Protect our business and innovate

 

IN THIS SECTION:

Continuous improvement
Protect and grow market share
Protect and grow our brand
Deliver and enhance our brand promise
Significant focus on costs
 

 

Monitor casino regulatory environment
Enhance corporate reputation
Innovation
Information technology management
 

AT A GLANCE

Gaming
The depressed economic climate has prevailed in the past year in part due to low levels of consumer confidence. We have seen a decline in play from a number of our top-rated customers although the overall trend in gaming revenues has stabilised. Our gaming revenues from South African casinos increased by 4% on last year leading to a marginal increase in our South African market share from 42.1% to 42.2%. The outlook in Chile remains positive with the casino again achieving record monthly revenues in August 2011. We have managed to tightly control costs and capital expenditure at all gaming locations, while building on our strengths in customer service and customer experience management.
 
Hotels and Resorts
Room nights sold were significantly affected by the dip in international travel declining by 10%. The decline was principally from the USA, UK and Western European source markets. The FIT and MICE segments declined by 15% and 12% respectively. South Africa remains an expensive long haul destination, and has to compete with destinations closer to key markets, with significant discounting. Competition in the long haul sector remains fierce and consumers continue to search for the best deals available. However, pockets of growth are surfacing, particularly out of the Indian and South American markets. The volumes of travel associated with the FIFA World Cup in 2010 and the strongrates achieved, made comparisons between 2010 and 2011 difficult. Forward bookings currently suggest some recovery in the FIT segment. 
 
OUR ACHIEVEMENTS
 
OUR CHALLENGES
 
OUR OBJECTIVES
A R400 million refurbishment and upgrade to the Wild Coast Sun commenced in accordance with commitments made for having secured a casino licence for a further 10-year period to August 2019.
The Monticello Grand Casino and Hotel in Chile was successfully relaunched following a four month closure to repair damage sustained in an earthquake on 27 February 2010.
Use of our new Relationship Marketing System was well entrenched.
The Group maintained its market share of the very competitive South African casino market. In Chile, Monticello’s revenue share of the Santiago casino market far exceeded its gaming position share as the casino continues to dominate the Santiago market.
The conditions of licence for a new 15-year casino licence to Emfuleni Resorts to operate The Boardwalk Casino and Entertainment World were successfully negotiated with the Eastern Cape Gambling and Betting Board.
Costs were well contained.
A significant project to raise the bar on standards and enhance the guest experience through our “Touch Point” initiative was launched.
The management structure at Sun City was re-aligned to create better focus and to facilitate better delivery of customer experiences to our different customer segments.
Achieved “Leading Hotels of the World” accreditation for The Table Bay and Palace Hotels.
The Table Bay was nominated 24th best hotel in the Travel & Leisure Magazine Top 500 – in Africa and Middle East.
Sun International was voted number one in the hotels category of the Sunday Times Top Brand 2011 award.
 
In the Western Cape, GrandWest Casino’s 10-year casino exclusivity in the Cape Metropole expired in December 2010. There is uncertainty regarding the impact of any potential change.

From a tourism point of view, economies in the UK, Europe and the United States remain under pressure. These are presently the primary source markets for The Table Bay, the Palace and the Royal Livingstone, and considerable focus will be given to improving occupancies and room rates at these properties, including the development of new markets in Africa, Asia and South America. The Group’s Africa sales strategy in particular is expected to attract African travel to these and other Group properties.
 
Secure a further period of exclusivity at GrandWest.
Enhance the EBITDA margin at Monticello Grand Casino and Hotel to at least 25% by 2015.
Prepare our customers and staff for the introduction in 2012/13 of the new Enterprise Gaming System through a process of change management.
Optimise and extract value from our campaign management system and drive customer acquisition, retention and reactivation.
Proactively manage our maturing business challenges.
Progress the R1 billion Boardwalk redevelopment.
Finalise the customer value propositions for the key customer segments at all properties.
Review and consistently maintaining operating and management standards to support the customer value propositions.
Optimise our core source markets and develop new markets in resorts.
Enhance stakeholder engagement activity plans.
 

Continuous improvement

Casinos and gaming
Introduction
We are fully focused on growing revenues and containing costs; managing our asset portfolio; and acquiring, retaining and reactivating customers. In a maturing business environment it is essential that we maintain the innovative entrepreneurial spirit for which the Group is renowned. In South Africa, the major challenge has been the decline in play by a number of top rated players as a result of the recent economic conditions. In contrast, the sentiment among other regular customers is increasingly positive and we are seeing some improvement in trading. We are cautiously optimistic that this is sustainable as the South African economy improves.

The situation in Chile is considerably more buoyant and we have seen a significant improvement in trading since the earthquake in February 2010. The MVG database at Monticello is growing strongly, as is the Santiago casino gambling market, despite the significant expansion of the major competitor casino. The outlook in Chile remains positive.

We exercised tight control over costs and capital expenditure at all casino properties during the year under review without significant impact on our customers or the properties. Successful implementation of the Group’s Touch Points training project ensured that considerable emphasis was placed on improving staff and guest interactions, as well as on enhancing guest service at all of our casinos. 
 
GrandWest
GrandWest again faced tough trading conditions during the year, with continued pressure on local disposable income. The Grand Arena played host to numerous high profile artists which increased visits to the complex. GrandWest broadened its tables offering by the introduction of “Double Zero” roulette during the last quarter to reduce the barrier to entry and drive customer acquisition. In our drive to remain innovative, 218 new slots were introduced to the floor during the year. Maintaining excellent customer relationships continues to be a priority in these tough economic times.
 
Boardwalk
The new casino licence for Emfuleni was issued in September 2010, and construction is now well underway. The new smokers’ casino, refurbished Bayside pantry, new MVG lounge, and underground parking for approximately 320 vehicles will open during December 2011.

The next phase of the development, for completion by December 2012, includes the new five star hotel and multi-purpose convention centre, as well as the “must-see” musical fountain on the lake. There is already significant interest from the local market in our new convention facility, which will be the premier convention centre in the Eastern Cape. 
 
Golden Valley
Golden Valley Casino completed its first full year with its tables offering, and is showing good growth in this area. The leveraging of the Golden Valley Lodge to drive gaming business has worked well and the lodge has achieved occupancies of 76% for the year. The new Worcester interchange development, which will provide a safer access to the property, is well on-track for completion in October 2011.
 
Lesotho Sun
In November 2010, the final stage of the Lesotho Sun’s R140 million refurbishment programme was celebrated with the opening of the “Ying Tao” Oriental Fusion Restaurant. The full refurbishment included the renovation of 158 rooms, the conference centre, the Nala Café coffee shop, the Hotsoma and Leifo Bars, the modern and upgraded smart card casino operation, the reception and foyer areas, as well as the gym and spa.

The improvements have been well received, significantly enhancing the overall product and standard, and making the complex much more appealing to the market. There has already been a notable increase in trading levels. 
 
Monticello
The Monticello casino complex can finally report its first full year of operation, having reopened to the public on 30 June 2010, following the earthquake that hit Chile in February 2010. Record revenues were achieved for July 2010 and the operation immediately regained its market share owing to an exciting multi-faceted re-launch promotional and entertainment programme. The year finished strongly with revenues continuing an upward trend, despite increased competition from our main competitor in the Santiago market – the Enjoy casino at Rinconada.

Throughout the year, the management focus has been on building the Monticello brand and providing our customers with a family-orientated, fun-filled entertainment experience that sets us apart from the competition. Improving profitability by generating revenue through innovative gaming and entertainment promotions, growing the customer base, and determined cost control; have remained the priority of the management team. An example of one of our innovative promotions was the masters’ tennis tournament, held at Monticello, on a specially-erected clay court. The event included previous champions such as Stephan Edberg, Wayne Ferreira and Chile’s Marcelo Rios, and this generated significant media coverage. For the year the MVG database grew at an average of 348 people per day, and the monthly visitor average was 96 479.

The Monticello Hotel achieved a very pleasing average room occupancy of 73% and has been well received by casino patrons and conference guests – the main source of the hotel’s business. The retail area, or “Paseo”, which consists of children’s games, ten pin bowling, restaurants and a Chilean craft market, has gained popularity as a family destination, showing high levels of patronage particularly over weekends and school holidays.

A key target over the past year has been to improve the EBITDA margin at Monticello. Considerable progress has been made in this regard, with the final quarter achieving 18.7% and 14.7% for the year (2010 – 9%). This has been achieved not only through revenue growth, but through a reduction in payroll costs, strict cost control and renegotiating certain service provider and supplier contracts. Management is committed to achieving at least a 20% margin in the forthcoming financial year.
 
Carnival City
Carnival City’s performance for the year was affected by reduced play from a number of top-end punters. This resulted in reduced revenues from the Privé, although overall revenues for the casino were marginally higher than last year, with satisfactory growth on the main floor. Net revenue from table games declined 5% compared to the prior year and this was mainly owing to the reduced drop on American Roulette in the Salon Privé. Room occupancy increased to 93% for the year, with net room revenue decreasing by 1%. With the ongoing pressure on revenue for the year, there was a continued focus on cost controls in order to maintain operating margins. We also added 240 slot machines at this property.
 
Sibaya
Sibaya’s revenues increased 6% on last year. The number of gaming positions increased by 200 slot machines in the current year, and this played a large part in achieving the unit’s results. Additionally, the win percentage on tables increased by 2.6 percentage points to 19.7%, assisting in the achievement of the satisfactory overall results.
 
Carousel
The Carousel was again faced with revenue challenges in the year, with gaming revenues increasing a marginal 2% on last year owing mainly to the stagnant Gauteng market and continued increase in travel costs faced by customers. The newly refurbished 21 self-catering two-bedroom units within the Village added a new facility and additional room inventory to the complex. These units achieved an occupancy of 48% for the 10 months since opening. Although tables drop showed an encouraging 7% increase, this department operated at a loss for the year and requires strong focus in the year ahead. The surveillance digital installation is nearing completion, and will be fully functional during the new financial year. Customer relationships and the marketing drive towards our black clientele remains a priority.
 
Morula
The 2011 financial year was very challenging in line with poor gaming demand in Gauteng. The focus remains on leveraging the renowned personal service at Morula and giving customers that little extra to enhance their experience. The product on the floor remains well-suited to our gaming clientele. Tables have performed well during the year, particularly American Roulette which is increasing in popularity. With Morula destined to be the pilot site for the new EGS system in 2012, the enhancement to the gaming product and experience is set to give the property the hype it deserves. 
 
Meropa
Meropa was the Group’s strongest performing casino, with revenues and EBITDA increasing by double digits. Plans are under way to expand the gaming floor in the new financial year with 16 additional slot machines. The local economic and trading conditions improved over the prior year, with significant capital expansion taking place in and around the city of Polokwane. The recently opened “Mall of the North” and other major capital projects in the pipeline should further boost business confidence and stimulate revenue growth.
 
Windmill
Windmill had an excellent year with overall revenue growing by 14%. The unit’s marketing strategies have been consistent, with Customer Management strategies high on the agenda. The new Salon Privé, which opened during November 2010 resulted in the addition of 43 slot machines and five tables which have been well received by our MVGs. This facility adds value to the guest experience, offering a more exclusive high-limit facility.
 
Flamingo
Kimberly’s economy has shown minimal signs of recovery in the financial year. Flamingo Casino reflected marginal growth in revenues over the prior year, with gaming revenue increasing by 3%. Net tables’ revenue reflected a decline compared to the prior year owing to the lower hold-percentage in the year. Costs were well contained. The gaming floor was enhanced by the replacement of 29 slot machines during the year. The gaming floor will be expanded by 30 additional slot machines in the new financial year.
 
Gaming marketing
The Group’s gaming marketing strategy is to ensure that all our customers enjoy the best value-for-money gaming experience possible. This includes ensuring that the latest and most popular machines and games are on our casino floors; customer service is of the highest standard, gaming promotions are innovative and exciting; and that we provide our customers with high quality entertainment, as well as comprehensive and varied range of food and beverage facilities.

Key gaming marketing activity included the Sun International Brand Campaign, ongoing national and property gaming promotions, the MVG Loyalty Programme, optimising use of the new Customer Management System, and managing the customer experience and entertainment. 
 
Gaming promotions
Joint promotions between the Group’s southern African casinos allow the Group to achieve the economies of scale made possible by the Group’s customer base and geographical spread. Our national promotions (the Black Diamond Blackjack Tournament and the Black Pearl American Roulette, both with a first prize of R1 million) are the premier gaming promotions in southern Africa. Regional heats are held throughout southern Africa with the finals being held at Sun City and Wild Coast Sun respectively.

Innovative property gaming promotions are the cornerstone of the Group’s gaming marketing effort. Examples of the many gaming promotions held in the Group’s casinos during last year include:
The Tables Mystery Mania promotion at Windmill during which a Nissan Qashqai was given away. 353 MVGs participated in the promotion.
The annual Grand Car Draw at GrandWest. We gave away 13 cars in 13 weeks and recorded the second highest attendance at a Grand Car Draw.
The Carnival City Party Pit provides fun and excitement, and low limit tables games for new table games players. This innovative approach to customer acquisition was immediately popular.
The “GrandWest Series of Poker” tournament was launched in August 2010 with subsequent tournaments in November, February and May. The GrandWest Series of Poker has become very popular among poker enthusiasts, and has resulted in a new “Freeze-Out” tournament, with a potential prize pool of over R1 million, due to take place in September 2011.
Sun City hosted the annual Platinum Weekend which has become one of the highlights on the Platinum card calendar.
The Privé Party Weekend at Sibaya included private dinners, golf, fishing and entertainment, culminating in a party held in the Salon Privé where R800 000 in cash was given away to lucky winners.
At Monticello, the draw nights have become very popular entertainment events in their own right, attracting excellent patronage.
 
MVG Loyalty Programme
The Group’s very successful MVG Loyalty Programme is available at all Group casinos, including Monticello in Chile where it has become the benchmark for industry loyalty programmes.

The MVG programme has four levels, each offering distinctive privileges to members at all Sun International hotels, resorts and casinos, with benefits becoming increasingly valuable as customers progress upward through each level.

The MVG Platinum card qualifies our top-rated MVGs for the very best rewards across the Group. This exclusive card gives our top players the status, benefits and recognition they deserve in acknowledgement of their patronage. The MVG Platinum card is highly sought after by our customers and this continues to be the best-performing sector of our customer base.
 
MVG customer segmental analysis – South Africa
  2011   2010
 
Card level Points threshold Active customers EP contribution   Active customers EP contribution
Platinum 4 500 2% 40%   2% 42%
Gold 475 15% 43%   15% 43%
Silver 50 24% 11%   24% 11%
Maroon Free 59% 6%   59% 4%
 
For the year ending June 2011, the best-performing sectors in South Africa – Platinum and Gold – accounted for 17% of cardholders and 83% of Earning Potential (EP) contribution.

There were 374 500 active MVG cardholders during the year under review. The number of active cardholders for the period increased by 1% and their EP was up 4% over the previous year. 
 
MVG customer segmental analysis – Chile
  2011   2010
 
Card level Points threshold Active customers EP contribution   Active customers EP contribution
Platinum 3 000 1% 41%   0.5% 34%
Gold 300 5% 41%   4.8% 43%
Silver 30 10% 11%   11% 15%
Maroon Free 84% 7%   84% 8%
 
For the year ending June 2011, Platinum and Gold cardholders at Monticello accounted for 6% of cardholders and 82% of EP contribution, up from 5% of cardholders and 77% of EP contribution in the previous year.

There were an amazing 185 000 MVG cardholders active in the period under review. Monticello is a popular destination with 102 730 new MVG sign-ups during the year.

75% of Monticello’s active cardholders originate from Santiago Metropolitan Region, and contribute 82% of revenue.
 
Customer Management
Our Customer Management technologies include the new Campaign Management System, Single Image Customer Database and Single View of the Customer components, which were developed as part of the recent Relationship Marketing Project.

Use of the Campaign Management System improved steadily at all properties during the year. Several refresher courses were held, which were well attended, and which improved knowledge of the system. At the same time the Group continued to provide database marketing coaching in order to raise the standard of this key marketing activity.

One of the advantages of the new systems is that we have been able to increase the use of digital marketing channels, especially email. All gaming properties now engage in regular email correspondence with their customers and the number of customers in the database with valid email addresses continues to increase. This has led to a reduction in the quantity of traditional mail sent out by the Group.

Several minor system enhancements will be deployed in the new financial year, all of which will make the system more effective. 
 
The customer experience
A great deal of effort goes into providing a consistently excellent customer experience at all of our properties. We make sure that there is always a great vibe on our casino floors, and that our hospitality and guest service exceed our customers’ expectations. This is the essence of the Group’s One Sun Programme.

We also ask our customers to rate their experience at our casinos. The results of our post-visit research, which is conducted among MVGs, demonstrates that our customers appreciate the great experience they have at our casinos. 
 
Hotels and resorts
Introduction
Following the international financial crisis and the subsequent recession in most countries around the world, the global and domestic tourism and MICE business has become increasingly competitive. It is therefore more important than ever to understand the target markets, the needs and wants of such customers and to ensure that the experiences delivered meet their expectations and thus differentiate our properties and products from competitors. We have accordingly taken the principles developed from the customer management strategies of the Group and applied these at an operational level. We are also in the process of developing customer value propositions (CVPs) for each of our properties so that the target customer groups are catered for in a manner that maximizes their experience. Each CVP is intended to extend down to touch point level. To achieve this we have started with our five star deluxe properties as they have the highest international exposure as well as average daily rate. The intention is to cascade this to all properties over the next two years.

In order to support the consistent execution of the CVP, it has been necessary to refresh our management and technical standards and conduct refresher training. This will ensure that our processes are appropriate and repeatable so as to deliver a predictable and, very importantly, a consistent service on a sustainable basis. In addition, physical standards are being addressed where these do not meet the CVP requirements.

We are sensitive to our customer feedback and Tripadvisor.com provides useful commentary on their views. It is our aim to achieve a satisfaction score of 90% or better in all properties, with a target of 95% in our three deluxe five star hotels, namely The Table Bay in Cape Town, The Palace at Sun City and The Royal Livingstone at Victoria Falls, Zambia. While we still have some way to go in respect of all properties, it is pleasing that the Table Bay has scored consistently above 95% and is rated highest in its peer group. We are also investigating a more efficient way in which to receive immediate feedback from departing guests and we are currently piloting an online and mobile solution at Sun City and GrandWest.

Furthermore, we ensure that all hotel and conference venues are graded by the Tourism Grading Council of SA (and other accreditation agencies in the jurisdictions in which we are located, where these exist). This provides a consistency of product, a reference point for our customers and the ability to use this accreditation (the only official one in SA) in our marketing collateral.

All our properties have an environmental management plan and systems in place to ensure that our operating outputs are as environmentally friendly as possible. We are audited by Heritage, our independent accreditation agency, and we were pleased that all properties have achieved silver or gold accreditation, with key properties such as Sun City, Wild Coast Sun, The Royal Livingstone and Zambezi Sun in Zambia, achieving platinum accreditation. 
 
The trading environment
  2011   2010
Total room nights available (000’s) 1 146   1 102
Total room nights sold (000’s) 725   735
Local 562   554
International 163   181
Total occupancies achieved (%) 63   67
Local 49   50
International 14   17
       
 
As a result of the adverse international trading conditions, our hotels and resorts suffered a 1% decline in room nights sold. The FIT and MICE segments declined by 15% and 12% respectively. Overall, the international segment dropped from 25% to 22% of our total room nights sold with international rooms revenue declining from 39% to 34% of total rooms revenue. The overall average room rate for the hotels and resorts increased by 3% to R1 069.

The Palace, Table Bay & Zambezi Sun showed declines in occupancies of 7,5 and 8 percentage points respectively.
 
Travel trends
International
Our primary source markets remain very challenging. The slow growth in GDP and disposable income pressures and job insecurity will continue to affect consumers in these countries, leading many to postpone higher cost long haul international trips. Coupled with these factors, wider economic concerns and an unsettled geopolitical climate in the Middle East/North Africa have had an impact on Europeans’ travel outside of Europe. The key USA and UK markets are expected to take some years to recover.

There are still pockets of growth – predominantly out of India, China, Brazil and other emerging markets, particularly in the MICE and leisure segments where we are seeing good growth albeit off a relatively low base. There is a strong trend across the industry towards negotiation for more favourable rates with hotels and airlines, as well as a demand for value-added incentives such as free room upgrades, extra free nights or special deals on excursions, in-resort restaurants and other benefits. 
 
Africa
Africa remains predominantly a FIT market, with SADC and West Africa yielding solid results. Growing the inbound business from Africa is a key focus, with land and air arrivals growing year-on-year. We will continue to invest and expand sales and marketing activities in Africa to capitalise on aggressive forecast growth projections. We have selected West Africa (Nigeria and Angola in particular), East Africa (Kenya) as key starting points and have invested our own resources in these countries to create the necessary PR and sales & marketing channels.
 
South Africa
A strong focus continues to be on new business acquisition with face-to-face direct sales. Key account coverage was consolidated in order to allow for stronger relationship building and a greater understanding of total customer value. This was enhanced by the roll out of The Premier Partner Programme, a tiered structured programme allowing for benefits and rewards based on revenue volume, to be offered to our key customers. The association segment of the business saw the enhancement of a group accommodation, booking capability being introduced to the Professional Conference Organisers (PCO) specifically focused on the association market. The aim was to ease the burden of the booking process with associations, allowing for direct bookings to be made on line, and tracked back to the PCO, eliminating the need for paper based requests and manual tracking. 
 
Creative packaging
Demand for all-inclusive packages will continue as consumers chase value and aim to predict and control spending in addition to looking for security in unfamiliar destinations.

South Africa remains a high cost long haul destination for many of our key markets in the current globally depressed, and yet highly competitive, environment.

We introduced several value adding packages in order to stimulate interest and to generate some enhanced business. Family packages with a specific focus on experiences for children seemed to gain some momentum. 
 
Suninternational.com and the internet

Sun International’s online booking engine was refreshed to be consistent with online travel trends and an improved user experience. Traffic to suninternational.com has increased by 7% year-on-year. Although off a very low base we have experienced a remarkable increase of 198% in online bookings. Our continued e-marketing activities and Million Thrills e-mail campaigns have resulted in a steady growth of loyal Twitter followers and increased readerships of our blogs.
 

TRAFFIC TO SUNINTERNATIONAL.COM HAS INCREASED BY 7% YEAR ON YEAR.

 
We embarked on a very focused GDS (Global Distribution Systems) and ADS (Alternative Distribution Systems) communication campaign which has resulted in a 21% increase in individual bookings through these channels. 
 
“Trip Advisor® is the world’s largest travel site, enabling travellers to plan and have the perfect trip. Trip Advisor offers trusted advice from real travellers and a wide variety of travel choices and planning features (including Flights search, Trip Advisor Mobile and Trip Advisor Trip Friends) with seamless links to booking tools.” (www.tripadvisor.com)

All of Sun International’s properties have profiles on Trip Advisor where guests can leave a review about the hotel and rate their stay. A business listing is being trialled with The Table Bay Hotel which allows us to include direct booking information (contact number, e-mail address and website link). On a standard listing, no contact information is allowed. Over two months, this listing has generated 436 visits to The Table Bay pages on suninternational.com. Trip Advisor as a whole has generated over 700 visits to the Sun International website in two months.
 
A four night combination package was introduced whereby FITs could book any combination of our hotels and were viewed as long stay guests and therefore additional relevant value.

Other packages were market specific and were communicated to the end consumer via our channels and for the first time we introduced direct consumer campaigns driven via radio campaigns in the Australian market around Kylie Minogue’s show at Sun City.

Joint marketing and sales ventures were enhanced with our key operators and channels in order to attain a greater reach on our marketing spend.
 
Entertainment
Sun International is renowned for the diversity, originality and variety of entertainment that it offers; from top international acts and shows to the best of South African talent.

The Group owns three of the most-desirable large entertainment venues in the country. These are: the Grand Arena at GrandWest, the Big Top at Carnival City, and the Superbowl at Sun City. Promoters have a real preference for these venues and confidence in our ability to stage world-class events. The ability to offer all three venues collectively gives the group a distinct competitive advantage and has positioned the group to attract the best international acts and shows. This is an integral part of the Sun International brand and gives the group great exposure in the media.

Some of the international acts that appeared at our casinos in the past year include Bryan Adams, Kevin Bloody Wilson, Jeff Dunham, Crowded House, Daughtry, 30 Seconds to Mars, AR Rahman, The Beach Boys, Faithless, Rammstein, Riverdance, Andre Rieu, Cirque du Soleil, Smokie, Roxette, and The Script.

The Group aggressively identifies and uses entertainment to grow our business and our customers can look forward to more exciting international acts such as Kylie Minogue, James Blunt, Michael Bolton, Jimmi Carr, the International Ballet Gala, Boney M, The Hollies, The Used and Josh Groban, to name but a few.

Sun International is probably the foremost supporter of South African entertainers. The following are just a few of the many local South African artists and bands that performed at group properties during the year under review: Jon Delinger, Zak van Niekerk, Mbuli and Band, Andries Botha, Solace, David Kau, Bizzy B, Freshly Ground, Trevor Noah, Mlami, Mojo Blues, Green Orange, Lira, Gerhard Steyn, Paseka Jazz Band, Steve Hofmeyr, Dowwe Dolla, Watershed, Ngwako Manamela and the Jazz Moods, Vhumunu, The Parlotones, Selaelo Selota, Poy Poy Makhubela, Ngwanyana Wa Morolong, Prime Circle, Simphiwe Dana, Gerrie Pretorius, PJ Powers, Blarney Brothers and Barry Hilton.

The Group will continue to use entertainment to broaden appeal for our casinos among the vast diversity of our current and prospective customers and their families.
 
Public relations
We continued to generate publicity throughout the year by capitalising on the success of the FIFA World Cup and an extremely successful Nedbank Golf Challenge, which celebrated not only its 30th year, but also the introduction of a Seniors Tournament. This event showcased, both locally and internationally, the company’s ability to host world-class events. The Miss South Africa pageant once again generated maximum publicity through the new TV broadcaster on the DSTV channel, Mzansi Magic.

On the international front, a record number of inbound media visits from across the globe, generated huge international publicity. The Rand-value of this publicity exceeded R650 million.

The focus of PR has been on specific themes relevant to all resorts in the form of lifestyle, business, glamour, taste and caring, the latter with respect to our social responsibility initiatives at our properties. The has also been a stronger drive towards listeners’ and readers’ weekends which allow the end consumer to take part in activities such as adventure weekends at the Royal Livingstone and the stiletto run at The Table Bay.
 
Sun City
The Sun City Resort remains a destination of choice for the Gauteng and national markets within South Africa, as well as a key destination for the African and international traveller. The last few years, following the global financial crisis, have had a negative impact on occupancy at the resort, but there appears to be some stabilisation beginning to occur. The FIT segment is slowly beginning to recover, but the very short lead times in the MICE sector are a challenge. We have commenced a programme of redefining our customer value propositions for all the key customer segments for The Palace Hotel and adjusted this in accordance with the needs and wants of these customer segments. This programme will be rolled out across the remaining Hotels and Vacation Club during the year ahead. Simultaneously, the operating and management standards are being critically reviewed and improved in accordance with the CVP where required. We have created more focus on the casino segment of our business and in this regard the Sun City Hotel & Casino has been consolidated into a single business unit. Furthermore a great deal more focus is being placed on the key Rustenburg and surrounding markets. We have also continued to focus on ensuring that we remain current in terms of the casino product and in this regard 130 new slots machines are being incorporated into the overall mix, with older machines being decommissioned. Cost control and margin protection is monitored carefully and savings are achieved wherever possible, but without negative impact to the guest.
 
The Wild Coast Sun
The past year has been somewhat disruptive during the refurbishment programme, with additional rooms being taken out of available inventory in order to limit the noise impact on the guest. Good progress is being made and by June 2012 the full 396 bedrooms, conference rooms, entertainment facilities, kitchens and certain back of house areas will be complete. The addition of the new world class waterpark, with completion by end November 2011, will add a significant and exciting new product to the overall Wild Coast Sun offering. The three state of the art adrenalin rides, lazy river, pools, children’s interactive play areas and retail & food outlets will make the resort the destination of choice in the target regional and national market. There will be a focus on attracting new business from the KZN leisure sector, namely Durban and surrounds as well as lower South Coast. Furthermore, the newly refurbished rooms and convention offerings will create the demand for a new destination for large conferences from throughout South Africa and beyond. 
 
The Table Bay
The Table Bay Hotel has experienced its third difficult trading year in a row, with international and local occupancies falling due to the continued global recession. However, we have maintained our strategy of rate integrity and not discounted as our competitor peer group are doing. With the second largest five star Hotel in Cape Town (after the Westin International) it is pleasing that we still sell more rooms on an average daily basis than our competitor set, which excludes the Westin. In addition, Table Bay has maintained a score above 95% on tripadvisor.com in terms of guest approval. The five star inventory in Cape Town has doubled in the past two years and we therefore expect the year ahead to continue to be a tough trading environment. However, the hotel is extremely well placed to take advantage of any upturn in global and international economic conditions.
 
Botswana
Our operations in Botswana have traded relatively well in the year under review, despite the Government of Botswana, the largest local employer, cutting back on a number of key infrastructure projects. In addition, SADC has redirected a number of regional meetings to Johannesburg (OR Tambo International Airport) in order to save on travel and accommodation costs. Gaborone Sun Casino has maintained its fair share of tables and slots revenues, while the hotel still remains the hotel of choice for business travellers, the major customer segment. The year ahead sees the opening of a new 150 bedroom Holiday Inn Hotel (with casino) which will have an impact on fair share. We plan to undertake a product refresh to ensure that we remain competitive with the new Holiday Inn.

The three casinos in northern Botswana had a satisfactory trading year and have maintained or improved their respective fair share of the target markets.
 
Namibia
The past year has been very disruptive during the refurbishment programme, with the construction noise being far greater than originally anticipated. As a result, occupancy and revenues from the casino and food & beverage facilities were negatively impacted. In addition, the new 150 bedroom five star Hilton Hotel opened toward year end. Whilst not competing directly in our target market, their recent decision to drop room rates has resulted in some of our premium business being impacted. However, with all components of the refurbishment complete we are experiencing a slow but steady return of business which we will continue to aggressively target in the year ahead. In a recent development, the Hilton Hotel has applied for a casino licence in the same target market. We have lodged an objection and await feedback from the licencing authority.
 
Nigeria
The past year has seen a continuance of aggressive rate discounting in the competitive market in Lagos, as well as the entry of new product, most notably the Radisson Blue on Victoria Island. However, we have continued to place emphasis on product improvement (such as the new Pool Club), customer service, high operational standards and quality of food and beverage, as well as ancillary services such as Wi-fi and cellular connectivity. We have experienced a gradual improvement in occupancy as well as average room rate over last year. In addition, the casino is steadily becoming the ‘Privé casino’ of choice, being the only legally licenced casino in Lagos State. We expect the year ahead to continue to show above inflationary growth in both revenue and EBITDA.
 

Protect and grow market share

Gaming market by province and country
Introduction
The National Gambling Board has not yet published the gambling statistics for the 12 months ended March 2011. We have therefore had to rely on revenues provided by provincial gambling board sources to calculate the 2011 gaming market for Gauteng, Western Cape, KwaZulu-Natal, Eastern Cape and Mpumulanga. Estimates have been included for the Northern Cape, Limpopo, North West and Free State Provinces as no information is available from their respective gambling boards.

We were also not able to obtain horse-racing revenues from the Regulator. Reference was made to Phumelela’s Annual Report for the 12 months ended January 2011 to estimate betting-sector revenues.

Where estimates have been used to establish Sun International’s 2011 market share for a particular province, we have assumed that the market share remained unchanged from 2010. Competitors in these markets are relatively small and are unlikely to have achieved the revenue growth required to significantly change the Group’s market share in these provinces.

No information has been made available by the National Lotteries Board and ticket-sales data has been obtained from the lottery operator’s website to estimate the lottery sector revenue.

Data to March is usually provided by the National Gambling Board and National Lotteries Board in September of each year.
 
The gaming industry in South Africa
The South African gambling market includes the casino, betting (mainly horse-racing), limited payout machines (LPMs), and bingo sectors.

In the 12 months under review to March 2011, the legal gaming and lottery market is estimated to have grown by 4.0%. The casino sector, with 73% of the market, continues to dominate the South African gaming market.

Online gambling remains illegal in South Africa and no reliable data is available for this sector.
 
South African gaming market revenue
Sector 2011
Rm
  %   2010
Rm
  %   2009
Rm
Casino 13 996   3   13 525   (1)   13 671
Lottery* 2 422   3   2 341   20   1 954
Betting 1 652   3   1 604   (2)   1 637
LMP 884   20   739   11   665
Bingo 192   (2)   197   79   110
Total 19 146   4   18 405   2   18 037
%   %   %
Casino 73   73   76
Lottery* 13   13   11
Betting 9   9   9
LMP 5   4   4
Bingo 1   1   1
Total 100       100       100
Statistics are for the year ended March. * Lottery revenues are stated at 50% of ticket sales (in line with the policy of the lottery to payout 50% of sales in prizes).
Sources: National and Provincial Gambling Board, National Lottery Board.
 
Casinos
The casino sector grew by 3.5% to R14 billion for the year under review, reversing the deteriorating revenue trend of the previous year. Casino revenues grew by 2.3% in Gauteng and the Western Cape, 3.9% in the Eastern Cape and 5.1% in KwaZulu-Natal.
 
Lottery
Lottery revenues increased by 3.4%. The 20% growth from 2009 to 2010 can be attributed to the introduction of two additional Powerball draws per week from October 2009.
 
Betting
Betting revenue, which is largely dominated by horse-racing, is estimated to have grown by 3% – reversing the revenue decline of the previous year.
 
Limited Payout Machines (LPMs)
Growth in the LPM sector remained strong, and revenues are estimated to have grown by 20% during 2011 to R884 million. Strong growth was recorded in Gauteng where new sites were rolled out during the period. LPMs are available in Gauteng, Limpopo, Eastern Cape, Mpumalanga and the Western Cape.
 
Bingo
Bingo is offered in Gauteng only. Overall revenues declined by 2.2% to R192 million during the period ending March 2011. The largest portion of this revenue is earned from Electronic Bingo Terminals, which are, in reality, slot machines. An amendment to the Gauteng Gambling Act permits the operation of these machines. This would appear to be contrary to national gambling policy and remains a concern to the industry. 
 
Our market share
  Gaming revenue   Gaming positions
 
Province 2011   2010   2011   2010
Gauteng 20.4%   20.6%   25.2%   25.2%
Western Cape 83.4%   82.6%   71.7%   71.7%
KwaZulu-Natal 35.5%   35.4%   34.3%   33.0%
Mpumalanga      
Limpopo 77.0%   77.0%   72.5%   72.5%
North West 78.1%   78.1%   74.9%   74.9%
Northern Cape 83.7%   83.7%   62.0%   62.0%
Eastern Cape 70.6%   70.7%   68.1%   68.1%
Free State 51.7%   51.7%   54.9%   51.0%
South Africa 42.2%   42.1%   43.2%   42.8%
Statistics for the year ended March. Positions are 1 per slot machine and 6 per table. Estimates included for Limpopo, North West, Northern Cape and Free State.
Sources: National and Provincial Gambling Boards, Sun International and CASA.
 
The revenue from Sun International’s South African casinos increased by 3.9% compared to the previous period, slightly ahead of the trend in the South African casino sector. Accordingly, our share of the local casino market increased from 42.1% to 42.2%.

The Windmill Casino’s Salon Privé opened in November 2010 increasing the Group’s share of gaming positions in the Free State from 51.0% to 54.9%.

Sibaya’s gaming positions increased by 200 slot machines in the current year taking the total number of machines to 1 212 in order to take up demand during peak periods. Fair share of the market, based on gaming positions, increased accordingly by 0.4%.
 
Gauteng
Carnival City’s market share for the 12 month period ending March 2011 was 16.3%, 0.1% less than last year. Reported revenue grew by 1.3% compared to the Gauteng market growth of 2.3%.

Morula’s market share for the period was 4.1%, 0.1% below last year. Reported revenue grew by 0.4%. 
 
Western Cape
GrandWest’s revenues which were particularly adversely affected in 2010 have recovered in 2011 and increased by 2.9%. Casino revenues at Golden Valley increased by 9.5%. Overall market share increased from 82.6% to 83.4%.
 
KwaZulu-Natal
Sibaya traded satisfactorily and increased its market share to 35.5% primarily due to the increased number of gaming positions.
 
Casino licences
          Competitors    
         
Province Licences   Sun
International
  Licences
trading
Licences
allocated
  Licences
unallocated
Gauteng 7   2   5  
Western Cape 5   2   3  
KwaZulu-Natal 5   1   4  
Mpumalanga 4     3   1
Limpopo 3   1   1 1  
North West 4   2   2  
Northern Cape 3   1   1 1  
Eastern Cape 5   2   2 1  
Free State 4   2   2  
 
The number of casino licences in South Africa remains unchanged at 40. There was one licence issued in Limpopo province during the year under review. In total, 39 of the 40 licences have been issued, of which Sun International holds interests in 13.
The Limpopo Gambling Board issued the Burgersfort licence to a Peermont Global subsidiary during the period under review. The casino has not yet commenced development.
In Mthatha, Eastern Cape, the bidding company, Elonwabeni, challenged the process through which the original licence was awarded to Peermont Global; Elonwabeni was subsequently awarded this licence. The Eastern Cape Gambling and Betting Board are appealing this decision.
A licence has been issued to Leithlo Resorts in Kuruman in the Northern Cape. This casino has not yet been developed.
There have been no further developments in the Free State. The fourth licence is currently held by Sun International (Naledi Sun) pending award of the Sasolburg licence which will result in the closure of Naledi Sun. The Sasolburg licence is currently the subject of legal action. The Naledi Sun licence has been extended to 31st January 2012.
No announcement has been made in respect of the one unallocated licence in Mpumalanga.
 
Competitor activity
The agreement for the merger between Tsogo Sun and Gold Reef City Resorts concluded during 2010 was implemented in February 2011 following the unconditional approval of the Competition Tribunal.

The merged entity has 14 casino licences across six provinces – Gauteng, Western Cape, KwaZulu-Natal, Eastern Cape, Mpumalanga and Free State.

During the period under review, the Eastern Cape Gambling Board awarded a 15-year casino licence for East London to Tsogo Sun, which operates the Hemingways casino.

Peermont Global was awarded the third, and final, casino licence in the Limpopo province at Burgersfort in December 2010.

The upgraded Tusk Umfolozi property in KwaZulu-Natal, was officially launched in January 2011. This operation has not impacted on the Sibaya casino located north of Durban.
 
The gaming industry in Chile
The Chilean gambling market includes casinos, horse-racing and a national lottery.
 
Casinos
There are two regulatory structures in Chile. The Superintendia De Casinos de Juego (SCJ) regulates the 18 new casino licences made available in 2005. 15 of these 18 casino licences are currently operating in Chile. No new casinos opened during the 12 month period ending March 2011.

There are also seven so-called municipal casinos operating in Chile, in the resort areas, established under the previous dispensation. These casinos are operated independently of the SCJ and the conditions of these licences have remained unchanged since 2005 when the new casino legislation was introduced. By 2015 all municipal casinos must conform to the SCJ legislation and control, and it is intended that these licences be made available through a bidding process commencing in 2013.
 
Chilean casino market revenue
The 15 casinos operating under the SCJ generated total gaming revenue of CLP$ 220.5 billion (R3.1 billion) for the year ending June 2011. The SCJ casino sector grew by 71.1% with three casinos, including Monticello, affected by the earthquake and not trading for the full 12 month period ending June 2010. All casinos affected by the earthquake had reopened by June 2010. The revenues for the municipal casinos are not made available by the municipalities.
 
Chilean casino market share
The 15 casinos operating under the SCJ generated total gaming revenue of CLP$ 220.5 billion (R3.1 billion) for the year ending June 2011. The SCJ casino sector grew by 71.1% with three casinos, including Monticello, affected by the earthquake and not trading for the full 12 month period ending June 2010. All casinos affected by the earthquake had reopened by June 2010. The revenues for the municipal casinos are not made available by the municipalities.
 
Chilean casino market share
      Gaming revenue   Gaming positions*
     
Casino Region   2011   2010   2011   2010
Monticello Grand Casino VI   28.9%   25.8%   19.9%   18.3%
Marina de Sol VIII   12.6%   9.7%   12.0%   10.2%
Enjoy Antofagasta II   10.4%   14.4%   9.9%   12.8%
Enjoy Santiago V   9.8%   2.0%   12.2%   2.9%
Dreams Temuco IX   7.3%   9.3%   7.6%   9.8%
Dreams Punta Arenas XII   5.8%   8.3%   4.7%   5.8%
Casino Sol Calama II   4.9%   5.8%   5.1%   6.4%
Dreams Vadivia XIV   4.0%   5.6%   5.0%   6.2%
Antay Casino & Hotel III   3.8%   5.2%   3.3%   3.9%
Gran Casino de Talca VII   3.4%   2.5%   4.6%   3.9%
Casino Sol Osorno X   2.9%   3.5%   4.1%   5.2%
Casino de Colchagua VI   2.3%   3.2%   3.3%   4.1%
Casino de Juegos del Pacifico V   1.9%   2.4%   3.9%   4.5%
Casino Gran Los Angeles VIII   1.6%   1.8%   2.5%   3.7%
Termas de Chillán VIII   0.2%   0.4%   1.9%   2.4%
      100.0%   100.0%   100.0%   100.0%
Statistics for the year ended June. Positions are 1 per slot machine and 6 per table. Source: Superintendia de Casinos de Juego (SCJ).
* Weighted average.
 
Monticello’s share of the SCJ casino market grew from 25.8% to 28.9% for the year ended June 2011. The Group’s weighted average share of gaming positions in SCJ regulated casinos increased by 1.6% to 19.9%.
 
Santiago casino market revenue
There are two SCJ casinos that compete for the Santiago Metropolitan Region casino market: Monticello in Region VI, south of Santiago and Enjoy Santiago in Region V, north of Santiago. The Santiago Metropolitan Region, has no legal casinos. The two casinos generated total gaming revenues of CLP$ 85.3 billion (R1.2 billion) for the year ended June 2011; this amounts to 137.9% more than the year ending June 2010. Both Monticello and Enjoy Santiago were affected by the earthquake in the prior year.

Enjoy Santiago opened its temporary facility with 301 gaming positions in August 2009. Between July 2010 and June 2011, an additional 1 484 gaming positions were added onto the gaming floor, increasing it to its current size of 1 785 gaming positions.
 
Santiago casino market share
  Gaming revenue   Gaming positions*
 
Casino 2011   2010   2011   2010
Monticello Grand Casino 74.8%   92.7%   62.0%   86.3%
Enjoy Santiago 25.2%   7.3%   38.0%   13.7%
  100.0%   100.0%   100.0%   100.0%
* Weighted average.
 
The additional gaming positions at Enjoy Santiago decreased Monticello Grand Casino’s fair share, based on the weighted average gaming positions of the Santiago casino market, from 86.3% to 62%.

The Enjoy Santiago casino has effectively grown the Santiago casino market and Monticello has benefited from this, although the Group’s share of the Santiago casino market, based on reported gaming revenues, declined by 12.8 percentage points from 92.7% to 74.8%. The Monticello Grand Casino continues to dominate the Santiago casino market.
 
The gaming industry in the rest of Africa
Botswana
The new Masa Towers casino and hotel in Gaborone is scheduled to open in November 2011. The casino, operated by Gold Reef Resorts, is expected to have 150 slot machines and 12 tables. However, approval has been received to increase the number of slot machines at Gaborone Sun from 135 to 150 in line with the opposition casinos.

The Group anticipates that there will be an initial negative impact on gaming revenues at Gaborone Sun following the opening of this casino, which will result in a correction of fair market share between the three main casino operations in Gaborone.
 
Namibia
The new Hilton hotel, adjacent to the Kalahari Sands in downtown Windhoek, opened to the public in May 2011. If the recent casino licence application is successful, a new casino at the Hotel, with around 100 slots and eight tables, will open during 2012. This will impact negatively on both the sands casino in Kalahari Sands as well as the casino at the nearby Windhoek Country Club and Casino. 
 
Swaziland
The Happy Valley casino opened in September 2009 with 112 slots and 15 tables, and was operational for the year under review. It is located some seven kilometres from the Group’s Royal Swazi casino, where overall gaming revenues have declined by 20%, and local market share by 40%.

The courts have been approached for relief against the opening of this casino; however, no resolution is anticipated in the current financial period. There is an increase in gaming levies mooted by Government from the current 5.5% to 15%. This has not been promulgated as yet, but has been circulated in Government by the Minister of Finance.
 
Nigeria
The Group’s Federal Palace casino is the only licenced casino in Lagos State; although the existing casinos in Lagos, which do not have formal licences, continue to operate.
 
Lesotho
There are no competitor casinos in Lesotho.
 

Protect and grow our brand

Over the past three years, we have aimed to differentiate our Group brand from our competitors, and to create a stronger link between the Sun International ‘mother’ brand, and the individual property brands through strategically investing in the positioning of our brand promise of “A Million Thrills. One Destination.”. During the past financial year, our campaign featuring our brand ambassador, Charlize Theron, continued flighting on TV, in print media and outdoor advertising.

Research which was conducted to test the public’s perceptions of this campaign and our brand positioning indicated that the recognition of our brand and the public’s association with its primary attributes have strengthened over the past year, particularly when Sun International is compared with our competitors’ brands, and among our target customer segments. There is also an increase in the recall of the advertising, as well as improvement in the public’s ability to link the communication and message to the Sun International brand. Overall these indicators suggest a closer affinity to the Sun International brand.

The current brand campaign will continue to run through the next financial year.
 

Deliver and enhance our brand promise

At Sun International, we believe that only engaged people can engage our customers. For this reason, we continue to focus on initiatives that communicate and drive the values and behaviours that we would like to see reflected in our people as they deliver on our brand promise.

As part of this engagement, we have implemented a service improvement initiative across all our service touch points. This initiative serves to remind our people how to deliver on the promise of “A Million Thrills. One Destination.”. The design of this unique approach and toolkit was based on best practice service quality and training examples; it is aimed at assisting operations in delivering consistent, quality, memorable service experiences and to enable functional areas to engage and coach their front line staff.

Our One Sun Magazine communicates the internal company vision and messages to our people. The magazine has gained credibility and value in the eyes of the readers, as more people contribute content. 
 

Significant focus on costs

The Group maintained its tight focus on costs which were well controlled at all properties. This did not always translate into margin enhancement given the impact of increased property and energy costs. We will continue to look for innovative means to reduce costs, including a full study on business processes and efficiency in our casinos, without detracting in any way from our highly rated guest experience.

Our focus for 2012 will be on improving customer service and profitability margins at our properties; ensuring tight cost controls and monthly profit improvement targets; ensuring that headcount and staffing levels are optimally aligned to unit business levels; improving the quality and efficiency of our outsourced services; improving productivity and raising the bar on physical, service and product standards with no tolerance of mediocrity.

Our marketing and promotional spend will be targeted to ensure we achieve maximum returns on these investments and, in the case of our hotels and resorts, marketing funds will be redirected to those markets and channels that are showing more promise; specifically Africa, South America and Asia.
 

Monitor casino regulatory environment

Casino Association of South Africa (CASA)
The industry body, the Casino Association of South Africa (CASA), is the vehicle through which interactions among the holders of casino licences, licencees and the various regulatory bodies are conducted. We continue to be an active participant in CASA’s activities. The company’s Chief Executive, David Coutts-Trotter, completed his term as CASA’s chairperson in May 2011.

CASA was a significant contributor to the public interactions conducted by the Gambling Review Commission, which had been appointed by the Minister of Trade and Industry to investigate and make recommendations regarding the gambling industry at large. The Gambling Review Commission’s report has been released, and their recommendations will be debated and processed by the Parliamentary Portfolio Committee of the Department of Trade and Industry.

CASA engages with provincial gambling boards regarding proposed amendments to legislation, and in so doing, ensures that the views of the casino operators on their regulatory environment, are well represented with the provincial regulators. Engagements with the National Gambling Board receive similar attention.
 
Responsible Gaming
There remains a perception in some regulatory arenas, that the socially-vulnerable sections of the population are particularly exposed to the potential harmful effects of casino gambling. Industry effort remains ongoing to address these perceptions, and to point out the assistance which is available under the National Responsible Gambling Programme.

Based on an independent survey commissioned by Ipsos Markinor, it was noted that most South African’s recognise the phenomenon of gambling addiction and 75% of casino visitors know of the service. A number of interventions are available through this programme such as clinical evaluation for the treatment programme, training events, in-patient treatments and the problem gambling counselling line. It should be noted that call volumes to the counselling line have remained consistent with last year and average at 100 per month. There is a total of 39 outpatient centres available throughout the country. There have been 2 891 calls regarding problem gambling for the year ended February 2011 compared to 3 480 last year.
 
Licencing developments
Following the award of a new 15-year casino licence to Emfuleni Resorts in October 2010, the R1 billion expansion project at The Boardwalk Casino and Entertainment World is well underway. Completion of the project is scheduled for December 2012.

The future of the casino market in the Cape Metropole remains uncertain, following the expiry of GrandWest’s exclusivity at the end of 2010. This challenge has been detailed in the Deliver to our Shareholders section.
 

Enhance corporate reputation

The Group understands and appreciates that stakeholder perceptions shape its corporate reputation and consistently engages with its stakeholders. During the year under review the Group compiled a comprehensive stakeholder register, including an engagement action list with measurable outcomes and accountability.

The Group also gave priority to its internal stakeholders and conducted a Group-wide Employee Engagement Survey during the period under review.
 

Innovation

At a glance
Constant innovation is important to maintain player excitement and anticipation as well as to help us deliver on our promise of “A Million Thrills. One Destination.”. To this end we launched new games and rewards throughout the year. We are investing R420 million in an Enterprise Gaming System (EGS) and related hardware from Bally Technologies. This new system will provide Sun International with a modern, scalable and agile technology platform to enhance customer facing functionality and capabilities, contributing significantly to the total customer experience. We have also invested in technologies which support business continuity and energy conservation as we continue to ensure the longevity and sustainability of our business.
 
Gaming product
In order to maintain levels of excitement and player anticipation new machines, games and turnover-reward applications were launched throughout the year. Our latest machines include options which allow customers to choose their preferred volatility levels and have as many as 15 game varieties on one slot machine. Our customers were introduced to the “you play, we pay” reward system. This exciting new concept allows customers to win at their regular slot or table games, and then be rewarded again through our “Promotional Executive” software application.
 
Race day
This unique promotional tool is a ‘virtual’ horse race where up to 14 horses run a 1 000m race. Customers are invited to participate in these races as horse owners or syndicate members, or by choosing horses to win a portion of a race pool. Race day is currently being rolled out at all Sun International casinos, and is already a customer favourite which has created much hype and excitement on our casino floors.
 
Live draw system
Our ticket dispensing system has been enhanced to include random live draws so that the selection of tickets (to find lucky winners), can be done manually or automatically.
 
IGT
A four-year deal was concluded with IGT, one of the major international slot machine manufacturers. This agreement provides the Group’s southern African casinos with 1 000 of IGT’s latest technology machines, including new and innovative games. 
 

Information technology management

The focus for information technology management in 2011 was on enhancing customer experience and reducing the cost of technology ownership. The replacement of our Casino Management System (CMS) and the upgrade of the Customer Contact Centre were some of the key initiatives. The cost of technology ownership was addressed through efficiencies in energy conservation, server virtualisation and multifunction devices projects.
 
Enterprise Gaming System
An EGS aims to replace the legacy Casino Management System (CMS), which is reaching end of life after 25 years in operation. CMS is now outdated technology and insufficiently flexible to enable an innovative customer service offering.

An Enterprise Gaming System (EGS) from Bally Technologies, a global leader in gaming technologies, was evaluated and selected as a preferred solution.

The Bally system will incorporate gaming industry best practice and standards, as well as additional Sun International business processes such as Smartcard functionality and enterprise-wide casino loyalty MVG points functionality. EGS will ensure Sun International retains its competitive advantage, and mitigates the risk of the current system.

The R420 million project is underway, with the development of the software application by Bally to meet Sun International business requirements. A pilot project will commence in 2012 in Morula; and complete deployment at all casinos will be in 2013.
 
Server virtualisation
Server virtualisation has been undertaken in various units to reduce server infrastructure costs, reduce power consumption and reduce Microsoft licencing costs. The R72 million project aims to consolidate the number of servers in the data centre, improving server management, and enhancing failover capabilities for business continuity. Thus far the project has successfully consolidated the physical servers by 80% (123 physical servers to 20 physical servers) at Carnival City, Flamingo, and Head Office. GrandWest, Morula and Carousel will be completed during the latter part of the 2011 calendar year. Project completion at the remaining sites is planned to occur before the implementation of the EGS in 2013. The total savings over four years is estimated at R63 million.
 
Business Continuity
Business continuity has become a major focus, not only as a King III requirement, but also to mitigate business risk from unexpected disruptions such as the power outages in South Africa or earthquakes in South America. Business Continuity Management (BCM) covers a range of issues from failover systems to disaster recovery plans. A business continuity framework has been developed for Sun International, which has been piloted at GrandWest, and will be rolled out to the Group. The BCM plan caters for loss of the entire buildings and equipment, which is mitigated through the Group insurance policy; loss of computer data centre or surveillance rooms, which requires an alternative facility within the same building, and loss of key staff, which requires succession planning, knowledge management and adjusting of operational processes. The BCM plan will be rolled out throughout the Group and monitored for continuous improvement.
 
Multi Function Devices
The Group initiated a project to consolidate Multi Function Devices (MFDs) for printing, copying, scanning and faxing in order to save costs. This was done through a Request for Proposal (RFP) process; with the award being made to Gestetner National and Ricoh. This project is aimed at reducing the number of devices, reducing the number of copies (particularly colour copies) and improving service maintenance.

After a year of deployment and due diligence, the business case was improved through negotiated out-right purchase pricing and service level agreements for break-and-fix, while the support maintenance was handed over to internal IT engineers for first-level and second-level support.

This project has reduced the number of devices from 1 200 to 700; and subsequently reduced the anticipated five year spend from R137 million to R50 million for a current 44 885 000 copies per year. There is still opportunity to reduce the number of copies even further through change management and improved business processes such as double-sided printing and eliminating printing in various areas of the business.

In order to create value, opportunities have been identified to either increase the use and functionality of technology, or to continue to reduce the total cost of technology ownership. Telecommunication Convergence will reduce the telecommunication costs by 15% through merging voice, video and data networks. Consolidation of applications and infrastructure like Microsoft Exchange will leverage best practice and opportunities such as Cloud Computing.

Technology investments are carefully evaluated to increase the business benefit and enhance customer experience. Customer Management initiatives such as our online bookings engine and use of social media, will receive high focus in 2012. These will position the business to explore new revenue growth opportunities through the use of technology.
 
Energy Conservation
 
Energy Conservation has been highlighted as a Green IT strategy, which aims to save energy consumption and reduce carbon footprint. Energy demands exceed supply capacity in South Africa and the 33% increase in electricity costs has had an adverse impact on operating margins in operating our business. By way of example, Energy Management System (EMS) pilot projects have been initiated at Wild Coast Sun and Kalahari Sands in the hotel rooms, during their refurbishments. The EMS activates programmable temperature settings when guest rooms are not occupied, and controls lighting to reduce energy consumption. The pilot installations have shown a 38% reduction in energy consumption, which will be significant to the whole Group.
 

The pilot installations have shown a 38% reduction in energy consumption.