Thursday 15 August 2013

Curmudgeons, Grotesques …. and the Economics of Racing

Well the middle of this month has been very enjoyable, particularly with a fantastic retirement bash at Windsor Racecourse on Monday. I’ve stepped down from the chairmanship role in my consultancy, Future Purchasing, and was delighted when colleagues organised a celebration (I think for my achievements, rather than pleasure that I was leaving!!) with much merriment, drinks and dinner in a large box in the Royal Grandstand. Even the speeches weren’t too boring. There were a couple of jokes about Champion spark-plugs and melons that certainly wouldn’t pass the spam filters. Even managed to back a few winners. Jack and I staggered off the course loaded down with presents so there was some tremendous generosity. We both resolved to retire every year from now on!

This sort of party definitely illustrates how racecourses can make money and provide lots of entertainment for non-racegoers. The vast majority of our guests had never stepped on to a racecourse before, and wanted to know whether our sport was always like this – fine food, decent wine, private bars, panoramic view of the racecourse and river, etc. It was hard not to smile wryly, thinking about what it will be like as we go through the winter enjoying the facilities at some of the minor jumps tracks, or even more wryly when considering the very dubious delights of the all-weather.

My last blog on owners being treated as “cash cows” triggered much discussion about the crazy economics of racing. Indeed, over a few pints of Donningtons down here in the Cotswolds the Curmudgeon and I developed a whole economic model around ROO (Return on Ownership). Those of you in the business world know that ROCE (Return on Capital Employed) is a very important financial metric, and we believe ROO is the same for racing. At the moment the ROO is about 20%, if you’re lucky. In other words, for every pound that an owner puts into racing, they get about 20p back. This puts us right at the bottom of the league table. In many countries, such as Dubai, Hong Kong, Japan and Australia, the return is massively better. The key question is what to do about it. Now that I’m officially retired and have a bit more time, I’m intending to try to get my mind around that, and also do some digging and delving into the facts and data of actual returns. I’d like to see the BHA and the ROA set a formal target of, say, 50% ROO to be achieved within five years.

When a friend of ours, Ruud van Ruitenbeek, and his wife Di were staying with us a week or two ago, we went to visit the historic church of St. Peter’s in Winchcombe, built in 1468. Right around the sides of the church are gruesome depictions of people, animals and mythical beasts. I’d always thought these were called gargoyles, but Ruud discovered that “gargoyle” comes from the French, gargouiller, which means “to gurgle”, and therefore refers to a water spout. Since the ones at Winchcombe don’t have any water coming out of their mouths, they are apparently called grotesques. The one that I have put into this blog definitely illustrates the likely reaction of anyone who tries to understand the crazy economics of our sport. It equally depicts my reaction to the disgraceful way in which bookmakers are milking our industry and failing to reinvest their profits so as to make an adequate contribution. This is another area that I intend to investigate. I’m going to start by seeking clarity on the BHA’s strategy – is the plan to keep on appeasing the bookies by allowing more and more low-grade racing, or will they be facilitating fundamental levy reform, and if so, how?

Off to Yorkshire now to see the horses at Karl and Elaine Burke’s. Bound to meet a few curmudgeons up at Middleham. I’ll keep you posted.

P.S. If you’d like to see any of Ruud’s photos, do have a look at his web site, - they are excellent. You can even buy his book of photos online.


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