GAMBLING: Chips Down At Cape Casinos
Recent Western Cape Business News
WHILE the Casino Association of SA (CASA) annual report for 2007/08 suggested Cape casinos were in fine fettle (see CBN, March), recent developments show that Western Cape-based casinos now appear to have been under-performing their counterparts in other provinces for the last six months of 2008.”
Recent results released by Gold Reef resorts showed that the Mykonos Casino saw revenue dropping 3.4% to R116 million with operating profits dribbling down 11% to R48 million.
This is not a great sign for Mykonos, which is in the middle of a refurbishment programme that is due for completion by mid-year.
The refurbishment exercise adds 22 slots to Mykonos’ gaming floor to “relieve capacity constraints during the busy holiday season.”
Another of Gold Reef’s Western Cape casinos – the Garden Route Casino at Pinnacle Point – also saw a slight crimp in revenue to R164 million with operating profits sliding almost 5% to R80 million.
In spite of the profit drop in the Garden Route, Gold Reef is going ahead with renovations to add more slot machines as well as expand the food and beverage and entertainment facilities.
The reasons for the profit pressure at Mykonos – which has over the last few years been one of the best performing small casinos in SA – could be numerous.
Firstly there has been additional competition in the Western Cape area with GrandWest completing an extensive expansion programme and the opening of the Golden Valley Casino in Worcester.
CBN notes the Golden Valley casino grew its revenues to R54 million in the six months to end December 2008, and produced a fairly solid R16 million in gross profits.
The rapid expansion of LPM (Limited Payout Machines) in bars and restaurants throughout the Western Cape – undertaken by Thuo Gaming and Vukani - is also bound to impinge on casino traffic on smaller Cape casinos.
The biggest reason, however, for the slowing down in revenue and profit growth in both the Mykonos and Garden Route casinos could stem from tighter economic conditions which is staunching spending at the casinos but also the number of visitors to West Coast and South-West coast holiday resorts.
Interestingly, Sun International reported that GrandWest – the biggest casino in the Western Cape by some margin – experienced difficult trading conditions that necessitated cost containment efforts.
GrandWest’s revenue was 4% down to R841 million and its gross profits were down 6% to R343 million in the six months to end December 2008.
While most Cape casinos - and CBN was not able to find the latest figures for the Caledon casino (which has been sold to HCI) - have taken some strain, it is worth noting that casinos in other parts of the country have fared better - including a few sites in the very competitive Gauteng market.
Performance by Cape casinos during the traditionally quieter months to the end of August will be interesting to gauge – particularly whether Cape casinos can keep their operating margins at over 35% in leaner times.
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