The current lockdown restrictions have negatively affected almost all industries. However, some of the hard-hit industries are the casino and hotel industries. This is because these industries mostly rely on international travelers and the sale of alcohol to survive.
Sun International Casino has become one of the latest casinos that have decided to take strict measures to ensure that they survive the lockdown restrictions imposed by various countries. For this to happen, the casino is planning to cut 3,300 jobs in South Africa and Chile. In South Africa, various casino outlets were forced to shut down for over three months, while in the rest of Africa and Latin America, the casino’s operations remain closed.
How COVID-19 Has Affected Sun International
If you look at the company’s losses since the lockdown measures were imposed, you can understand why the casino has decided to take these measures. Sun International has registered big losses in the first half of 2020. It declined by 615% by the end of June 2020 to R885 million. During the same period in 2019, Sun International earned R172 million. In addition to this, the company’s income was recorded at 56% lower at R3.7 billion in the six months ended June compared to R8.46 billion the year before. On the other hand, the earnings before interest, tax, depreciation, and amortization fell by 96% at R79 million compared to R2.14 billion recorded in the previous year.
Sun International claimed that these losses resulted from most gaming venues and hotels remaining shut from March to June 2020. The company further endured impairment charges of R1.2 billion related to its resort and hotel properties. In response to this outbreak, Sun International claimed that it took measures to minimize cash outflow, protect balance sheet liquidity, and reduce operational costs. Sun International still has some hope since it has started to show recovery signs during post-lockdown. Its gaming operations managed to achieve an income of 39% by the end of July compared to last year. It also enjoyed a 56% income during the first twenty-seven trading days of August.
In Chile, the company has encouraged most of its employees to sign up for a voluntary retrenchment process that will involve approximately one thousand people. Up to date, only 451 employees have accepted the offer.
What Does This Mean for South Africa?
Sun International’s operations in South Africa were hit very hard by the pandemic, which saw the company register impairments totaling up to R1.2 billion across most valuable assets. The biggest chunk of the impairments happened at Sun City, with a total of R900 million. Some of the other affected outlets include Boardwalk at R180 million, Maslow Sandton at R99 million, and Sun Dreams at R12 million. In general, the income from South African operations declined by 55% compared to the previous year. The company made a lot of profit in 2019, but the pandemic has seen nearly most of its operations suffering losses in 2020 in South Africa.
Due to a decline in its profit, Sun International informed SACCAWU, its trade union, that it was planning to use section 189A related to retrenchment exercise. This move is likely to impact close to 2,300 employees in the country. The approximated cost of this move is R280 million. It further stressed that this move would affect some of their big outlets such as Maslow Sandton, Sun City, The Table Bay, Boardwalk, and the Wild Cost.
The consultation process was to take place for sixty days, which was to end on August 18. However, the time frame was later extended to give some of the employees a voluntary retrenchment. This move aimed to ensure that the number of retrenchments done under section 189A is reduced as much as possible.
What the Future Holds for Sun International
Sun International expects that the current situation of COVID-19 and lockdowns will continue for some time, and it expects further negative impacts on its operations. However, the company said that it expects a slow recovery in the coming days. Even though most of its casinos have bars and restaurants, some of them remain closed due to little demand, unlike South African online casinos. Also, as a result of the lockdown and the various restrictions imposed regarding the sale of alcohol. Initially, the curfew’s impact largely affected the company’s operations in terms of a reduction in gaming revenue. However, towards the end of July, the situation steadily improved, and the trend continued in August.
Properties in the hospitality industry in South Africa largely remained closed in July because of the restrictions involving inter-province travel for leisure. The country has, however, recently announced that it would move the restrictions to level two. This will oversee the resumption of inter-province travel. As a result, Sun City is scheduled to reopen on September 2, 2020. During a recent update, Sun International also claimed that it expects a slower recovery in the hospitality industry due to the ongoing international travel restrictions. As a result, the Maslow Sandton and The Table Bay outlets will remain closed until there are sufficient grounds to justify their reopening.
What Should the Other Casinos Learn from Sun International?
The latest move by the Sun International should act as a wake-up call for other casinos that do not currently have the right measures to ensure their survival during any future lockdowns. It is high time that the gambling industry looked for other means that will ensure they survive through similar circumstances in the future.
The industry should partner with other industries to find alternative ways of earning revenue other than just depending on revenue earned from their physical premises. The industry should also take advantage of the online space, and move part of its business operations online, which will help tap this market that is not widely affected by lockdowns.