Premier racing festival still pulling the punters despite recessionary hurdles
Fewer Irish are travelling to Cheltenham these days, but they remain hugely important to the festival
As the build-up to this year’s Cheltenham festival stepped up a gear last week, it emerged that Irish horses hold almost 600 of the record 2,075 entries for the annual national hunt racing showdown in the Cotswolds.
Of course, many of them will, even at this late stage, have two or three options, but the overall number of entries shows that the meeting, which kicks off next Tuesday, just seems to get bigger and bigger.
Ian Renton is looking forward to Tuesday, although as Jockey Club Racecourses regional director, who has responsibility for Cheltenham, along with Exeter, Warwick and Wincanton, he must be viewing it with some trepidation.
Renton began his near 30-year career in racecourse management at Cheltenham, but most recently ran the Reuben Brothers-owned Arena Leisure, which owns a number of tracks in the midlands and north of England.
His latest move gives him charge of not just its biggest festival, but one of the more commercially important events in British racing.
Jockey Club Racecourses is responsible for 14 courses in all, which it either owns or leases. As racing portfolios go, Renton agrees that it is world class. Along with Cheltenham, it has Aintree, Epsom and Newmarket, British flat racing’s headquarters.
It means the company hosts many of British racing’s marquee events – the Cheltenham and Grand National festivals in the jumping arena and on the flat, four of the five classics: the Derby and Oaks at Epsom and 2,000 and 1,000 Guineas at Newmarket.
In 2011, the last year for which accounts are available – it is a private company and is thus not subject to the same reporting requirements as a plc – it had sales of £129.5 million, slightly ahead of the £128.1 million it recorded the previous year. This translated into an operating profit of £4.1 million, a 25 per cent jump on 2010 and a pre-tax surplus of £700,000.
The group’s owner is the Jockey Club, which itself is ultimately a trust. Profits are ploughed back into the racecourses themselves. It also gets about 25 per cent of the income generated by a levy scheme on British bookmakers, which is administered by a public body, the Horserace Betting Levy Board (HBLB), and distributed to tracks.
The current scheme, which ends this month, is likely to yield £72.4 million. The board estimates that the next scheme, which begins in April and closes on March 31s next year, will generate £72.9 million.
The HBLB also provides funding for capital projects. Jockey Club Racecourses accounts for its entitlement under this scheme on its balance sheet.
The grant account at the end of 2011 stood at £162.4 million, leaving shareholders funds at £91.9 million. Without the HBLB funds, it would be in the red to tune of £70.5 million.
Cheltenham does much of the heavy lifting. Renton says it is a “very significant” part of the Jockey Club Racecourses business, although he won’t be drawn on just how significant. Industry sources estimate that the gate receipts run between £12 million and £15 million.
Outside this, it generates income from corporate entertainment, media rights and concessions. Either way, it is clear that the festival not only keeps Cheltenham on the road, but plays a big role in keeping Jockey Club Racecourses going as well.
The other place to which the festival is important is, obviously, Cheltenham itself. The otherwise quiet regency spa town becomes the centre of the universe for most racing fans for almost a week.
Renton says the economic payoff for the town is about £50 million, a fair proportion of which comes from the Irish racegoers, who need to be accommodated, fed and, if this the right word, watered.
Since the recession kicked in in 2008, opinion in the town has been divided about its impact on the numbers travelling every year. Some businesses have noticed no change, others believe there are fewer Irish.
Renton confirms, not surprisingly, that the latter view is correct. “The numbers are a bit lower than in the heady days of the Irish tiger,” he says, adding that they still travel in significant numbers and remain a hugely important part of the festival.
It has also lost a few Irish sponsors. At one point, four Irish companies – Anglo Irish Bank, Independent News Media, Smurfit Kappa and Ryanair – sponsored festival races, while Paddy Power and Boylesports branded meetings in November and December respectively.
Of those at the festival, only Ryanair is still standing – its races at Cheltenham and Punchestown are among the few events that the airline sponsors. The rest terminated their deals as the recession bit.
Paddy Power continues its backing of the November meeting. Boylesports ended its support of the headline races at the December meeting in 2010 after four years, but left the door open to more sponsorship in the future.
Two Irish-connected sponsors continue to support the festival, construction and engineering business Byrne Group, run by brothers Patsy and John Byrne, and the Racing Post, which is British based but mainly Irish-owned.
Sponsorship is a critical part of the mix. This year, runners in the 27 races will compete for £3.76 million in prize money. The races’ backers are responsible for £1.93 million of this.
Across its 16 racing days, Cheltenham generates £3 million in sponsorship. Added to this, by tying festival sponsors into deals where they also back recognised trials for championship events at the meeting itself, at other racecourses, it generates closer to £5 million in commercial backing for the sport as a whole.
Under this system, bookmaker Stan James, which sponsors next Tuesday’s champion hurdle, also supports the Fighting Fifth Hurdle at Newcastle, a race run in November and generally contested by horses whose main seasonal aim is the headline race in March.
The other racecourse beneficiaries do not necessarily have to be part of the Jockey Club Racecourses stable. The logic behind the approach is that it broadens the festival’s own base.
One of the other sources of prize money is the levy. The HBLB is a public body but operates at arm’s length from the British government. The actual levy, which is charged on bookmakers’ gross profits, is determined by generally tough negotiations between racing and the bookies.
In common with the Republic, Britain is wrestling with the issue of charging online operators with for bets placed in its jurisdiction. The Irish solution has been to legislate for a 1 per cent charge on each online bet placed here, irrespective of where the internet bookie is based.
As this necessarily involves crossing jurisdictional lines, the new law is awaiting EU approval. Renton says that British racing is watching the Irish situation carefully, but, he stresses, “we would prefer a commercially negotiated solution”.
At least part of the reason for that approach, he adds, is that the British government is wary of passing legislation that is likely to run afoul of EU law.
If the Irish approach were to get the green light, it would point the way forward for similar legislation in Britain. However, even if this were the case, he still feels that a negotiated solution would be the best.
However, he won’t deny that if the Irish law passes muster with Europe and is enacted here, it would at least strengthen British racing’s negotiating hand.
“But,” he emphasises, “we are getting reasonably close to agreement with the betting industry.”