PA benchmark report for 2018 tracks racetrack gaming impact

Posted: June 8, 2019

A Pennsylvania Gaming Control Board benchmark report on horse racing in the state in 2018 shows common industry trends, including declines in pari-mutuel handle, field size and purses.

The racetrack gaming report, released June 6, also documents the reasons for some of the declines, including shifts in revenue from the Pennsylvania Race Horse Development Fund Trust, which receives what is now about 10% of gross revenue from slot machines at 12 casinos in the state.

The PRHDFT in 2018 earned $241.74 million, up slightly from $238.54 million in 2017, the report states. The increase is attributed to a 1.3% increase in gross terminal revenue at six racetrack casinos.

From the majority of the fund, which includes Thoroughbred and Standardbred racing, 80% goes to purses, 16% to breed development programs and stakes, and 4% to health and pension benefits for horsemen. But last year another $11.67 million went to the State Racing Fund, which helps pay for regulation, drug testing and marketing; and $31.27 million was set aside for a restricted receipts account for other animal- and agriculture-related programs in Pennsylvania.

The racing marketing program, which is directed by the state Department of Agriculture and Pennsylvania Horse Racing Association, amounts to about $2 million a year and is paid for by money previously used for purses. It was part of horseracing reform legislation by which horsemen agreed to fund marketing and some testing costs. The marketing and educational program began in earnest last year and is beginning to take root in the state.

The legislation also make a key language change that made the PRHDF a trust, which protects it from appropriation for other uses by state government.

An executive summary states that “2018 proved to be a challenging year for the horseracing industry following an overall positive performance in 2017. The performance of the horseracing industry can be volatile due to uncertain weather conditions throughout the racing season. Pennsylvania received record rainfall in 2018, which negatively affected overall performance indicators. Other indicators were also negatively impacted including overall decreases in racing dates and live races due to cancellations, a decrease in attendance at the racetracks, and corresponding decreases in the number of horses competing. In addition, two off-track wagering locations closed in 2018, which negatively impacted total handle.”

The PRHDFT has been stable for the past five years, according to the benchmark report. It amounted to $242.33 million in 2014, which is about even with 2018. During that same period, gross slots revenue has held steady as well.

Purses paid in 2018 totaled $162.50 million for both breeds, which was down about $10 million from 2017. The number of races for both breeds totaled 9,858, down from 10,167 the previous year.

The report notes that of total purses earned—$176.55 million in 2018—$155.61 million (88%) came from slots and $20.93 million from pari-mutuel revenue. It also says that “purses earned decreased in 2018 compared with the previous year due to the timing of transfers made to the Pennsylvania Racehorse Development Restricted Receipts Account.” In 2014, slots account for 86.4% of purses earned.

Total starts last year came in at 76,832 for both breeds, down 4.6% from 80,554 in 2017. Of the three Thoroughbred tracks in Pennsylvania, Parx Racing had the highest average field size at 7.85, followed by Presque Isle Downs & Casino at 7.47 and Hollywood Casino at Penn National Race Course at 7.02. All three tracks were down in average field size compared with the previous year.

In 2018 on-site wagering on live races at all six tracks in the state totaled $24.53 million; at in-state off-track betting facilities, the figure was $4.89 million; electronic wagering offered by licensed racetracks in the state generated $5.45 million in handle on the live product; and $16.74 million was bet via in-state export, the report indicates.

Signals from the six Pennsylvania tracks accounted for $617.34 million in handle out of state, down 4.1% from 2017. Total handle on Pennsylvania races in 2018 was $668.97 million, down 4.6% from last year and off 12.5% from 2014.

The report contains a section on attendance, but the racetrack casinos don’t charge admission or have turnstiles. The document does say “attendance may increase in the future due to implementation of sports wagering within the racetrack casinos and off-track wagering facilities. This new gaming option may attract a new fan base which can benefit the racing industry.”

Parx, at its casino at two OTB facilities, and Penn National have already begun sports betting. During a recent PHRC meeting, Parx Chief Operating Officer Joe Wilson said wagering on horse races actually increase at the South Philly Turf Club when sports betting began, and it has held steady at the Valley Forge Turf Club. Wilson also said Parx is considering a sports betting option in its grandstand to accommodate horseplayers, but it would require a reconfigure because the minimum age to bet on horses is 18, but it’s 21 for sports betting.

Penn National Gaming Inc. is currently in the approval process for two-mini casinos near York and Lancaster, where it currently operates it two remaining OTB outlets. The small casinos will have race and sports books, which will replace the existing OTB facilities.

The full report is available here.

(Penn National photo by Tom LaMarra)