The Hotel Industry in Ethiopia: The best is yet to come

Third only to Brussels and Washington DC, Addis Abeba is home to 118 diplomatic missions accredited to both the govern¬ment in Ethiopia, the AU and the UNECA. But it is a city which has only three international chain and six internationally branded hotels. For the hotel industry in Ethiopia, the best is yet to come

Kalkidan Yibeltal

 

When the Sheraton Hotel Addis Abeba, a member of the Starwood Hotels & Resorts Worldwide Inc., was opened in February 1998, it marked the first of such investment the city had to enjoy in nearly three decades – the only other global name to precede it, Hilton Addis Abeba, was opened in 1969. The years in between were, unfortunately, relegated to dis¬poroportional insignificance in the development of the hotel industry.

 
Although a number of other hotels have dotted the city since the opening of the Sheraton, the only five star hotel in town, yet, no one can argue (rightly) that they belong to the same league with the above two, or could sufficiently meet the demands of a city that has been home to a number of dip¬lomatic missions over the years, including being the seat of the headquarters of the then Organization of African Union (OAU), now the African Union (AU) and the United Nations Economic Commission for Africa (UNECA).

 
In mid 1990s, lack of hotel infrastructure in the city was a fact well exploited by those who wanted to see the OAU relocated permanently to elsewhere in the continent. Until the case was once and for all settled with the African Union Constitutive Act of article 24/1 which declared “the head¬quarters of the Union shall be seated in Addis Abeba in the Federal Republic of Ethiopia,” there had been at least four attempts to move the seat of the continental body out of Ad¬dis Abeba.

 
Whilst the country had been busy experimenting with an array of political ideology – from feudalism to socialism to revolutionary democracy, chosen by successive governments since the late 19th and early 20th century, the hotel industry throughout the country remained regrettably muted. Even the onset of Sheraton Addis, the first hotel in the entire conti¬nent to join the luxury collection, failed to inspire an immedi¬ate follow up.

 
Another decade was needed for that inspiration to come in the form of the third Ethiopian Millennium observed in September 2008. Overestimated as the beginning of a new and bright era for the nation, an overall analysis of the fruits of much of the promises thrown out during the year-long cel¬ebrations may not offer a glamorous portrait. Nevertheless, it undoubtedly left its mark on Ethiopia’s hotel industry, which took off the ground since then.

 

Agents of change, and the ups and downs

 
Benyam Bisrat is a cofounder and general manager of Jupiter International Hotels, a local firm that runs two hotels around Bole and Kazanchis districts, where many of the star rated hotels are located. He points towards his own firm as an example of investors flocking into the sector from differ¬ent businesses. “In Jupiter Business Group, we were engaged in various sectors like general trading. Then six years ago we wanted to diversify and set our eyes on building hotels. In a similar fashion business men and women from sectors as varied as construction and real estate [and] agribusiness are turning their attentions on the hospitality industry,” he says. The main reason for this, according to him, is the fact that the growing demands of the industry are unmet for the large part.

 
But that demand is not only unmet, but disproportionally
exploited by opportunistic businesses. According to Elias Kebede, a veteran of the industry with years of managerial experience in some of the top hotels in and outside of the country, there are a number of businesspeople who just took an existing building constructed for another purpose and tried to make a hotel out of it. “What they saw was a feasible busi¬ness. And nothing else matters. This is one of the pitfalls that had and still have to be overcome,” Elias told Addis Standard.

 
For Workinesh Getachew and Asfaw Amdie, a couple who own a newly opened Washington Hotel, located opposite the European Commission Office, it is essential to know the particularities any business presents before getting into it. Running an Ethiopian restaurant in Washington DC for about thirty years, they claim to know every twist the industry brings forth. “There isn’t one size fits all guideline in doing business. This works specially in the hospitality industry. It is not a product you are offering, it is a service,” says Workinesh.
But for Elias, those who decided to develop new hotels when the opportunity availed itself were more prudent in their spending than meeting certain standards such as fire exists and parking. “Most of the hotels that were built five or six years ago didn’t have bedrooms more than sixty. There was uncertainty. It was only later that investors began to dare in the amount and size of their investment.”

 
Owing to that a number of hotel owners are now trying to adapt to the changing times by undergoing massive expansions as well as quality improvement, according to Benyam, who is also the chairperson of the Board of Directors for the Ad¬dis Abeba Hotel Owners Trade Sectorial Association (AHA). “Most of the private hotels from way back were, relatively speaking, small scale and of poor quality. The owners wanted to join the caravan. So many of them are trying to rebrand themselves now,” he told this magazine.

 

Of tourists…
According to Ebisa C. Gobena and Andualem H. Gudeta of Awash International Bank, whose study “Hotel Sectors Investment in Ethiopia” is published on Journal of Business Management in 2013, the hotel industry in Ethiopia is signified by a substan¬tial gap between demand and supply. This creates a big business opportunity for those planning to enter into the sector.
“The total number of international tourists arriving in Ethiopia is steadily increasing. As a gateway to all inter¬national inbound, outbound and transit tourists/passen¬gers, Addis Abeba has been taking the lion’s share in the country’s tourist arrivals hosting an estimated 95-99% of the total international tourist arrivals,” they said. Being a popular conference venue is also helping the city attract more visitors each year. “Conference tourism has a great potential and is poised to gain greater significance.”

 
But according to data obtained from World Hospital¬ity Group, Ethiopia has only six internationally branded hotels with just 990 rooms, a fact that alarmed Tewolde Gebre Mariam, CEO of Ethiopian Airlines, who told ho¬tel owners at the inaugural ceremony of the Africa Hotel Investment Forum (AHIF) 2014 back in June that “this is not acceptable.” Nigeria, for example, has 40 internation¬ally branded hotels with 6614 rooms followed by Moroccowhich has 29 hotels and 4828 rooms. Out of the ten countries in the list, Ethiopia is the ninth, second only to Senegal, which has five internationally branded hotels and 914 rooms.

 
“[Ethiopia’s] overall growth and the continued progress in the tourism industry is forecast by the World Travel & Tourism Council to be 4.8% per annum over the coming decade. Increas¬ing the supply of high-quality, top-end hotel accommodation through hotel construction is necessary for improved competi¬tiveness and the economic success of the sector,”said Matthew Weihs, Managing Director, Bench Events.

 
In July this year during a forum on the development of tour¬ism in Ethiopia, Prime Minister Hailemariam Desalegn vowed to reverse this unfortunate trend and help Ethiopia benefit from the tourism sector. It was to reduce this dilemma that two organs, the Tourism Transformation Counsel and the Ethiopian Tourism Organization were established. The former provides leadership and set guidelines for the country’s tourism market¬ing initiatives while the later serves as a secretariat for the for¬mer. The two new offices are tasked to transform the industry as the country aims to earn around US$150 million in 2014/15 from the sector.

 

 

It is not the building that makes a hotel a hotel. It is the flawless combination of the right people, the right prices and the right technology providing an unforgettable service

Ethiopia’s Growth and Transformation Plan (GTP), a five year grand plan that is set to expire in 2015, targets one million annual inbound tourist arrivals by the year 2014/15. In the same manner, the Ministry of Culture and Tourism has a vision to make Ethiopia one of the top five tourist destinations by 2020. Despite an increase in the number of tourist arrivals, however, this strategic target “seems unlike¬ly to be achieved with the current rates of inbound tourist arrivals in the country,” say Ebisa and Andualem.

A report released in June 2014 by Fast Market Research, a distributor of market research and business information, states that the number of domestic trips within Ethiopia has reached 8.1 million people while international trips were merely more than 660 000 with the main source coun¬tries being China, the US, Nigeria and Sudan. The number showed a 12% increase from the previous year. For a coun¬try which has its own fair share of historical, cultural and natural attractions in the continent, and is one of the safest destinations, this is not a performance to pride with.
…diplomats
Third only to Brussels (185) and Washington DC (176), Addis Abeba is home to 118 diplomatic missions accredited to both the government in Ethiopia, the AU and the UN¬ECA, which adds to the increasing trend in the number of conventions held year in, year out.

 
One familiar month when Addis Abeba becomes crowded with diplomats, lobbyists, journalists, and aid workers is the month of January, when the AU hosts its bi-annual summit for heads of state and government. The 86 hotels, accord¬ing to Ministry of Culture and Tourism, and 118 B & B Inns, and 18 specialty lodgings, according to Trip Advi¬sors, become utterly short of the demands, forcing confer¬ence participants to book at expensive lodges and resorts outside of the city. Although the January AU summit is the landmark of huge gathering in the city, Addis Abeba is never short of other small and medium range regional and international conferences. “This unfortunate gap of demand and supply often leads to not only unethical exploitations by hotels of desperate customers, but also the provision of substandard service which forces many customers to think twice before boarding a flight bound for Addis Abeba,” said Elias.
…and the quest for professionalism
According to unofficial estimates from the AHA, approximately one hotel joins the market every month and that number may rise up to 1.5 hotels a month in the coming few years. Thanks to both local and international architects commissioned by devel¬opers, a number of dazzling buildings are giving the city a new look. However, there are cases in which the scene behind the glamour is not so attractive.

 
“It is not the building that makes a hotel a hotel. It is the flawless combination of the right people, the right prices and the right technology providing an Projection of Tourist Arrival (projected and unsatisfactory demand) unforgettable service,” says Elias. Like many other sectors in the country, the hotel industry is a sector suffering from a lack of professionalism.

 

“Our main problem has been finding the right people,” admits Benyam. “It is a sector with a serious deficiency when it comes to human resources.” Although state universities like Hawassa University in the south have started providing un¬dergraduate degree programs in catering and tourism, many of the graduates find their classroom experiences useless when they come in contact with reality.
The government in Ethiopia is busy building enormous infrastructure projects that will undoubtedly have a tre¬mendous effect on the industry. What that doesn’t change, however, is fill the human resource gap. “We are naturally hospitable people. It shouldn’t be hard to train us to be hospi¬table professionally,” says Benyam.
In his study “A Critical Research on the Major Challenges of the Hospitality Industry in Ethiopia,” Alelign Aschale of the Addis Abeba University categorically identifies human resource management and worker turnover as major prob¬lems. “An excellent hospitality business cannot be excellent in its operation and service without professional employees in the field. What is observed [so far] in the hospitality in¬dustry is employment based on kinship, ethnicity or religion; paying very low wages and salaries,” he says.

 
Some hotels try to tackle that problem in different ways. “We have set up a regular training program. We train our workers to uplift them to our standard. A little disregard to the detail can affect the whole experience,” says Benyam.
As Benyam sees it the sector is in the right track and if the right measures are to be taken it can take the nation to a great destination. Ebisa and Andualem see the industry as a bridge linking other industries to the local market. “The [hotel] industry is in interface with other sectors such as ag¬riculture, restaurants, handicrafts, infrastructure and trade.”

 
Whilst the country had been busy experimenting with an array of political ideology – from feudalism to socialism to revolutionary de¬mocracy, chosen by three successive governments in those years, the ho¬tel industry in the capital remained regrettably muted

Tip of the iceberg
For now, the more than 30 heads of state and government who will be in Addis come January have to rely, once again, on the only five star hotel in town, the Sheraton Hotel Addis, which lies between two palaces, the National Palace and the presidential Menelik Palace. It has 294 deluxe guestrooms including 33 suites, 11 conference rooms covering up 1500 square meters of function space in a five storey sandstone building. Within a walking distance is found the latest addi¬tion of global chain, the Radisson Blu, part of the Rezidor Hotels Group which joined the market in 2010 with 204 rooms and 16 suites and prides itself as the “first class busi¬ness hotel”.
Marriot International Inc., which just became one of the largest hotel companies in Africa after its acquisition of South Africa’s Protea Hotel Group on April 2014, announced its plans of opening 40 additional hotels in 13 African countries including Ethiopia by 2020. It has already signed a franchise agreement with a local firm, Sunshine Construction, to man¬age a Marriot Executive Apartment for extended stay travel¬ers and another branded hotel scheduled to be open in 2014 and 2015 respectively. And in Sep 2014, the Intercontinental Hotels Group (IHG) has signed a management agreement with Tsemex Hotels and Business Plc to develop Crowne Pla¬za Addis Abeba, a deal which marked the entry into Ethiopia of IHG. But given the burgeoning potential in this country of 90+ million odd populations, that is just the tip of the iceberg.
For Alex Kyriakidis, President, Middle East & Africa, Mar¬riott International, one of the most critical elements for more international chain hotels to come to Ethiopia is “choosing the right local partner…because it gives an international brand the weight of developed market experience with local know-how on the ground. The partnership decision is more than just market experience though. It has to be a fit of business cultures and values, like-minded industry leadership thinking and – in the service industry – a similar commitment to flaw¬less service and brand standards.” 

 

Photo: The Nami-Tiwi Beach Resort in Kenya

 

Photo Credit: Bonfireadventures