Asia’s turf clubs take steps to protect revenue as competition grows

Published in: Latest Intelligence Asia’s storied horse racing clubs, once the only legal means of gambling in many nations across the region, are taking steps to protect their revenue in the face of increasing competition, as casinos and other types of sports betting are legalized.
The region’s clubs are also reporting a severe threat from the rise in illegal gambling, with black market operators able to offer a wider range of products and offer punters credit.
The Hong Kong Jockey Club recently reported a record financial year, but was clear about the challenges, while both Singapore and Japan have reported a declining revenue trend.
"Looking ahead, I am cautiously optimistic of seeing continued positive growth in our racing and betting operations, but competition in the leisure and entertainment business is growing all the time," HKJC CEO Winfried Engelbrecht-Bresges said in the club’s annual report.
In the 2013/2014 financial year, HKJC saw racing turnover rise 10 percent to HK$103.92 billion, producing a net margin for the club of HK$4.42 billion, a 7.4 percent increase.
However, Chairman T. Brian Stevenson pointed to estimates indicating that Hong Kong citizens lost about HK$31 billion in Macau’s casinos last year alone. He said the opening of a bridge between Hong Kong and Macau in 2016 will ease transport links to the world’s biggest gambling hub presenting a further threat.
In Singapore, total totalisator turnover for the Turf Club in the year ending March 2013 fell 9.9 percent to $1.56 billion, with the Totalisator Board attributing the decline to competition from casinos as well as lower attendance rates at the track due to work on the main grandstand.
According to the STC, the biggest challenges for horse racing and wagering are “combating illegal bookmaking and the current greying customer population.” In addition, the club says that in Singapore, there are “increasingly more entertainment options and it is very difficult to engage the younger demographic in a sport such as horse racing.”
The Japan Racing Association meanwhile, has seen turnover decline about 40 percent since its peak in 1997. The peak year as far as wagering is concerned was 1997, when the annual turnover through 288 JRA racing days totaled more than ¥4 trillion ($40 billion), and average wagering per day was ¥13.8 billion ($139 million). The best year for on-course attendance was 1975, when the total was 14,898,794: More than double the figure for 2012.
Part of the decline in Japan, where the government is currently debating legalizing casinos, was the decision to legalize sports betting on three other sports - motorboat racing, bicycle racing and motorcycle racing.
To reverse the declining trend, the turf clubs have extended their product offering, but are still concerned they are unlikely ever to be able to offer the same kind of variety, or credit, as the illegal operators can.
Until 1999, only three types of bet (Win, Place, and Quinella) were offered at JRA tracks. The JRA introduced Quinella Place in 1999, followed by Exacta and Trio betting in 2002, Trifecta betting in 2004, and Pick Five in 2011. Of these, the Trifecta has proved by far the most popular, accounting for more than 35 percent of total wagering in 2012 and 2013.
The clubs have also begun to offer commingling, which they say will help cut down on the threat posed by illegal outfits by reducing arbitrage opportunities.
In 2013, the HK government amended the gaming law to allow commingling for the first time and the club now expects to extend international partnerships next year to Australia, Singapore, Macau, New Zealand and parts of Europe.
"This will give hundreds of thousands of racing fans across the globe the opportunity to bet into Hong Kong pools, which have the world's highest liquidity and highest average turnover per race at over HK$132 million,” Engelbrecht-Bresges said. “Commingling will help further in positioning us as a global leader and preventing sizeable pools on Hong Kong racing from developing elsewhere in the world, which could result in a loss of public revenues."
The HKJC in 2008 also won the right to offer rebates on big losing bets.
Singapore also allows commingling. Since 15 March 2014, pari-mutuel common pooling has been available between STC and Australian tote operators. The club commingles its totalisator pools with Tabcorp’s Victoria pool, as well as its WIN and place betting pools with Tabcorp’s New South Wales WIN and PLACE betting pools.
"While online platforms for tote wagering and common pool commingling are seen as key trends in the horse betting industry, pari-mutuel wagering remains relevant and dominant in the context of horse racing today," says STC.
"The fixed margins and lower risk exposure contribute to channeling funds back to the horse racing industry. Moreover, common pool commingling across wagering jurisdictions will be a key driver to sustain this form of wagering," the club adds.
In Singapore, Win and Place-type bets form the larger pools with the customer seen as predominantly male, aged 40 to 60.
STC agrees with its H.K. counterpart that the market for illegal gambling is “still rampant as the availability to place bets on credit, better rebates and promotions offered are driving customers towards illegal bookmakers.”

STC also agrees that horse betting is under pressure from other forms of gambling, such as casino games that offer instant gratification, while other sports betting has also experienced huge growth.
"In general, as a society matures, new forms of leisure and entertainment emerge and trends evolve. The same betting dollar is being invested across an increasingly varied product spread,” STC said.
At a recent conference, executives from all the associations highlighted upgrades and initiatives designed to maintain their competitive edge.
HKJC executive director of racing Mr William A. Nader said: “State of the art quarantine facilities, outstanding hospitality for international owners, trainers and jockeys and a comprehensive marketing and media strategy have all been keys in the growth and success of this meeting.”
Kaora Obata, director of Japan Racing Association in charge of International Affairs, said the industry had been seeking to broaden its appeal through television marketing.
“There are special feature shows and sports news programmes on television, and we try to showcase the event by having exposure more than ever before on popular, top-rated TV shows. We also air more TV commercials plus advertisements in major newspapers, and in many other ways. As a result, about 7 million people watch the Arima Kinen on TV.”
The clubs have also made moves to leverage modern technology. The HKJC last season introduced a popular Racing Touch App that has graphic-intensive and vivid 3D horse graphics. Users can also look up racing info, jockey profiles and real-time odds enquiry in addition to place a bet with its simple drag-and-drop feature.
Meanwhile, other countries are considering opening up to horse race wagering.
Mongolia’s government plans to propose laws to set up a professional horse-racing league and legalize betting to compete for the Chinese gambling market.
The government is seeking to build a horse-racing track near the site where the country is building a new airport, 54 kilometers (33.6 miles) south of the capital Ulaanbaatar.
This comes as rumours circulate that China will lift a ban on horse-race betting that could generate as much as 100 billion euros annually ($136 billion) in revenue if legalized.
 

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