with 500 registered foals produced in 2015 from 751 mares bred, compared with 369 foals produced in 2012 from 582 mares bred.

More money is coming. Earlier this year, the Maryland legislature passed a bill that would give the Maryland Racing Commission $500,000 each year from uncashed lottery tickets for awards to Maryland-bred horses who compete in the Preakness. That bill also included a $500,000 award from the same source to the Maryland Jockey Club to revive the Washington D.C. International, a turf race with a long history that nevertheless hasn’t been held since 1994, supplanted by richer races leading to the Breeders’ Cup.

The bill, which is still awaiting the signature of Gov. Larry Hogan, passed unanimously in both houses of the legislature, a stunning measure of support from a legislative body that had expressed nothing but frustration with the fractured racing industry just five years earlier. But ever since the state’s horsemen and the Maryland Jockey Club reached a 10-year agreement on racing dates and revenue in 2012 – and, not coincidentally, the casino subsidies began rolling in – the Maryland Thoroughbred racing community has coalesced into one body, according to Foreman, dramatically improving its clout in Annapolis.

“I have to hand it to the Stronach people,” said Foreman. “They are living Maryland racing every day, and everything they do is designed to promote Maryland racing and bringing the sport to as many people as possible. Everywhere you look, they are tearing down a wall and building something better. It just feels like we’re starting to flourish, and it’s that enthusiasm for racing and new ideas that is being felt in Annapolis.”

Tim Ritvo, the chief operating officer of The Stronach Group, who is based at the company’s Gulfstream Park in Florida, said the Maryland tracks and the Mid-Atlantic racing circuit have become a priority for the company over the past two years. While Ritvo would not identify the tracks by name, he said The Stronach Group has its eye out for acquisitions or leases in the Mid-Atlantic that would result in better coordination of racing schedules across the region.

“There are facilities out there that feel they have to race just to keep their casinos,” Ritvo said. “We want to show them there is another way, using our success in Florida as a model. There is a way you can make racing the center of attraction. We think we can step up in this industry and help out with that. Because some of these tracks don’t care about racing and just want to keep their casinos, they are doing a disservice to the sport.”

At the same time, Ritvo said he has no illusions about the strength of the overall racing industry, despite strong gains recently at The Stronach Group tracks, especially Gulfstream. While handle recently has been up despite a significant contraction in the number of races, wagering on U.S. races is still well below its 2003 peak of $15.2 billion, a number that is unadjusted for inflation.

“There are groups of horsemen who like running in six-horse fields, but that model doesn’t work anymore,” Ritvo said. “[The Stronach Group tracks] are doing great stealing market share, but we’re not growing the market. We’re not making that $10 billion any bigger.”