Archives for June 2011

On April 5, 2011, the Florida Senate Commerce and Tourism Committee approved a bill allowing up to five “destination resort” casinos situated around the Sunshine state. No action had been taken when the state legislature adjourned May 6, but the ramifications would be far-reaching should the casinos eventually be approved.

Proponents claim the casinos would help immensely in rejuvenating Florida’s tourism industry and add 100,000 much-needed jobs. Existing gambling facilities seek to protect their interests.

Florida currently authorizes three kinds of gambling. First, casino boats proffer slots and sundry table games like blackjack, roulette, poker, and bingo. Second, the Seminole Tribe runs seven casinos and the Miccoskuee Tribe operates one. The Seminole facilities are licensed for both federally-defined Class II gaming (e.g., bingo and lotto) and Class III gaming (e.g., card games, slot machines, and keno), whereas the Miccoskuee casino has a license for Class III gaming only.

Finally, pari-mutuel wagering includes Thoroughbred and dog racing and jai-alai. Most pari-mutuel facilities—including Calder Casino & Race Course and Gulfstream Park–have slot machines and poker. Tampa Bay Downs offers poker in addition to wagering on live racing and simulcasts.

Were Florida to open the door to a full-blown casino strip—ideally on the Atlantic Ocean in the Miami/Fort Lauderdale area—the repercussions would most certainly be distressing to Las Vegas. With the cost of flying increasingly escalating because of fuel charges, automobile driving has become relatively attractive for long trips, especially for two or more travelers, even at rising gasoline prices.

A casino strip modeled after Las Vegas and located in the warm climate of south Florida would be a huge draw for snowbirds in the Northeast and Midwest. The vast majority of the residents of the densely populated areas of the Eastern and Midwestern United States can drive to Florida in 20-24 hours and people in metro areas like Atlanta and Charlotte are much closer still. Even St. Louis, the “Gateway to the West,” is considerably nearer to Miami than to Las Vegas.

Could Thoroughbred racetracks survive this competitive offensive? The view here is that they probably could because they already have diversified into limited casino gaming and have accrued expertise and a customer base.

An even more intriguing potential development may realistically emerge some 228 miles south of Miami in Havana, Cuba. Both casinos and racetracks had a prominent place in Cuba in the days before the repressive Castro regime seized power and may again be part of a new Cuban economy founded on tourism. After the demise of the 84-year-old dictator, Cuba will strive to shed its self-inflicted poverty, largely by capitalizing on in its tourism resources and escaping the half-century embargo imposed by the United States.

Copyright © 2011 Horse Racing Business

Originally published in the Blood-Horse. Used with permission.

Click here to read a CNBC article on a Malaysian corporate gambling giant looking to Miami for expansion.

Earlier this week, on June 15, the governor of Ohio, John Kasich, announced a revised agreement with the licensees of the four casinos about to be built in Ohio that provides more revenue to the state. Part of the pact granted permission to Ohio’s seven racetracks to install video lottery terminals. The three Thoroughbred racetracks—in Cincinnati, Cleveland, and Columbus—are all owned by casino companies.

Once casino and racino operations are up and running in Cincinnati, the implications for apparently struggling Turfway Park in Northern Kentucky are dicey.

The Horseshoe Casino Cincinnati will be owned by Rock Ventures and managed by Caesars Entertainment Corporation, which is the world’s largest casino company. Rock Ventures is controlled by Daniel Gilbert, founder of Quicken Loans and owner of the Cleveland Cavaliers of the National Basketball Association. Rock Ventures also will own the Horseshoe Casino Cleveland and is likely to be a partner with Caesars Entertainment in Thistledown racetrack. The Horseshoe Casino Cincinnati will be located less than 12 miles from Turfway Park.

River Downs racetrack is owned by Pinnacle Entertainment, with casino operations in Indiana, Louisiana, Missouri, and Nevada. Pinnacle Entertainment started out in horse racing as the Hollywood Park Turf Club founded by Jack L. Warner, Bing Crosby, Walt Disney, and other Hollywood legends in 1938. River Downs is situated on the Northern side of the Ohio River and is 15 miles from Turfway Park.

Turfway Park is jointly owned by Caesars Entertainment and Keeneland and offers Thoroughbred racing, but is not permitted to have video lottery terminals or any other form of gaming per Kentucky law. Thus Turfway Park will be confronted by the Horseshoe Casino Cincinnati providing almost all kinds of gaming except sports betting and by the River Downs racino providing Thoroughbred racing and slots.

The interesting twist in all of this is that Caesars Entertainment would, on the one hand, lose in the closure of Turfway Park since it owns 50 percent of the facility. On the other hand, the Horseshoe Casino Cincinnati that it manages would have less competition for the gambling dollar and Caesars Entertainment might recover much of its investment in Turfway Park by selling the property for commercial development.

Turfway Park has four realistic courses of action. First, it can attempt to survive solely as a racetrack with pari-mutuel wagering. Second, it can try to hang on in an increasingly adverse competitive milieu and keep up the effort to get video lottery terminals legalized for Kentucky racetracks. Third, it can close almost immediately on the reasoning that it simply cannot compete effectively in the face of the ramped-up gaming situation in nearby Ohio, while conceding that the legalization of racetrack slots in Kentucky is an idle fancy. A final possibility is for the owners of Turfway Park to shutter the plant temporarily until the slots issue is resolved by the Kentucky governor and legislature.

Without access to the financials for Turfway Park, it is not possible to adequately evaluate the stay open or close decision. Yet it is possible to say with a high degree of certainty that Turfway Park’s financials will deteriorate dramatically as soon as the Horseshoe Casino Cincinnati and the River Downs racino are up and running.

Turfway Park’s decision hinges largely on estimating the likelihood of the Commonwealth of Kentucky legalizing slots soon enough to have them in place by the time the Horseshoe Casino Cincinnati and the River Downs racino are operational, or at least shortly thereafter. With the governor’s election in full swing in Kentucky, the slots issue won’t be meaningfully addressed by the legislature at least until after the election in November 2011, if then.

Turfway Park’s options come down to choosing the least-worst decision. Readers can draw their own conclusions regarding the likely outcome. (Turfway Park has some “out-of-the-box” possibilities, but discussing them is beyond the scope of this analysis.)

Why a state governor and/or a legislator would stand by while the state’s flagship industry slips away and jobs and tax revenues atrophy is a question that is easy to answer:  The individual is playing to his or her base rather than placing the economic well-being of the state first.

Copyright © 2011 Horse Racing Business

If you would appreciate an historic house decorated with rare antiques and having a Thoroughbred racing theme, then the Long Branch mansion in Millwood, Virginia, is for you. It is located on 400 acres in the scenic Shenandoah Valley at the foot of the Blue Ridge Mountains in Virginia Hunt Country about sixty miles from Washington, DC. I went there over this past weekend.

A young George Washington helped to survey the property on which Long Branch was built around 1811. The property was owned by famous men of their time—Lord Culpeper, Lord Fairfax, and Robert “King” Carter. Robert Burwell Carter built the Long Branch mansion with the assistance of the famous Benjamin Henry Latrobe, who was an architect on the U. S. Capitol. The house survived the U. S. Civil War and was owned down through the years by Mr. Carter’s descendants. The estate also had a number of other owners, including Abram Hewitt, an industrialist, philanthropist, congressman, and mayor of New York City.

By the end of the 20th century, Long Branch was in disrepair. It was saved by Harry Z. Isaacs, who purchased it in 1986 and spent millions on its restoration. Mr. Isaacs owned I. C. Isaacs & Company—a clothing manufacturer–in Baltimore until 1984. He made his home at Brookfield Farm in Glyndon, Maryland. Mr. Isaacs raised Thoroughbreds and specialized in the blood of Fair Play and his son Man o’ War. Two of his best known racehorses were Intentionally, who won 18 of 34 races and $600,000 in the late 1950s and early 1960s, and I Rejoice, who won the Kelso Handicap at Belmont Park in 1989.

When Mr. Isaacs learned that he had incurable cancer, he accelerated the Long Branch restoration and established a non-profit foundation to preserve the estate for posterity. He died in 1990, having spent less than fourteen overnights at Long Branch.

Long Branch is furnished with 18th and 19th century antiques personally selected by Mr. Isaacs in Europe and the United States. The house has hand-painted wallpaper in the Hunt Room and is exquisitely decorated throughout with elaborate fabrics and equestrian paintings and sculptures. The silver trophies won by Mr. Isaacs’ racehorses can be seen in nearly every room. The tour guide gave great attention to detail in informing her visitors of the particulars of every room and its contents. She told of the fate of some of Long Branch’s inhabitants, such as the young man who left to fight in the Civil War and did not live to return.

A visitor can sense history at Long Branch, from its early years in Colonial times until the present. The drive to reach the estate through rolling hills and small towns is worth the journey. Today, Long Branch is the site for guided tours, wedding receptions, and a therapeutic riding facility.

Click here for the Long Branch website.

While in Hunt Country, I also stopped by the Middleburg Tack Exchange in Middleburg, Virginia, that is owned by Graham Motion’s mother. This was only hours before Mr. Motion was to saddle Animal Kingdom in the Belmont Stakes. As one would expect, Graham Motion’s very friendly mother and sister were excited and anticipating the big race, although they were concerned about how the muddy track conditions would affect a deep closer like Animal Kingdom. The colt should have several chances yet to come to make a stronger showing and nail down 3-year-old of the year honors.

Copyright © 2011 Horse Racing Business