Land-based casinos in South Africa are finally showing signs of a full recovery following several difficult years. 2020 was particularly challenging, with Sun International, one of the industry leaders, announcing a record loss of R1.1 billion.
The industry overall saw a significant drop in earnings, down 48% from the previous fiscal year.
Conversely, during this period the iGaming market expanded significantly. Demand for gambling did not decrease, which meant online alternatives were able to take advantage. In terms of market share, land-based establishments have arguably experienced permanent damage.
Amid growing competition and ever-changing market conditions, what is the future for brick-and-mortar casinos in South Africa? Will companies be able to adapt, or will some of the biggest names go bankrupt?
Analyzing the Competition: Online Casinos
The online gambling industry is currently experiencing record-breaking growth in South Africa. According to estimates from PWC, online gambling revenues jumped to 21,200 (R million) in 2021, up 20% from 2016 figures. Industry analysts predict this is just the beginning, with iGaming not yet having reached maturity in the region.
To land-based casinos, online alternatives represent an existential threat. It’s not difficult to see why consumers have increasingly shunned land-based establishments in favour of iGaming:
The sheer number of high-quality online casinos catering to South Africans. Just a decade ago, pickings were very slim indeed, with companies often focusing on the European and Asian markets instead. The landscape has changed, with established multinationals working to attract South African consumers.
South Africa is home to a growing younger population, all accustomed to doing everything on their smartphones. New gamblers tend to opt for online casinos, with land-based establishments only visited occasionally.
Smartphone penetration is also one of the biggest reasons why online casinos have experienced such a meteoric rise in South Africa. Between 2016 and 2018, the Independent Communication Authority of South Africa published an increase in smartphone ownership from 43.5% to 81.72%.
‘If You Can’t Beat ‘Em, Join ‘Em’
It’s clear that online casinos are here to stay, whether the brick-and-mortar casinos like it or not. And it looks like the tide is finally starting to turn, with traditional establishments realizing that it is impossible to stop the wave.
Not only that, but it’s also starting to click that having an online presence is good for business. Online-only casinos are competition, sure, but adding a digital component can represent an opportunity for growth.
As a result, land-based casinos are looking more favourably at online competitors, seeing the potential in expanding or launching their own iGaming offerings. According to Martin Sack, speaking at the SBC Digital Africa conference, land-based establishments are increasingly pushing for further legalization of iGaming in South Africa.
Casino to Entertainment Venue
The traditional casino is a gambling venue first and foremost, yet in this competitive environment companies will need to offer a little bit more to entice online gamblers. For example, many casinos are attempting to become fully-fledged entertainment venues, mimicking the success of land-based establishments such as Caesar’s Palace or Luxor in Las Vegas.
Venues are expanding investment in their bar and restaurant operations, whilst also adapting their online media channels to highlight aspects beyond their slots and table games. Monte Casino, for instance, puts its live-action sports, music, and restaurants front and centre of its website.
Emperor’s Palace, another leading provider in South Africa, is pivoting to attract conference organizers, highlighting their quality accommodation, spas, live entertainment, and large selection of restaurants.
This wide-ranging approach means that casinos can attract consumers who do not need to place a single bet for the land-based operators to be profitable. These services are not mere add-ons, but core components of the service offering.
Simon Thomas, the chief executive of London’s Hippodrome Casino, goes one step further. Casinos shouldn’t aim to be ‘just’ entertainment venues, but rather become embedded in the local area’s fabric. This process of integration, he argues, is “absolutely essential” to the survival of the industry.
Land-based casinos have a legitimate concern that the existing online gambling industry lacks regulation. To effectively compete in the market, Sunbet’s representative at the SBC Digital Africa conference, Nitesh Matai, argues that a cohesive legislative framework must exist to ensure fair competition.
Should the South African government decide to relax the existing legislation and choose to legalize the provision of online gambling within the country, land-based casinos stand to benefit. In other countries where licenses have been granted, established companies were often given a first-mover advantage.
It’s clear there is still room for land-based establishments, even in an industry where online gambling seems to be the focus of expansion. However, brick-and-mortar casinos must rely on more than just their traditional offerings, as consumer behaviour indicates they expect more than simply access to slots and table games.