A Pointless Exercise
The Racing Rewards program announced by Racing NSW at a glittering $400 a head function in Sydney's exclusive Tetsuya's restaurant seems a clever concept on the surface.
Take advantage of the billions of unused frequent flyer and loyalty points floating around in the community and encourage their holders to spend them on racing.
The only problem is that the points are about as useless for racing as they are for the rest of the community.
That's the reason they remain unspent.
To illustrate, John O'Shea, one of only three participating trainers, requires 312,500 points to get just a $500 discount off his monthly training bill.
Few clients would get much change out of $4,000 for a month's training, while in the real world you have to spend $312,500 to get that many loyalty points.
This rate of exchange is pretty pathetic even by the real world standards of credit card providers. I recently got a letter from the Commonwealth Bank offering to exchange 117,973 points for $648 in cash.
As originally conceived, the Racing Rewards program would have seen Racing NSW venture into the factoring business.
The idea was that the whole NSW racing industry would float on a sea of loyalty points, earned from within the industry itself and transferred from other programs.
Every trainer was expected to embrace the Racing Rewards program because they would be paid within a month of rendering their account.
Instead of sending the accounts to their owners, the trainer would instead use Racing NSW as his collection agent, paying a 2.5% commission for doing so.
The owners would of course be able to pay their account with loyalty points. The remaining balance would be paid with their credit card, thus unleashing a further flood of points to be used for the betterment of the industry.
To some extent the idea was financially viable. Since half of all owner costs are returned in prizemoney, Racing NSW could dip into their prizemoney accounts to cover half the training expenses it was trying to collect. Some of the remainder would have been paid for by the points.
But for the factoring scheme to work, Racing NSW would have had to collect 97.5% of the outstanding training bills from an owner community with a dubious payment record. Racing NSW already has a somewhat chequered history in the financial services business as its loss making performance in the workers compensation system demonstrates.
Training the owners is actually the most difficult part of being a trainer and training them to pay on time the trickiest part of all. But for a trainer like Gai Waterhouse, being presented with the Racing Rewards factoring arrangement was an insult.
"All my clients pay within 30 days", she told me. "I'm not going to pay Racing NSW 2.5% to collect them for me."
Given all the arrangements where loved ones hold shares in racehorses without their partners being aware, where businessmen are spending undeclared income on training fees and where they are paid in cash and kind, its not surprising that trainers collectively were lukewarm about the Racing Rewards program.
They knew that a payment system where every last cent could be tracked through credit cards was unlikely to be popular with their clients. At a meeting at Randwick with Racing NSW only two of forty trainers put up their hand to participate.
The scheme as announced has all the appearance of being half baked.
Only three trainers are participating - Chris Waller, John O'Shea and Tim Martin. There are a whole heap of categories in the "Redeem Points" section of the Racing Rewards web site which say "Racing NSW Rewards Club will be announcing partners in this category shortly."
The lack of rewards available is an embarrassment given that Pinpoint Marketing, which bills itself as "the largest and most successful loyalty and rewards program company in the Asia-Pacific", is behind the scheme.
Headed by Racing NSW director Kim Harding, Pinpoint appears to have picked up a lucrative rewards program of its own in getting the gig for Racing Rewards. So much so that if it was running the program prior to the selection of the new Racing NSW Board, Harding would surely have been excluded by the Minister on conflict of interest grounds.
Undoubtedly she would have stepped out of any Racing NSW Board meeting at which the Racing Rewards program was being discussed, but then so also would fellow Board member Arthur Inglis, Chairman of bloodstock agent William Inglis which stands to be a major beneficiary of the scheme.
Many racing industry participants will be interested to see the related party benefits declared in the Racing NSW annual report for this year, which will give give them an idea of how much has been disbursed to Pinpoint and William Inglis.
And then of course, there will be the cost of running the program itself, which seems to have engaged Racing NSW management for the best part of the last year.
From my perspective, I cannot see how Racing Rewards can bring a single new owner into the NSW Racing industry. I hope I'm wrong.
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