The Effect of Takeout on Thoroughbred Horse Racing Wagering Handle
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Transcript of The Effect of Takeout on Thoroughbred Horse Racing Wagering Handle
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The Effect of Changing the Takeout Rate on Thoroughbred Horse Racing Wagering Handle
By: Lenny Moonwww.equinometry.com
@equinometry
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Takeout Rate vs. Wagering Handle
• Hypothesis: There is a negative correlation between takeout rate and wagering handle, wherein as one increases the other decreases and vice versa.
• Test: Review the impact of increasing and decreasing takeout rates on wagering handle.– Case Study #1: Laurel Park Pick 4– Case Study #2: Tampa Bay Downs Pick 4– Case Study #3: Fort Erie Pick 4
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Case Study #1 - Increased Takeout %Laurel Pick 4
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Case Study #1 – Increased Takeout % Laurel Pick 4
• The takeout % for the Pick 4 at Laurel was:– 2006 = 14%– 2007 = 10%– 2008 = 14%– 2009 = 25.75%– 2010 = 25.75%
• The data used for this example is the Pick 4 pools at the August meets from 2006 to 2010.
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Case Study #1 – Increased Takeout % Laurel Pick 4
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5%
10%
15%
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25%
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2,500
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August '06 August '07 August '08 August '09 August '10
Laurel Park P4 Pool Size vs. Takeout %
Avg P4 Pool
Takeout $
Takeout %
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Case Study #1 – Increased Takeout % Laurel Pick 4
• From 2006 to 2010:– Takeout increased from 14% to 25.75%.– The average Pick 4 pool decreased 53%.– The average takeout dollars generated decreased 13%.– The one year takeout was lowered handle increased 16%.
• Simple conclusions:– Higher takeout resulted in decreased handle.– Higher takeout lowered profits generated for the racetrack.– Higher takeout is, therefore, a lose-lose situation.
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Case Study #2 - Decreased Takeout %Tampa Bay Pick 4
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Case Study #2 – Decreased Takeout % Tampa Bay Pick 4
• The takeout % for the Pick 4 at Tampa Bay was:– 2008 = 20%– 2009 = 20%– 2010 = 19%– 2011 = 18%
• The data used for this example is the late Pick 4 for the first two weeks of February from 2008 to 2011.
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Case Study #2 – Decreased Takeout % Tampa Bay Pick 4
16%
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18%
19%
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15,000
30,000
45,000
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February '08 February '09 February '10 February '11
Tampa Bay P4 Pool Size vs Takeout %
Avg P4 Pool
Takeout $
Takeout %
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Case Study #2 – Decreased Takeout % Tampa Bay Pick 4
• From 2009 to 2011: – Takeout was reduced from 20% to 18%.– The average Pick 4 pool increased by 97%.– The average takeout dollars generated increased by 77%.
• Simple conclusion:– Lower takeout resulted in increased handle.– Lower takeout generated more profit for the racetrack.– Lower takeout is, therefore, a win-win situation.
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Case Study #3 - Decreased Takeout %Fort Erie Pick 4
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Case Study #3 – Decreased Takeout % Fort Erie Pick 4
• The takeout % for the Pick 4 at Fort Erie was:– 2010 = 26.20%– 2011 = 14.00%
• The data used for this example is the June Pick 4 pools from 2010 to 2011.
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Case Study #3 – Decreased Takeout % Fort Erie Pick 4
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1-Sun 1-Mon 1-Tue 2-Sun 2-Mon 2-Tue 3-Sun 3-Mon 3-Tue 4-Sun 4-Mon 4-Tue
Fort Erie Early Pick 4
2010 - EP4
2011 - EP4
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Case Study #3 – Decreased Takeout % Fort Erie Pick 4
• The Early Pick 4 averaged $3,579 in 2010 when the takeout rate was 26.20%.
• The Early Pick 4 averaged $5,833 in 2011 when the takeout rate was lowered to 14.00%.
• The Early Pick 4 average handle increased 63% from 2010 to 2011.
• The Early Pick 4 average handle:– Increased 38% on Sundays– Increased 75% on Mondays– Increased 70% on Tuesdays
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Case Study #3 – Decreased Takeout % Fort Erie Pick 4
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3,000
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1-Sun 1-Mon 1-Tue 2-Sun 2-Mon 2-Tue 3-Sun 3-Mon 3-Tue 4-Sun 4-Mon 4-Tue
Fort Erie Late Pick 4
2010 - LP4
2011 - LP4
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Case Study #3 – Decreased Takeout % Fort Erie Pick 4
• The Late Pick 4 averaged $7,563 in 2010 when the takeout rate was 26.20%.
• The Late Pick 4 averaged $8,810 in 2011 when the takeout rate was lowered to 14.00%.
• The Late Pick 4 average handle increased 16% from 2010 to 2011.
• The Late Pick 4 average handle:– Decreased 7% on Sundays– Increased 15% on Mondays– Increased 36% on Tuesdays
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Case Study #3 – Decreased Takeout % Fort Erie Pick 4
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5,000
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1-Sun 1-Mon 1-Tue 2-Sun 2-Mon 2-Tue 3-Sun 3-Mon 3-Tue 4-Sun 4-Mon 4-Tue
Fort Erie Total Pick 4
2010 - Total
2011 - Total
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Case Study #3 – Decreased Takeout % Fort Erie Pick 4
• The Total Pick 4 averaged $11,142 in 2010 when the takeout rate was 26.20%.
• The Total Pick 4 averaged $14,642 in 2011 when the takeout rate was lowered to 14.00%.
• The Total Pick 4 average handle increased 31% from 2010 to 2011.
• The Total Pick 4 average handle:– Increased 8% on Sundays– Increased 33% on Mondays– Increased 48% on Tuesdays
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Case Study #3 – Decreased Takeout % Fort Erie Pick 4
• The average Total Pick 4 handle increased 31% when the takeout was reduced from 26.20% to 14.00%.
• The Early Pick 4 outperformed the Late Pick 4.
• Monday’s and Tuesday’s outperformed Sunday’s likely as a result of less competition from other tracks, especially the major circuits.
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Final Thoughts
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Summary
• In each of three case studies a negative correlation between Takeout % and Wagering Handle existed.
• Increasing the Takeout % resulted in decreased Wagering Handle and stagnant Takeout Revenue for Laurel.
• Decreasing the Takeout % resulted in increased Wagering Handle and increased Takeout Revenue for Tampa Bay.
• Increased Wagering Handle as a result of decreased Takeout % can be amplified by racing on days with less competition as was the case with Fort Erie.
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Conclusion
• The results from the small sample presented affirmed the hypothesis that there is a negative correlation between takeout rate and wagering handle. Therefore if the thoroughbred horse racing industry wants to increase wagering handle the takeout rates on all wagers should be reduced.
• Please visit my website www.equinometry.com for an in depth look at each of the case studies presented in this presentation.