In sub-Saharan Africa, the casino industry is biggest in South Africa, where gaming giants such as Tsogo Sun, Peermont and Sun International dominate the land-based industry.  All three companies have casinos located in hotels that they manage, as well as stand-alone operations.  Elsewhere, Kenya has a reasonably large gaming industry, although most operations are quite small, and none rival what is on offer in Sun City and MonteCasino.

Look at the figures for per capita GDP, and it is no wonder that South Africa has the largest industry – at US$10,280, the per capita GDP in South Africa is almost five times the average for sub-Saharan Africa at US$2,108 (both figures at 2010 purchasing power parity, World Bank July 2011).

Whilst most casinos in Kenya cater primarily to the tourist trade, the bedrock of profitability in most operations is the local population, including resident expatriates.  So casinos in capital cities, from Abuja to Monrovia, can attract the higher-earning population there, and the diplomatic community.  Go into most casinos in Nigeria, for example, and the majority of players appear to be either Chinese or Lebanese, both nationalities known for their love of gaming.

The gaming industry is a difficult one to succeed in.  It is rarely praised, and often vilified.  Governments mostly love the industry, because it is such an easy target for taxation.  Local communities blame the industry for fomenting social ills, not only problem gambling (which the serious players in the industry take seriously, as being as much their problem as the individual’s), but also those such as corruption, crime and prostitution, seeing casinos as only for the rich and powerful, an alien presence owned by a foreign company, employing foreigners in all the top jobs, and so on.  It is not for them, so it must be wrong.  Religious organisations often support this antipathy – but it is noteworthy that Islam and Egypt, a country with the second largest number of casinos on the continent of Africa, live amicably side by side.

But casinos are a legitimate part of the hospitality business, and can be an extremely useful component of a mixed-use development.  Look at MonteCasino in Gauteng as an example; named not after the gaming content but after an Italian village, and themed as such, it is a superb mix of gaming, retail, entertainment, lodging and other facilities, a destination in its own right in which the casino is a relatively small, but essential, part.

Even if you are not a player, the presence of a casino, the noise, the lights, the ambience, still gets the adrenaline going.

But casinos are volatile businesses, and here’s a fact – the house does not always win!  Casinos can make a loss.  The economic environment will directly affect the propensity of the locals to gamble, and Tsogo Sun has recently announced a 4 per cent drop in profits due to a decline in leisure spending, and Sun International reported like-for-like growth in revenues of only 3 per cent in early 2011.  Not only is the impact from a negative economic environment, however – local and international political factors can have an impact.  A change of government can bring about new legislation, new taxation, or even an outright ban on gambling (which just forces it underground). And a deterioration in relations with foreign countries can close off cross-border traffic overnight.  Or (and lets face it, this is what it is all about!), the players can win, and the house can lose!

Casinos are not a licence to print money, but well and responsibly managed they are a profitable business, and fit well alongside a hotel, and especially within a mixed-use development.  Like any other business, they need careful planning, especially a close examination of the market – some communities have a higher propensity to gamble than others, and just because there are some big-time players in the country, doesn’t necessarily mean that they want to (be seen to) play in their home town.  Casinos are not a proverbial “licence to print money”, but they can be profitable businesses – and don’t underestimate the need to continuously reinvest in the equipment, especially the slot machines – tired old one-arm bandits will not attract the “right crowd”.

Operating costs of a casino are high – an operational margin of 10 per cent of the house revenue (i.e. after paying out winnings) is not uncommon.  A modern casino has high tech security equipment, sometimes with a 24-hour dedicated link to an offshore control centre, a large number of security, surveillance, gaming and catering personnel, and the need for an uninterrupted power supply, a major challenge in some places in Africa.  And then there is the investment required in responsible gaming programmes, and within the host community to overcome or at least mitigate negative attitudes.

Interestingly, Tsogo Sun and Sun International are two of the biggest investors in hotels outside of their home country – the former own hotels in Lusaka, Maputo and Dar es Salam, all branded Southern Sun, and it s a moot point whether the completion of the renovation of the Federal Palace Hotel in Lagos, and the creation of Nigeria’s largest casino there, would have been completed in 2008 without an investment from Sun International.

From their point of view, they would never assume that a casino will subsidise an otherwise-marginal investment in a hotel.  Whilst casinos are attractive to the leisure and

conference markets, they are not the main pull factor – the location has still got to be the right one.  And if the hotel cannot attract enough business in its own right to be sustainable, then the business model is flawed from the outset.

Casinos are exciting, glamorous and profitable – but they are not for the faint-hearted, and definitely not for the amateur!

Trevor Ward

W Hospitality Group, Lagos

Affiliated to

1 Resort Court
Plot 15,Block XV,Chief  Abiodun Yesufu Way Lekki,Lagos, Nigeria
+234 803 321 0646
phoneenvelopelocation-arrow linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram