and guest experience
In challenging the assumption that the markets in which we operate in are relatively mature, we are actively relooking how our business is structured and how we operate to maximise the value we can create and to improve the guest experience. Ensuring that existing and new guests keep choosing Sun International properties as their destination of choice – through offering a great experience – is core to this focus area.
We also collapsed the historic divisional structure where gaming was managed separately from hotels/resorts. Gaming represents around 80% of our total business and it was our belief that we could improve our gaming revenues by removing the “silos” and giving our gaming customers better access to our unique hotels and resorts, in particular Sun City. Under the new structure it has been very pleasing to see Sun City’s gaming revenues grow 16% – significantly better growth than prior years due to more frequent visits by our existing customers as well as new gaming customers.
Key initiatives currently underway to improve our operational performance include:
Following the restructure of the management team, we focused next on the organisational structures of the rest of the business, in particular to try and achieve better operational efficiencies. In Chile this could be achieved rapidly and was successfully implemented in September 2013, leading to a significant improvement in margins without negatively impacting on guest experience. In South Africa, this process, implemented in terms of section 189 of the Labour Relations Act, has involved a thorough and lengthy consultation process with unions and other stakeholders such as provincial gambling boards. We offered a voluntary retrenchment/early retirement programme which was accepted by approximately 700 of our 6 800 employees in South Africa. The cost associated with this programme (and other performance-related retrenchments) amounted to R165 million and this was provided for at 30 June 2014 (with the affected employees leaving then or shortly thereafter). A further 500 to 700 employees are likely to be retrenched following an extensive assessment. These employees have been identified and will leave the organisation by end October 2014, with associated costs of approximately R100 million. The anticipated benefits of the more efficient operational structure will start to flow through in the 2015 financial year.
As can be expected, it has been a very difficult time for all employees across the Group, exacerbated by the protracted time frame necessitated by the extensive consultation process. The improvement in operating results in recent months has been achieved in a very uneasy environment with staff morale at an all-time low and we would like to thank and commend everyone, including those no longer with us, for the immense effort in very trying conditions.
In line with our efforts to improve all aspects of our operations, we have also revitalised our brand strategy. We have interrogated our business, our market position and our values, and used these inputs to formulate a new brand. In developing a new brand proposition, we considered feedback from external stakeholders (including our most valued guests, provincial and national gambling boards, the media and investment analysts) and internal findings (such as the culture survey reported on last year). With the organisational restructure almost complete, the next phase is to develop and entrench new values and a performance-based culture which is a key focus for the year ahead. In the interim we have launched our new logo.
We understand the power of our brand. It is the promise that we make when we take ourselves to market. But we also know that we do not own our brand – it is owned by our employees, customers and other stakeholders. Our best brand ambassadors remain our employees, and our customers typically feel and experience the brand through them.
Sun International’s new brand will be more than the colours and lines of a corporate identity; it is in essence a new positioning and business intervention that, like our revised strategy, is a critical foundation for taking the Group into a new era.
Over the years Sun International has developed a collection of different brands – each property individually named without any strong pull towards the mother brand. Our new brand architecture is based on a monolithic logo to unite these elements, and build the credibility of the overarching brand. It retains a strong connection to our established brand – “Sun” – and carries forward the nostalgia and value built up over our proud history of being a premier leisure and entertainment group.
The increasingly digital environment favours the simple and short; the new logo is instantly recognisable at any scale, and the brand architecture will follow in, for example, Sun City, SunBet, Sun Rewards, Sun Touch and Sun Cares.
In our shift to being a customer-focused marketing-driven company, our brand is “Sun”, and our name and logo is “Sun”. It is imbued with life, energy and consistency.
The new branding strategy is just one component of the significant effort being put in by our marketing team, and in this regard we have strengthened our marketing and sales capability with the appointment of Rob Collins in January, as our Chief Marketing and Strategy Officer. Rob has a significant amount of experience in the hospitality, leisure and gaming industry and has already made an impact in this critical part of the business.
We have made good progress towards improving our marketing and sales capability – we have brought in new talent and centralised the team, grown sponsorships through higher-visibility partnerships, and have a major emphasis on digital. The real benefit of this should be seen in the year ahead where we expect that brand awareness will greatly improve.
Our review of the sales and distribution channels has resulted in significant change. To align with our strategy, we have closed the overseas marketing offices, which included offices in London and many countries in Europe. In light of the weakened Rand, closing this fixed- and high-cost network has also had a significant cost saving benefit. We are now marketing internationally through a fully integrated commission-based representation model in our core and growth markets. We have also concluded the disposal of Sun International Travel (Pty) Ltd (Dreams), our in-house tour operator.
We have completed a restructure of our sales approach in South Africa, which is improving the sales culture, conversion, workflow and administration.
In addition to managing our extensive distribution partner network of over 5 000 travel trade partners, we continue to leverage our affiliate partnerships and ventures to grow our direct exposure to corporates and consortia.
When it comes to creating general brand awareness, our two flagship events have received a lot of attention over the past year. The Nedbank Golf Challenge has entered a new era, with the event being co-sanctioned by both the Sunshine and European Tours, a change in format to 30 players and an increased prize fund of US$6.5 million. We also have made substantial changes to the 2014 Miss South Africa Pageant, with a new television and production format, and a total rebrand. This has attracted Cell C as the title sponsor. Both events were extremely well received by the media and public and generated significant media coverage for the Group across all platforms.
We view “Casino Marketing” as being distinct from the general marketing/brand awareness initiatives and this area has gone through a complete transformation over the past year. We have built an entirely new team that is focused on driving gaming customer revenue growth – our core business. We are utilising advanced customer analytics, consistent retail messaging and retail promotions across our casinos, as well as customer bonusing by harnessing the recently installed Bally gaming and customer relationship management systems.
The new casino marketing team now reports to the COO through the following focus areas:
To keep our offering fresh we are launching an entirely new loyalty programme – Sun Rewards – that will replace the current MVG programme. It leverages the improvements we have made in our IT systems to extend beyond gaming to include hotels, restaurants and entertainment across the Group. It stands as an excellent example of the synthesis of brand, gaming and resorts, and aligns with the new brand architecture.
We are already seeing the benefit of a more focused approach to casino marketing, with the significant second half improvement in gaming revenue standing testimony to the hard work that has gone into this area. In the year ahead we hope to get a bit more traction in the VIP initiative which is still being developed.
We have evaluated the possibility of insourcing key services that serve as key touch points in delivering a differentiated customer experience as well as other areas of the business as we seek to minimise the use of contractors and consultants and bring key contractor skills in-house. Where skills should logically be outsourced to consultants we are exploring options to improve aspects of their contracts including rewards or penalties based on performance.
In the food and beverage space, we have appointed specialist expertise, including a Group General Manager for food and beverage. He has engaged with key properties and developed a broad strategy for enhancing food and beverage to ensure consistency and excellence across our properties. In the year ahead we will be renovating and upgrading certain of our restaurants and anticipate that we will take ownership of a number of outlets.
We have made some progress in insourcing cleaning and housekeeping at The Table Bay Hotel, The Maslow and some smaller units in South Africa, and at The Royal Livingstone and Zambezi Sun in Zambia.
The implementation of EGS was concluded ahead of time and below budget. The focus is now on utilising its features to benefit from the significant investment made – and as reported above the recent increase in casino revenues can in part be attributed to this.
An important ongoing project for the IT team is the implementation of the ERP system. The analysis and design phases have been completed, identifying additional requirements and clarifying scope items. The change management team is ramping up and working closely with the pilot properties. We expect that implementation will be well advanced by the end of the 2015 financial year.