The hotels and leisure sector continues to be dominated by the big gaming groups.

Sun International (SI) and Gold Reef still dominate the sector, while hotel group City Lodge continues to be a big player.

However, the sector was smacked by the recent downturn in the economy - SI's stock is down 40% over the past year, Gold Reef 41%, City Lodge 9% and IFA 57,6%.

SI's revenues were 12% ahead of the comparable period last year, but its operating profits were battered. As interest rate increases and higher inflation rates began to affect consumers, the group's revenue growth has slowed.

Two share buy-backs at R2,3bn that Sun International undertook, as well as the purchase of 61,3% of Real Africa Holdings, hit Sun International's net asset value (NAV) hard.

The buy-backs were an effort to improve balance sheet ratios, but in effect doubled debt.

With the regulators providing limited opportunities for new casino licences in SA, SI has set aside R2,25bn for international expansion, including a US$200m casino complex in Chile and a $120m development in Nigeria. Investors are upbeat about the group's 40% interest in Chilean entity San Francisco Investment SA.

The 66 300 m² hotel and casino complex is SI's first major investment outside Africa. It's expected to open in October.

"We see this as an opportunity to get involved in other opportunities in South America," says CE David Coutts-Trotter.

Meanwhile, controversy has hit gaming group Gold Reef, after an R11,4bn buyout deal with private equity company Ethos fell through. Gold Reef paid chairman Maxim Krok a R12m "special fee" despite the failed deal. Rival Tsogo Sun said the payment was an "improper incentive" to sway Krok in favour of supporting Ethos. The group says the failed deal won't affect the group's performance - it opened two new casinos, Silverstar in Gauteng and Queens in the Eastern Cape.

The casino group also concluded a number of deals that increased its BEE shareholding to more than 25%.

City Lodge also concluded its BEE deal, worth R485m.

The Tourism Investment Corp (Tourvest) was bought out by a consortium led by Union Square Properties (trading as Guma Tourism Holdings), the Industrial Development Corp, Old Mutual Life Assurance Company and some management members of Tourvest.

The deal was closed at R2,08/share - valuing the company at R1,7bn. Tourvest's listing on the JSE will be terminated once the deal is implemented.

The Don reported another year of solid results. The group is now firmly on the growth path and is looking at expanding in Africa.

However, the share price of IFA Hotels & Resorts SA, a subsidiary of the Kuwait-based IFA Group took a beating after total revenue decreased from R127,3m in the previous year to R78,6m in 2007.

The group says major capacity expansion will result from acquisitions such as the Legends Golf & Safari Resort in the Waterberg and from developments nearing approval, such as Zimbali Lakes and the Boschendal Estate.