Churchill Downs' Derby City Gaming in Downtown Louisville Begins with Delays
In December, Churchill Downs launched their $90 million Derby City Gaming facility in downtown Louisville, offering historical horse racing (HHR) machines. However, the facility has not met the anticipated revenue projections since its inception.
Located in a former US Bank site on the corner of 140 S. 4th St., the downtown HHR destination is equipped with approximately 500 gaming terminals. These machines, similar to casino slots, function on the basis of previously run horse races and are categorized under parimutuel wagering.
Despite a significant investment from Churchill Downs, the company's expectations for strong revenues haven't been realized at this location. The Kentucky Horse Racing Commission's reports indicate that the downtown HHR terminals generated only around 25% of the monthly gross gaming revenue (GGR) of the original Derby City Gaming center along Poplar Level Rd. near the Louisville Airport during January, February, and March, the most recent filing months.
Initial Sluggish Performance, Company Response
At 500 terminals, Derby City Downtown has a significantly lower number of HHR machines compared to the original location at over 1,300 gaming seats.
Leaders from Churchill anticipated that the downtown venue might begin modestly as a large portion of its business derived from tourism and downtown traffic. CEO Bill Carstanjen stated in the company's April earnings call that they had expected a less-than-expected start due to the less-than-ideal timing of opening in December, right before winter in Louisville. Consequently, they've seen gradual growth from the downtown location.
"We had anticipated it would start relatively modestly because a big component of its business would be driven by tourism and downtown traffic," Carstanjen said. "Opening in December at the height of winter in Louisville is not the ideal time to open. So, what we're seeing is pretty consistent ramping."
Regarding a potential future outlook for the downtown location, Carstanjen noted that the company will have a clearer understanding of its economic impact on Louisville after witnessing the revenue influx during the spring and summer months.
HHR Evolution
For a casual player, HHR machines resemble traditional casino slots. However, they operate quite differently.
The machines choose a random horse race that has already been run and then translate its odds into a visual animation. Most players go for the simple bet with the best odds, which is, behind the scenes, a parimutuel wager on the favorite horse's victory during the historically recorded race. If the horse wins, the player's HHR machine bet is also successful.
Commonly referred to as instant racing machines, HHR machines had been in operation in Kentucky, relying on the state's legalization of parimutuel wagering, for a few years before their future legality was challenged. In 2020, the Kentucky Supreme Court ruled against these games. Consequently, the state legislature passed an HHR statute in February 2021, which was signed into law by Governor Andy Beshear.
Kentucky earns 1.5% of the total bets, or handle, placed on HHR machines.
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Source: www.casino.org
