No Vacancy: Churchill Pulls Plug on Planned Hotel

When racing fans arrive for the 150th Kentucky Derby Day in 2024, they can expect to see a vastly different Churchill Downs racetrack but those renovations will not include a hotel.

During a conference call with analysts and investors April 22, Churchill Downs Inc. CEO Bill Carstanjen said the company had decided to not move forward with a previously announced hotel for Churchill Downs racetrack. Announced in October 2019, plans had called for a 156-room hotel in the first turn of the Louisville, Ky., track as the anchor of a $300 million investment project.

Even with some initial construction of the hotel already begun, Carstanjen said in Thursday morning's conference call that after considering factors like reduced travel during the COVID-19 pandemic, the company decided there are better ways to spend its money. He said as the company's building projects were paused during the pandemic, it provided the company added time to further analyze all investments.

For the hotel project, the company closely examined hotel occupancy and room rates in the region and consumer travel trends.

"Based on this analysis, we have decided to not build a hotel on the first turn of Churchill Downs racetrack at this time," Carstanjen said. "We may decide to build a hotel at the racetrack in the future, but now is not the right time. We think we have excellent alternative projects that offer better returns on our capital over shorter periods at the racetrack."

CDI still plans to invest in the facility but Carstanjen said those projects will be more focused on amenities for on-track visitors Derby week and beyond. He noted such efforts would generate more immediate—and higher—returns on investment than the hotel.

While he said further detail will come in the weeks ahead, he noted that significant changes are planned in three phases ahead of the 150th Kentucky Derby Presented by Woodford Reserve (G1) in 2024.

"We have developed a multi-year, phased set of projects that we believe will create significantly improved experiences for our guests at the Derby and will generate consistent adjusted earnings growth in the coming years for this iconic asset," Carstanjen said. "We are developing the final designs, completing the due diligence, and obtaining firm construction estimates for these projects. 

"We anticipate that the first capital investment would be completed by next year's 148th Derby in 2022; the second project by the 149th Derby in 2023; and the third and most transformative project by the 150th Derby in 2024. While we haven't gotten firm construction estimates yet, we know these projects are economically viable.

"We will provide a complete summary of the 148th Derby projects at our next earnings call, as well as provide more information on the project to be completed by Derby 149 in 2023. We'll also share some of our plans for additional amenities for Derby 150. Please stay tuned. We're excited about what is to come at Churchill Downs racetrack over the next three years, but we are not ready to share our detailed plans today."

The previously announced hotel plan also had called for a historical horse racing family facility at the hotel. With the company not moving forward on the hotel, it no longer plans an HHR facility at the track. Carstanjen said while adding such a facility at the track is always an option, the company plans to instead move forward with an expansion at its current Derby City Gaming about five miles from the track.

Carstanjen said adding an on-track HHR outlet would raise concerns about cannibalizing players from Derby City Gaming. While an on-track outlet currently is not in the cards, the company is considering and actively researching the addition of a second satellite facility in the Louisville area.