Churchill Sees Growth Opportunities for Derby, Racing

While Churchill Downs racetrack enjoyed a $9.3 million improvement in adjusted earnings in 2018 largely fueled by Kentucky Derby Week, owner Churchill Downs Inc. still sees opportunity for growth of its biggest event as well as racing overall at the Louisville, Ky., track.

Talking with analysts and investors on a Feb. 28 conference call, CDI CEO Bill Carstanjen said there are still a variety of ideas for growing Kentucky Derby Week, including creating more seating for some of the vast majority of patrons who still attend the Kentucky Derby Presented by Woodford Reserve (G1) without a seat.

"There are many areas to grow our signature event over the coming years, from additional pricing segmentation, additional seating capacity for portions of the roughly 110,000 guests who come to the Derby and do not have a seat, additional sponsorships, and leveraging the interest generated from the European and Japan Roads to the Derby," Carstanjen said.

CDI has steadily improved its flagship facility and this year will unveil a $5 million rooftop lounge and entertainment area atop its Starting Gate Suites. Carstanjen said the approach helped the company to record Derby Week performance in 2018 for virtually all of its significant financial benchmarks despite the wettest Kentucky Derby Day in history.

"Beyond the metrics, our mission is to improve everything we do surrounding the Kentucky Derby. We have consistently invested to deliver a world-class experience for our customers," Carstanjen said. "Our strategy for the long-term growth of the Derby is to invest in projects that help more of our guests feel a strong connection to the event and to experience, as a participant, not just as a spectator, the unique magic that is the Kentucky Derby."

Carstanjen said CDI will continue to invest in the Derby. Some of that investment this year will include increased purses. For the meet, purses will be up significantly, but there will be an extra commitment of purse money for Derby Week, the track announced Feb. 28. Purses for the six days of racing that week will see maiden special weight races at $100,000 and allowance races ranging from $103,000 to $110,000. Total purses on Oaks Day will exceed $3.6 million, and Derby Day prize money will be worth a record $6.9 million.

The track unveiled Thursday a daily purse schedule for its first condition book that will feature a 46% bump from last spring to $20.1 million. Average daily purses will be at $1,056,842, up from $722,579 last year. The growth has been fueled by the success of historical gaming at Churchill's Derby City Gaming, which opened in September.

"With respect to racing at Churchill Downs racetrack, we are excited about the increase to the purse account for 2019 generated by the historical racing machines at Derby City Gaming," Carstanjen told analysts and investors. "Just as an example, we are increasing the prize money for the Kentucky Derby from $2 million to $3 million. And on a smaller scale, we're increasing the purses meaningfully for every category of races we run. 

"We believe increased purse money will help us attract more and better quality horses to Churchill Downs. Ultimately, this will increase the amount of money wagered on our races, which is good for horse ownership and other industry participants as well as for the Commonwealth of Kentucky."

In Thursday's release on the upcoming spring meet, Churchill Downs Racetrack president Kevin Flanery said there's a lot of buzz.

"This is such an exciting time to be a part of Kentucky racing," Flanery said. "Our investment into Derby City Gaming, which opened just five months ago, continues to pay immediate dividends to Kentucky horsemen. We have reinforced our Derby Week festival concept, solidified our lucrative stakes program, and tremendously strengthened our overnight racing product. We truly believe this growth and methodology will benefit all owners, trainers, and jockeys that participate at Churchill Downs and make for an extremely exciting and competitive meet."

There's plenty of potential for additional purse money from historical racing for Churchill and Kentucky tracks on the horizon. Carstanjen said because of the popularity of Derby City Gaming, which in January saw more than $1.9 million in daily handle, 100 additional games will be added by the second quarter of 2019.

He also said Churchill plans to offer 12 days of Standardbred racing in October at its new track in the Oak Grove, Ky., area with the historical gaming facility expected to open in the first half of 2020. There is a lawsuit filed by the previous owners of Kentucky Downs appealing the Kentucky Horse Racing Commission's awarding of that license.