Records tumble for HKJC but fight against illegal operators continues

The Hong Kong Jockey Club (HKJC) said that it expects to face a “technology war” with illegal and offshore gaming operators as it begins a five-year journey to develop a new wagering and information system for its customers.

HKJC posted a 14 per cent increase in turnover to $174.0m for the year ended June 30th following record highs across all three of its wagering businesses.

Despite this, HKJC said that its long-term performance and competitiveness continue to be impacted by intensifying competition from Macau’s gaming industry, illegal betting operators, an ageing population trend among local racing fans, the changing lifestyles of customers and an unfavourable betting duty regime for the company’s wagering businesses.

To address the negative impact, the company said that it implemented comprehensive strategies to enhance its products and services, refresh customer facilities and carry out continuous improvements to its business operations.

As a result of this, it reported a record high in racing turnover to $103.9bn, an increase of 10 per cent versus the previous year, including bets from overseas for the first time.

The operator benefited from targeting younger clientele through new digital offerings and the further development of the successful Happy Wednesday brand. This concept was was extended to Sha Tin Racecourse with the opening of Hay Market in January, equipped with the latest mobile technology and applications.

The operator said that the re-launch of Quartet in January and the offering of other exotic bet types also showed positive results during the year.

HKJC was able to offer commingled betting pools for the first time this year, a strategy that the company had first advocated in 2007 as the racing industry's response to the “globalisation” of sports betting, and in particular to combat the efforts of illegal bookmakers who were “taking advantage of the odds differences between different jurisdictions for arbitrage purposes.”

Hong Kong racing is now being broadcast into some 55m homes in the US through its deals with two racing operators and distributors, including Webis’ WatchandWager.com. It generated turnover of $137m during the period from the commingling, with Webis’ agreement extended by a further two years on Monday.

“Partnerships with Australia, New Zealand, Singapore, Macau and parts of Europe will get under way in the new season,” said HKJC CEO Winfried Engelbrecht-Bresges. “This will give hundreds of thousands of racing fans across the globe the opportunity to bet into Hong Kong pools, which have the world's highest liquidity and highest average turnover per race at over $132m.

“Commingling will help further in positioning us as a global leader and preventing sizeable pools on Hong Kong racing from developing elsewhere in the world, which could result in a loss of public revenues.”

Engelbrecht-Bresges also emphasised the importance of technology in presenting racing in a more “creative and dynamic way” to connecting better with customers, citing last season's introduction of the popular Racing Touch App.

Football betting achieved another record high turnover of $62.2bn, an increase of 23 per cent year-on-year, boosted by strong customer interest in the World Cup in the final month of the year.

The business also benefited from more matches offered with Asian Handicap, an increase in the number of live matches broadcast on TV and HKJC’s live streaming platform, as well as growth in its customer base as a result of customer relationship management programmes.

“As in racing, we see technology as an essential element in connecting better with our football customers and offering them a unique service experience,” continued Engelbrecht-Bresges. “Going forward, we expect to face a technology war with illegal and offshore operators. For this reason, we have now started the development of a next-generation wagering and information system, which will be a five-year journey.

“To realise its full benefits, however, we need support from our regulators in ensuring that the Club can stay competitive. Imposing further restrictions on us will only benefit the illegal operators, as it will not stop those who wish to bet from doing so.”

HKJC estimates that up to $12bn is lost every year by Hong Kong residents to illegal operators, in addition to $31bn a year lost to legal casino operations in Macau.

Turnover from the Mark Six lottery game rose 4 per cent to a record $7.9bn. Engelbrecht-Bresges said that while growth has remained largely flat in recent years, it remains a favourite form of thrice-weekly entertainment for the population at large, and also plays an important role in supporting social welfare projects citywide through the Lotteries Fund.

As a result of the successful year, HKJC donated a record $3.6bn to charitable and community projects in Hong Kong, an increase of nearly 85 per cent versus the previous year. The strong performance also saw the operator pay $19.6bn in betting duties and tax – equivalent to 8 per cent of all taxes collected by the Inland Revenue Department during the year.

Adding together betting and lottery duties, profits tax, contributions to the Lotteries Fund and charitable donations, HKJC’s total direct return to the community reached $24.4bn, an increase of 18 per cent on the 2012/13 figure.

“Looking ahead, I am cautiously optimistic of seeing continued positive growth in our racing and betting operations, but competition in the leisure and entertainment business is growing all the time,” said Engelbrecht-Bresges. “In the light of our significant investments and resulting increase in our cost base, we have to maintain steady growth to sustain and be able to increase our contributions to the community.”