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Gambling and horse racing industries hope for a boost from increased off-track betting

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Christopher McErlean, vice president of racing, Penn National Gaming, inside Favorites in Gloucester Township.
Christopher McErlean, vice president of racing, Penn National Gaming, inside Favorites in Gloucester Township. - ()

New Jersey's racetrack operators have spent years pushing for legalized sports betting and the expansion of casino gaming beyond Atlantic City.

The future of those efforts remains to be seen. But another means of bolstering their slumping industry — off-track betting — is slowly making new strides.

Next month, Penn National Gaming will open the state's fifth off-track wagering parlor, in Gloucester Township, hoping to tap into a market of bettors that may have been traveling to Philadelphia since the closure of Garden State Park in Cherry Hill in 2001.

“There's still a good core audience around here,” said Christopher McErlean, the vice president of racing for the Wyomissing, Pa.-based gaming firm. “I think people are — pardon the pun — chomping at the bit to get going.”

Known as Favorites, the Gloucester Township facility follows an OTW business that opened in Bayonne in 2012, and precedes one slated to open in Hillsborough later this year. It will have seating for 400, nearly 150 televisions, self-service betting terminals and live tellers, with elements of a sports bar mixed in to help draw a wider clientele.

And like the other four OTW parlors that have opened in the state since 2007, stakeholders hope it can help bolster a racing industry that has seen better days. Attendance and betting at Jersey racetracks has been declining for decades, driven by increased competition from out-of-state venues that can offer slot parlors.

Those conditions have slowed the state's longtime plans to build a vast network of OTW businesses, which would supplement purses and revenue for track operators.

But McErlean's new location could serve as a model for future sites, at least for Penn National Gaming, as economics become increasingly important. The 15,000-square-foot facility was created by retrofitting an existing restaurant, which he said saved millions of dollars from the cost of new construction.

“(T)he business of racing has changed and is changing,” said McErlean, whose firm is part of the joint venture that operates Freehold Raceway. “That was one reason we kind of went for this model as opposed to a large capital investment, a standalone ground-up facility. We wanted to go into more of a turn-key location and have a lower cost of investment to justify the returns.”

The trick now is to get people in the door, which McErlean doesn't see as a problem with the pent-up demand of dedicated bettors around the area, many of whom have been paying tolls to place bets in Philadelphia. In South Jersey, the closest off-track betting option is 40 minutes away in Vineland, and only one Atlantic City casino still offers simulcasts.

But OTWs must also contend with the rise in convenience gambling — bettors in New Jersey have been able to place online wagers for years — and the prospect that a limited pool of betting dollars is simply being redirected as new options appear.

The state's only three OTW parlors from 2009 to 2011 took in between $143 million and $147 million in total wagers during those years, according to data from the state Racing Commission. That sum jumped to $170 million in 2013 — the first full year of operation for Bayonne, the state's fourth OTW — but it was clear the facility was pulling some business from the Woodbridge location less than 20 miles away.

The Gloucester Township facility will be the latest in a network of 15 such parlors that lawmakers envisioned more than a decade ago, with OTW licenses divided among the operators of Meadowlands Racetrack, Monmouth Park, Freehold Raceway and Atlantic City Race Course.

The plan has been called into question as being unrealistic or not reflective of the economic hardships facing the industry. But track operators have moved to build them nonetheless, in part because of pressure from state regulators.

The state's next OTW facility could open in Hillsborough by the fall, said Dennis Drazin, whose firm Darby Development operates Monmouth Park and owns four of the OTW licenses. Construction at the facility is nearly complete, but the application is pending a public hearing and a review by the state Racing Commission, which may require the firm to restructure its tax agreement with the township.

The new 10,000-square-foot facility will occupy a renovated restaurant, much like the Gloucester Township site, and Darby is also looking at refining its model. The company's existing parlor in Woodbridge is three times the size, but Drazin said that type of space is only needed a few days a year, such as the Breeders Cup and Triple Crown races.

“The rest of the days, 10,000 (square feet) is probably adequate,” he said. “The best problem you could have is you're too busy and have to put on an addition.”

There are also concerns that building new parlors can cannibalize betting in a market with little growth. But track and OTW operators hope to grow the market by giving people a new reason to visit the facilities.

That includes short-term answers such as exchange wagering, in which customers can set their own odds on horses and take wagers from other bettors through an online platform. The practice was legalized in New Jersey in 2011 and is now pending a review of regulations by the Racing Commission.

That also means longer-term prospects such as legalized sports betting, for which New Jersey is now seeking support from the U.S. Supreme Court, and the possibility of slots at racetracks if state officials consider expanding casino gaming beyond Atlantic City in 2016.

“All those things would be a big shot in the arm,” Drazin said. “We need to be able to compete with other states that have everything around us.”

Meantime, the parent company of Freehold Raceway has two remaining OTW licenses in South Jersey, but McErlean is eager to see how the business fares in Gloucester Township.

“This will be a very interesting test to see what kind of volume we can do here,” he said.

E-mail to: joshb@njbiz.com
On Twitter: @joshburdnj

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