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CHIEF
EXECUTIVE’S
REPORT |
CASINOS AND GAMING (continued) |
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| Our new brand promise of delivering our customers ‘A Million Thrills’ is centred
around each unit’s programme to offer a diverse range of high quality entertainment,
superior and passionate service and innovative products and promotions. |
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GAMING MARKETING
Major marketing campaigns
The past year was focused on further strategic development on
all aspects of customer acquisition, retention and reactivation.
Our new brand promise of delivering our customers ‘A Million
Thrills’ is centred around each unit’s programme to offer a diverse
range of high quality entertainment, superior and passionate
service and innovative products and promotions. This is especially
important given the high visitation rate of many of our customers,
and especially those in the highly competitive markets of Gauteng
and KwaZulu-Natal.
Particular cognisance is taken of the fact that many customers
seek a variety of entertainment options at casinos, and our programmes need to cater to this
need. The successful introduction
of the Grand Arena at GrandWest
and the Jembe Tavern at Meropa
has enhanced our ability to deliver
in this area.
Product diversity and customer desire to play new games will
consistently drive innovation in games and gaming promotions.
Apart from games supplied by recognised international manufac -
turers, ongoing development of proprietary intellectual properties
for promotional purposes continues and provides added value to
the gaming experience.
A group-wide slots promotion, the ‘World Series of Slots’ was
launched across all casino properties during the second half of
the year, with a combined prize pool of over R13 million and a
first prize of R2,5 million. The promotional tournament attracted
over 11 000 participants, with the finals held at Sun City where
some 500 customers were hosted to a weekend of entertain -
ment and gaming activity.
In the tables gaming arena, tournaments and games add-ons
continue to provide interest and variety to the main menu of
games. The worldwide explosion of ‘Texas Hold-em Poker’ has
seen many of our casinos introducing poker tournaments
to attract poker players and certain casinos have introduced
permanent poker tables. The annual R1 million first prize Black
Diamond Black Jack and Black Pearl roulette tournaments
continue to be well supported as does the US$1,5 million poker
tournament at Sun City. |
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| Sun International Privé magazine |
| Privé magazine continues to enhance brand perceptions, especially
in light of the launch of the ‘A Million Thrills. One Destination’
brand campaign. Ongoing reader research allows us to enhance
Privé’s popularity with our top customers and better guide
editorial content. |
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| Establishment of marketing in Chile |
With the development of the Monticello casino south
of Santiago in Chile, significant emphasis has been
placed on the establishment of a marketing team
suited to the Chilean market. Training for key members of this local team has been conducted over the course
of many weeks in South Africa.
Extensive research into the entertainment and gaming profiles of
potential customers has been conducted which will assist in the
formulation of strategies to ensure the correct mix of product,
promotions and communications. |
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| Entertainment |
The highlight of the year was the opening of the Grand Arena
at GrandWest Casino in October 2007. This 5 200-seat state-of-the-
art arena, together with the existing 5 800-seat Superbowl
at Sun City and 3 500-seat Big Top Arena at Carnival City, gives
Sun International the advantage of presenting both visiting and local entertainers exclusively within our venues in the main
centres of the country.
The Grand Arena’s opening artist was the powerful and popular
international star Mary J Blige, followed by superstar Enrique
Iglesias, giving Cape Town a concentrated taste of what to expect
from this new premier entertainment venue. In November, Jethro
Tull, Foreigner and Pat Metheny were among the international
artists on stage, and each of these also played in the Big Top
Arena at Carnival City.
Big international names were once again a feature throughout
the year, and our arenas played host to Gladys Knight, Pink, Joe
Cocker, Dana Winner, the Village People, Sister Sledge, James
Blunt, Joe Jackson, Counting Crows and Regina Belle, as well as
the beautiful former member of Destiny’s Child, Kelly Rowland,
who rallied to the Aids cause at the Sun City Superbowl for the
Posi+ive Events.
American comedian and TV and big screen star Chris Rock
broke SA box office records on a tour co-promoted by Sun International. Chris sold out seven shows in South Africa,
appearing in front of over 32 000 fans in the space of six days.
Six of these shows were held at the Sun City Superbowl, Big Top
Arena and Grand Arena, with the seventh at the ICC in Durban
in conjunction with Sibaya casino.
Local talent again featured prominently in our casinos, with
notable theatre runs of Umoja at the iZulu Theatre at Sibaya
casino and Let There Be Rock at the Extravaganza Theatre at Sun
City. Centrestage Productions performed several shows during
the year at the Vodacom Amphitheatre at the Boardwalk casino,
Steve Hofmeyr recorded
Dis Hoe Dit Is at the Mardi Gras Theatre
at Sun City, and Skouspel expanded to fill two weekends at Sun
City’s Superbowl.
In addition to these, the group’s casinos also hosted the following
local artists, amongst others: Kruna, Trevor Gumbi, Loyiso, Bala Brothers, Eugene Khoza, Lerato Moloisane, Madima Madhuva,
David Kau, Lucia Mthiyane, Incha, Trevor Noah, Oliver Mthukudzi,
Stimela, Roni Modimola, Malaika, Denimm, Tshepo Mogale, HHP
(Hip Hop Pantsula), Dr Victor, Loyiso Gola, Budhaza, Dawnay,
Lira, Freshly Ground, Jamali, Gang of Instrumentals, Oupa
Makhubela, Selaelo Selota, Zane Adams, Neo Muyanga, Swazi
Dlamini and Concord Nkabinde.
Sun International has always been one of the most prominent
players in the entertainment market in South Africa and is very
well placed to bring regular guests and the South African public
bigger and better events, many exclusively within our venues, in
the coming years. |
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| The Grand Arena’s opening artist was the powerful and
popular international star Mary J Blige, followed by superstar
Enrique Iglesias, giving Cape Town a concentrated taste of
what to expect from this new premier entertainment venue. |
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| GRANDWEST, Grand Arena |
SUN CITY
SUPERBOWL,
‘Let there be Rock’
concert |
SIBAYA, Izulu Theatre |
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| MVG programme |
Sun International’s MVG programme is the group’s gaming
customer loyalty programme. It has some 365 000 active
members and is available in all group casinos. There are four card
tiers, the highest of which is the Platinum card, followed by Gold,
Silver and Maroon.
MVG members are rewarded for their play on slots and tables
and all levels receive valuable benefits, rewards and special offers.
These are also available at the group’s hotels and resorts.
The MVG programme is an integral part of the group’s customer
management strategy. The MVG database forms the initial core
of the new Single Image Customer Database, and the new
campaign management system will manage communication to
this customer base. Through this the group will gain new insights
into this extremely valuable customer segment.
Around 366 000 MVG cardholders played in Sun International
casinos during the year under review, representing an increase
of 2% on the previous year.
Of these active players, 2% were Platinum cardholders, 16%
were Gold, 24% were Silver and 58% were Maroon. There has
been a slight reduction in the absolute numbers of Platinum and
Gold cardholders as a result of a tightening economy with a
number of cardholders moving to lower card tiers and some out
of the programme.
Despite this, revenue contribution from the programme has
remained resilient with tracked play increasing by 14% over the
previous year. The Platinum and Gold cards were the best
performing sectors, providing 84% of MVG derived revenue,
2% behind last year. |
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| MVG Customer segments |
|
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2008 |
2007 |
Card |
Points
threshold |
Active
customers |
Revenue
contribution |
Active
customers |
Revenue
contribution |
| Platinum |
4 500 |
2% |
42% |
2% |
43% |
| Gold |
475 |
16% |
42% |
17% |
43% |
| Silver |
50 |
24% |
10% |
25% |
9% |
| Maroon |
Free |
58% |
6% |
56% |
5% |
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| Points threshold is indicative of the level of play or handle the customer generates. |
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| Relationship Marketing Project |
The Relationship Marketing Project which the group announced
last year is making good progress. This project will deliver a new
customer database which will provide a single view of the
customer, and a new campaign management system. This project
forms an important part, and indeed the foundation of the
group’s larger customer management strategy.
The new customer database is complete and is populated with
MVG customer data, while the associated data management
tools are in place and functioning very well. We have also
significantly upgraded our customer data security processes
internally and externally.
The Microsoft Dynamics CRM product was selected for the new
campaign management system. This has been customised to suit
the database marketing processes to the extent that we will be
able to largely decentralise these processes in the gaming
operations. The development of this product is complete.
All of the components are being tested together prior to
commencing deployment at our major properties, as planned,
towards the end of 2008. |
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| LEGAL MATTERS |
The National Gambling Amendment Act, 2008, which deals with
the regulation of online gambling among other issues, was
assented to by the President during July 2008 but has not yet
been brought into effect. The Amendment Act is not expected to
come into effect in the near future as the tax and levy structure
to apply to the online gambling industry is still to be researched
and formulated by means of a statutory instrument. In addition,
the Amendment Act makes provision for regulations to be issued
and these are expected to be formulated and promulgated to
coincide with the effective date of the Amendment Act.
The Pretoria High Court has handed down judgement in the
matter of the unlicenced operators in the North West, the effect
of which is that they are not entitled to conduct their gambling
machine businesses. An application for leave to appeal has been lodged by the operators, although a hearing date has not
yet been set.
Two cases have been heard with regard to electronic bingo
terminals (EBTs). In Gauteng, casino operators sought a review
and setting aside of the decision of the Gauteng Gambling Board
to permit the licensing of EBTs under bingo licences. The Pretoria
High Court has handed down judgement in favour of the casino
operators, the effect of which is that EBTs may not be operated
under bingo licences. An application for leave to appeal has
been noted. In the second EBT matter, the High Court in
Pietermaritzburg has handed down its judgement and has
also found in favour of the industry and in this case also the
provincial licensing authority. An application for leave to appeal
has been brought.
Legal advice obtained from Senior and Junior Counsel has been
not to seek to obtain rulings to enforce the current judgements
in all three matters mentioned above, and instead, to seek to
expedite the allocation of hearing dates of the application for
leave to appeal in each matter.
CASA continues to perform an important role as industry
spokesman, has a sound reputation among its stakeholders and
enjoys strong support from its members.
The group is attempting to resolve a number of land claims with
the Department of Land Affairs. In the case of the Wild Coast
Sun, a set of settlement proposals has been extended to the land
claimants and no conclusive response has been received. The
Regional Land Claims Commissioner appears to be seeking clarity
on the guidance it should offer to the parties.
In the case of the Fish River Sun land claim, the court has been
requested to allocate dates for hearing this matter, however, no
progress has been made during the year. |
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HOTELS AND RESORTS |
| OPERATIONAL OVERVIEW |
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Revenue
Rm |
EBITDA
Rm |
EBITDA
margin % |
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2008 |
2007 |
2008 |
2007 |
2008 |
2007 |
| Sun City |
1 147 |
1 059 |
223 |
190 |
19,4 |
17,9 |
| Wild Coast Sun |
299 |
274 |
62 |
55 |
20,7 |
20,1 |
| Zambia |
208 |
181 |
63 |
51 |
30,3 |
28,2 |
| Table Bay |
197 |
173 |
69 |
63 |
35,0 |
36,4 |
| Other hotels and resorts operations |
428 |
368 |
105 |
82 |
24,5 |
22,3 |
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2 279 |
2 055 |
522 |
441 |
22,9 |
21,5 |
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The hotels and resorts division contributed strongly throughout
the year and improved EBITDA margins by 1,4 percentage points
to 22,9%. The premier properties – Sun City, Table Bay and the
Royal Livingstone – benefited from increased foreign demand
which translated into higher occupancies and rates.
Sun City achieved an occupancy rate of 84% which was
5 percentage points ahead of the previous year and an average
room rate of R1 157, which was 10% ahead of last year. Good
cost control resulted in an improved margin, and EBITDA was
17% ahead of the previous year. |
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| Occupancies at the group’s hotels and resorts improved to 79% and the average
room rate increased by 10% over last year. |
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The Table Bay achieved occupancies of 74% compared to 72%
last year and an average room rate of R1 739 which was 12%
ahead of the previous year. EBITDA was 10% above the previous
year reflecting a small deterioration in margin as a consequence
of higher property rates and taxes.
The Royal Livingstone and Zambezi Sun achieved an aggregate
occupancy of 76% compared to 74% last year at an average
room rate of US$178, which was 16% ahead of the previous
year. This growth in revenues can primarily be attributed to the
growing popularity of the resort with international visitors. |
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| LOCAL DEVELOPMENTS |
The second phase of the Sun City Main Hotel refurbishment
comprising 170 rooms and certain back of house areas is due
for completion by November 2008. The cost of the total
refurbishment is expected to be within the original estimate of
R260 million.
The group is evaluating various alternatives for a major upgrade
of its operations in Swaziland. In Namibia, the Kalahari Sands will
be undergoing an extensive R54 million rooms refurbishment
which will include upgrades to the bathrooms as well as corridors.
The Wild Coast Sun’s casino licence expires on 31 August 2009.
The group has submitted its application for a new licence to the
Eastern Cape Gambling and Betting Board (ECGBB). The bid
proposal includes a R340 million upgrade and expansion of the
resort, including the refurbishment of all the rooms, enhanced
conference facilities and upgrades to the public areas as well as
an exciting water park. The announcement of the ECGBB
decision is scheduled for October 2008. |
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| MARKETING |
| Customer profile |
The majority of the international visitors to the group’s hotels and
resorts comprise FITs (foreign individual travellers) and MICE
(meetings, incentives, conferences and exhibitions) guests.
In our domestic markets, the customer base remains in the
corporate business arena, group travellers and leisure and
gaming guests. This business is secured through intensive
marketing campaigns, direct corporate sales intervention, travel agents and the growing professional conference and event
organiser industry. |
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| Local and international market statistics |
| Local and International market statistics for the group’s hotels
and resorts for the last two years are reflected in the table below: |
| Hotels and resorts occupancies and rates |
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2008 |
2007 |
| Total resort room nights available (000's) |
1 058 |
1 080 |
| Total resort room nights sold (000's) |
837 |
818 |
| Total resort occupancies achieved (%) |
79,1 |
75,7 |
| Local room nights sold (000's) |
573 |
577 |
| Local occupancies achieved (%) |
54,2 |
53,4 |
| International room nights sold (000's) |
264 |
241 |
| International occupancies achieved (%) |
24,9 |
22,3 |
|
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Occupancies at the group’s hotels and resorts improved to 79%,
three percentage points ahead of last year. While most properties
reflected moderate growth, Gaborone Sun and Kalahari Sands
were major contributors.
The average room rate achieved of R966 increased by 10% over
last year. Good growth was generated through international
sales with increases of 10% and 13% in room sales and rate
respectively. This growth is particularly evident at Sun City, Table
Bay, Royal Livingstone and the Zambezi Sun. Southern Africa
remains a sought after destination and the group’s international
sales network has been effective in achieving revenue growth
of 23%. |
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| International marketing offices |
Through focused and targeted marketing strategies, our
international offices continue to deliver good growth and the key
focus has been to attract the MICE business into the hotels and
resorts operations.
The United Kingdom remains the largest market for the group,
accounting for 25% of international sales revenue, followed by
USA and Germany. The strategy of focusing on the emerging
tourism markets of Brazil, Russia, India and China has yielded
double digit growth year on year from these markets and
improved market share of inbound tourist arrivals due to
enhanced relationships with direct sales channels.
As occupancies edge higher, a strong focus on yield management
will become more important in achieving sustained revenue
growth. |
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Route of the African Sun
The Route of the African Sun is an effective platform to market
some of our premier hotels, particularly the Table Bay, the Palace
of the Lost City and the Royal Livingstone. The package has
received wide coverage in trade shows, exhibitions and extensive
publicity through our media partners. |
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Dreams
Dreams, our in-house tour operator, was originally established to
sell our Zambian properties. However, as occupancies increased,
this has been expanded to include all of our hotels and resorts.
Relationships have been secured with the retail travel agents who
are key to a successful sales and marketing cycle and our offering
is further enhanced by media advertising.
New software is currently being installed which will package
flights, activities and accommodation via our website. |
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| POSI+IVE once again delivered a magnificent fusion of fashion, food, art
and music with a cameo performance by superstar Kelly Rowland. |
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| NEDBANK GOLF CHALLENGE |
MISS SA
PAGEANT |
POSI+IVE CONCERT, Kelly Rowland, Danny K and Incha |
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| Internet |
Our website content was enhanced in March 2008, featuring
Charlize Theron, which further reinforced our brand. Further
upgrades to the site are currently in place to enable real-time
accommodation reservations.
The current Sunscape database was stimulated by monthly
updates of events and promotions through consistent
e-mail
campaigns and special rates geared towards valley periods. |
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| Major events |
The Nedbank Golf Challenge remains the most popular event on
the South African golfing calendar and a major South African
social highlight.
The tournament consistently attracts the world's best golfers.
Supersport has the local exclusive broadcast rights and growing
international coverage is extremely important in maintaining
Sun City and Sun International at the forefront of desirable
destinations. Setanta Sports (UK and Ireland), Fox Australia, Golf
Channel (USA and Canada), Sony India, Jupiter Golf (Japan) and
many other major sports channels cover this four-day event,
resulting in an estimated 1,4 billion viewers and millions of dollars
in publicity not only for the Sun City resort, but for South Africa as
a tourist destination. Locally, attendance figures continue to rise.
The extensive publicity received both locally and internationally
reflects the substantial effort in hosting this tournament.
Sun City again hosted The Women's World Cup of Golf sponsored
by Telkom and the North West Province. This event is gaining
momentum, bringing with it some of the world’s greatest women
golfers. The success of this tournament is reflected in increased
global television audiences and interest.
The Miss SA and Miss SA Teen pageants were again key events
with the crowning ceremonies being held at a banquet in the
Sun City Superbowl.
POSI+IVE once again delivered a magnificent fusion of fashion,
food, art and music with a cameo performance by superstar
Kelly Rowland. Other entertainers included local diva Lira, Incha
– the 11 year old wonder of the violin, and Danny K. Fashion
included amazing collections from local designers Marianne
Fassler and Sun Goddess among many others. Headline to the
fashion extravaganza was South African born Marc Bouwer,
whose collection was particularly well received. Marc, now living
in the US, dresses world famous red carpet celebrities, including
Charlize Theron. |
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