As the elevator doors open onto the second floor of the Treasure Island (TI) casino, you could be forgiven for almost forgetting you're in Las Vegas. The nondescript floor feels like nearly any hotel conference center in the country; surroundings dominated by bright, ugly and slightly-worn carpet and overly ornate wall decorations.
On this windy, sunny Saturday in January, a week before Super Bowl fever consumes the entire Las Vegas strip, a different sport has taken over TI: Behind a long buffet table of lunch food stretches a banner welcoming all to the National Thoroughbred Racing Association's National Handicapping Championships (NTRA NHC).
Now in its 17th year, the NHC is the culmination of a year-long series of qualification tournaments and brings the best horse racing handicappers together for a three-day tournament to crown the handicapper of the year.
While more commonly associated with places like Louisville and Saratoga, New York, it is fitting that handicapping comes west to Vegas each winter. It may be forgotten now, but horse racing was largely responsible for turning the quiet western town of Las Vegas into VEGAS. Ben "Bugsy" Siegel was the man most responsible for building the Las Vegas strip, controlled horse racing result wires in the western United States and -- with the help of some "friends" back east -- helped fund the first casinos on the Strip.
The first Saturday in May this year saw $192.6 million, the second-highest betting total ever, collected on the Kentucky Derby across all sources -- 1 percent fewer than last year's initial leg of American Pharoah's eventual Triple Crown.
But last year was only the second time in the past decade that saw a rise in total horse race betting handle, as it grew 1.2 percent (across a smaller number of races, this was a 7.25 percent growth on a per race basis). Since setting a record handle in 2003, horse racing handle and the total number of horse races held annually have been in steady decline, as the table below shows.
It is easy to surmise that American Pharoah's Triple Crown win, the first in 40 years, was the impetus for this small beam of sunshine. The first couple of months of 2016 have continued to see the afterglow of American Pharoah's success, with handle up over 4 percent compared to last year. But if no great horse emerges again this year, will the new bettors stick around for the long haul?
Combining American Pharoah's success with the national growing acceptance of gambling would seem to make now the time for horse race handicapping to permanently reverse its decline.
Are tournaments like the NHC the answer and a way to appeal to a younger generation of bettors?
NHC participation is increasing
Despite the dire statistics about the overall horse racing handle's steady decline, NHC participation has grown steadily. The first NHC in 2000 had 160 participants and a total purse of $200,000. This year, TI required a spillover room to fit in the record pool of 629 players competing for a total prize pool that has climbed above $2.77 million.
While there are a number of variants on tournament play, most involve a one-time buy-in followed by regulated, simulated bets on a number of races. The NHC differs, though, in that players didn't buy in, they earned their spot in one of the qualifying tournaments that span the spring, summer and fall. Tournaments are held on-site at specific racing tracks where players compete against the guy at the next table on the races run immediately in front of them. They are also held online, through popular sites like TwinSpires, HorseTourneys and DerbyWars where competitors can be located anywhere, and bet on a pre-determined set of races from across the country.
At the NHC in Vegas, competitors place theoretical $2 bets on a horse to win and place in a number of designated races. After two-and-a-half days of winnowing the field across a number of mandatory and optional races, on Saturday afternoon, the 10 players with the highest remaining bankrolls compete in a final seven mandatory races. The player with the largest bankroll at the end is the winner.
Similar to poker's rapid rise earlier this century, growth is being fueled by online tournaments. "It has become easier to participate in the last half dozen or so years [because of] the internet," says Keith Chamblin, NTRA Chief Operating Officer and NHC Tournament Director. In 2015, 353 of the 629 (56 percent) NHC participants qualified through online contests.
The NHC is still awaiting a "Chris Moneymaker moment" that explodes its growth and brings it mainstream, but it is seeing steady, consistent growth. There were 161 separate qualifying tournaments held last year; this year, the NTRA expects at least 185 contests.
The other large profile handicapping tournament, The Breeders' Cup Betting Challenge, takes a different approach. Held on-site at the Breeders'Cup host track each autumn, the Betting Challenge has a $10,000 entry and is a "real money" tournament in which players bet whatever amount they want from their bankroll using a number of betting options including win, place, show, exactas and trifectas on each race of the weekend. Berths into next year's NHC are also awarded to top placers.
But regardless of tournament format, the intent is the same -- find undervalued athletes who your competitors don't. It is this similarity that brings to mind another competition that battled American Pharoah for headlines last year.
Similarities to daily fantasy sports (DFS)
While the overall population of tournament players is still tiny relative to the broader horse race betting public that simply visits a track or Off-Track Betting facility (OTB) for an afternoon of fun, the characteristics of tournament play possess logical appeal for a highly coveted group of gamblers that have recently emerged: daily fantasy players. As Chamblin succinctly notes regarding tourney play: "[They are] data driven, tailor-suited for the internet with action coming in one-and-a-half, two-minute bursts."
DFS and handicapping tournaments share a number of common elements:
Strategy: Neither daily fantasy nor handicapping tournaments are won by picking the best players; they are won by picking players whose value is out of line with their cost. In tournament handicapping, betting low-odds favorites gets you nowhere, but finding the right high-odds horse being undervalued by others can propel a player up the standings. "DFS players have an intrinsic awareness of the importance of being different," says Eric Wing, Daily Racing Form Advertising Director and NHC emcee.
Ease of access online: Yes, it is more fun to play a tournament at the track and cheer live, but that is no longer necessary. It is just as easy to log on to TwinSpires as it is DraftKings. And unlike daily fantasy, TwinSpires is still legal in every state.
Low cost of entry: While not quite $1 or $2 DFS tournaments, handicapping tournaments can have entry costs fewer than $20 -- for an entire days' worth of betting action.
Opportunities for steady action: DFS was born from a desire to not wait an entire season to be crowned champion and popular sites run a breadth of games each day. Similarly, winning and losing a horse race doesn't take four hours to decide; it takes two minutes, with another betting opportunity no more than 20 minutes away. Nearly every tournament outside of the NHC and Breeders' Cup Betting Challenge are single-day tournaments and are held just about every weekend.
The biggest barrier to horse racing tournament growth will always be the steep learning curve, but tournaments are a way to ease that barrier. As Wing notes, "In most tournaments you pay an entry fee and no matter how poorly you do, you aren't losing more than the entry fee." It also brings a communal aspect and support system. "Tournament players are very helpful as a group." Wing continues, "They realize that new players are the life-blood of the sport. They want to see tournament play grow."
A new generation of handicappers
Where it used to take years of experience to accurately interpret a racing form, the newer generation is looking for edges beyond watching the horses in the paddock pre-race. The same quantitative approach that has swept across sports handicapping is steadily taking over horse racing as well.
First-time NHC contestant Tony Zhou understands this as well as anyone. Attending the Belmont Stakes in 2010, Zhou went 0 for 11 on his bets. Rather than vowing to never return to the track, Zhou instead decided to figure out a better way to use a background that wasn't spent in paddocks. Possessing a master's degree in mathematical finance from NYU, a job in quantitative analysis for a hedge fund and years of spending his free time at the poker table, Zhou looked at the computer programs he used to play the market for his day job and realized he could augment them to handicap horses.
Zhou recognized that the complexity of horse race handicapping lay in the number of variables to be accounted for; something computers excel at relative to humans. After his day at Belmont, he modified a computer program to define true odds for each horse, while attempting to remove noise and randomness.
Where the offered odds on the horse differ enough from his calculated probability, he has a horse to bet on.
He recognizes and embraces that his approach is going to identify different horses than those using more traditional handicapping methods, "The best bets I have ever had are when the form looks really bad," he says. But he notes that even if he could clearly understand every piece of information on the Daily Racing Form, its utility would be limited, "Any [information] that is widely available has limited value." Zhou isn't dismissive of all old-school handicappers, and actually sees a ceiling on his own approach, "The top 1 percent of old-school players will remain because they have a secret sauce."
In other words: It isn't computers that are the key to handicapping, it is the differentiation among where handicappers find value. As a mathematician, he may dismiss the sample size but in his first year playing tournaments, he won a HorseTourneys.com tournament with more than 240 entrants and qualified for the NHC, so he must be doing something right.
Zhou is therefore in no hurry to abandon his position as an outlier in the use of computer models in handicapping tournaments. However, he recognizes the shift is inevitable, "Computers won't completely take over the sport but will play a bigger role. A computer mind is going to gain traction. It is only a matter of time."
One of Zhou's fellow 30-something competitors this year at the NHC also has seen success this year but brings a more traditional handicapping background.
Off in the adjunct room, huddled with others strategizing bets on upcoming races (despite already being eliminated), Jonathon Kinchen is one of the younger generation that has seen success in handicapping tournaments using more old-school methods. The 33-year-old from Austin, Texas, grew up visiting race tracks with his father but dabbled in other gambling ventures like poker and sports before returning to handicapping after winning $85,000 on a Pick-4 bet in 2011. In 2015 he won the overall NHC Tour title, taking home $75,000.
While Kinchen acknowledges the similarities between handicapping, DFS and poker -- "You are playing against other players, looking for an edge," he says -- he also notes one big difference: no one wants to come watch you play poker. Even if his friends don't handicap, they are happy to join him for a day at the track during one of the tournaments that stretch across the summer.
Perhaps horse race handicapping's ultimate secret power over the likes of DFS and poker is so simple, it's easy to ignore: It is fun to watch.
After three long days of betting, the 10 NHC finalists climb the stage and take their places around a long table for the final seven races of the day. The overall leader now must not only handicap the horses in a given race but his nine fellow competitors, determining which horses they are likely to back to overcome the deficit; game theory now takes precedence over backing a winner.
While these 10 will decide this year's handicapper of the year during the course of a couple of hours, the future of the tournament landscape is harder to identify.
Chamblin has ambitious plans for tapping new players to grow the NHC. "We are ... looking at it from the standpoint of where would we like to be in 2019, at the 20th anniversary of the NHC ... it is probably a tournament in the $4-5 million [payout] range and has 10,000 or more people as tour members participating to try to qualify on a regular and ongoing basis."
Tournaments are on a strong growth trajectory, but the impact beyond the walls of Treasure Island is harder to forecast.
Some players I spoke with remain skeptical as to the impact that pure tournament play can have on horse race betting as a whole; even the envisioned tour of 10,000 players is small relative to the millions of casual, recreational handicappers. Can the allure of low-cost feeder tournaments, the ability to play online and the opportunity to apply the same math and computing skills impacting other gambling pursuits make a sizable difference in handicapping's steady downward trajectory?
Chamblin, for one, remains optimistic that tournaments like the NHC can be an effective vehicle for growing the horse racing betting industry.
As the horses of the final race depart the gate, leader Paul Matties sees on the board that all of his fellow competitors have picked large-odds underdogs hoping to catch him. When the horses cross the line, the leading horses are among the pre-race betting favorites, confetti pops into the air and Matties finds himself $800,000 richer.
While new players will be coming to the sport and may ultimately be the fuel to ignite handicapping tournaments, Matties is not exactly a harbinger of the changing times. His brother Duke also makes the final table, his other brother trains horses and his father is a handicapper. For at least one more year, old-school handicapping reigns supreme.