Churchill Downs’ Derby City Gaming Struggles to Meet Revenue Projections

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In the heart of downtown Louisville, Churchill Downs’ new prized possession, the $90 million Derby City Gaming, stands as a monument to the allure of historical horse racing (HHR). Opened in December at a former US Bank location on the corner of 140 S. Fourth St., the state-of-the-art facility represented the company’s high hopes of revitalizing the city center and offered glimpses of a bright, bustling future. However, the early months of its operation have not quite matched the anticipated prelaunch revenue projections.

Reinventing a traditional structure into a casino-like venue, Derby City Gaming glimmers with the flicker of HHR machines – slot-inspired terminals teeming with the energy of previously run horse races. But while the venue glows, the groundswell of crowds that the company anticipated has not materialized as expected.

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The Kentucky Horse Racing Commission’s early reports expose the rather somber reality. The usually buzzing terminals that are Derby City’s lifeblood are managing to generate only around a quarter of the monthly gross gaming revenue compared to its sister site situated on Poplar Level Road, near the Louisville Airport.

Converting numbers into stories reveals that the 500 HHR positions at Derby City Downtown clinched an average monthly win of approximately $2,520 across the months of January, February, and March. A stark contrast emerges when held up against the Derby City near the airport, which gloated an impressive average of about $11,600 per HHR terminal in the same period.

Despite having nearly 500 HHR machines, the downtown Derby City Gaming feels dwarfed by the original Derby City’s over 1,300 gaming seats.

Since its Democrats debut as a key element of its economic revitalization strategy, Churchill’s executives have emphasized the contribution it would bring to the community. While the sluggish start is a slight hiccup, they clarify it was not entirely unforeseen. Their eyes are set on a more comprehensive picture, once a sufficient operating period unfolds to better gauge the property’s impact on Louisville comes to light.

Churchill Downs CEO Bill Carstanjen stated during the company’s April earnings call, “We weren’t expecting an immediate surge as a significant part of the business will be propelled by tourism and downtown traffic. Opening during December didn’t set us off on our best foot, but we are steadily ramping up.”

Carstanjen remains optimistic, explaining that a better understanding of what to expect from the Derby City Downtown operation will develop after assessing revenues from the spring and summer months.

In their essence, HHR machines mimic the simplistic charm of casino slots while offering a novel betting experience. They randomly select a previously run horse race, transform the race odds into a visual animation, leading gamblers to intuitively opt for the quick bet promising the best odds – a decision that in reality translates into a parimutuel wager on the race’s favorite horse. If the horse triumphed, the bet placed on the HHR machine wins too.

Following a brief legal struggle in 2020, legislation was passed, leading to the legalization of HHR machines by Governor Andy Beshear (D) in February 2021. With every spin of these machines, Kentucky gains 1.5% of the overall money wagered, thereby solidifying the potential of the HHR market as a significant contributor to the states economy.