Risma: Hospitality

THE COMPANY: Founded in 1993 and floated on the Casablanca Stock Exchange (CSE) since 2006, Risma is the first investment vehicle dedicated to hotel development in the kingdom. With 33 hotels and nearly 4800 rooms, Risma manages the largest hotel chain in Morocco and deploys a unique portfolio of hotels under the Accor brand in 13 cities across the country. Today, Risma has a broad offering enabling it to target the upper segment through the Sofitel Luxury brand; the mid-range segment through the Novotel, Suite Novotel, Mercure, MG allery and Pullman brands; and the entry-level segment through the Ibis and Ibis Budget brands.

As of October 2012, Accor Group controlled 31.33% of Risma’s capital, RMA Watanya 21.16%, CIMR 1.11%, MCMA-MAMDA 6.65%, T Capital Group 6%, Banque Marocaine du Commerce Extérieur 3.55% and Casablanca Finance Group 2.28%, respectively. The remaining 17.04% floats on the CSE. Risma’s assets are managed by Accor Gestion Maroc (AGM), such that Risma pays brand, management and performance fees to AGM. To ensure a convergence of Accor Group interests with those of the other shareholders of Risma – Accor Group holds 75% of AGM’s capital – Risma has 25% participation in AGM’s capital.

Over the last few years, Risma’s share price has witnessed a strong decline, with a decrease of 71.4% from its all-time high of Dh458 (€40.72) in December 2006 and a drop of 35.6% on a year-to-date basis. It was trading at Dh131 (€11.65) as of December 2012. The negative performance of Risma’s share price can be explained both by the overall negative performance of the stock market and by the fact that Risma had a poor financial performance in 2011. These financial performances can mainly be explained by the impact of Risma’s ambitious development programme with more than Dh4bn (€355.6m) invested in hotel development and acquisitions over the last 12 years. One of the specificities of the hotel industry, in fact, is that a hotel needs generally needs three to five years to reach its break-even point, as its net income is affected following its opening by high depreciation and interest costs. From an operating and marketing point of view, hotels need some years before reaching satisfactory occupancy rates and revenues per available room.

The company was worth Dh1.0bn (€88.9m) and deals at a price-to-book ratio of 1.0 as of December 2012. As of the end of June 2012, revenues increased by 4% to Dh558m (€49.6m) while net income stood at -Dh66m (-€5.87m) compared to Dh27m (€2.4m) as of the end of June 2011. This decline in performance is mainly the result of the hotels that have only been recently opened (in operation less than two years), generating a net income of Dh63m (€5.6m), of three hotels that are facing financial difficulties (with net income of -Dh15m, -€1.33m), and of Saemog (a company dedicated to the development of the Essaouira Mogador Resort) which had a -Dh26m (-€2.31m) impact on Risma’s net income. Hotels that can be considered relatively mature (those that have been open for more than two years) generated a positive performance with a net income of Dh47m (€4.18m), despite a difficult macroeconomic and sectoral environment marked by the stabilisation of tourist arrivals as of the end of October 2012.

DEVELOPMENT STRATEGY: After several years of an intensive development strategy that included opening its last Sofitel hotels in Morocco (Sofitel Thalassa Agadir and Sofitel Casablanca), Risma is going to enter a new era that will mainly be concentrated on entry-level hotels (Ibis Budget). These hotels are less capital intensive than mid-range and upper-end hotels, and require less time to reach their break-even points, meaning that their impact on Risma’s profitability will not be significant during the first years following their openings. The objective now is to benefit from the outcome of more than a decade of huge, long-term profitable investments. By 2014/15, Risma expects to have a portfolio of 39 mature hotels (totalling more than 5700 rooms), ranging from two-star to five-star, and an important business offer that will enable it to start generating recurring net incomes, cash flows and dividends.