Auckland clubs concept gains national applause

by Brian de Lore
Published November 27th, 2020

Racing in New Zealand has an opportunity to enter a new era of prosperity that would benefit every racing person in the country if Auckland’s three clubs embraced the latest plan of merging all three to form a ‘super club.’

But uncertainty remains about Avondale joining both Counties and Auckland to participate in a triumvirate of club strength after last night’s fiery AGM at Avondale, which saw the club stay uncommitted about opting to pool Avondale’s assets with the other two clubs and make it a threesome.

Avondale keeps its options open at this stage and prefers to give it more thought before making a firm decision either way. But what is there to decide – the alternative is death by 1000 cuts.  

Given the extent of the legislation, which became law in July, the Government could force Avondale to give up the racecourse under Clause 27 of the ACT -Transfer of surplus venues by Order in Council – which in part says:

Regardless of the Avondale decision, the other two clubs will proceed with the plan. In a joint letter to members of the ARC and Counties Racing Club on November 9^th, from ARC Chair Doug Alderslade and Counties Chair Mark Chitty respectively, they outlined a merger between the two clubs that would deliver the following:

Doubling of average stake levels per race from $50,000 to $100,000

• Doubling of average stake levels per race from $50,000 to $100,000.
• At least 40 race days per year on an international standard track at Ellerslie                        (achieved via the installation of a new Strath Ayr surface).
• Ten races worth $500k per year and three races worth $1m per year.
• A racing scene that attracts owners, trainers, jockeys and punters.
• A financially viable regional racing club.

Counties and Auckland agreed to the concept at board level and then sent the letter to club members. Soon after, the Avondale Jockey Club in ‘Committee Recommendations’ in their annual report made four recommendations to their members, which could have seen Avondale join the other two clubs and become the third partner in potentially the most progressive advancement seen in NZ thoroughbred racing in 100 years.

The Counties-Auckland letter to members didn’t give too much detail and how these objectives would be achieved, but it came with a Deloitte summation which stated:

“The analysis that we have undertaken suggests that an amalgamation of ARC and CRC would create a club with the financial strength and facilities to meet the objectives that the Clubs are looking to achieve. The Clubs would be in a position to materially lift stake money and other returns to the industry as a consequence of their ability to release capital and build a significant investment portfolio – the returns on which would supplement distributions from NZTR. Further, there is additional value that would be available to ATC that has not been modelled for the purpose of our analysis. This includes the opportunity offered by the StrathAyr track to significantly increase the number of race days, the ability to attract additional advertising and sponsorship revenues and very significant additional option value in land that could be realised over a longer time period.

…essential if the industry is to survive and flourish.

“A plan based around consolidating club ownership and realising surplus assets to fund the capital expenditure necessary to bring the premium venue up to international standard and build the financial assets that can improve returns aligns with the recommendations of the Messara report and strategies that have been successful in other jurisdictions – and in Australia in particular. A successful execution of the amalgamation option would position Auckland to lead the way for the restructure of the New Zealand Thoroughbred Industry that is essential if the industry is to survive and flourish.”

The fact that Deloitte has given the thumbs-up should not be lost on anyone in racing. It was Deloitte that in mid-2017, compiled a report for NZTR that comprehensively outlined a plan to save the industry $54 million per year – total result, $162 million better off by 2020 without taking into account all the money subsequently squandered on the Fixed Odds Betting Platform (FOB) – $50 million that went down the drain in building it plus whatever they have wasted on updates.

They (NZRB) dismissed the Report without due consideration

The 2017 Deloitte Report was full of common sense and authority, and you needn’t be an Einstein to conclude the then NZRB board was culpably incompetent. They dismissed the Report without due consideration and proceeded to bathe themselves in an inglorious display of ineptitude by spending recklessly on an ill-conceived betting platform ultimately destined for the dust-bin.

Corporate suicide brought on by industry ignorance. Just because you have the academia to become a lawyer or an entrepreneurial accountant doesn’t qualify anyone from advancing beyond the level of ‘useless in business,’ which has been endemic in racing over many years – how often have we been retarded as an industry since all the academics with zero racing knowledge arrived en-masse to run it!

Club committees require a mix of skills. Counties and Auckland have recognised the issues and come together in an attempt to reset the ship’s course to avoid a giant wave that will eventually swamp them. It’s summed up in one line in the letter to members from the respective Presidents Doug Alderslade and Mark Chitty: “The status quo is simply not sustainable.”

…$16+ million annually to fund the doubling of stakes

The letter outlines the goals but understandably gives scant detail on how they can double prizemoney on 40 race dates on a StrathAyr at Ellerslie without using up the principle raised jointly by the clubs. They are not saying too much until the club members give their approval to proceed, but we know that they must be contemplating a ‘super business plan’ for an investment that will return in the order of $16+ million annually to fund the doubling of stakes – that’s my estimation of the cost, but I stand to be corrected.

The two clubs in the 2019/20 season collectively held 26 meetings and ran 227 races at an average of 8.7 races per meeting and an average stake per race of $49,994 – that includes the Karaka Millions races.

They paid out $11,348.675 in stakes, which is less money in stakes than one race we are all familiar with at Randwick known as The Everest and not much more than total prize money for the Melbourne Cup – that’s another example of how far we have fallen behind in stakes money.

Increasing the number of meetings to 40 based on our current prizemoney levels is how I arrived at $16+ million. How big can the pile of money be by selling up Counties and surplus land assets of Auckland, and adding what cash they have on hand to get this done? Certainly not by putting the money in the bank and earning interest at two percent or less.

“The Messara Review was the body of work that set the wheels of change in motion.” – ARC CEO Paul Wilcox

I decided to try and glean more information from ARC CEO Paul Wilcox. He said: “The Messara Review was the body of work that set the wheels of change in motion.

“Our letter sets out what we can do in the merger between the ARC and Counties. After that, it will be a matter of Avondale coming in as a joint partner. The increase that we are talking about from $50,000 to $100,000 – that will start to happen as soon as we get the green light from our members.

“This project is about maximising the return on our investments to maintain the stakes at a $100,000 average. We have surplus land here, and counties have their assets, and it’s about combining those assets for an investment from which we use the proceeds.

“We are not privy to the details at Counties, but we know what we have here which is surplus to racing requirements, and particularly PC168 where we did a 125-year lease and got that money upfront which has formed the ARC investment fund as it stands now.

“…the plan to put the Strath Ayr track in is not reliant upon anyone but ourselves and Counties”- Paul Wilcox

“What’s our plan? It goes back to your statement before that we stand on our own two feet in this arrangement – the plan to put the Strath Ayr track in is not reliant upon anyone but ourselves and Counties. If there was some assistance along the way, it wouldn’t be turned down, put it that way.  

“Once we have that buy-in from our member base and we can go, then I will be not as evasive. I can’t say too much at present because we don’t want to upset any of the members with information before they have the chance to consider everything.”

In conclusion, Paul said: “The plan is to race at Counties and Avondale until the StrathAyr surface is in, which will take between 18 months and two years to build – the Ellerslie dates would spread out between those two courses. When you get a consistent surface to race on with quality horses, the punters will be eager to bet on them.”

In past times, the ARC has talked of selling ‘the Hill’ and although Paul Wilcox wouldn’t be drawn into the detail, it would be surprising if ‘the Hill’ wasn’t part of the surplus land plan, and jumping races became an Ellerslie thing of the past. Relocation of the Great Northern Steeples and Hurdles to a country course in the Waikato could be on the cards.

As well, the Strath Ayr surface is not conducive to jumping events, so it seems inevitable that hurdles and steeple events have a limited lifespan at Ellerslie.

Change is a dirty word in racing

The reluctance of the Avondale Club to make a decision is typical of what we see in racing everywhere in New Zealand. Change is a dirty word – most want things to remain the same in perpetuity in some faint hope the good old days might miraculously return – well, they’re not going to!

Club amalgamations and fewer venues is the biggest certainty for the future of racing. Another certainty is partnering the TAB, and these two certainties can be embraced and planned to achieve a better result, or they will be thrust upon us through our paralysis for engaging change or our inability to foresee racing’s horizon.

Racing is now looking for dynamic leadership and recent changes in the legislation, new personnel on the boards, a new entity called Racing NZ, COVID19 since March, a new Government and new Racing Minister, and a TAB in virtual administration – the Statutory Crown Entities Monitoring Department overseeing the TAB – have all contributed to a tumultuous 2020.

At budget time, Winston Peters threw $72.5 million at racing for synthetic tracks and prevented the TAB from going into receivership, which inevitably meant the Government effectively became the TAB owners and would assume control without making it official or public. Very little information has come out of the RITA/TAB website in the past six months.

The problem is the TAB still owes the ASB $45 million

The problem is the TAB still owes the ASB $45 million, which nobody talks about. My information is Government has told the TAB that money for increasing stakes won’t be available until the debt is significantly reduced, but we know stakes money is still the only thing that will drive this business forward into a better future

How do we get rid of the $45 million debt? Auckland’s Strath Ayr and 40 dates a year could be the start of it. We know that well-presented racing with good horses on a consistent surface is what drives betting. We know that Ellerslie is the showpiece of New Zealand racing, and on a StrathAyr, New Zealand racing can be marketed to the rest of the world.

We also know that six percent of racing presented to the betting public in Australia comes out of New Zealand. Yet betting on New Zealand racing is only two percent of their turnover. We don’t market our racing to Australia, and why would we when one week we are at Te Rapa, the next at Rotorua, the one after at Otaki – all different racing surfaces from dry to mud producing inconsistent results.

We want consistency and tiered racing to get the betting up. The Ellerslie StrathAyr at a $100,000 average stake catering for better horses would improve our product out of sight and provide a platform on which to market New Zealand racing to the overseas betting public in our unique timeslot. Only then can you get that two percent up to six percent, and suddenly ‘racefields’ is earning $20 million instead of only $5 million.

The new administrative set-up in a visual is shown below. It depicts who’s responsible for what with the shift in the power-base identified in accordance with the new legislation. The number of people involved has obviously increased, and therefore the cost of keeping those extras will have risen.