1. Asset overview
The subject asset is a renovated boutique riad operating as a 4★ guesthouse in the Mouassine district of Marrakech medina, 8 minutes walk from Jemaa el-Fna. The property is held under Titre Foncier (clean title, fully registered at ANCFCC) — a critical point for bank financing and international buyer due diligence.
- Built area: 420 m² over 3 levels (+ terrace)
- Rooms: 12 (8 standard, 3 superior, 1 suite)
- Amenities: restaurant (30 covers), hammam, plunge pool, 2 patios, rooftop terrace
- Staff: 9 FTE including manager, chef, housekeeping, reception
- Licences: commercial lease compliant, tourism classification 4★, local authorisation current
- Condition: renovated 2020, very good overall, next major refurbishment due ~2027-2028
2. Methodology — RICS VPGA 4 (trade-related)
RICS VPGA 4 governs the valuation of hotel and hospitality assets where value is derived principally from the business operated at the property rather than the bricks alone. It recommends a Discounted Cash Flow (DCF) on trading cash flows as the primary method, rather than direct comparison — the Moroccan hotel market has limited transactional liquidity, making comparables insufficient on their own.
The basis of value is Market Valueunder VPS 4, assuming a fully-fitted-out, open and trading business. The DCF models 10 years of operating cash flow (GOP — Gross Operating Profit, FF&E reserve, CAPEX, non-recoverable expenses) plus a terminal value based on capitalising year 11 GOP at an exit cap rate. All flows are discounted back at a WACC reflecting hospitality risk and medina illiquidity.
A comparables cross-check is applied via the implied cap rate (NOI / MV) — allowing us to verify the DCF output against observed market yields.
3. Key operating assumptions (2026)
| Parameter | Value | Rationale |
|---|---|---|
| Rooms available | 12 | Current tourism classification 4★ |
| ADR (average daily rate) | 1,200 MAD | Blend of standard (950), superior (1,350), suite (2,200) |
| Occupancy rate | 62 % | Post-Covid stabilised, in line with Mouassine benchmarks |
| RevPAR | 744 MAD | ADR × occupancy |
| RevPAR growth | +3.5 %/year | Moderate, inflation + tourism cycle |
| F&B revenue | 28 % of rooms | Restaurant + bar, typical boutique 4★ |
| GOP margin | 42 % (stabilised) | Higher for owner-operated, lower for branded |
| FF&E reserve | 4 % of revenue | Industry standard for 4★ hospitality |
| WACC | 9.5 % | Risk-free 3.5 % + hospitality premium 3.5 % + medina illiquidity 2.5 % |
| Exit cap rate | 7.0 % | Prime Moroccan hospitality 6.5-7.5 % |
| Disposal costs | 2.0 % | Transfer taxes + broker fees |
4. 10-year cash flow projection
Revenue side: 12 rooms × 365 nights × RevPAR (growing +3.5 %/year) → rooms revenue. F&B revenue added at 28 % of rooms. Operating costs scaled to maintain the stabilised GOP margin. All values in k MAD.
| Year | RevPAR | Rooms rev. | F&B rev. | Total rev. | GOP | CAPEX | NOI | DF @9.5% | PV |
|---|---|---|---|---|---|---|---|---|---|
| N+1 | 744 | 3 259 | 913 | 4 172 | 1 752 | (167) | 1 585 | 0.913 | 1 447 |
| N+2 | 770 | 3 373 | 944 | 4 318 | 1 813 | (173) | 1 641 | 0.834 | 1 369 |
| N+3 | 797 | 3 491 | 977 | 4 469 | 1 877 | (179) | 1 698 | 0.762 | 1 294 |
| N+4 | 825 | 3 613 | 1 012 | 4 625 | 1 943 | (185) | 1 758 | 0.696 | 1 223 |
| N+5 | 854 | 3 740 | 1 047 | 4 787 | 2 010 | (191) | 1 819 | 0.635 | 1 156 |
| N+6 | 883 | 3 871 | 1 084 | 4 955 | 2 081 | (198) | 1 883 | 0.580 | 1 093 |
| N+7 | 914 | 4 007 | 1 122 | 5 128 | 2 154 | (205) | 1 948 | 0.530 | 1 033 |
| N+8 | 946 | 4 147 | 1 161 | 5 308 | 2 229 | (213) | 2 017 | 0.484 | 977 |
| N+9 | 979 | 4 292 | 1 202 | 5 494 | 2 308 | (220) | 2 088 | 0.442 | 924 |
| N+10 | 1 013 | 4 442 | 1 244 | 5 686 | 2 388 | (227) | 2 161 | 0.404 | 873 |
| Σ PV NOI | Sum of discounted operating flows, years 1-10 | ≈ 11 389 | |||||||
All figures in k MAD. GOP = Gross Operating Profit. NOI = GOP − FF&E reserve − CAPEX. DF = discount factor.
5. Terminal value & final Market Value
Terminal Value at end of year 10:
NOI year 11 = 2,161 × 1.025 = 2,215 k MAD
TV = 2,215 / 7.0 % = ≈ 31,641 k MAD
Net TV (after 2% disposal costs) = ≈ 31,008 k MAD
Discounted @ 9.5 % over 10 years (DF 0.404) = ≈ 12,527 k MAD
6. Implied cap rate cross-check
The implied cap rate is year 1 NOI divided by the retained Market Value — a reality check against observed hospitality yields in the Moroccan market.
Year 1 NOI = 1,585 k MAD
Retained MV = 21,000 k MAD (rounded)
Implied cap rate = 1,585 / 21,000 = ≈ 7.5 % (stabilised ≈ 7.0 %)
This is fully consistent with the Moroccan boutique hospitality benchmark (6.5-7.5 % for top-tier medina riads with clean titles and strong operating histories). The DCF output is internally coherent.
7. Sensitivity analysis
Market Value sensitivity to occupancy and exit cap rate (in M MAD):
| Occupancy \ Exit cap | 6.5 % | 7.0 % | 7.5 % |
|---|---|---|---|
| 56 % | 20.8 | 19.4 | 18.2 |
| 62 % (central) | 22.9 | 21.0 | 19.6 |
| 68 % | 24.8 | 22.6 | 21.1 |
Value corridor [18.2 — 24.8 M MAD], roughly ±15 % around the central. Typical for a hospitality asset — sensitivity is dominated by occupancy and exit cap. A prudent lender or buyer would price at the lower half of this range.
8. Limits & key assumptions
- Operating continuity — assumes continued 4★ classification and operating licence
- Title — valuation relies on full TF; a Melk status would trigger a 15-25 % haircut
- Medina regulatory risk — any tightening of short-term-let rules in medina would materially impact value
- Tourism cycle — sensitivity to Marrakech tourism recovery (currently favourable)
- FF&E reserve — assumes owner funds scheduled 2027 refurb from cash flow
- Brand or independent — a branded franchise (Maisons & Palais, Small Luxury, etc.) could add 5-10 % premium
Frequently asked questions
Why use VPGA 4 for a riad instead of standard residential methodology?
A riad operating as a boutique hotel derives value from the business, not the bricks alone. RICS VPGA 4 recognises this via trade-related valuation — the underlying real estate is only part of the story. A standard DCF on operating cash flows (GOP, CAPEX) gives a defensible Market Value that a buyer-investor would recognise.
How do you compute RevPAR for a boutique Marrakech riad?
RevPAR (Revenue Per Available Room) = occupancy × ADR. For this riad: 62% × 1,200 MAD = 744 MAD/room/night. Annualised across 12 rooms, that's 3.26 M MAD rooms revenue — the core of the DCF.
What is the implied cap rate and why does it matter?
Implied cap rate = stabilised NOI / Market Value. Here ≈ 7%. It's a reality check — if the DCF output produces a cap rate wildly inconsistent with observed market yields (Moroccan boutique hospitality 6.5-7.5%), the model is likely wrong. 7% here is coherent.
Can I use this valuation for a Moroccan bank mortgage?
Yes — a RICS VPGA 4 + VPGA 2 (secured lending) report is accepted by CIH, Attijariwafa, BMCE, BMCI, SG, BP and other Moroccan banks for hospitality asset loans.
RICS VPGA 4 · Hospitality valuation
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