Churchill considering building casino in downtown Louisville

Churchill Downs Inc. has dropped its plans to build a hotel and casino at its Louisville property but is eyeing the downtown Louisville market as a potential site for a new casino, officials of the company said on a conference call with analysts on Thursday morning.

Bill Carstanjen, the company’s chief executive officer, said that the plans for the hotel were re-evaluated during the pandemic and that the company felt that there are “just better projects for us to do that are higher-return, lower-risk.” Churchill officials announced plans for the hotel and an on-site casino at Churchill in late 2019, prior to the disruptions caused by the coronavirus pandemic.

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However, Carstanjen said that the company is developing plans for three projects at Churchill that will establish new reserved seating areas for the Louisville property, further leveraging the company’s most lucrative race dates, The Kentucky Derby and the Kentucky Oaks. The projects will proceed in three phases, with the final phase of the project completed by the running of the 2024 Derby. Carstanjen said details about the first two phases would be announced in the next several months.

Churchill held the conference call one day after announcing its first-quarter results. In the quarter, the company had net income of $36.1 million, according to financial statements released late on Wednesday, a sharp turnaround from a $23.4 million loss in the first quarter of last year, when many of the company’s operations were curtailed by the emerging coronavirus pandemic.

Total revenue in the quarter was $324.3 million, up 28.2 percent from first-quarter revenue of $252.9 million last year, according to the statements. During the first quarter of 2020, Churchill had to shutter its casino and racetrack operations beginning in March, and the shutdowns of racetracks across the U.S. had significant impacts on its account-wagering business.

But those shutdowns, for the most part, did not exist in the first quarter of 2021. In addition, Churchill’s account-wagering company, like all major account-wagering companies in the U.S., has generated outsized growth rates in the past 12 months as handle has migrated to remote providers due to attendance restrictions. The company also opened a new casino in southwest Kentucky and a casino annex in Northern Kentucky in the fall of last year, bolstering its casino numbers for this year’s first quarter.

Revenue for Twinspires.com, Churchill’s account-wagering company, jumped from $69.1 million in the first quarter of last year to $99.7 million in the first quarter this year, a gain of 44.3 percent. In its statements, Churchill said that first-quarter handle through Twinspires.com was $443.1 million, up 34.4 percent compared to first quarter handle of $329.8 million last year. Those handle figures now include betting through Twinspires-branded sports betting operations, Churchill said.

In a note, Churchill disclosed that its Twinspires.com handle figure does not include handle through a separate entity known as Velocity, a rebate shop that caters to private teams operating computerized robotic wagering programs. Churchill did not directly disclose the results for that operation in the statements released on Wednesday, nor respond to requests to identify which segment of the company’s financial operations contain the results.

The company’s live and “historical racing” segment – which refers to casino locations that exclusively use a type of gambling device relying on the outcomes of previously run races – had revenue of $63.2 million in the quarter, up more than double the 2020 number, but this year’s numbers include revenue from the new Kentucky casino, called Oak Grove, and the Turfway Park annex. The numbers were further bolstered by full first-quarter operations of Churchill’s other historical horseracing facilities, which had to be closed in mid-March due to pandemic protocols.

In a statement accompanying the financial results, Churchill said that its Louisville casino, Derby City, had a record first quarter this year, with net revenue of $32.9 million up 52 percent over the same number last year.

Carstanjen said on the conference call that Churchill is evaluating a location for a casino annex that is allowed under state law that would be attached to the Churchill racetrack license. The law allows an annex within 60 miles of the location of the licenseholder, and he strongly hinted that Churchill is considering a location near downtown Louisville that would compete for customers with casinos across the Ohio River in Indiana.

“We have a lot of analytics [from Derby City] on where our customers come from,” Carstanjen said. “So we’re looking at, where do we see zip codes that we don’t draw from that maybe go across the river?”

Earlier this year, Churchill announced that it was placing its Alrington Park property in suburban Chicago up for sale, and Carstanjen said on Thursday that “a preliminary bid date has been set” for the second quarter. He said that the property may be sold in separate parcels, but also said that the company is still waiting to receive the bids before deciding on a course of action.

“We’ll evaluate them and figure out next steps.” Carsntajen said. “The ultimate conclusion of that process is not something I can confidently predict to you.”