Roll of the dice
“Money won is twice as sweet as money earned,” drawled Paul Newman in The Color of Money.
And while his Fast Eddie Felson character may have been shooting pool, not craps, the thrilling prospect of winning is what has kept Africa’s casinos ringing despite jittery economies.
For while gaming – and the hospitality products that invariably accompany casinos – has seen a dip in demand; it’s an industry that is proving remarkably resilient to fiscal jitters.
“The gaming industry has proved resilient, but is still susceptible to prevailing economic conditions,” notes Mark Jakins, Chief Marketing and Customer Officer for Peermont, which operates 10 casino properties across South Africa and Botswana. “If consumer disposable income is under pressure, we, too, feel the impact.”
And although the gaming industry in South Africa remains healthy, “recent growth rates are lower than the growth experienced prior to the current economic downturn,” says Jacques Booysen, Managing Director of Tsogo Sun Gaming. “The growth is ultimately driven by consumers’ disposable income and will, therefore, rise and fall on the same drivers that impact consumers generally.
“Properties offering gaming have generally proved more resistant to the economic downturn, as such properties have more leisure options to drive footfall and leverage revenue than pure hotel establishments.”
And a compelling offer to bring feet through the door is crucial, particularly for properties dependent on tourists. Inbound tourism to the continent has been hit hard by economic woes in the United Stated and Europe, with a knock-on effect for the hospitality industry.
But while some casino resorts rely on tourism to keep the roulette wheels turning, city-based casinos across the continent also need to work hard to keep local punters happy.
“For gaming to thrive there needs to be a vibrant middle class within the economy. Africa, outside of South Africa, still lacks this middle class, resulting in smaller gaming activities,” says Marcel von Aulock, Chief Executive Officer of Tsogo Sun Holdings. “In South Africa, the industry has been designed to cater for the local market with developments situated in specific areas. This makes it important to design your offering to cater for repeat visits by the local consumer, rather than tourism-related visitation.”
However, local government regulations can often make it difficult for gaming enterprises to flourish. While local punters are usually the life-blood of casino properties, gaming licences in South Africa stipulate that hotel facilities accompany the slots and tables.
The cost of licences can also put the brakes on potential investment, although the cost of the licence is often proportional to the potential revenue.
“The casino licences in Lagos state are extremely expensive,” says David Kliegl, General Manager of Sun International’s Federal Palace Hotel & Casino in Lagos, Nigeria. “In Abuja licensed casinos do exist and I believe that the licensing fees are lower, but Lagos is one of the most densely-populated cities in the country, so the size of the market will determine the costs of the licence.”
Importantly, in 2008 Lagos state – Nigeria is a federal republic, so laws vary between states – began to regulate the gaming industry, and a clear regulatory framework is essential for a successful casino industry.
“The political and legislative climates in stable countries are imperative for gaming growth,” comments Mr Jakins. “It is far easier for reputable gaming operators to invest in jurisdictions where the legal framework is certain, and levies and taxes are acceptable to return-on-investment models.”
“Sun International will only trade in the casino business in a controlled and legislated environment,” adds Mr Kliegl. “For a good gaming industry there needs to be regulations, and the regulations need to be enforced.”
While gaming is tightly controlled in South Africa, that’s not always the case further north. Nigeria is known for its assortment of illegal casinos, which can have an adverse impact on legal gaming operators, tarring all casinos with the same brush of outdated technology and rigged machines.
“We are the only licensed casino in Lagos, although there are a number of unlicensed casinos,” adds Mr Kliegl. “The state government really needs to enforce the rules.”
In essence, operators and authorities need to be on the same page for a successful gaming industry to thrive, says Paddy Brearley, Managing Director of Legacy Hotels and Resorts. “The health of the industry is very closely related to the location of a casino as well as the country it is in… where gaming legislation, laws and regulations are in support of the industry, they naturally do better than in areas where these regulations discourage it.”
Legacy operates two casinos in Namibia, and southern Africa is certainly the largest – if somewhat overtraded – gaming market on the continent. However, with limited opportunities for new casino licences, the major players see future expansion happening further north.
“No further casinos are being planned by the Legacy Group at present,” notes Managing Director Paddy Brearley. “If there were, however, it would be outside of South Africa.”
“Peermont is actively seeking hotel management contract opportunities in South Africa and Africa,” adds Mr Jakins. “There is currently an oversupply of hotel rooms in South Africa, but opportunities in Africa still exist.”
“South Africa is currently the most significant casino market, but the number of licences is regulated by law and almost all have been issued and built,” comments David Webster, General Manager Gaming Marketing for Sun International. “Religious considerations are the major obstacle to investment in the northern African states [while] sub-Saharan Africa is generally more open to the casino industry and new investment.”
And despite the economic doldrums, Sun International is investing heavily in its gaming properties.
“In Port Elizabeth, our Boardwalk property is undergoing a R1-billion upgrade,” says Mr Webster. “New facilities include a 140-room five-star hotel, a state-of-the-art convention and exhibition centre and extensions to the casino. We have just completed a major refurbishment at the Wild Coast Sun in the Eastern Cape, including the convention centre and all of the hotel rooms. As a consequence this property is now perfectly positioned for the MICE market and is already attracting major conventions and exhibitions.”
The Federal Palace Hotel in Lagos is also a prime example of South African companies looking for opportunities further north, opening its casino doors in 2009 after the relaxation of gambling restrictions in Lagos State.
“The casino is part of our strategic expansion programme. All South African gaming licences are currently allocated, so in order for Sun International to grow we’re looking outside of the borders,” says David Kliegl. “Lagos was Sun International’s first foray into West Africa, but the group is actively looking at other opportunities.”
The Federal Palace is an anomaly in that the hotel generates more revenue than the casino – “The hotel is well established, whereas the casino is very much pioneering in the city,” explains Mr Kliegl – and achieving the right mix between hospitality and gaming is a delicate balancing act, with local market conditions dictating which is the ‘horse’ and which is the ‘cart’ on the road to economic viability.
“There is little doubt that hotels constructed within a casino resort environment – provided that locations are close to urban business centres – enjoy higher occupancies, in that casino players boost traditional business and conference hotel [business],” says Mr Jakins. “In Peermont, gaming revenues account for approximately 77% of our revenues.”
“Gambling constitutes the majority of our revenue,” adds Mr Webster. “In periods of economic strain, casino income tends to hold up better than revenues in the hospitality sector. Casinos and hotels do, however, complement each other, and we are therefore always looking for opportunities for both.”
“Casinos drive hospitality investments,” emphatically agrees Jacques Booysen of Tsogo Sun Gaming. “Casino developments contain other hospitality elements – such as hotels, theatres, conference facilities – that would not necessarily be viable as stand-alone facilities.”
“Gaming makes up around two-thirds of our reported revenue,” adds Marcel von Aulock, CEO of Tsogo Sun Holdings. “Gaming is obviously the main entertainment offering at a casino development, but by no means the only offering, and needs to form part of an overall package that is attractive to consumers.”
And that’s essentially what the gaming and hospitality industry is all about: providing the services and attractions that will draw punters and guests through the front door.
A good example of providing something for everyone is Montecasino, Tsogo Sun’s flagship property north of Johannesburg.
Providing hotels, theatres, outdoor attractions and retail attractions alongside a gaming offering is all part of the Montecasino ‘mind and mood’ strategy, says General Manager Steve Howell: “This diversity of entertainment experiences and a precinct approach to providing an all-encompassing leisure offering is what sets Montecasino apart.”
Whether it’s bright lights or fine food, connecting with the punter’s needs is essential to keep feet flowing through the door, says Legacy’s Paddy Brearley: “You make the customer feel special by having the product that they love, provide an effective and efficient level of service, and combine that with the right ambience at your casino’s location.”
This might be easily done in a mature gaming market, but in many parts of Africa it’s often a case of responding to unique market conditions.
“Countries such as Angola, Zambia, Nigeria and the DRC are experiencing tremendous GDP growth from mining, oil and agricultural investment… with a resultant increase of Chinese citizens and workers in these regions,” explains Mr Jakins. “Therefore table games – in addition to the mainstream slots offerings – will be important. Roulette, Blackjack, Baccarat, Poker and Punto Banco remain the favourites for this market.”
“In most casino environments punters will usually prefer either cards or machines, but here in Lagos gamblers flip between the tables and the slots at will,” notes Mr Kliegl. “And people here also have the propensity to chase big wins, so we have a lot of volatility in our business.”
Ask any punter who’s had a flutter in a casino and he’ll tell you that volatility is the name of the game. Lady luck is either with or against you. You win some, you lose some. Volatile it may be, but while the hospitality industry may be quick to feel the pinch of economic troubles, in the gaming arena the house – it appears – always wins.
Where to roll
Travelling on business and fancy a flutter? These properties are worth enjoying a dance with Lady Luck…
Montecasino, Johannesburg
One of the largest casinos in the country, over 1700 slot machines and 70 gaming tables are spread between both non-smoking and smoking casinos. Play a serious game of poker, or take your chances on novelty games like Wheel of Fortune and Life of Luxury. Excellent entertainment and restaurants on offer.
Federal Palace Hotel & Casino, Lagos
Offering state-of-the-art slots and stylish table games, this is far and away the most glamorous casino in Lagos (and the only legal one). Slots and tables cater for low and high rollers, but all are welcome to celebrate their winnings in the intimate bar and lounge area. Members of Sun International’s Most Valued Guest programme receive reciprocal benefits here, too.
GrandWest, Cape Town
The most popular casino in the Cape, GrandWest offers 2500 slot machines and over 70 gaming tables, along with a separate area for first-time players to learn the ropes before hitting the casino floors. There are plenty of restaurant and entertainment offerings here as well.
Emperors Palace, Johannesburg
With its grand Romanesque styling, and convenient location near Johannesburg’s OR Tambo International Airport, this is ideal for guests staying the night or with a few hours to spare. There are 1700 slots and 60-plus gaming tables to enjoy, and there’s even an exclusive private gambling salon for loyal punters.
Desert Jewel Casino, Windhoek
Situated in the Windhoek Country Club Resort, a popular stop for business travellers, the Desert Jewel Casino is open 18-hours a day with N$2 slots offering a progressive jackpot of N$2500. There are video machines and table games to boot, so there’s no need to place bets on who’ll win the golf!
Richard Holmes