Santa Anita Park and Racetrack Economics
Today is opening day at Santa Anita Park. Located at the foot of the San Gabriel Mountains, the “Great Race Place” is one of the most beautiful sporting venues in the world. But the view looking forward is not so rosy.
Reporter John Cherwa presents some of the issues facing Santa Anita and American horse racing in today’s Los Angeles Times. A “fix-it man,” Tim Ritvo, has been dispatched from the Florida headquarters of The Stronach Group, owners of several horse racing venues including Santa Anita. Ritvo is quoted as saying “the problems are bigger than I thought,” and he clearly recognizes that the larger problem is industry-wide. According to the American Racing Manual, the number of races run in the U.S. has fallen to 41,277 from its 1989 peak of 74,701, a decline of 44%. The industry decline has been concentrated among smaller racetracks and slower horses, as alternative forms of gambling proliferated and diminished local demand for cheap racing. Making matters worse, field size per race has fallen even faster than the number of races, from 9 runners per race in the 1950-1990 period to about 7.5 today. Smaller field sizes make betting the races less attractive, generating lower betting handle and contributing to horse racing’s downward spiral.
Ritvo’s charge is to keep the industry’s slide from engulfing Santa Anita. Tracks with top level racing and well-defined seasons — — Del Mar and Saratoga in the summer, Keeneland in the spring and fall — have been able to maintain their luster and their business despite horse racing’s headwinds. But at Santa Anita, racing has been reduced from five days to four days per week, and Ritvo has introduced the possibility of concentrating the races even further, to three days per week. Since racing is a time-intensive leisure activity, losing a Thursday card and replacing it with fuller fields of additional races run Friday through Sunday makes economic sense, at least at some level. Thursday racing would not be a great loss to most stakeholders in racing, especially if a better product results from running when fans will be more attentive to the sport.
But Ritvo brought up one issue that has always puzzled this economist. The norm in the U.S. is for tracks to provide stalls to horsemen for the horses that train over the racecourse. There is not an explicit monetary cost to horsemen for the stalls; rather, the quid pro quo is that the track expects horses stabled on the premises to compete in the races there. Incentive conflicts arise, however, when horses stabled at one track have better racing opportunities elsewhere. Tracks respond to this with rules which limit the ability of horses to ship in and out in pursuit of optimal racing opportunities. The is counterproductive from an industry perspective and contributes to lower field size and betting handle. The incentive conflict doesn’t exist in British racing, where the horses are generally stabled at home and entered to race wherever they please, with no racecourse holding sway over that decision.
Ritvo is concerned that horses that train at Santa Anita often don’t race there. This will be the case for the two favorites for the Breeders’ Cup Classic, Arrogate and Gunrunner, who are preparing at Santa Anita for the race that will be held at Del Mar in November. Horses entered in graded stakes races are generally exempt from restrictions on shipping out to race, sensibly so. But this case nicely illustrates the problem of a track bearing the costs of stabling for horses that don’t race often, if at all, during the afternoons. The two mares who are favorites for the Breeders’ Cup Distaff also exemplify an industry-wide problem: Forever Unbridled and Stellar Wind both plan to train up to Distaff without a prep race, having run only twice and three times respectively this season. That’s a problem for racing too: can you imagine a world in which soccer fans got to watch Lionel Messi play just a few times each year? No other sport hides its stars as much as American horse racing.
The problem of stabling horses for training that rarely race seems easy to address however. As pointed out earlier, the problem is absent in places where horses are stabled in the home training facilities of their trainer. It would be a non-issue here if American racetracks charged a fee that accounted for the costs of stabling. Horsemen pay for the costs of shipping, feed, vet care etc., so why not make stabling costs explicit as well? This would be a significant step towards minimizing the incentive conflict. Moreover, the stabling fees could be funneled directly back into the prize money offered on raceday. Pricing the resource properly, and adding to the incentive to race at the track seems such a simple solution to this problem. It’s Econ 101. But horse racing as an industry repeatedly exhibits a strong aversion to simple economic principles. Perhaps that’s another reason contributing to its steady decline on the sporting scene.