Friday, December 30, 2011

Hong Kong 3: Drug Rules and Horse Care

When it comes to drug use, Hong Kong is one of the strictest racing jurisdictions in the world. No medications are allowed. Period. And some drugs -- Lasix, for example -- can't even be used in training.

At the same time, Hong Kong is among the most transparent jurisdictions regarding the physical condition of horses entered in races. The Hong Kong Jockey Club's web site has a link to complete veterinary information for every horse entered in every race, and in far more detail than is available to US bettors. For example, a look at Sunday's upcoming card at Sha Tin shows reports on which horses showed up lame after a race, which had fevers, which showed mucus or traces of blood in the trachea, which ones had fractured bones, which ones had suspensory injuries, and much more. I'm not sure whether all that information would actually help a bettor, though I find it valuable in explaining layoff lines, but it can't hurt.

Hong Kong, of course, has many inherent advantages over the US when it comes to regulating drugs. As I mentioned in the first of these posts, the Hong Kong Jockey Club is racing's sole regulator, enforcer, operator, and virtually sole employer. All the vets work for the Jockey Club, as do all the grooms. No trainers with private vets to make everyone suspicious. That makes things a lot easier to police. And the HKJC's drug testing lab, with a professional staff of 40, is a match for just about any of the labs in the US. Given the small number of racing days, Hong Kong almost certainly tests a higher proportion of horses than any US jurisdiction. It's not just the winners and a few random horses from each race that are tested, but also any horse that, in the opinion of the stewards, fails to perform to expectations.

Another advantage Hong Kong has in being able to ensure clean racing is that it screens horses before they can be imported into the jurisdiction. Once a member of the Jockey Club wins the annual lottery giving him or her the right to import a horse, that owner has to secure the Jockey Club's approval for the actual import. That screening process keeps out unsound horses and tends to insure a homogeneous, competitive supply of horses in the barns.

A further advantage is that older horses have a guaranteed retirement option; they don't have to be held together with drugs and tape while they slide down the claiming ladder. The Jockey Club requires each owner to post a HK$40,000 (US$5,000) deposit when the owner imports a horse. If the owner can arrange a confirmed retirement placing for the horse, the deposit is refunded. If not, the Jockey Club adds some of its own funds and itself arranges for retraining of the horse and finding a new career for it in China. In some cases, the Jockey Club will pay as much as another HK$80,000 on top of the owner's deposit. It's a great plan, and not just because it has the ancillary effect of reducing drug use in older horses. The US could do well to emulate such a plan, with mandatory contributions toward retirement by each thoroughbred's breeder and each subsequent owner.

Still, even with all these advantages, Hong Kong race horses aren't paragons of health. The incidence of actual bleeding during or immediately after a race is very high by world standards -- 4.6 per 1,000 runners. That compares to 2.0 per thousand in the US before widespread use of Lasix and only 0.7 per thousand currently. Dr. Brian Stewart of the Hong Kong Jockey Club attributes the high rate primarily to pollution and high humidity in an urban training environment. And, interestingly, there's less bleeding at the evening meetings at Happy Valley, when temperatures and humidity tend to be lower. Horses also tend to lose weight on the van trip over to Happy Valley from their barns at Sha Tin. I can understand that; I'm sure I lose weight just through stress and fear every time I take a long taxi ride in Hong Kong. Dr. Stewart's full report on bleeding at Hong Kong tracks can be found here.

Some of the pollution problem -- and Hong Kong is certainly a lot more polluted than New York, Chicago or Los Angeles, thanks both to too many cars on the road and to industrial pollution blowing over from China -- may be alleviated in a couple of years when the Jockey Club opens its Conghua training center in China, about three hours' drive from Hong Kong. The training center will have room for 400 horses, allowing them to be rotated out of the crowded racetrack training environment at Sha Tin, and will have a mile and a quarter turf course, a six-furlong uphill turf gallop and two synthetic training tracks, as well as swimming pools and turn-out paddocks. I can feel the envy of those who train even at Fair Hill or Saratoga, much less Belmont and Aqueduct.  In any event, getting horses out of Hong Kong for a part of each season should help the bleeding problem.

Part of the opposition to Lasix on the part of the Hong Kong Jockey Club is based on their vets' firm belief that Lasix is a masking agent for some other drugs. That's a belief that most US equine vets strongly reject; the US lab chiefs say that their testing has advanced to the point where Lasix is no longer effective in hiding other drug use. That's a scientific argument that I don't have the knowledge to have an opinion on, and one, I suspect, that will remain unresolved.

Could the US go to a racing environment that's as drug-free as Hong Kong's? Should it? After all, Hong Kong has an incidence of serious bleeding that's more than six times as high as that in the US. But those are questions for another day. For now, with only one or two more trips to the racetrack left before we return to New York, I'm just content to enjoy the high-quality racing and the spectacular customer service in Hong Kong.

See you at Aqueduct.

Thursday, December 29, 2011

Hong Kong 2: The Race Track Experience

The beer garden at Happy Valley

Critics, consultants and industry insiders in US horse racing agonize over how to make race-going a fan-friendly, exciting experience, one that newcomers will enjoy and want to repeat. In Hong Kong, they've figured out how to do that. True, the circumstances are different, and Hong Kong racing doesn't face the kind of competition from other spectator sports and gambling options that tracks in the US face, but, nonetheless, perhaps there's something to be learned from looking at how it's done elsewhere.

This is the second of three reports based on several visits to each of the Hong Kong race tracks. Yesterday's dealt with the economics of Hong Kong racing. Tomorrow's will deal with care of horses, medication rules, and equine retirement.

Happy Valley

The urban racetrack is an unprepossessing species in America. Aqueduct, Hawthorne, Pimlico. Blighted neighborhoods, wind whistling through near-empty stands, a few thousand patrons whose median age is deceased.

Not so in Hong Kong. Happy Valley, the in-town racecourse that runs on Wednesday evenings, is close to the center of the city, a short walk from a major subway stop, in an upscale neighborhood, with the track surrounded by expensive high-rises. And going to the races, with 30,000 or more fellow racing fans, is fun.

As for the track itself, think Aqueduct on steroids. No, not that kind of steroids; Hong Kong has just about the tightest drug rules in the world. But take an urban race track with a mid-week meeting, fill it with 30,000 or more people, build the stands 8 stories high, surround the track with skyscraper apartment buildings, throw in a beer garden for the expatriates, and you have Happy Valley. It's Hong Kong's second track, home to mid-week night racing, mostly for average-quality horses, and with few of the top-quality stakes that are mostly run at the other Hong Kong track, Sha Tin, out in the New Territories.

While visiting Hong Kong, we've seen both extremes of the accommodations at Happy Valley. Thanks to Bill Nader and Anny Kwan, we enjoyed the luxury of the Hong Kong Jockey Club's executive box high up in the members' stand (aka club house, but in fact so much more), with a serious buffet and excellent wine. The huge members' stand has a wide variety of restaurants, lounges and viewing areas; ours was but one of many. And on another visit, we paid our HK$10 (about US$1.25) grandstand admission and watched the races from the commotion of the stretch-side beer garden, where a fully costumed Santa Claus was standing at the rail yelling his heart out for Number 5, and from the balcony just off the food court on the second floor. Two nights of good, competitive racing, with full fields -- Hong Kong averages 12.4 horses per race, compared to just under 8 at most of the major US tracks -- and lots of good betting opportunities.

The betting menu at the Hong Kong tracks is a bit more extensive than at most US tracks. All races offer win and place (i.e., 1st, 2nd or 3rd) betting, plus quiniellas and "place quiniellas" (pick any two of the top 3 horses) and trifectas (called "tierce" in Hong Kong). No exacta or superfecta betting, but quiniella-type bets on the top 3 in any order ("trio") and the top 4 in any order ("First 4"). The biggest single-race pool (which is typically the exacta pool in the US) is the trio.

Rolling doubles and Pick 3 bets are also available, with consolation payoffs if you hit the first leg (or first two in the Pick 3) and finish second in the last leg. The big high-payoff exotics are the double trio (hit the trio in two consecutive races) and, especially, the triple trio (hit it in three consecutive races). The latter builds up a jackpot, much like the Pick Six at US tracks. It's not easy to get the three top finishers three races in a row, when the average field size is more than 12; as of the end of Tuesday's race card, the Triple Trio jackpot was over HK$14 million (almost US$2 million). There's also a Pick Six, which pays off if you get either the first or second-place horse in six consecutive races, with a bonus for getting all six winners; that bonus, as of Tuesday, was over HK$10 million.

The Happy Valley walking ring is on the apron, rather than behind the track, allowing lots of grandstand patrons -- at least those who aren't enthralled by the beer garden festivities -- to get a last look before placing their bets. In contrast to Sha Tin, though, the HK$10 racetrackers don't have the chance for seats on the finish line; that's clubhouse, or, in HK parlance, members' stand, territory.

Down the stretch at Sha Tin

Sha Tin

If Happy Valley is Aqueduct on steroids, then Sha Tin, out in the New Territories north of Kowloon, is a combination of Belmont, Churchill Downs and Santa Anita, done better. Mountains in the background, a la Santa Anita, stands eight stories high, a la Churchill, and a dedicated race track train, a la Belmont (though the one to Sha Tin was a lot more crowded, even on a relatively off day). The Sha Tin facility holds 80,000 or more, with excellent unreserved seating and remarkable restaurant facilities for those willing to pay a bit more. The high-rise stands offer great views of the track from the balconies, and the infield tote board is long enough to show lots more payoff and pool data than is typical at most US tracks.

For Hong Kong's big racing day, the Cathay Pacific Hong Kong International Races on December 11th, we watched from the "Champions' Circle," set up for the day with a lavish buffet, lots of TV monitors, and easy access to the balconies facing the track and the walking ring behind the stands. A spectacular day of racing, from which American race track executives could learn. Take care of your foreign visitors, make a show of awarding the trophies, and, perhaps most impressive, have lots of helpful, friendly customer-service folks all over the track to help out the once-a-year visitors and, perhaps, turn them into regular racegoers.

Customer service is generally more friendly in Hong Kong than, say, in New York, but the Hong Kong Jockey Club puts a lot of time and effort into service, both at the track and in maintaining contact with its customers. Even by Hong Kong standards, it does well. Whether at the betting windows in the Champions Circle or at the (somewhat primitive-feeling) betting machines in the grandstand, there was always a mutuels information person within reach for the confused tourist. Try finding either of those (the friendly information person or the tourist) at Aqueduct in February.

And the information available to the serious bettor is significantly more complete at the Hong Kong tracks than in the US. The Jockey Club web site and most of the newspapers' racing sections include reports on horses that have bled in workouts or races and on horses that turned up lame or with other injuries. That contrasts with the general lack of explanation for a layoff that's found in the Daily Racing Form or track programs in the US. Equipment changes and  additions are also more comprehensively reported. In the US, the only equipment generally reported in the Form are blinkers and front bandages. In Hong Kong, there's also notification of, among other things, shadow rolls, figure-eight nosebands, the horse's weight (not just the assigned jockey weight) and a fair number of other equipment issues that may or may not make a difference, but certainly project an air of complete transparency.

The Form doesn't show as many prior races as in the US, and there's no precise equivalent of Beyer Speed Figures or the Ragozin or Thorograph Sheets for figure players, but in all other respects, the information provided to the Hong Kong bettor (at least the English-speaking variety; I can't comment on what's available in Chinese, but it certainly looked co-extensive with the English version) seems more thorough and complete than in the US.

As for medication notes, that's easy. None allowed. More on that tomorrow.

Tuesday, December 27, 2011

Hong Kong 1. Where Even the Owners Make Money

Sha Tin Racecourse on a busy day

Through a combination of fortuitous circumstances, my wife and I are lucky enough to be spending a month in Hong Kong, visiting our daughter, who works here, grading our law school exams far from the pleas of worried students, and, not so incidentally, checking out the Hong Kong racing scene.

Thanks to the kindness of Hong Kong Jockey Club Executive Director of Racing Bill Nader, formerly chief operating officer of NYRA, and Bill's assistant, Anny Kwan, we've enjoyed the best accommodations that Sha Tin and Happy Valley race courses have to offer, and we've also just wandered around in the grandstand at each track, absorbing the ambiance of being a regular racing fan.

So, for those who haven't had the chance to see Hong Kong racing in person, here are three blog postings on our experience, and how the Hong Kong scene compares with American racing. Today's post covers the economics of racing in Hong Kong; subsequent posts will deal with the experience of racegoing at the Sha Tin and Happy Valley tracks and with the medication and related issues.

First, the money.

Hong Kong has 83 racing days a season, typically a weekend day at the sprawling Sha Tin track in the New Territories north of Hong Kong proper, and a Wednesday night meet at close-in Happy Valley on Hong Kong island. For those 83 days, total handle is roughly HK$1 billion (US$128 million)per racecard; HK$81.9 billion for the most recent fiscal year. Counting betting on soccer and the lottery, both of which also flow through the HKJC coffers, total annual handle for the HKJC is upwards of HK$130 billion (US$ 17 billion).

Yesterday's 10-race card at Sha Tin -- a typical race day with mostly what would be mid-level claiming and allowances races in the US and a couple of high-level allowance/small stakes as the features (albeit with a purse of US$175,000 on the "small" stakes) -- drew 26,580 to the track, which felt comfortably busy, but by no means crowded, and attracted total handle of HK$ 1,113,121,195 (US$142 million). Of that, roughly 10% is typically bet on-track, with the rest on the HKJC's phone and computer networks and in the 100-plus OTB storefronts. No matter; all the takeout from each wagering platform flows through to the HKJC.

Takeout averages 18.5%, marginally less than the US average, but in the same general range as most US tracks. That produces net revenue of nearly HK$24 billion, of which nearly two-thirds goes to the Hong Kong government in the form of taxes. The remaining one-third is split roughly equally between money for operations and purses on the one hand and charitable contributions on the other, making the Jockey Club by far the most important philanthropist in Hong Kong. Some idea of the scope of HKJC's charitable efforts can be seen here. And the most recent annual report of the HKJC is available here.

Unlike US horse racing, the HKJC has an effective monopoly on legal gambling in its jurisdiction. The nearest casinos are in Macao, an hour away by high-speed ferry. And those casinos, while glitzy, are no match for the better gambling palaces in Las Vegas, Atlantic City, or even for establishments like Foxwood's in Connecticut, all of which siphon off money from US tracks. The HKJC also runs Hong Kong's lottery, although total lottery handle is less than a quarter of what's bet on the ponies. And the HKJC has, since 2003, enjoyed a monopoly on sports betting -- principally on overseas soccer -- that previously flowed to illegal bookmakers. Moreover, there are few organized sporting event in Hong Kong to divert attention away from the races; no pro football or basketball, no college sports with crazed alums tailgating before the big game, etc. Not even any standardbreds pulling silly little carts (aka harness racing). The thoroughbreds are just about the only game in town.

Like Keeneland, NYRA and the Oak Tree Racing Association, the Hong Kong Jockey Club is effectively a self-perpetuating not-for-profit corporation. It has no shareholders, and is governed by a self-selected leadership, presumably with the tacit approval of the government. Unlike Keeneland, NYRA and Oak Tree, however, the HKJC is the entire show as regards racing. It puts on the races, owns the facilities, employs just about everyone in the business except for horse owners and trainers (even the grooms and hotwalkers are HKJC employees), runs the vast network of OTBs and phone and online wagering, and, perhaps most important of all, is its own regulator, setting the rules, running the testing laboratory and meting out punishments. A bit lacking in checks and balances and in due process, at least to American eyes? Perhaps, but it works.

Total purses in the 2010-11 racing season were HK$785 million; just about US$100 million. The total number of starters for the 83 racing days was 9,502, and the average horse based in Hong Kong made 7.4 starts during the year -- also comparable with the US -- so earnings per start, a key measure of owners' financial health, was HK$82,600, or roughly US$10,500, and the average earnings per horse were HK$611,000, or US$ 78,300.

According to Bill Nader -- I wasn't able to verify these numbers independently, but I have no reason to doubt them -- the all-in cost of keeping a horse in training in Hong Kong is about US$45,000. Once again, that's comparable to training and vet costs at New York race tracks. Factoring in the jockeys' and trainers' commissions on purse money, that means that a horse based in Hong Kong probably needs to earn US$60,000 or so to break even. So, with actual purse money per horse averaging more than that, it appears that a majority of Hong Kong-based horses actually pay for themselves.

If only that were true in the US. According to the US Jockey Club's statistics, purse money for American horses comes to roughly 50% of the cost of maintaining our race horses in training, not counting the initial cost of breeding or purchasing the horses.

And owners aren't the only ones in the game who do well. For example, grooms, who are employed directly by the HKJC and assigned to trainers (no worries about the trainer missing a payroll or failing to pay his workers comp. premium) earn on the order of US$5,000 a month, plus a share of their horses' winnings, for caring for a maximum of three horses each. I know a fair number of US trainers who'd be happy with monthly earnings of that much, and few grooms in the US earn more than half that amount, usually for taking care of at least four horses. Not all grooms in Hong Kong may be driving Mercedes, but at least a few are.

And the Hong Kong government does very well from racing. Hong Kong is generally a low-tax jurisdiction; my daughter, who was paying something like 35% of her income in income and FICA taxes when she worked at CNN in Atlanta, now pays only 15%, the maximum personal tax rate in Hong Kong. But racing is the government's cash cow. Over 7% of total government revenue traces back to the HKJC, mostly in the form of very high taxes on betting handle; in addition, the HKJC pays a small tax in lieu of income tax on its annual surplus. The wagering taxes are so high, in fact, that the HKJC's annual report rails against the danger that the current rate of taxation might someday make Hong Kong gambling uncompetitive, compared to Macao and to unregulated internet gaming options.

In the long run, the demands of government may impinge on the financial success of Hong Kong racing. But that's true in the US as well, as financially strapped state governments look covetously at the slot-machine revenues that have been keeping so many race tracks afloat. In the short run, the Hong Kong Jockey Club's monopoly on legal gambling, combined with a public extremely fond of wagering -- according to Nader, 80% of adults in Hong Kong are HKJC customers, and roughly 20% are regulars -- presage a continuation of a racing business in which almost everyone, except, of course, the poor bettor, wins. So far this year, business at the track is up about 10% over last year, so the sun isn't showing any sign of setting soon.

Next: the Hong Kong race track experience.