Camilo Thame, Business Reporter

In this November 2004 file photo, chairman of the United Bookmakers Association (UBA), Xavier Chin (left), presents the Gold Cup to Howard Hamilton whose classy four-year-old colt, A King is Born, scored a narrow win over stable-companion Distinctly Irish in a 1400-metre race at Caymanas Park - File

Jamaicans spend upwards of $460 million of monthly disposable income on horse bets alone, and when the total turnover from the broader gaming sector is factored, gambling rakes in $3.3 billion per month.

Revenues from horse bets are growing but not at a pace fast enough to outstrip inflation, and the numbers also indicate that the sector is contracting.

"People are no longer enamoured by the sport and a number of breeders have simply come out of the business," said Howard Hamilton, local thoroughbred association president.

Sales total

For the three months ending June 30, 2006, betting sales totaled $1.4 billion, or 6.5 per cent more than the comparative quarter last year, when annual inflation was running above eight per cent to erode any real gains.

Industry players are blaming sluggishness in legislative changes to regulations under the Betting Gaming and Lotteries Commission Act and the lack of a radical restructuring of local promoter and track operator Caymanas Park for the fallout in the horse betting sector, which has been characterised by a real decline in betting revenue and significant reduction in bookmakers over the past two-three years.

Breeders and owners, who are involved in the most critical part of the multibillion dollar industry - supplying racehorses - have also felt the squeeze.

The 739 individual owners that were around in 2003 has now fallen below 500, while the number of commercial breeders, by Hamilton's estimate, has been halved since the late 1990s to about 40.

"Apart from the sale of horses, the main income to the breeders is the bonus," said Hamilton. Those bonuses are paid out of race meet purses.

Current figures indicate that the annual turnover from bets is running above $5.2 billion.

The total betting/gaming sector by contrast has a near $40 billion revenue pull.

With inflation of 8.4 per cent for the 12 months to June 2006 outpacing the growth in revenues, and the 17.5 per cent movement in the consumer price index for the comparative period last year beating sales growth of seven per cent, pointing to a real decline over the last two years, more than 100 betting shops have been locked down in the past two years declining by nearly a third from 492 at the beginning of 2004 to 353 up to June 30 this year.

According to Derrick Peart, executive director of the Betting Gaming and Lotteries Commission (BGLC), the numbers have forced bookmakers, who took 38 per cent, or $537 million, of total racing bets during the quarter, to rationalise their operations.

"They have had to be weeding out unprofitable betting offices," said Peart.

Analyses of betting offices

"The analyses of betting offices, or shops, show that they will have profitable ones subsidising those that are not making money."

Apart from the reduction in shops, Peart also noted that there has been consolidation of operations islandwide. For instance, he pointed out, the principals of Capital Betting had grown by acquisition of Big A, adding that: "Champion has had growth by acquisition."

Capital and Big A combined made $43 million or 8 per cent of total bookmakers' sales from 46 betting offices during the period under review.

Champion, which for the June quarter this year took in just over 21 per cent of betting sales across all bookmakers, or $114 million, saw a 32 per cent increase in its revenue over the past two years, even as the number of shops it had in operation reduced from 56 to 48 at the end of June.

In 2004, the sector had 14 bookmakers, but four has since closed down their businesses or sold out.

Cornwall Betting and a 40-year-old entity called Follys Betting both locked down in October 2004; Western Track Limited stopped taking bets in June 2005; and in March of this year Total Betting exited the market.

Xavier Chin, principal of the single largest bookmaker, Track Price Plus, which made $173 million sales in the June quarter, or 32 per cent of total bookmakers' revenue, believes the slow implementation of changes to regulations that guide the racing industry and a stern tax regime has squeezed out these players.

"Up to November it was not viable to be in business," said Chin. "They had a sales tax on gross sales, which was replaced by a gross profit tax in November 2005."

New tax regime

The new tax regime implemented last November 1 saw the 11 per cent tax on gross sales replaced by a 16.5 per cent levy on gross profit - gross sales minus gross payouts.

"Average payout is 65 per cent, but it is not unusual that on a particular day, the payout is greater than total sales," conceded Peart.

Chin says he has also closed some of his shops, but indicated that there were factors other than revenue performance guiding his decisions.

"The commission holds bookmakers responsible for all illegal activities that take place in shops, so where I have shops that could not be connected to computer networks I closed them," Chin told the Financial Gleaner.

He has reduced his number of betting shops from 71 to 61.

Bookmakers under pressure

The bookmakers are also under pressure from the BGLC to modernise, said the betting and gaming regulator.

"Looking down the road, computerisation will be a precursor to licences," Peart added, "but not until we establish amendments to the regulations."

Peart was referring to changes in the regulations, a process with which Chin and other horse racing industry players have become impatient.

"We have made several recommendations including longer opening hours we are allowed to operate between 7:00 am and 12:30 pm; and ability to advertise, which we can't do now," said Chin.

"We have been waiting six years."

Horseracing in Jamaica is a two century old industry, but the first race promoted by a company called Knutsford Park Limited did not occur until 1905.

In the decades that followed, new investors emerged but eventually the track went into bankruptcy.

In 1989, the government stepped in to form Caymanas Track Limited (CTL), which leased the 196-acre Caymanas Park plant and assets. The restructuring that followed included the implementation of a new claiming system and computerised off-track betting (OTB).

Richard Lake a former director of the transformation team says the model which he was in part responsible for implementing nearly tow decades ago was outdated, and was now holding back the industry.

"Fundamentally, the model hasn't been changed since 2001, when its suitability for the changing sector would have expired," said Lake, who now heads a venture group, Horsmen Limited, which has been eyeing acquisition of CTL since government put it on the auction block two years ago.

"The model has run its course. What need to be done, among other things, is increase the number of bettors. The image of racing also has to be changed to include more people and a wider cross-section of the market."

Caymanas, which has a staff complement of 469, saw its net profit of $65 million for the year to March 31, 2005 turn to a loss of $17 million the following year.

The racing promoter also contracted the number of OTB parlours from 75 to 62 up to its financial year end, March 2006.

For its first quarter to June 30, Caymanas' revenues increased by 6.9 per cent to $877 million, in line with its 12-month projections of $3.49 billion or a 6 per cent increase in turnover over the previous year.

But on those projections it is also looking at a net loss of $93 million.

The overseas market, which includes the United States, United Kingdom and Australia, represents 307 race days compared to Jamaica's 90 - and, consequently, accounts for a significant portion of Caymanas' revenues.

Simulcasts, the local track's version of overseas racing, represents 44 per cent of its sales.

For bookmakers only half of the 10 operators offer betting on overseas races, but the segment makes up about 46 per cent of their total sales and about 55 per cent of the revenue made by the five that do offer the service.

As an industry, horse racing employs upwards of 20,000 people, from jockeys to breeders, to trainers to bookmakers, grooms, and track employees.

The proposed legislative changes for the industry are at the Parliamentary Counsel for drafting, beyond which the draft has to be approved by Cabinet before it gets to the House to be debated into law.

Also pending is the divestment of Caymanas Track Limited, now a project of the Development Bank of Jamaica following its merger with National Investment Bank of Jamaica, which initially had the assignment.

camilo.thame@gleanerjm.com