Hotel valuation in Morocco
RevPAR, GOP, VPGA 4 of the Red Book RICS

A hotel isn't valued like a residential building. Its value depends primarily on future operating flows — RevPAR, GOP, margin — not just on the gross real estate asset. RICS-specific methodology framed by VPGA 4.

1. VPGA 4 — special-purpose properties

The Valuation Practice Guidance Application 4 (VPGA 4) of the Red Book RICS specifically frames hotel and trading property valuations. It recognises that the value of these assets can only be assessed through their ability to generate operating flows. Methodology favours the income approach, complemented by per-room comparables and — when relevant — a cost approach for new assets.

2. Key hotel KPIs

• ADR (Average Daily Rate) — average price of a sold room.
• Occupancy Rate — annual room occupancy.
• RevPAR (Revenue Per Available Room) = ADR × Occupancy. Central hotel performance KPI.
• TRevPAR (Total RevPAR) — includes ancillary revenues (F&B, spa, events, other services).
• GOP (Gross Operating Profit) — operating result before depreciation, management fees and property charges.
• GOPPAR (GOP Per Available Room) — GOP per available room.
• Hotel cap rate — capitalisation rate applied to GOP to estimate operating value.

3. RICS methodology — DCF + comparables + cost

Hotel valuation articulates three approaches:

• Income Approach (DCF) — projecting operating flows (RevPAR, GOP) over 5-10 years with motivated assumptions, discounting at WACC, terminal value (exit cap rate). Dominant approach.
• Transactional comparables — similar hotel transactions (segment, size, city, star classification), expressed in MAD per room. Reconciliation and sanity check.
• Cost Approach (DRC) — for new or recently renovated hotels where replacement cost is relevant. Reference for hotel VEFA programmes.

4. Real estate vs operating value distinction

Per Red Book RICS, the valuation typically distinguishes:

• Value as fully-equipped operational entity (going concern) — bricks & mortar + equipment + FF&E + clientele attached.
• Value of bricks & mortar alone — real estate asset alone, independent of operation.
• Value of operating business — sometimes object of separate valuation by purpose.

This distinction is essential for management or franchise contracts (Marriott, Accor, Hilton, IHG) significantly impacting profitability and operating value.

5. Required documents for hotel valuation

• Land title (TF) + recent ANCFCC certificate.
• Permits and authorisations — habitation permit, ONMT classification, hospitality and F&B approvals.
• Operating accounts for past 3 years (detailed P&L: room, F&B, other revenues; fixed and variable charges; GOP).
• Management or franchise contracts — terms, duration, fees.
• Technical plans — surfaces, rooms by typology, common areas, F&B, spa, technical equipment.
• FF&E inventory — Furniture, Fittings & Equipment.
• ADR / Occupancy / RevPAR KPIs monthly over 3 years ideally.
• Commercial commitments — TO partners, event contracts.

6. Special case — riad-hotel and guesthouse

Same methodological principles, adapted scale and specifics: medina location (often particular land status — see our riad valuation article), specific guesthouse ONMT classification, limited within-medina comparables, heritage value adding to operating value.

7. Recognised uses

• Hotel acquisition / sale — quantified basis for negotiation and due diligence.
• Bank financing — mortgage or corporate, often substantial.
• IFRS 13 financial reporting — for listed hotel groups or funds.
• Restructuring / portfolio arbitrage.
• Litigation — shareholders, expropriation, management contract breach.
• Hospitality OPCI reporting in Morocco.