Lower pari-mutuel takeout rates can lead to more money for racetracks as well as bettors, according to a panel of experts gathered at the International Simulcast Conference Oct. 4 in Arizona.
"You can't spend a percentage; you can only spend cash," said Todd Bowker, general manager of Oregon advance deposit wagering provider Premier Turf Club. "Forget the percentage; focus on the money."
Bowker presented arguments and figures in support of lower takeout rates.
"We all want to increase wagering," he said. "Lowering takeout in every instance increases handle. Raising takeout always decreases handle."
While many horsemen's agreements are based on a percentage of takeout, lowering that percentage can drive higher handle and more earnings for everybody, Bowker said.
"I get that there's a revenue issue," he said. "But if lowering the takeouts is so bad, why is everybody trying it here and there?"
Bowker used Tampa Bay Downs in Florida as an example. "They tweak their takeout and betting menu every year," he said, "and each spring, you hear Tampa Bay is having a great meet. Taking those little chances to maximize handle has been very successful."
Competing against other ADW companies, Premier Turf Club tries to keep host fees as low as possible in order to offer the best rebates it can, Bowker said.
"Only 10% of our customers (use our service exclusively)," he said. "They go where they get the best rates. We get shopped all the time. Customers migrate to the lowest, best fees.
"When you talk to bigger players, they would rather have lower takeouts and lower rebates," Bowker said. "That way, they also feel less sophisticated money would come back into the pools."
Bowker used as an example two racetracks he declined to name but are located within 100 miles of each other and share a common pool of trainers, jockeys, owners, and horses. Both tracks had very similar blended takeout rates—about 21.1%—but Premier, through deals with the host tracks, was able to discount effective rates to 17.2% at one track and to 10.33% at the other.
The track with the lower rate attracted almost five times as much handle, he said. In return, the host fees for that track were almost three times that of the track with the higher takeout.
Experiments with lower takeout rates also produced increases in handle, Bowker said. Conversely, increases in takeout—even a miniscule one—had a negative impact on wagering, particularly among major players.
"Half of our customers would move (their wagering) for 1%," he said. "They're extremely price sensitive; 17% would move for .25%."
Raj Mutti, regional general manager of Great Canadian Gaming, told of the success his company's British Columbia track Hastings Racecourse found by lowering takeout on several types of wagers. He said the move heped turn around a decline in wagering that amounted to 15% in 2009 and 8% the following year.
Hastings ended its 2011 season up by 4% in total handle. "Considering the circumstances, we were pretty happy with what happened," Mutti said.
Mutti said there has been little pushback against Hastings from satellite betting venues. "No one said they're not taking our signal," he said. "Instead, we're in four new jurisdictions this year. That means a considerable amount of money we didn't have in 2010."
Takeout may be a big issue to big bettors, but what about attracting new fans? Any change needs promotion, officials said.
"I'm not a believer in slashing takeout and just making a note in the program and being done with it," said panelist Greg Blanchard, assistant raceway manager at Western Fair Raceway in London, Ontario. "(Takeout reduction) needs to be part of an overall strategy."
In 2011, Blanchard added a second Pick 4 wager to his menu and lowered takeout on both from 23% to 15%, a move he said generated positive publicity and greater revenue. "We saw the average pool size double," Blanchard said. "By the end of the meet, it had tripled."
Bowker used casinos as an example of how better payoffs can help entice customers. "The low-takeout slot machines are at the front of the casino to get (patrons) in the door," Bowker said. "New players will feel the difference in their wallet. That can add up to another bet."
