Riad guesthouse yield: how to calculate it honestly

Short answer: net yield = (annual revenue − all operating costs) ÷ total price paid, including works and fees. Differences between two listings almost always come from the occupancy rate assumed and the costs left out.

Yields quoted for Marrakech riads range from reasonable to fanciful. The difference lies not in the property but in the assumptions. Here is how to redo the calculation yourself, in four steps.

1. Revenue

Revenue = number of rooms × average nightly rate × nights sold per room over the year. The third term does all the work. A medina guesthouse has a high season in spring and autumn, a dip in high summer because of the heat, and variations around the holiday calendar. A serious calculation uses a yearly average, not April's occupancy.

2. Operating costs

These are what people underestimate. For a guesthouse, the minimum list:

• Booking platform commissions, often 15% or more of the nightly rate.
• Staff: housekeeper, cook, caretaker, with their social charges.
• Water, electricity, gas, air conditioning, and pool heating if there is one.
• Linen, toiletries, breakfasts.
• Routine upkeep: lime paint, tadelakt, joinery, plumbing.
• Tourist tax, local taxes, insurance, accounting.
• Management fees, if you delegate the operation.

Depending on the level of service, these commonly amount to 35 to 50% of revenue. A calculation that assumes 20% costs deserves a close look.

3. The reference price

Yield is calculated on what you actually paid: purchase price, notary and registration fees, titling, works, furnishing, and the months without income during the renovation. Calculating it on the purchase price alone flatters the result by several points.

4. A step-by-step example

Take a 5-bedroom riad delivered turnkey for MAD 3,000,000. Assumptions: MAD 900 per night on average, and 200 nights sold per room per year, an occupancy of about 55%.

• Revenue: 5 × 900 × 200 = MAD 900,000 a year.
• Costs at 45%: MAD 405,000.
• Net operating income: MAD 495,000, before tax.
• Net yield: 495,000 ÷ 3,000,000 = 16.5% before tax.

Rerun it with 150 nights per room: revenue falls to MAD 675,000, income to about MAD 370,000, and yield to 12.4%. That is why our listings always show two scenarios, a conservative one and a target one, and why we write the assumptions out in full.

The classic traps

• High-season occupancy applied to the whole year.
• A nightly rate taken from the best riads in the area rather than comparable ones.
• No line for maintenance, when a riad needs some every year.
• A yield calculated before works, on a property that cannot yet operate.
• Forgetting permits: a guesthouse must be classified to host tourists legally.

The Airyod calculator reruns this with your own assumptions, on any property in the catalogue or on a price of your choice.

This example is purely illustrative and is neither a promise nor a guarantee of income. Actual results depend on the property, how it is run and the market.