Wednesday, 15 October 2014

Our Reaction to Booming Bloodstock Prices – Building the Pipeline in Different Ways

I’m writing this while listening to the Newmarket Tattersalls sale on the computer in the background. While it is obviously great for the vendors and the bloodstock industry to be harvesting such returns, it is definitely a head-scratcher. We have had trainers and agents looking closely at both National Hunt horses and the yearlings for the Flat at the various sales, and they are staggered by how many distinctly average horses are realising such enormous sums. At the Derby sale in Ireland (where we bought The Fugitive), there were numerous store horses going through for €150k+, none more so than the procession of Yeats’ progeny who were bought back in by the Magnier clan. Again at the Goffs Orby sale, records were broken and that momentum has continued through Tattersalls Book 1 and into Book 2. At our own level, there is just no way at all that we can chase these prices, not that we would want to. It is becoming increasingly clear that the dominance of NH owners with Messrs. Henderson, Mullins and Nicholls means that when they clash, the prices rapidly escalate to the ludicrous. Equally on the Flat, there is a platinum tier of global owners for whom money doesn’t matter.

So as a result of all of this, in Owners for Owners it is time to take stock. We’re not prepared to pay the sums required, and equally not prepared to lower the quality standards. What is our current thinking?

On the Flat we’ve commissioned Karl Burke and his family to work with us through Book 2 and then the Deauville Arqana sale next week, where we had tremendous success last year buying our two 90+ rated colts, Lord Ben Stack and Jolievitesse, both of whom have won and shown more than enough promise to indicate that they could easily be winning Group horses next season. All the owners now have the Dante meeting at York pencilled in their diaries, and we’ll be disappointed if one of them doesn’t go for the eponymous race itself. We’ve also joined forces with one of our key owners, Tim Dykes, who is investing in buying a number of fillies, both to race and to breed. By doing this we have been able to increase the budget to a maximum of £80,000 (inclusive of commissions etc.) and this is going to be a joint ownership: 50/50 between OfO and Tim. That way our owners can buy into the horse in shares for less than a total of £40,000. Bearing in mind how well we have done this year, please let me know as soon as possible if you’d like to be involved. At the moment the plan is to race the filly for two years and then we would breed from her. We’ll be giving owners the options of buying in either to race only, or to race and breed.

For NH, I was very struck by some comments made recently by Dan Skelton, who is pursuing what he termed, “the Marks & Spencer supply chain model of building a supply pipeline”. That is something that we are also going to pursue. Rather than just buying ready-to-race horses, such as those who have won their point-to-points, we are going to invest in a number of foals and have commissioned top agents Aiden Murphy and Gerry Hogan to act on our behalf at the upcoming foal sale at Tattersalls in Ireland, week commencing 10th November; and also Anthony Honeyball and Rachael Green. We would then have three horses in the pipeline and can make decisions as they develop whether we retain them so that they come in to racing in two to three years’ time, or sell them in the normal way as store horses. While it is higher risk, we’re hoping that by buying three we will have at least one or two able to race for us at a lower total price than investing in equally high-risk store horses or paying over the top for the winning Irish pointer.

As you can see, therefore, there is a shift of emphasis where over time we may accommodate not just buying policy around “buying to race” but also “breeding to race”. The intention is to do this in a balanced and judicious way while still working closely with our trainers and agents to buy horses able to come in to training on a much shorter timescale. As ever, I’ll be circulating details of the next opportunities for owners to become involved with us as co-owners. Watch this space!

I am always interested to hear your views so please do leave a comment. If you can't see the comment box at the bottom of this post then navigate to the post using the right hand navigation or click here > and scroll to the bottom of the page. Look forward to hearing your views. Thanks very much for sharing them.

Wednesday, 1 October 2014

First Class or Third Class: The Beastly Business of Bargaining for Badges

Very occasionally in my management consultancy career I enjoyed entering an aircraft and turning left to fly first class. Bearing in mind that I was a procurement specialist, it would hardly have been an impressive action on the part of the client to spend all that money on me. However, when I did travel like that, I really enjoyed it, and it was always on the Heathrow to JFK run. Currently a first-class flight with British Airways and onward helicopter into Manhattan is just a whisker under £5,000. You book your ticket and check in online; there is a limo to the airport; you are fast-tracked through security; you can relax with a glass or three of Krug before being feted by top-class cabin staff while enjoying an excellent gourmet dinner; before a relaxing sleep in a luxury fold-down seat.

You’re probably wondering why I’m wittering on about such luxuries. It is because, if you take the average price of the average racehorse and its average training fees over its average career, and total it all up before dividing it by the number of races the horse runs, you’ll find that it is between £4,000 and £5,000. If you take into account the purchase price of the bloodstock and write that off completely, it would take the average racecourse appearance cost up to nearer £7,000.

So next time you go racing as an owner, you may (but then again, may not) want to consider the fact that your investment for that afternoon is somewhere between £4,000 and £7,000. You may also want to reflect upon whether you are being treated in the same way as someone with a first-class ticket on British Airways.

That, in a nutshell, is the difference between being a purchaser of racehorses and a purchaser of other luxury goods and services. In one, we have traditionally been treated as relatively unimportant, whereas in the other we are the number one customer.

Let’s just examine one aspect in more detail – badge allocation and collection. In our house, my wife Jack and I share the same office to do all the admin and communications for Owners for Owners. One of the biggest sources of tension is dealing with racecourses and persuading them to allocate as many badges as we need for our owners. Some courses are miserly, while others are generous; some are highly inefficient, requiring lots of emails and phone calls, while others appear far more switched-on and customer orientated; some hide behind health & safety rules (“we can’t have too many owners in the paddock”), while others will do everything they can to accommodate; some of the staff on O&T desks haven’t a clue, whereas others are highly professional “owner ambassadors”; the one common denominator is that you will invariably have to join a shuffling queue and be given the once-over by someone who suspects you are trying to blag your way in for nothing. Allocations can vary between 6, 8, 10, 12 or more. Sometimes there is a free hot meal and sometimes only a bun and cup of tea. Some accept ROA swipe cards, some don’t. Hardly ever do you see a computer. Usually there is just a long list of names by horse and race, and someone has to track down manually who you are.

I don’t think airlines selling first-class tickets would keep many customers paying £4-5,000 a time for the privilege of being treated so shabbily and inefficiently. Surely it’s time to catch up with modern customer relationship management and jump several decades at a single go, by introducing smart technology, owner recognition systems, privilege cards, professionally trained customer liaison staff and also some old-fashioned courtesy towards racing’s number one customer, i.e. the owner. Many decades ago I worked with British Airways on their behavioural training programme, “Putting People First”. It’s about time racing and racecourses did the same: “Putting Owners First”, and genuinely meaning it.

I am always interested to hear your views so please do leave a comment. If you can't see the comment box at the bottom of this post then navigate to the post using the right hand navigation or click here > and scroll to the bottom of the page. Look forward to hearing your views. Thanks very much for sharing them.