Opportunity for Investment in Ethiopia’s Hospitality Sector

Do you wish to invest in Ethiopia’s hospitality sector? With a population of over 100 million people, Ethiopia is Africa’s second most populous nation. Just like many other countries on the continent, Ethiopia has gone through various economic and social challenges. Ethiopia is one of the countries in Africa that has begun to realize the full value of its economic potential.

In the recent years, Ethiopia’s GDP has been experiencing a positive growth. Known to primarily depend on agriculture as the country’s main economic mainstay, Ethiopia is now focusing more on hospitality in a bid to reduce over-reliance on agriculture. Seeing as hospitality is also the new economic frontier, there are hopes that it will steer the country’s economy in a positive direction.

The Ethiopian economy has continued to realize great potential thanks to the growth of its hospitality industry. The increased number of tourist arrivals currently being witnessed is a result of strategic marketing efforts by industry players and government-led policies to ensure the country’s tourism potential is fully realized.

While opening a hospitality expo in Addis Ababa, Ethiopia’s President, Dr. Mulatu Teshome reiterated the need to continuously improve the tourism and hospitality sector, for it is a key economic pillar for the country. “For this reason, our government has given due attention to the development of the sector. To exploit its amazing tourism potential, Ethiopia has committed to provide support to the private sector for the development of tourism and hospitality service”.

According to the President, Ethiopia is an extremely privileged country- given it is the seat of AU, UNECA, and other global organizations. Dr. Teshome also emphasized the need to make sure that more investors are being lured into the country to provide world class hotels and hospitality services.

Did you know Addis Ababa, following New York and Geneva, hosts the third-largest diplomatic community in the world? The presence of many international organizations such as African Union, UN affiliated organizations, and other global organizations have played a key role in developing Ethiopia’s hospitality sector.

An ongoing partnership between the government and private hospitality sector players is aimed at mapping out the country’s tourism facilities for further development. In addition, intensified investor interest is expected to boost Ethiopia’s hotel capacity to over 58,000 hotel rooms in the next few years. Twelve international hotels are expected to open in Ethiopia, which will add another 2,400 hotel rooms to meet the rising demand.

According to CEO of Jumia Travel, Paul Midy, “The Ethiopian hospitality industry has grown quickly over the last few years, and there remains a lot of untapped potential. Exploiting these opportunities, with the help of new technologies and accommodation service providers, will support the country’s initiative to become one of Africa’s top five destinations in the coming four years. The challenges are abundant, but the future is inspiring. We look forward to bringing the intended growth and progress into reality”.

There is no doubt that Ethiopia’s hospitality sector is a force to reckon with. Unlike the past where the industry was on its knees, there is renewed effort to unearth an untapped potential. There is a new goal to make Ethiopia not only one of the best destinations on the African continent, but globally as well.

Factors That Have Contributed to the Growth of Ethiopia’s Hospitality Sector:

The recent milestones realized in the industry are attributed to close partnerships between various industry stakeholders, in addition to a formulation of growth-driven policies.

Improved Security and Peace

Ethiopia has had its own share of political and social upheavals in the past that both destroyed social cohesion and threatened peace. However, a lot of strides have been made, and the country is now generally peaceful and politically stable. As a result, the number of tourists visiting the country has gone up. This has paved way for the formulation and implementation of the tourism transformation plan. Given the country’s present peaceful environment, the Ministry of Culture and Tourism has put in place a strategic plan to make Ethiopia a top tourist destination by 2020.

Ethiopia’s resolve to fully implement its hospitality policies has also created more investment and job opportunities. The government knows too well that where there’s no peace, tourism can never thrive. Therefore, the authorities have come up with various security strategies and policies to ensure the country’s peace is maintained at all costs. The conducive environment has seen a rapid growth of the hospitality sector; this relies heavily on security.

Due to good security, the hospitality industry in Ethiopia continues to grow, and there is an overall positive economic impact attributed to increased foreign revenue. Entrepreneurs wishing to invest in Ethiopia are assured of good returns, especially in 4-star and 5-star establishments, as long as their facilities meet diplomatic standards. There are also plenty of opportunities to be explored in guest houses and luxury lodges.

The government has come out to fully support the growth of the hospitality industry; therefore, investors are assured of doing business in a safe environment. In recent years, there has also been massive infrastructure development aimed at opening up the country’s hospitality industry.

Government Initiatives

The Ethiopian government has worked tirelessly to formulate good policies. This is to ensure that the country’s hospitality industry positively contributes to overall economic growth. The current trends witnessed in the industry reflect the government’s efforts to boost hospitality as a priority economic sector.

To cater to the increasing demand of local and international travelers, Ethiopia has started implementing a tourism strategy aimed at creating more investments in franchise hotels and luxurious facilities. The increase in tourist and conference guest numbers helped Ethiopia’s hospitality income revenue rise from 17 billion birr (USD 724 Million) in 2012, to 18.7 billion birr (USD 797 Million) in 2013, and 22.2 billion birr (USD 946 Million) in 2014.

The introduction of tax relief and land incentives has helped to boost investor confidence as well. Because of these measures, the number of hotels and lodges across the country has increased, which creates more employment opportunities. In order to boost reputation and professionalism, the Ministry of Tourism is currently undertaking the process of issuing quality assurance certificates to 2,620 companies operating within the tourism and hospitality sector. In 2016, the Ethiopian government granted 1,800 permits to new investors to build luxury hospitality establishments.

In addition, the government is actively working with stakeholders in the finance industry to offer flexible bank loans to hospitality investors seeking to invest in Ethiopia. The travel and tourism sector currently contributes approximately 1.2% to the country’s GDP, but if current growth trends are anything to go by, analysts predict there will be at least 4.8% contribution to GDP in 2024.

The Ethiopian government has also simplified the process of issuing investment permits, thus attracting more international hospitality brands to the country. With an increase in the number of investors, the government has successfully addressed the accommodation deficit by allowing more hotels to be built to adequately cater to the needs of various travelers.

It’s worth noting that the government has been able to cover many milestones, especially in regards to implementing transformational policies and working closely with the private sector. There is no doubt that Ethiopia is keen to take the hospitality industry to the next level and compete with Africa’s hospitality powerhouses such as South Africa, Namibia, Kenya, Egypt, and Ghana. The ultimate goal is to have Ethiopia rank among the top 5 tourism and hospitality destinations in Africa.

Boosting the Airline Industry

Ethiopia hosts the third-largest diplomatic community in the world. For this reason, Addis Ababa has become a busy regional hub for international conferences and seminars. Conference tourism is set to become a major attraction in Ethiopia as more organizations set up offices in the country. Addis Ababa already has plenty of foreign missions, international aid agencies, and NGOs based in the city. In addition, conferences held at the African Union (AU) and United Nations Economic Commission (UNEC) bring in a lot of foreign revenue to the economy.

Today, more international airlines have direct flights to Addis Ababa from various destinations across the world. The Ethiopian government has also embarked on an ambitious plan to expand the national career of Ethiopian Airlines, which is a well respected airline brand across Africa and beyond.

​After​ ​winning​ ​major​ ​aviation​ ​awards, Ethiopian Airlines has played a key role in boosting the country’s hospitality prospects. Some of these awards include: 2017 African Airline of the Year Award, 2017 SKYTRAX World Airline Award for Best Airline in Africa, and 2016 “The Rising Star Carrier of the Year” Award among others.

The government’s goal is to see Ethiopian Airlines bring in more tourist numbers, while opening up additional international routes. Furthermore, Addis Ababa International Airport is currently undergoing massive expansion that will increase its capacity to accommodate 20 million passengers annually by the year 2019.

Destination Marketing Campaigns

Not many people ever imagined Ethiopia could rise to become a famous travel destination; however, sustained marketing initiatives by the Ethiopian Tourism Organization (ETO) have yielded impressive results as industry players continue to vigorously market Ethiopia’s diverse tourism products. Facilities range from hotels and parks, to numerous historical sites. A number of hospitality conferences, trade shows, and exhibitions have been held both locally and internationally to market Ethiopia as a travel destination.

Addis Ababa ranks globally with the highest concentration of foreign diplomatic missions. This has created a huge market for other hotels and players in the hospitality industry. There is a scramble for the few top-notch accommodation facilities as organizations fly in high-ranking executives for meetings and conferences. Although substantial progress has been made, the number of branded hotels is still low. In order to attract the investors needed to bring the industry up to par with other top African and global counterparts, experts advise the adoption of intense marketing strategies.

Some of the hospitality events that have taken place in Ethiopia include MICE’s (The 2016 Meetings, Incentives Travel, Conferences and Exhibitions) East African International Forum and Expo, and 4th Hotel Show Africa’s 2016 Hospitality and Tourism Investment Trade Show. Both events were organized by Ozzie Hospitality and Business Group, one of the leading hospitality firms in Ethiopia, and took place at Millennium Hall in Addis Ababa.

One of the pillars used to market Ethiopia is emphasizing the fact that twelve visitors are guaranteed value and good quality facilities while on tour. Travelers always want to feel like they get value for their money irrespective of the type of services they choose. With the increasing number of diplomats, corporate travelers, and leisure tourists, Addis Ababa, and Ethiopia in general, is expected to be a top African tourist destination in the coming years. The untapped tremendous tourism potential has been unearthed through strategic marketing ventures.

The main customer of Addis Ababa’s hospitality market is the corporate sector whose demand for top-notch hospitality facilities has increased. Previously, due to accommodation shortages, many conference and leisure tourists had to opt for 3 star unbranded hotels whose services were below internationally accepted hospitality standards.

Growth of ICT

The growth and recent success of Ethiopia’s hospitality industry has been attributed to the adoption of modern ICT (Information Communication and Technology) policies. ICT has indeed hugely transformed the hospitality industry in Ethiopia. Ethio Telecom, a state-owned organization, has been spearheading an ICT driven policy in close conjunction with technology and hospitality players.

ICT has empowered Ethiopia to sell its tourism products on a global platform, which allows both investors and visitors to take notice of Ethiopia’s hospitality industry. Hospitality technology platforms such as the Jumia Travel Platform have helped over 600 Ethiopian hotels advertise their facilities online. Even though internet penetration is still relatively low, Ethiopia has made great strides in rolling out technology infrastructure. This move has helped to support many of the hospitality industry’s day-to-day operations.

Ethio Telecom is currently working on boosting wireless telecom coverage from 64% to 90%, as well as increase the number of internet users to 20% in the next 5 years. Certain initiatives, such as the e-government strategy launched in 2011, have also helped Ethiopia to upgrade its technology and internet infrastructure.

Additionally, the Ethiopian government is building an “ICT Park” whose aim is to bring together numerous multi-national ICT firms. It is expected that this move will see more software developers, business process outsourcing firms (BPOs), incubators, system integrators, and other ICT industry players invest in Ethiopia. Ultimately, key sectors such as the hospitality industry stand to directly benefit from these ICT initiatives.

In conclusion, the hospitality industry offers numerous opportunities for investors looking to be part of this growing industry. The industry has a wide service sector that covers aspects like accommodation, transportation, and event planning within the tourism sector. A number of key related services including fine dining, sporting activities, and leisure facilities, such as spas and entertainment, have gained momentum. Ethiopia’s tourist peak seasons range from November to January, and July to August. Africa is the leading source of tourists to Ethiopia at 31%, followed by Europe at 30% and North America.

Ethiopia’s resolve to boost the hospitality sector has significantly increased investor confidence. For instance, in 2016, Ethiopia had only two major international hotel chains set up in the country: Ramada and Marriott Apartment Hotel. This number has since grown, and there are currently a few international hotel chains under construction- Pullman, Wyndham Hotel Group, AU Grand Hotel, Crowne Plaza, Best Western, and Accor Group among others.

Upon realizing that Ethiopia is an untapped market, many global hospitality chains have started setting up their establishments. The growth of Addis Ababa as a regional business hub has greatly spurred hotel numbers to an average rate of 60% bed occupancy.

Authored By: Steve Siboe

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