Innovations In The Gambling Industry Save Oaklawn And Southland

Editor’s note:  This article, written by Steve Shuler, first appeared in the latest magazine edition of Talk Business Arkansas. You can access the complete magazine online at this link.

May, 1999:  Oaklawn had a major problem.

The season had just wrapped up, and once again, numbers were bleak. What’s more, the crown jewel of Oaklawn, the Arkansas Derby, had been tainted. Valhol, ridden by Billy Patin, finished first by four-and-a-half lengths, but was disqualified days later after racing officials determined Patin used an electric device during the race. It was stunning to the racing world, and it was the last thing Oaklawn needed.

“We were on the ropes in the 1990s, and as we reflect back on that period, I think it’s a miracle that Oaklawn survived,” says Eric Jackson, Oaklawn’s general manager. “I still have nightmares about those years, because we didn’t see any light at the end of the tunnel.”

“During the 1990s we had lost approximately half our business,” says Jackson.

Oaklawn’s resurrection didn’t begin with increased marketing or sweeping infrastructure changes. It was a small machine that began to change Oaklawn’s fortunes. It was a device that looked like a slot machine called Instant Racing.

“Instant Racing is a product we developed primarily out of desperation,” says Jackson. “We had to have an electronic product; we were not going to stay in business if we did not have an electronic product. We are a remote race track. We are not surrounded by horse country, and we’re not on any racing circuit, so it was even more imperative.”

Instant Racing essentially allows players to place wagers based on historical race data, then watch video clips of those races to see the outcomes. It is a pari-mutuel system, where wagers from all machines are pooled to create the jackpot that any player can win betting on any race. It was a massive success.

Race tracks around the country are adding Instant Racing machines. Oaklawn now has more than 400 of the devices, and brings in tens of millions of dollars each year solely from the machines. That money has directly translated into bigger draws at the race track.

“We’re putting nearly $10 million more into our purse structure than we would be able to if we did not have instant racing and electronic games of skill,” says Jackson. “But because we can do that, we’re attracting some awfully nice horses. This is the biggest purse distribution Oaklawn has ever had, and we’re getting horses that would not be racing here otherwise, simply because of the purses. That was the whole game plan to begin with, was to try to develop a revenue stream that would benefit racing, and that’s what it’s done.”

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May, 2011:  It was the first day of the month, and already parts of Arkansas had seen more rain than they had during the entirety of April. More than eight inches fell in 24 hours across the state. The White River would soon crest at an astounding 39.4 feet, more than double its usual height. All that water raced toward the Mississippi River, putting cities and communities downstream at risk.

Tunica County, Mississippi was right in the flood’s path. Within days, floodwaters forced the shutdown of all 10 casinos for the first time in history. More than 9,600 employees were idled while the casinos waited for the waters to recede. And while the casinos were only closed for 3-4 weeks, they lost an estimated $87 million in revenue.

A good portion of that money traveled back up Highway 61, through Tennessee and into West Memphis and the closest gaming center to the now-shuttered Tunica: Southland Greyhound Park in West Memphis.

“When the Tunica flood happened, we made a concerted effort with advertising to capture the people that came and gave us a try,” says Troy Keeping, president and general manager at Southland Greyhound Park. “There were about 13,000-14,000 devices in the Tunica market, and when the flood happened, we were at 600-700.”

Southland quickly realized that thousands of gamers were looking for an alternative while Tunica was flooded, and started expanding.

“We quickly added 100 games and staffed up, we ran 24/7,” says Keeping.  “We had our part-timers working full time, and so when the Tunica customers came in, they got a great experience of Southland.”

The flooding predictably led to a huge spike in revenues at Southland. But Keeping and his team were able to keep the momentum going from that temporary bump.

“We were able to capture and hold on to those customers, and have continued to do so,” says Keeping.

Keeping directly attributes that continued retention to Southland’s recent success. The increased business led to an $11 million expansion that opened in January of 2012. Southland gutted the west wing of its building and put in room for an additional 200 electronic games of skill (or EGS). It also added a feature lounge and bar, and added a new player rewards booth to keep up with the demand.

Finally, Southland expanded its buffet kitchen and beverage capacity, and built a new event center.

“After the opening of that (the expansion) in August, we’re continuing to see year-over-year increases,” says Keeping.

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Both Southland and Oaklawn have taken advantage of EGS to greatly increase their business efforts.

In 2012, the two combined in reporting more than $2.7 billion in wagers on EGS. In 2011, that number was under $2 billion. Money from games like video poker, Instant Racing and table games has gone to draw bigger racing names to Oaklawn.

Jackson says, “Hopefully we’ll continue to grow, because that’s where the purse increases are coming from. And if we want the best horses to continue to ship to Arkansas from California and New York and Florida, you’ve got to feed the purse monster, you just have to increase those purses every year.”

“It was just announced that the Arkansas Derby will be on national TV in April,” says Jackson. “Last year it was on national TV, and it was the only non-Triple Crown or Breeder’s Cup race to be on national TV, so that’s a reflection on the entire program, and a great way for Arkansas and Hot Springs to put their best foot forward.”

At Southland, the increased business in EGS play is leading to future expansions, though Keeping is staying tight-lipped on exactly what those expansions will be.

“We’re evaluating what the next phase looks like,” he said. “A lot of the guests that come through the door are asking for more restaurants and hotels, so we’re looking at that as a potential addition down the road.”

“What we’re doing right now is assessing,” says Keeping.  “We just opened this expansion in August, so we’re going to watch how we do this first and second quarter, see if we still have capacity issues, and we are starting to experience some, to see if the numbers make sense to continue to add devices, food and beverage outlets, and a hotel.”

While the flood certainly helped Southland’s business, Keeping says growth at Southland was already going in the right direction.

“If you graphed the numbers and took out what happened in April, May and early June (during the flood) and draw a straight line in terms of our growth, it was on that same plane of growth pattern, regardless of whether the flood happened or not,” says Keeping.

“I think what it did, though, was sustain what was going, because it forced a lot of people to take a look at the property who had not looked at it in a long time. We were already adding games and taking off old games to increase our business pre-flood, and then we continued to add game count and capacity as our needs warranted,” he added.

In talking with both Keeping and Jackson, you get the sense they both grasp one simple concept: you can’t rest on your laurels.

“The first time you stop and start patting yourself on the back, you start going backwards. So we have to keep it going,” says Jackson. “When you’ve been to the edge of the cliff and you’ve looked into the abyss as we did back in the 1990s, I think you enjoy the good times even more, and right now these are pretty good times for racing. The breeding industry is good, the racing industry is good. There’s lots of employment, lots of tax revenues, and lots of visitors coming into Arkansas and Hot Springs. It’s all good. And our biggest concern is that we’re going to wake up and realize that this was kind of a dream.”