JP Morgan commentator Daniel Politzer got the red-carpet treatment at Churchill Downs, in Louisville. He came away impressed. Churchill Downs is expanding on several fronts. Its Illinois purchase of a majority stake in Rivers Casino will cost CHDN 
a pretty penny: 11.25X cash flow (the industry average is 7-8X), which implies an impressive $129 annual cash flow for the casino, Illinois’ most successful. Closer to home, Churchill Downs has the option of adding 1,100 historical-racing machines, in addition to the 900 it has at Derby City. Customers aren’t entirely sold on HRMs as an alternative to slot machines. Derby City does $138/win/VLT/day compared to a gangbusters $328/win/slot/day at Horseshoe Southern Indiana. Wrote Politzer, “We believe aggressively the property is being marketed fairly aggressively though is seeing incremental traffic from its ‘You Play, We Pay’ promotion (it was quite busy when we were there). Management noted it has been a challenge to market the property as it needs to educate its customer base, which has proximate access to full casinos with table games in Southern Indiana and are unfamiliar with HRMs.”
Lastly, but not leastly, CHDN’s racetrack in Calder, Florida, received a jai alai license, paving the way for slot machines. As for sports betting, “Management expects sports wagering legislation will occur more rapidly than the wide-spread rollout of brick and mortar casinos, which spanned years, and sees the technology and customer base evolving over time.” Although it makes few, highly targeted acquisitions, Churchill Downs is emerging as one of the major players in the casino business.
* Sega Sammy gets a chance to show the Japanese government what it can do with a casino megaresort when it opens $1.4 billion phase two of Paradise City in South Korea early next year. Although Las Vegas Sands has succeeded in dominating the Nipponese-casino discussion, Sega Sammy figures to be a major player when requests for proposals are elicited. As for Paradise City, its attractions include an indoor theme park, presumably the sort of amenity that a megaresort in Japan would be commended for having.
