Leading up to the start of 2022, we have been taking a close look at various industries to gauge the potential for promising commercial real estate investments. Thus far, we have examined other outdoor entertainment venues that have drawn greater attention during the pandemic: Marinas and Golf Clubs. Each has stood out as promising investment opportunities. In this blog, we move onto the Horse Racing industry to determine if it holds similar potential as a worthwhile investment.

There has not been much promising news to report in the Horse Racing industry over the last few years. The one silver lining is that industry services also include on-track, offtrack, and simulcast betting. This came in handy during the 2020 shutdown when horseracing was among the only active live sports broadcast on television. Industry players were able to ride the wave of online track betting to stay afloat. Moving forward, both in-person and online betting will remain major sources of income for the industry. However, this “benefit” is actually a double-edged sword for investors. That’s because these betting services are also offered by companies that are not even in the horse racing industry, which can siphon demand away from first-party services.  Unfortunately, this is only one of many reasons why it may be best to hold off from investing in this industry in 2022.

The Latest Trends in the Horse Racing Industry

In the past five years, there have been two major factors that have led to suboptimal performance in this industry:

  • Horse racing fans are aging, and the sport has not been attracting new younger fans at a promising rate;
  • The number of active horse racing tracks has diminished, along with industry employment; and
  • Many venues are located in seasonal climates (unlike, say, Florida) where the betting action eventually moves indoors, which may be less appealing during another wave of the pandemic.

At this point, betting and gambling are the crutches that have been keeping these establishments upright. So much so, that many tracks have pivoted and turned into “racinos” (racetrack casinos) in an effort to attract patrons.  

Outlook for Horse Racing

It’s no secret that the last few years have not been the greatest for the Horse Racing industry, but there is evidence that things could turn around. Industry revenue is expected to grow 3.4% per year over the next four years. If this growth takes place, it will be because of the recovery from the pandemic and the increased convenience of gambling. Even still, the largest industry players are expected to consolidate through 2025, leading to a forecast decrease in the number of industry enterprises of 1.4% per year. Depending on location, these venues may have upside as changes highest and best use lead developers to pursue them for new development in tight land markets, as has happened in Boston and Chicago.

Our final word of advice? Think very carefully and strategically before entering this industry.

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