South African Casinos Withstand Recession
A current report put out by market analysts PricewaterhouseCoopers shows that while the South African leisure industry has been hit by a recession in recent years, local casinos have managed to weather the storm, and they have not been as badly impacted as would be expected.
The director of PricewaterhouseCoopers, Nikki Forster wrote in the group’s report, South African Hospitality Outlook: 2013 – 2017 that the country’s hospitality and leisure industry has experienced difficult times since 2009, and has needed to evolve in order to adapt to new markets.
According to the report, the struggling economy had an impact on South Africa’s casinos and South Africans’ gambling habits, but the impact was not as severe as experienced by local hotels.
“There is often a misconception that the casinos and Limited Payout Machines (LPM) target the poor, but this is not the case and a large number of players come from middle- and higher-income brackets. While the recession has definitely impacted them, the effect is somewhat tempered,” said Forster.
“Nevertheless we have seen a significant amount of money being invested into casinos to improve the product offering and often to reposition them to appeal to a wider audience. This would include cinemas, popular restaurants and theatre productions.”
Forster provided as an example the Gauteng based Montecasino which has created an entire entertainment resort around its gambling facilities, including a theater, movie houses, stores, hotels and restaurants.
The report shows that between 2006 and 2008, the hotel and accommodation markets expanded rapidly and then slowed in 2009 as the global recession hit. In 2010, boosted by visitors to South Africa for the World Cup, the market picked up again. However, the World Cup resulted in an oversupply of hotels in South Africa and “occupancies fell dramatically.”
“Room rates dropped as hotels fought for a limited market of guests,” said Forster. “Supply exceeded demand.”
However, had it not been for the World Cup, the market would have declined in 2010.
In recent months, there have been signs of improvement in the industry and demand has increased. Forster says that there has been a “limited increase in supply”, improving average room rates. However, the market still has a way to go before it reaches the levels of pre-2009/2010, and there is still considerable variability in room occupancy from month to month.