A $300 million plan to bring a hotel and historical race wagering machines to Churchill Downs Racetrack is the most ambitious project in the iconic venue's history, Churchill Downs Inc. CEO Bill Carstanjen said Thursday.
Carstanjen spoke about the project during an investor call, following the release of the company's third quarter earnings Wednesday (more on those below.) With that significant expansion, Churchill's total capital investment plans in Kentucky and Ohio are now more than $700 million.
The company announced Wednesday evening its plan to add a 156-room, seven-story hotel that will include 92 trackside suites with private balconies and four spacious presidential suites. Another 60 non-trackside suites round out the project, and Carstanjen said each suite user will have access to numerous passes during the Kentucky Derby so the suites can double as both entertainment and sleep space.
The project also calls for multiple hospitality and meeting spaces, including a second-floor party deck to watch racing, a penthouse banquet room and a 27,000-square-foot ballroom.
The original plan was to have the facilities open by May 2021, but Carstanjen said more time is needed. The project is now targeting a late 2021 opening.
“This is a very important project for Churchill Downs,” Carstanjen said. “It provides a foundation for … long term growth for the Kentucky Derby.”
And he said the hotel and gaming facility will be easily expandable should that growth call for additional rooms and machines. Historical race wagering machines are very similar to slot machines and populate Churchill Downs' Derby City Gaming facility on Poplar Level Road.
In an interview, Churchill Downs Racetrack President Kevin Flanery said the hotel had been on the track’s radar for decades, as guests have often asked for an on-site hotel to provide more access and more convenience to the Kentucky.
Flanery said the hotel will stand out from others in the city because it will be fully embedded in the racetrack’s rich past.
“We have 145 years of history and tradition," he said. “Every building we build, every room we renovate, we make sure we are telling the story of horse racing and the Kentucky Derby.”
Churchill Downs has continued to invest new capital into the racetrack each year, even as some other notable competitors have struggled to keep their facilities modern.
“It’s absolutely critical to invest in our facility, our events and our people,” Flanery said.
“We’re blessed with that 145 years of history, but we have to reflect what the modern world wants. ... That’s been my motto during my tenure: Listen to our guests and give them what they want.”
The hotel and gaming venue was one of several announcements that was handed down on Wednesday. The company also is investing $11 million into a renovation of the sixth floor Millionaires Row. The update will offer upscale guest offerings and elevated service for up to 350 guests. The renovated space will feature private dining rooms, lounge seating, window dining and a speakeasy bourbon room.
“The timing could not be better as all of The Mansion tickets for next year are already sold out,” Carstanjen said of the Millionaires Row expansion.
That project and a previously announced $8 million equine medical center and quarantine barns are supposed to be ready by the 2020 Kentucky Derby, Carstanjen said.
Other major projects
In other parts of Kentucky and the Greater Cincinnati area, CDI also has committed to invest upward of $400 million in renovations to Turfway Park in northern Kentucky, an expansion of Miami Valley Gaming & Racing and creation of Oak Grove Racing & Gaming in southwestern Kentucky in a partnership with Keeneland Racecourse.
The $100 million Miami Valley expansion, a Greater Cincinnati area racino, was also announced on Wednesday and would add up to 250 gaming machines and more than 10,000 square feet of gaming floor space alongside 194 hotel rooms and 1,000 parking spaces.
CDI also recently closed on the $46 million acquisition of Turfway park. It intends to invest $100 million, not including the purchase price, to reopen the facility as Turfway Park Racing & Gaming, with a racetrack hosting live thoroughbred racing and a historical racing gaming facility. A 2,500-seat grandstand, new ballroom area and several bars also are planned.
And Oak Grove Racing & Gaming has been estimated at $200 million with a new standardbred horse racing track, gaming facility and hotel in Oak Grove, Ky. Oak Grove Racing & Gaming's historical race wagering venue will house as many as 1,500 machines.
Third quarter earnings
CDI's adjusted earnings per share for the third quarter rose slightly to $0.55 from $0.53 a year earlier. The company's quarterly revenue increased 38 percent to $306.3 million. Net income was down 73.7 percent to $14.8 million.
CDI indicated that the net income figure varied so dramatically over the previous year because it received a $42.3 million after-tax non-cash gain in the third quarter of 2018 on the acquisition of the remaining 50 percent equity interest in Ocean Downs Casino & Racetrack, which came in exchange for a 25 percent equity interest in Saratoga New York and Saratoga Colorado properties. CDI also sustained some additional after-tax expenses this quarter.
The company's Churchill Downs segment, which includes Churchill Downs Racetrack and Derby City Gaming, reported adjusted earnings of $5.2 million compared to a loss of $2.8 million a year earlier. Revenue for the segment rose to $32.7 million from $11.8 million.
Adjusted earnings for the company's gaming segment rose to $71.7 million from $44.7 million while revenue rose to $178.6 million from $110.5 million.