Dream big: Sun Dreams looks to new horizons

Casino Review Sun Dreams Patricio Herman
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2016 was a landmark year for Chilean operator Sun Dreams as the firm completed its merger with Sun International in June and opened a new venue in Panama. Patricio Herman, the company’s Gaming Business Director, gives his take on what will be the challenges and opportunities for Sun Dreams in the year ahead.

 

International Casino Review: What were the reasons behind Dreams decision to partner with Sun International and what will be the benefits of this merger?

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Patricio Herman: One of the objectives of the merger was to ensure the company had the financial backing and the executive capacity to continue to develop new investment plans in the international markets.

In this vein, we have already made a total investment close to US$90m in Panama, with two casinos and about 600 gaming machines and we are developing a very similar growth process in Colombia and Peru.

Additionally we are watching very closely the opportunities offered by the markets in Brazil, Uruguay and Argentina.

ICR: In 2016, Sun Dreams opened its new Sun Ocean Downtown Casino in Panama. How much investment did this Casino Review Sun Dreams Patricio Hermanproject require and what distinguishes it from the company’s other Panamanian venue?

PH: The opening of the new Sun Ocean Downtown in October 2016 marks a milestone in the company’s history, since it represents the first project carried out by Sun Dreams as a merged entity.

This new entertainment centre adds to the Sun Ocean casino offering, and together the two venues represent a global investment close to US$90m by the company in the Caribbean country.

Our first venue, Sun Ocean, focused on a high class segment, with a luxury offering together with a 5 star hotel, while our second casino and 4 star hotel is aimed more at a medium class audience.

The casino has 250 gaming machines and 15 tables, alongside an attractive range of entertainment options, including shows.

ICR: The Panamanian gambling industry has protested against the five percent tax on winning players. How can operators reverse the impact of this tax and does Panama remain an attractive market for foreign investors despite this?

PH: For an operator it is better to pay a higher percentage of gaming tax than any direct tax on the customer, as in the case of Panama or Chile’s entry fee.

In both cases, the measure used to offset and minimise the impact of this direct tax on the customer is to provide compensation to them – via free playing credit, complimentary drinks and snacks, and free shows etc.

Above all it’s key to provide a quality of service that surpasses the barrier to entry imposed by this tax on clients.

In the case of Panama, at present we are seeing a negative trend in the local casino industry as a result of this tax on players, and this is reflected in the decrease in gambling tax revenue since it came into force. For this reason, Panama is not an attractive market at first sight.

Despite this tax, Sun Dreams has opted for an aggressive expansion strategy during this difficult period, anticipating that the Government will reevaluate the tax in order to help reverse this economic trend.

This would be to the benefit of both the casino industry and the country as a whole, since if there is more income there will be more tax revenue collected.

ICR: How do you see the Latin American market at the moment and which market is currently the most competitive?

PH: There are several very competitive markets in the region, but in my opinion the one that is clearly ahead is Peru, particularly Lima. This is due to the large number of casinos and gaming parlours concentrated in the city, alongside the country’s strict legislation against illegal gaming.

This creates a situation where we see more than one significant operator competing – at times on the same block – in many areas of the city.

Regarding Uruguay, we are convinced that it continues to be an attractive market and we continue to explore the best opportunity for us to enter.

Both Panama and Colombia are also very competitive markets which forces us to be creative and innovative in order to access segments that are not considered in the current casino offering.

This diversification is an important part of what we are doing today with our second operation in Panama and in the very near future also in Colombia, with a similar format, of casinos aimed at other player segments, which will join our Sun Nao Casino, the largest and most modern entertainment centre on Colombia’s Caribbean coast.

ICR: Which market do you consider presents  the most unfavourable conditions for casino operators?

PH: Speaking in terms of operations, rather than investments, the most unfavourable conditions in any market are those that impose a tax directly on customers, such as the case in Panama and Chile.

In Chile, under the title of entry ticket, the state charges a direct tax on people who want to enter a casino and even if every effort is made to compensate for this, such as waiving the entrance fee, it places the casino at a disadvantage when set against competing forms of entertainment.

ICR: What can we expect to see from Sun Dreams in 2017?

PH: For the 2017 financial year, Sun Dreams will be investing around about US$47m. This covers all of the company’s operation in Latin America, in Chile, Colombia, Peru and Panama.

This figure represents 50 percent more than we invested in 2016 and covers remodeling works in some of our Chilean operations: particularly infrastructure projects in Sun Monticello and the renovation of the rooms in several of our hotels in the south of the country. Additionally it will go towards improvements in our casinos and games in Peru and expansions in Panama and Colombia.

However, this figure corresponds only to the investment in assets, improvements and internal growth. The procurement and development projects currently in the pipeline are not covered since many are still under consideration.

Vital Statistics

Currently, Sun Dreams is the largest operator of casinos in Chile and Latin America, with a total of 13 properties distributed in four countries and a total of approximately 7,000 gaming machines and 300 gaming tables. At present the company’s properties include the Sun Ocean and Sun Ocean Downtown casinos in Panama, the Nao Casino in Cartagena de Indias, Colombia; The New York, Pachanga, Kingdom and the Pachanga San Borja casinos in Lima, Peru. While in native Chile, Sun Dreams operations are located in Iquique, San Francisco de Mostazal, Temuco, Valdivia, Puerto Varas, Coyhaique and Punta Arenas.

 

 


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