the effect of takeout on thoroughbred horse racing wagering handle

The Effect of Changing the Takeout Rate on Thoroughbred Horse Racing Wagering Handle

By: Lenny Moonwww.equinometry.com

@equinometry

http://www.equinometry.com/

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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

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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0%

5%

10%

15%

20%

25%

30%

-

2,500

5,000

7,500

10,000

12,500

15,000

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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• 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.

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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16%

17%

18%

19%

20%

21%

22%

-

15,000

30,000

45,000

60,000

75,000

90,000

February '08 February '09 February '10 February '11

Tampa Bay P4 Pool Size vs Takeout %

Avg P4 Pool

Takeout $

Takeout %

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• 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.

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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-

3,000

6,000

9,000

12,000

15,000

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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• 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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-

3,000

6,000

9,000

12,000

15,000


Fort Erie Late Pick 4

2010 - LP4

2011 - LP4

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• 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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-

5,000

10,000

15,000

20,000

25,000


Fort Erie Total Pick 4

2010 - Total

2011 - Total

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• 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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• 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.

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.

http://www.equinometry.com/

the effect of takeout on thoroughbred horse racing wagering handle

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