Government must help club weather storm
With significant businesses and financial institutions around the world wobbling under the weight of the credit crisis, there is a palpable concern at Sports Road about the prospects of the Jockey Club's business this season.
In this climate, a fall is not only unreasonable but inevitable. Everyone, at any income level, will have concerns that make them more cautious with their disposable income and one area in particular is going to cost the club turnover money.
The club has assessed over the past few seasons that a growth area for betting has been with the owners. While they will typically be wealthy and successful business people who can well afford their flutter, they will also be the group among the club's customers who find themselves right in the eye of the storm as their businesses come under pressure from the most significant financial meltdown in generations.
So where is turnover currently? Well, at HK$8.836 billion after 11 meetings, it is down some HK$590 million year-on-year, or 6.25 per cent.
Mitigating that, due to the way the calendar fell, is the 2007-08 figure which included the Sha Tin Trophy meeting scheduled for this weekend and which was one of the club's billion-dollar days last term, so there should be some catch-up factor by this time next week.
On the brighter side, it is still up by HK$429 million at the same stage in the 2006-07 season. In terms of turnover per race, there had actually been one more race at this stage last season, so the drop is slightly ameliorated there too, with turnover running at HK$84.96 million per race against HK$89.76 million at this time last year.
The club will certainly have to dip into its funds to make up the government's HK$8 billion tax guarantee this season, and every couple of per cent that turnover drops over the full season is going to add hundreds of millions to that bill.
Now we enter the phase where the government can choose to sit on its hands and watch the gains melt away, or do what businesses generally do in tougher times and renegotiate the situation to the benefit of all.
While we have always believed the addition of extra meetings to the calendar is unnecessary and offers only a short-term fillip to turnover, many of the club's other requests - in particular those regarding extra simulcasting or the original desire to change its pool takeouts - were reasonable ways in which to grow its business, or in the current climate to soften the blow of adverse times.
The Jockey Club had to wear a second-choice remedy of rebates and, by any measure, has been proved to be right after turnover increases in the two seasons in which rebates have been applied. According to the club, the government is HK$800 million better off in the restructured regime than if the tax restructuring had never been undertaken, proof that the club's judgment of its own business has been accurate.
In a normal business climate, had the moves been proved wrong in the past couple of years, the Jockey Club would have had to meet its bill and would have had no grounds to complain.
But even the US government, long champion of letting business take its course, has had to bite the bullet and make moves to prop up the situation - even bailing out some of the contributors to the crisis - because a collapse of the financial system is clearly not helping anyone, rich or poor.
Considering the general benefits to the community brought by the Jockey Club, letting its bottom line suffer more than necessary in these extraordinary circumstances beyond its control also makes no sense.