Howard Hamilton

This article was written some six years ago and it is worth repeating.

From the days of racing at Knutsford Park (now the New Kingston business district) to the newer generation Caymanas Park, horse racing - the Sport of Kings - has been deeply entrenched in Jamaica, as a sport and an economic activity.

Over time it has also been an important contributor of revenue to government's coffers, a share that has progressively increased as horse racing has grown and as government has kept increasing its level of taxation from the industry.

The taxation policy has proven to be counterproductive to the growth and development of the horse racing industry.

In many other places, governments and racing promoters are cottoning on to the initiative of takeout reduction - lowering the tax cut from racing proceeds.

This is not generosity on their part.

Rationale

The rationale behind this seeming paradox is this: that customers will bet more when they receive more, because they will have extra dollars in their pockets to spend.

Enough evidence has been gathered over the years in the American racing industry that shows a direct relationship between declining consumer interest in horse racing and the trend towards higher takeouts over the years.

The empirical evidence also shows a negative relationship between the takeout rate and the amount wagered, i.e. - that decreases in the takeout rate increase the handle and vice versa.

The research also indicates that whereas horse racing have steadily been increasing the take over the years, many other forms of gambling, including sports betting and most casino games has kept lower rates (in single digits), which keep people in action longer and makes winning far more attainable.

In recent times there has been a welcome reversal of the higher takeout trend and it has been galloping across racetracks from coast to coast in the United States. It's about time, horse racing officials and fans are saying.

Takeout, reductions are finally beginning to catch up with the shift in handle from straight to multiple bets, where takeouts are the highest, and thus the most likely to discourage or lose today's players.

Wherever it's been implemented, the result has been an increase in overall business and customer satisfaction, not to mention increased revenue for government and horse racing promoters.

The time has come for this initiative to get out of the starting blocks in local racing.

No secret

It's no secret in the local industry that the takeout is higher than most jurisdictions in the region.

What horse racing promoters also know is that horse racing is at a critical juncture, where decisions need to be made concerning its reinvention, for further growth and sustainability.

The objective reality is that over the past 10 years, there has been increased competition from other legal forms of gambling - lotteries, betting machines, video and games of chance of all types.

A reinvention of the horse racing industry must consider factors, such as:

Increasing the value per dollar wagered by the punter.

Improving the quality of service to the punter.

Increasing the entertainment value of the racing product.

Providing and maintaining a decent and attractive environment for betting.

Improving the quality of the horse as a key ingredient of the sport.

Underlying all of this, of course, is the need for increased revenue for all concerned. Government, through Caymanas Track Limited, is the promoter of horse racing in Jamaica, and therefore has a clear onus to lead the charge in modernising the industry.

Current tax structures

It can begin by considering a lowering of the current tax structures. As has been demonstrated, far from reducing revenue, Government stands to gain far more, and rather than declining, the sport can be revived.

It's a win-win situation for all.

Well, the promoters did a minimal adjustment in April of this year reducing the takeout by a miserly five per cent, moving it from 25 per cent from 30 per cent. This against the background that 15 per cent to 20 per cent is the maximum takeout in every other racing jurisdiction. I was so convinced of the positive effects of reducing the takeout that I offered many years ago (through the Jamaica Lottery Co.) to guarantee an increase in turnover of at least 20 per cent if the promoters increased the payout to the punters from 70 per cent to 80 per cent. My offer was never accepted.

Well, the result of this adjustment in just two months is most revealing. The turnover for the two months was:

2006 May J$162,498,135.00 2007 May J$191,184,339.00 an increase of 18 per cent.

June J$147,923,525.00 June J$216,161,988, an increase of 47 per cent. It will be argued that it is still too early to tell and there may have been other factors which influenced this dramatic increase. My response is that the promoters and Government should reduce the takeout further and the results willbe even more dramatic.