Amplifying the Positive Effects of Lowering Takeout Rates on Wagering Handle

Yesterday I presented an example of the positive impact of decreasing the takeout rate on wagering handle for thoroughbred horse racing.  In that example the decreased takeout rate of the Pick 4 at Tampa Bay Downs resulted in an increase in wagering handle and in turn an increase in takeout revenue.  Today I will present an example that takes the positive effects of lowering the takeout rate and by adding one other factor into the equation amplifies the results significantly.

For this example I looked to our neighbors up north in Canada.  Fort Erie is a modest track but just as Tampa Bay Downs illustrated you do not have to be in the upper echelon of thoroughbred racing to impact the sport.  Prior to the beginning of the 2011 thoroughbred horse racing meet Fort Erie lowered the takeout rate on the Pick 4 from 26.20% to 14.00% and as expected the wagering handle increased significantly.

Early Pick 4

The chart below compares the wagering handle for the Early Pick 4 from June 2010 and June 2011.

The chart compares the Wagering Handle of the Early Pick 4 at Fort Erie for June 2010 and June 2011.

The average wagering handle was $3,579 in 2010 when the takeout rate was 26.20% and increased by 63% to $5,833 in 2011 when the takeout rate was lowered to 14.00%.   While the substantial increase in wagering handle is important it is that other factor that I mentioned earlier that cannot be ignored.   Fort Erie races on Sunday, Monday and Tuesday and while the wagering handle increased 63% it was not an even spread.   The average wagering handle increased 38% on Sundays, 75% on Mondays and 70% on Tuesdays.  What was the driving force behind the huge discrepancy?  One word: competition.  Fort Erie has to compete with most of the major race tracks on Sunday but does not on Monday or Tuesday.

Late Pick 4

Was the same scenario true for the Late Pick 4?  The chart below compares the wagering handle for the Late Pick 4 from June 2010 and June 2011.

The chart compares the Wagering Handle of the Late Pick 4 at Fort Erie for June 2010 and June 2011.

The average wagering handle was $7,563 in 2010 and increased 16% to $8,810 in 2011.  While the increase in wagering handle for the Late Pick 4 was not as robust as the Early Pick 4 it was still an overall increase.  Looking at the three race days though is of greater importance as the average wagering handle decreased on Sundays by 7%, increased on Mondays by 15% and increased on Tuesdays by 36%.

Total Pick 4

The chart below compares the combined average wagering handle for the Early and Late Pick 4 from June 2010 and June 2011.

The chart compares the Wagering Handle of the Total Pick 4 at Fort Erie for June 2010 and June 2011.

The overall increase was 31% from 2010 to 2011.  The average wagering handle increased 8% on Sundays, 33% on Mondays and 48% on Tuesdays.

Final Thoughts

Three lessons can be learned from this example.  The first is lowering takeout almost always results in increased wagering handle, a point that was made in the previous examples using Laurel Park and Tampa Bay Downs.  The second is choosing which days to operate should be at the top of the list for low and mid level tracks.  Competing against fewer tracks will obviously result in larger wagering handle then competing against more tracks, especially when the top tier tracks are running.  The third and final lesson is that more is not always better.  In the case of Fort Erie the wagering handle increased significantly (63%) for the Early Pick 4 but only modestly (16%) for the Late Pick 4.  The best solution may be to eliminate the Late Pick 4 and focus on the continued growth of the Late Pick 4.

Although the sample size was small the outcome was the same at all three tracks that were looked at: lowering takeout rates increase wagering handle, raising takeout rates decrease wagering handle.  Three tracks from three different regions proved this and at the same time an important corollary factor was discovered: avoiding competition against top tier tracks results in increased wagering handle for low to mid level tracks.  After stumbling upon that nugget of information I decided to look at some of the low to mid level tracks to see if the results are the same across the board.   Check back next week to find out the results.