Clearer Focus

1909

Sun International has always been a gaming group with hotels, but that focus began to blur with the emergence of some of the group’s more iconic properties. As a result, the last three years of introspection have brought the South African gaming giant back in line with a more clearly-defined strategy, as explained by CEO Graeme Stephens to Dylan Rogers in Johannesburg.  

Sun International is arguably a victim of its own success, with iconic properties such as the Royal Livingstone in Zambia and Table Bay and Palace of the Lost City in South Africa creating the perception that group had taken up a position as a luxury hotel operator.

CEO Graeme Stephens admits that Sun International may have been “a little confused in how we put that message out”, but the appointment of a new management team allowed the group to once again look at exactly what it is.

“We’ve always been predominately gaming, if you look at our numbers,” says Stephens. “All we’ve done is said let’s be clear on where we make our money and where the opportunities for growth lie.”

According to Stephens, whilst Sun International “will always have a hotel component”, those growth opportunities lie in gaming, and not necessarily here in Africa. Hence the group’s decision to explore South America some years back, to the extent that it now has a presence in Chile (Monticello Casino & Hotel), Colombia (Sun Nao Casino), and Panama (Ocean Sun Casino).

“Unlike Africa, many Latin American countries offer a depth of wealth in the economies, where there is a mass market that can move the needle for a casino,” says Stephens. “The countries that we’ve targeted are growing much faster than South Africa, even with the slow-down from China.

“We don’t think there’s the depth of wealth in most African countries to support a large casino product like we’re used to in South Africa.”

With that in mind, it was no surprise then when Sun International disposed of the majority of its African assets to Minor Hotel Group last year. That deal ultimately resulted in the Zambezi Sun in Zambia, the Gaborone Sun in Botswana, the Lesotho Sun and Maseru Sun in Lesotho, and the Kalahari Sands in Namibia all being rebranded as AVANI – one of MHG’s hotel brands – properties this year.

As you would expect, Sun International continues to manage the on-property casino operations, with MHG assuming the hotel management, marketing and distribution of the properties.

“Those properties had a greater relevance to a South Africa that didn’t have gaming,” says Stephens. “As the country has evolved, post-1994, the original client base for those properties was driving from South Africa, and they’re no longer doing that.”

As with the Royal Livingstone and the other components in its SunLux Luxury Hotel Collection – Table Bay, The Maslow in Johannesburg, and the Palace – Sun International was reluctant to give up the Federal Palace Hotel & Casino in Lagos.

“We held onto Nigeria because it does offer a deep population which can support a large casino,” says Stephens. “Our model is casinos that draw from the local community around them. It’s a big economy and we don’t want to exit.”

That includes developing the Towers next door to the Federal Palace, with plans for office parks, a residential offering and a relocation of the casino.

Nigeria is not the only location in the Sun International development ‘master plan’. In Latin America the next few years will see the group bidding for new licences in Chile with plans to also expand into Peru. Back ‘home’, Sun International awaits the Competition Commission’s approval of its plan to buy Peermont Hotels & Resorts, with the latter’s Emperors Palace property the jewel in the crown of that proposed acquisition.

“What the deal achieved was the lifting of an objection that Peermont made against us relocating a little license at Morula to a potentially big entertainment complex in Menlyn, Pretoria,” says Stephens. “There are also a lot small casinos in the Peermont stable and we see an opportunity to put them together with ours into a portfolio that is then run by a management team that focuses on small casinos.”

 

The Menlyn project is arguably Sun International’s ‘900-pound gorilla’ – a $225-million urban entertainment destination that would include a 5-star hotel, conference centre and casino, an indoor entertainment centre, retail shops, restaurants and bars.

“It’s the most exciting development in South Africa for more than a decade,” says Stephens.