Kentucky Derby’s Host on an Expansion Track : Churchill Downs Looks to Diversify

Churchill Downs Inc., the highly profitable race track whose fame stems from the Kentucky Derby, plans to diversify its business beyond the Bluegrass region and perhaps beyond horse racing.

The track, which Saturday hosts the 115th running of America’s most prized thoroughbred race, is studying projects that could put it in the fledgling horse racing industry in Texas, a Churchill executive told Reuters in an interview.

Other possible ventures, he said, include stadium and arena management or perhaps even hotels or convention centers.

Churchill secretary-treasurer Jeffrey Smith said a new subsidiary--Churchill Downs Management Co.--had just been formed to give the Kentucky track the flexibility to expand beyond its current business.

“Soon after the Derby, we should reach a decision on a possible project in Houston,” he said.

Churchill, he said, has been approached by various unidentified investor groups about taking part in race track projects in several states, including Virginia, Missouri and a failed track in Birmingham, Ala., and in Costa Rica. But, he said, a Houston track project was the furthest along.

“We also want to get involved in management of stadiums (and) arenas. It could be any kind of facility management--not just limited to sports. You’re going to see us actively pursuing that,” Smith said.

Such diversification plans come only five years after the venerable track installed new top management aimed at countering an industry-wide downturn in horse racing that had seriously eroded Churchill Downs’ income and made the track a takeover target.

Aided by state tax relief, new corporate sponsorships and an aggressive array of modern marketing techniques, Churchill Downs boosted revenues from both the Derby and its regular racing cards.

Though traditionalists have complained that the new approach is too commercial, the financial results have been impressive.

From a slight operating loss in its 1984 season that was tied to the old management’s plunge into summer racing, the track rebounded to achieve record profits of $4.4 million or $11.67 a share in its most-recently completed fiscal year. Over the same five years, revenues grew to $41.5 million from $25.5 million.

Churchill, which invested $25 million to update its aging facilities, has enjoyed such a healthy increase in attendance and betting that it has become a leading role model in the U.S. racing industry for reviving a troubled operation.

But Smith said track managers believe the phenomenal growth of Churchill’s basic Kentucky-based racing business cannot continue at the same pace.