CDI Still Confident in Kentucky Derby Week

With an industry already concerned about the future of racing at Gulfstream Park and hopeful that some positive gains at Santa Anita Park can provide a path forward in Southern California, a decision by Churchill Downs Inc. to pause plans on a major investment in its namesake racetrack raised a few eyebrows when announced April 23. In this decision, though, the overall economy was the driving force as opposed to any lack of confidence in Kentucky Derby week. CDI executives noted the change in plans was tied to changes in the stability of the economy overall following volatility tied to tariffs. Among companies, CDI has plenty of company in pausing major projects over concerns about a volatile economy. CNBC reported April 27 that Microsoft is pulling the plug on data centers in Ohio and Amazon's AWS is pausing some leases in a story headlined: "AI data center boom isn't going bust but the 'pause' is trending at big tech companies." Earlier this month, Barron's posted a story headlined: "'Wait and See' Is the New Business Plan. Tariff Uncertainty Could Put Economy on Pause." As CDI has enjoyed a high batting average with seating upgrades that have brought its namesake track into the 21st century in terms of fan expectations—and, for the company, brought added ticket sale revenues from premium seating—it's a concern that a $900 million infrastructure improvement discussed in a February earnings call is now being put on hold. But it clearly is a decision driven by uncertainty in the economy. "A lot has changed in the world in the past nine weeks since that earnings call," CDI CEO Bill Carstanjen said in an April 24 earnings call with analysts and investors. He said those factors include "increased general economic uncertainty and risk of significant inflation driven in part by the new tariffs that the U.S. intends to charge on products from almost every country in the world. This has created unanticipated, and currently unquantifiable, expected cost increases in most materials. Due to these factors, we have made the difficult decision to temporarily pause this multi-year effort in order to let things settle down so that we can better determine any permanent changes in the cost of this project and better evaluate any changes in the overall economic environment." The good news for racing is that he immediately followed that comment with an expression of continued confidence in Derby week. "We remain completely committed to growing the Kentucky Derby through the prudent timing of capital investments over the long term," Carstanjen said. In recent years, Churchill has steadily improved the home of the Kentucky Derby (G1) with a number of massive projects, including an addition of seating in the first turn and last year's completion of the new paddock area ahead of the 150th edition of the race. It will move forward on two other smaller projects, a renovation of the Finish Line Suites and The Mansion. Churchill did acknowledge some softness in the market for its renovated seating near the Derby starting gate for this year's race, but attributed that to fans having some hesitancy in this economic landscape—specifically to an aggressively priced new section. Carstanjen acknowledged the company will learn lessons but added that he expects Derby week revenues to be similar to last year's record numbers. "The Derby is a very, very strong event that continues to grow and is getting stronger year to year," Carstanjen said. "We had a significant 'up' last year with Derby 150. That was a big step up in all of our financial metrics, and I'm pleased that this year we're going to be comparable to that. "I think our growth trajectory will continue from there. In terms of the customers this year, I don't see any real concerns or weaknesses in the upper tier seats that we have. … I think when you see this Derby this year, it'll look like every other derby. It'll be a packed house."