Historical racing machines have Kentucky bucking industry trends

LEXINGTON, Ky. – For its entire modern history, the Kentucky racing circuit has never been thought of along the same lines as California or New York, as a place for horsemen with top-class stock to settle down year-round. There were too many holes in the calendar that sent horsemen to richer locales in the summer and winter.

But that is rapidly changing.

Bolstered by revenues from electronic gambling devices, purses on the Kentucky circuit have soared over the past two years, to levels surpassing the average purses at California and comparable to purses at New York tracks for most of the year. And there is far more growth ahead: New investments in casinos by Churchill Downs Inc., Kentucky Downs, and Ellis Park will add more than 4,000 of the electronic gambling devices to Kentucky tracks over the next three years.

What’s more, average handle per race at Kentucky tracks was up double digits at nearly every single meet run so far this year, according to an analysis of wagering, purse, and racing data conducted by Daily Racing Form based on charts of all Kentucky races run in the past three years (the Churchill Downs fall meet was not included in the comparison because the track hosted the Breeders’ Cup last year).

“There is something incredible going on in Kentucky right now that people haven’t noticed by and large,” said Steve May, director of parimutuel wagering for the Kentucky Horse Racing Commission. “It’s mind-boggling, the numbers that are being put up.”

To horsemen who race on the Kentucky circuit, that means more and more incentive to make Kentucky their full-time home, according to Marty Maline, executive director of the Kentucky Horsemen’s Benevolent and Protective Association.

“They want to be home, and this is giving them the opportunity to stay home,” Maline said.

The driving force behind the purse growth – and the handle growth – are historical horse racing machines, gambling devices that are remarkably similar to slot machines. The machines had already led to outsized purse growth at Kentucky Downs, which was the first track to fully embrace the devices after the KHRC wrote rules approving the operation of the machines in 2012. But most tracks dithered on fully investing in the machines in those early years.

Pushed by the KHRC, Keeneland and The Red Mile, a harness track in downtown Lexington, partnered on a casino in 2015. Churchill, fearful that the installation of the machines would sap the political will to authorize full-blown casinos, did not apply to operate any machines until 2018, but after it opened a casino at its Trackside training center in south Louisville, the company jumped in with both feet.

Last year, Churchill received the lone remaining racing license in Kentucky for a harness track and casino in the southwest portion of the state. This year, it purchased Turfway Park and intends to install as many as 2,500 of the devices in a total teardown of the track. Then, just weeks ago, the company announced plans to build a casino and hotel at its flagship track in Louisville, with approval to operate as many as 3,000 of the machines between the new facility and the Trackside casino.

In total, the number of machines in operation in Kentucky jumped from 679 in the 2015 fiscal year to 2,829 in the fiscal year ending in June 2019, a 316 percent increase, according to KHRC records. Moreover, the devices are getting better at attracting customers: Total handle through the machines has jumped 446 percent over the same time frame, to $2.03 billion, according to the records.

The largesse at Kentucky Downs has even led the track to transfer millions of dollars in its own purse money to other Kentucky tracks, with the most notable beneficiary being Ellis Park, the sleepy track in western Kentucky that fills out the summer dates on the circuit. This year, Ellis was bought by the Laguna Development Corp., a New Mexico holding company of the Pueblo of Laguna tribe. Under the new ownership, the average purse distributed at Ellis Park reached $35,700, up 29.7 percent over last year and up 46.9 percent over the average purse at the track two years ago.

That jump was not isolated. At Churchill, the average purse at the track’s spring meet was up 48.5 percent, to $89,000. At the track’s September meet – held on dates that Churchill wrested from Turfway Park six years ago – the average purse was up 56.6 percent, to $73,000. (All purse figures include money distributed through the Kentucky Thoroughbred Development Fund, which is available only to horses bred in Kentucky.)

The average purse at Kentucky Downs continues to lead the nation, at an average of $236,000 per race this year, up 12.8 percent over last year, and up 36.8 percent over the average purse at the track just two years ago. At Keeneland, average purses increased more than 5 percent at each of the track’s two meets this year.

The lone weak spot on the circuit is Turfway Park, where the average purse has lingered at $11,000 for the past three years. But this year, in anticipation of the money that Turfway’s machines will generate in the years to come, Churchill is “loaning” the track money from its own purse account, and the average purse will double for the upcoming meet, to approximately $24,000.

Horsemen believe that the average purse at Turfway will double again once the devices are up and running. The former owners of the track had declined to install the devices, in large part to protect a casino the owners also operated across the river in Cincinnati.

“There’s no question Turfway Park is going to be an important part of the circuit now,” Maline said. “The purses there are just going to continue to escalate.”

As important as the purse increases have been and will be, the handle jumps also are notable. While national handle was down 2.78 percent through the third quarter, handle per race at Churchill’s spring and September meets was up 10.5 percent and 17.4 percent, respectively. Handle at Kentucky Downs set another record, up 13.3 percent, to $825,000 a race. While handle at the spring meet at Keeneland was down 1.7 percent, handle at the fall meet was up 11.1 percent. At Ellis, handle was up 21.7 percent.

May said that the only common factor behind the wagering increases was an increase in the quality of racing. Field size was up noticeably at only one track, Churchill Downs.

“It’s the quality of racing,” May said. “And that’s going to get even better down the road. You are going to have more horses staying here in the summer and winter, and that means more horses for the other meets as well. It’s just a much better racing product, and there’s more to come.”