Back on track: the rejuvenation of the Tote under new ownership

When jockey Frankie Dettori swept clear aboard John Gosden-trained Inspiral to take the seven-furlong Coronation Stakes at Royal Ascot, the horse’s connections weren’t the only ones raising a glass after it passed the winning post. It turns out the Group 1 encounter was also the largest-ever World Pool – the Hong Kong Jockey Club-hosted commingling of liquidity between global totes across 20 jurisdictions – on a British race as £6.6m was bet into the pool. Likened to the pan-European Euro-Millions lottery in how World Pool functions, the collaboration went from strength to strength at this June’s Royal Ascot, with £168m gross turnover generated across the five-day meeting, a 35% increase on last year. And this also came hard on the heels of record volumes bet into World Pool on the Oaks and the Derby at Epsom.       “These are very formative stages of World Pool, but to have it making that amount of progress this early is really encouraging,” enthuses Alex Frost, chief executive of UK Tote Group. “And particularly when we know there is much more to give, whether it be new bet types or incremental countries coming through. But just with broader awareness [of World Pool], you are seeing big growth at the moment.” As for the Tote itself, it is nearly three years now since UK Tote Group took control of the UK’s leading pool betting operator at the heart of British horseracing since 1928. Reflecting on the company’s journey, Frost says: “We were quite quiet for the first two years because it’s hard graft integrating and getting the likes of Hong Kong alongside us. We appointed a chairman [John Williamson] who’s been utterly brilliant and who’s based in Hong Kong to make sure we have proper Asian connectivity in terms of strategy and the politics out there. Getting that bedrock in place allowed us to do the more obvious stuff [to improve the Tote].”

Jamie Hart, racing and liquidity director at UK Tote Group, chimes in: “When we inherited the Tote, it was when most betting had gone online, the bookmakers were getting very competitive and lowering their margins, [but] in the previous 30 years the Tote margin had crept up as people milked it a little bit and didn’t really see it as a growth product.” The “people” he is referring to includes Betfred. Fred Done, Betfred’s owner, paid the government £265m to acquire the Tote and its 517 shops in 2011 as he looked to expand his firm’s retail estate. Yet seven years later, a consortium of racing industry heavyweights, led by Frost, acquired a 25% stake in the Tote for £20m. The consortium, known as Alizeti at the time, completed the full purchase of the Tote in October 2019 in a deal which valued the company at around £115m and kickstarted a plan to resurrect this British institution. “Everyone associated the Tote with poor value,” Hart emphasises. “If you were charged 20% on a betting exchange it would be poor value, but we associate betting exchanges with good value as they don’t charge 20%. So, the first thing we did was address the value point.” One way the team improved value was with Tote Guarantee. Introduced in 2020, it guarantees that all dividends will at least match the starting price (SP) or exceed it if the pool price is bigger. While any tote tends to award juicier payouts than SPs on longer-priced horses, it isn’t always the case at the top of the market and, thus, many bettors stick to backing favourites with a bookmaker or an exchange. Plus, they can take a price or receive best odds-guaranteed with most UK layers. “If you have a 9/2 winner that pays £3.70 [on the Tote] you are not happy and you tell four people about your disappointment,” says Hart. “We had to get rid of that and guarantee that people would never be underpaid.” Since Tote Guarantee was extended to 55 UK racecourses last November, on-course win-market volumes on the Flat are up over 50% and up 35% overall on a spend-per-head basis. “That tells you what customers want: value and liquidity,” Frost asserts. Along with the fact the nature of parimutuel betting means the Tote is agnostic to race results, Tote Guarantee makes the proposition more attractive to those who have had bookmaker accounts restricted or closed. On World Pool races the maximum stake is £20,000. “We don’t restrict anyone for being a winner […] we are not part of the SP system, but we guarantee against the SP,” Hart explains. “If you can get 20 grand on with a bookmaker, your bet is going into the market and will lower the price for everyone. If you bet it into the Tote, it will affect the Tote price, but we are guaranteeing against the SP, so you are not going to get less than SP and you are not affecting it.” In fact, he suggests the Tote is the option for those who want to place significant bets. This, in turn, leads to increased turnover as other runners are pushed out. “All the 9/2 shots paying 11/1 get backed,” Hart says. Overseas horses running here on World Pool days can also impact dividends. For example, a flood of money internationally on Japanese raider Shahryar in Royal Ascot’s Prince of Wales’ Stakes meant the other four horses lengthened on the win market. It caused the book to become over-broke at 89% when including Tote+ (10% is added to payouts for those who bet directly with the Tote on all UK, Irish and Hong Kong racing rather than with a partner bookmaker). So, you could back all five runners in that race with the Tote by ‘Dutching’ your stakes and lock in a profit regardless of the result. It’s a situation that never happens with a bookmaker, nor an exchange for that matter.

A solid track record

Both Frost and Hart have an ingrained love for horseracing. Frost is a life-long equine obsessive – a passion that he inherited from his father and grandfather – and runs the Ladyswood Stud set within 90 acres of pastureland near Malmesbury, Wiltshire. As well as having horses with various trainers, he manages five racing syndicates and is a member of Epsom Downs Racecourse board. “I’m a complete racing nut,” the 46-year-old confesses. Meanwhile, Hart, 51, grew up in Newmarket, otherwise known as racing’s HQ in the UK, and much of his youth in the summer months was spent on the July Course and the Rowley Mile. When he was old enough to bet, he says the Tote was a go-to option at the Suffolk track. “It was part of the enjoyment of the day and seen as the thing that you bet on,” he recalls. Hart studied law at Cambridge while working in betting shops to supplement his student grant, yet he eschewed a career in the legal profession and chose instead to combine his love of horseracing with an aptitude for maths by entering the betting industry full-time in 1992. A spell with a bookmaker in Darwin, Australia, was followed by a role at William Hill in Leeds where, under future Hills CEO Ralph Topping, Hart was part of a four-person team working in a windowless room building the firm’s first website. In 2003, he moved to the trading department at Coral before returning to William Hill’s Gibraltar office in 2008. Stints followed years later at Sun Bets and Eastern European bookmaker Superbet before his switch to UK Tote Group in 2018. Frost, meanwhile, spent much of his career in investment banking; at 29 he was one of Dresdner Kleinwort’s youngest MDs. In 2016, he left Merrill Lynch after nine years and embarked on his mission to secure funding to acquire and overhaul the Tote. UK Tote Group, which is backed by over 150 individual investors comprising mainly of racehorse owners and breeders, is based in a 16,000 sq ft office in Wigan complete with racing-related imagery and decor in the colours linked to the Tote’s branding. There is also a satellite office in London. The total headcount has grown from 80 to about 170, with around half of staff working in engineering, technology, product and data as they maintain and iterate a platform that can process up to 6,000 bets a second. From a business perspective, the Tote is also back in profit; accounts published on Companies House’s website in June 2022 show EBITDA of £3.6m for the year ending 26 September 2021 compared with a loss of £3.8m in the prior 12 months. Active customers jumped 25% to 54,000. Furthermore, the Tote’s UK host pool wagers swelled 43% year on year to £413m, although it’s worth noting the prior 12 months were impacted by Covid-19. In the summer of 2020, as horseracing returned behind closed doors after the sport’s prolonged shutdown caused by the pandemic, the Tote rolled out the Pool Guarantee Service (PGS). It allows the Tote to seed markets to add “consistent layers of liquidity to make the pools deeper and more robust”, the aim being that the guide prices give customers greater predictability about what the payout will be on a winning bet when the dividend is declared. However, The Guardian’s horseracing correspondent, Greg Wood, penned an article recently questioning whether there should be greater transparency about the PGS and how it works. He went on to highlight how the Tote can itself win money off customers. Hart’s response is that customers want bigger pools, bigger payouts, reliable odds, and instead of having high-staking players provide liquidity in return for rebates, it was brought “in-house” with the PGS. “We start seeding four hours out in tranches,” he explains. “It’s a black box that doesn’t look at anything in the pool […] if something has a 50% chance, 50% of the money will go on that horse. It’s to give people a bigger pool so your £50 doesn’t move it from £7.80 to £6.10.” Hart continues: “We don’t even know what it is backing; we switch it on in the morning and it sits there chuntering away layering on money betting everything. It’s completely impartially throwing money into the pool.” Frost concurs: “That article refers to betting against customers; it has zero visibility on customers, that’s the whole programmatic piece of it. It sees what you and I would see – exactly how the market is formed.” With the help of the PGS, Frost and Hart are confident they can grow pools and the awareness of the Tote not just among serious racing bettors but also among recreational gamblers as well. There is no escaping the fact, though, that the esoteric lingo associated with so-called exotic bets can also be confusing for a casual bettor who has only ever gambled with a bookmaker. For instance, instead of placing a Straight Forecast (first two in the correct order), a Reverse Forecast (first two in any order) or a Tricast (first three in the correct order), a tote calls these bets an Exacta, Reverse Exacta and Trifecta, respectively. There is also the option to place a Swinger (two horses to place in the first three in any order) or on World Pools the Quinella (two runners to finish first and second in any order), both of which are extremely popular bets in markets like Hong Kong. In fact, the Swinger will often generate bigger pools than the win pool in certain international markets. “The UK probably has the world’s most sophisticated gamblers,” Frost says when it comes to promoting exotics to a wider audience. “It’s our job to communicate that [exotics] to people in a really clear way and make the CX really good.” An opportunity to get more people involved with the exotics could be when there is a heavy odds-on favourite in a race paying just the first two places and, therefore, it deters some people from having a bet. An example would be Baaeed going off at 1/6 in the seven-runner Queen Anne Stakes at Royal Ascot. “If you go to any other country, they will talk about exotics all the time,” Hart says. “There are so many more things to do than just back a winner – we are obsessed with picking the winner in this country.” He adds: “If you want more money in racing, we have to make more money as bookmakers and the Tote, so there’s more margin for everybody in the exotics, they are more fun, and you can play them for smaller stakes.”

A fine line

When it comes to smaller stakes, the team took the decision to slash the minimum bet per line on bets like the Jackpot (pick the winner of the first six races at a meeting) from 50p to just 1p. Feedback from customers was that 50p a line for the popular multi-leg pool bet made it too costly to perm multiple selections. Now they are, for instance, perming 1,374 lines for £13.74 instead of just a few straight 50p lines for £1.50. So, total stakes have actually increased. The Placepot (select a horse to place in the first six races) is also available to play from 1p per line and remains probably the Tote’s most well-known bet. In fact, Ascot’s biggest Placepot dividend ever came on the final day of Royal Ascot when it paid £79,125 to a £1 stake – or £87,038 if you bet directly with the Tote thanks to the 10% boost – due primarily to outsiders at 40/1, 80/1 and 33/1 filling the places in the Chesham Stakes. By their very nature, however, multi-leg pool bets like the Jackpot, Placepot, Quadpot and Scoop6 are a more time-consuming proposition than placing a win single. “People love the Placepot, but when you ask them why they don’t play in the week they say, ‘I’ve got a bloody job’,” Hart says. To address the dilemma faced by casual bettors who enjoy a Placepot but don’t have the time to pore over the runners and riders for six races, Hart and the team are working on a personalised automated system in which an algorithm spits out six horses for a straight-line bet. It’s personalised in that you answer a set of questions relating to what is and isn’t important to you, such as trainer form, the ground or breeding. “It has to be personal to you and something that you can trust,” Hart insists. Meanwhile, the Tote’s tech partner, BetMakers Technology, will soon introduce a feature that lets you bet a combination Trifecta involving five horses and set your spend limit at £5. The system crunches the numbers to calculate the stake per combination. “That’s the biggest breakthrough we can make, so that it’s simpler for people to get involved in those bets,” Hart remarks. Still on the topic of product innovation, a Tote Survivor game was added to the portfolio earlier this year whereby players pick their most likely winner from six specific races. Those who didn’t have the winner are eliminated until there is one person left or the pool is shared. Meanwhile, the return in 2019 after a five-year hiatus of the Ten to Follow – a fantasy-like game where you select a stable of 10 horses and points are accrued based on their performances throughout the season – seems to have been a smart move. Participants pay £5 per entry and can win upwards of £20,000 on the 2022 Flat season, while there is also a free-to-enter competition with a £5,000 cash prize up for grabs. An algorithm (Smart Pick) can select a balanced stable of horses for those who prefer to leave the job up to a machine. Nearly 45,000 stables competed in Ten to Follow for the previous jumps season, with the overall winner scooping almost £105,000. Such has been the success of the game that the team are in the process of soft launching a much shorter version along the lines of daily fantasy sports (DFS). Tote Fantasy involves picking seven horses with a budget of 10,000 guineas and you score points across seven races on an afternoon. The top 25% make a profit and the winner scoops the jackpot. “More than 35,000 people playing Ten to Follow and eight million playing fantasy football tells you everything,” Frost says. “It’s about being the owner or trainer because it puts people in that decision-making, managerial role.” Hart adds: “We think it is a massive opportunity for the Tote to be right at the centre of daily fantasy racing and it could be our biggest growth product.” Besides fantasy-like products, the racing and liquidity director is also keen to differentiate the Tote by letting customers bet two-way racing markets with razor-thin margins the bookmakers would struggle to price up. One which has undergone internal testing is dubbed ‘clear v close’ and involves betting on whether the winning distance will be under or over a length. The takeout is just 2.5%. It was partly inspired by backing both teams to score or over 2.5 goals on football markets. “The great thing about those bets is you haven’t lost until the final whistle,” Hart explains. “Quite often with horseracing you have horses disappearing out the back of the telly, but I wanted to have something where you are guaranteed an involvement in the finish.”

Fit for the modern age

It is more than 90 years since the Tote was first established by parliament when Sir Winston Churchill was Chancellor of the Exchequer. All these years on, an affection for the Tote still exists, yet there was a feeling in recent years it had become somewhat dated and that with today’s plethora of betting and gaming opportunities, it simply had to modernise and provide better value. “A poor-value Tote in a competitive environment will fail,” Hart states emphatically. In fact, he suggests that with the overhaul made to the Tote it is now a legitimate weapon in any serious punter’s armoury. “Your portfolio has to include a Tote, exchange and a bookmaker. You need to have as many outlets as you can.” Meanwhile, Frost says: “The sense I get from everybody now, such is the nostalgia for the Tote, is that a strong Tote is critical for racing, not just good for racing. When you look at prize money and the £65m gap between us and France, that’s what good looks like. If we don’t get to that in some sort of reasonably short order, I think UK racing looks quite vulnerable.” Being so heavily invested in horseracing as a breeder, owner and CEO of UK Tote Group, Frost is ideally placed to comment on the challenges the sport faces right now. For him, the industry is in an “unsustainable position”. “You cannot have a situation whereby it is so heavily loss-making for everybody involved. It is heavily subsidised and it’s just not a sustainable business model.” British horseracing faces mounting challenges, whether it be under-funding leading to falling prize money or criticism that too many fixtures and low-grade action is diluting the product, the consequence being smaller fields. On top of that, attendance at racecourses fell by over a third in May, which was partly blamed on soaring inflation contributing to the cost-of-living crisis. The industry also has to be cognizant to changing public attitudes to using horses in sport, an issue the World Tote Association debated in a recent webinar hosted by the trade body. Of course, many of these issues are outside UK Tote Group’s control, yet Frost is adamant that the Tote can play a unique role in the future prosperity of horseracing. “There is no jurisdiction around the world that is thriving without a Tote. That is no coincidence.” He concludes: “If we do thrive then, by virtue of that, the underlying industry thrives.”