Back in Business

The Fate of the Hotel Industry After Turmoil

The hotel industry in Ethiopia has been reeling over the last couple of years, following political unrest in various parts of the country, and a drop in tourist numbers. Room occupancy rates dropped, and hotels found themselves losing money hand over fist. But now the industry is starting to revive, as political stability returns to the country. EBR’s Ashenafi Endale spoke with some in the industry to find out what’s next for hospitality in Ethiopia.

The political turmoil in Ethiopia over the last few years brought with it the declaration of a State of Emergency twice in three years, as well as travel bans issued by the embassies of the United States and United Kingdom among others. One of the effects of this instability has been dwindling numbers of tourists traveling to Ethiopia, which has come as a blow to the hotel sector. In July 2017, the Ethiopian Hotels Association even disclosed that hotel occupancy rates declined by 25Pct and caused a revenue loss of ETB380 million for the hotel industry.

But now, business is starting to revive from the slump over the last two years, at least in Addis Ababa. In January 2019, the Addis Ababa Hotel Owners Association disclosed that both local and global brand hotels are gradually regaining momentum after the declaration of the first State of Emergency in 2016. In addition, the second State of Emergency, which lasted for four months, made matters worse for the already struggling hospitality and tourism industry.

“The hospitality market has begun to revive. Currently, travelers are staying in hotels for an average of 3.5 nights, lower than the average of almost five nights before the first State of Emergency,” said Benyam Bisrat, president of the Association, during a press conference last month. “However, the recovery may well be quick compared to situations in Europe and Africa, and especially Egypt.”

The data obtained from the Ministry of Culture and Tourism (MoCT) cements the association’s claim. The number of tourists in Ethiopia stood at 920,000 in 2015/16, which shrank to 886,897 in the next fiscal year. However, it climbed to 954,552 in 2017/18. Although it was 28Pct lower than the previous year, the flow of tourists in the first quarter of 2018/19 also stood at close to 200,000, which is much better than the figure two years ago.

Tesfaye Amenu, director of sales and marketing at Elilly International Hotel, testifies to the returning of the hotel business to its previous heights. “The hotel occupancy rate of five star hotels in Addis Ababa dropped to 30Pct in the last few years. It has now doubled.”

With an investment of close to ETB700 million, Elilly International is a five-star hotel, which joined the industry in 2013. It has 154 rooms including penthouse and presidential suites.

Tesfaye says almost all of Elilly’s rooms are now occupied, at least since January 2018. “Our revenue has significantly improved. Conference tourists constitute 90Pct of our clients. We also work with select high class tour operators.” The average price for a room at Elilly is USD110 per night. It has nine conference rooms, among other facilities.

According to the United Nations Conference Center, 25 to 59 conferences are held in Addis Ababa each month. Close to 37Pct of the tourists coming to Ethiopia come for leisure and holidays, while 29.4Pct are transit tourists who cross the border due to overnight connecting flights or to spend a few hours in Addis while waiting for a connecting flight. Tourists that come for the purpose of business and conference account 17.7Pct whereas those visiting relatives and friends constitute 7Pct of the total.

According to official figures, more than 300 foreigners arrive in Addis Ababa Airport in transit through Ethiopian Airlines each day. Although the Airline rented hotel rooms in the capital to accommodate transit travelers, it has opened a 326 room luxury hotel a few meters away from the Addis Ababa Airport. Tesfaye says he doesn’t know under which law the Airlines can be involved in the hotel business. “But it does not threat Elilly’s market,” he said.

Currently, there are 137 hotels in Addis Ababa, with a total of 7,979 bedrooms, according to Fikirte Belachew, information expert at the Addis Ababa Culture and Tourism Bureau. Out of the total, 76 are ranked, of which six are five star, 14 four star, 26 three star, 21 two star and 9 one star. On top of these, there are 31 new operational hotels which have not been star rated yet.

Just like Elilly, conference tourists contributed a lot to the improvement of the occupancy rate at Capital Hotel and Spa. “This is mainly because of the increase and frequency of foreigners coming for meetings and conferences. In fact, almost all our rooms and conference rooms are currently occupied,” a marketing officer at Capital Hotel and Spa tells EBR.

Located along Haile Gebrselassie Road near Urael church, Capital, which was established with an investment outlay of ETB720 million, opened its doors in 2013. It has 114 bedrooms divided into four standards, and 14 conference rooms.

A year ago, EBR published an article on the slowdown of the hotel business after the second State of Emergency was declared, and owners and managers expressed their frustration at losing business through the cancellation of prior bookings and the absence of transit passengers from Ethiopian Airlines as a result of the political instability. During a consultative meeting organized at the time by the Ministry of Culture and Tourism, granting grace periods to settle bank loans, financial support in the form of loans to sustain business and maintain employees, and tax reduction were among the solutions proposed by participants to cope with the downturn.

As a result, hotel managers took measures to rescue their businesses from further downturns and to enhance efficiency. This included capitalizing on the meeting rooms available to host local and international meetings, as well as big wedding receptions. In so doing, they managed to increase sales of food and beverages. Some even introduced weekly entertainment nights with live music bands and famous local singers in order to boost sales of foods and beverages.

Others implemented cost reduction strategies such as forced leave for employees, delaying employment when there were resignations, as well as saving and efficiency in all areas.

On the other hand, Hannamariam Yiheyis, CEO of Zala Tech, provider of an online platform for hotel bookings, says the hotel business is now reviving. “There has been improvement, especially in the last three months. International organizations in particular, and others have been frequently requesting hotel spaces.”

In fact, Hannamariam contends that the problem has now changed from low tourist flows to insufficient hotel space. “Some foreign institutions are even asking to book hotels that can accommodate up to 400 people who will come for conferences for a few days. However, there is no hotel with such capacity in Addis Ababa. The only option available is to book rooms in more than one hotel. But they do not like such arrangements for various reasons.”

On top of insufficient capacity, those close to the issue stress that it is difficult to find similar service and price across the hotels. The differences between hotels in Addis Ababa both in price and service quality are visible. As a result, Ethiopia is losing opportunities in conference tourism.

However, the resurrection of the hotel business is not similar even across hotels in Addis Ababa. The revival is still more intense for hotels located around the Bole and Kazanchis areas.

The hotel business in Addis Ababa is highly influenced by location, according to Rediet Woldegebriel, who has been in the industry for the last six years as a front office manager at the 120-room Nega Bonger Hotel, in Akaki Kality District. “The current business revival does not reflect the actual trend across the city. Occupancy rates at Nega Bonger have remained between 20Pct and 30Pct for over the last couple of years.”

“Most of the hotels whose business is currently reviving are big hotels located near the Airport. This is because they can accommodate transit travelers on top of being active in online booking and work hand in hand with tour operators,” adds Rediet. “Smaller hotels and those far from the Airport are still struggling. Although Nega Bonger has an agreement with Ethiopian Airlines to accommodate transit travelers, but since it opened its hotel, our occupancy rate will likely drop.”

Tesfaye agrees with Rediet. “Of course, location as well as security has big impact in the hotel business. Elilly’s location just on the gates of UNECA is a big advantage. Delegates mostly come for our banquets. Sometimes, the revenue from banquets exceeds revenue from rooms.”

8th Year • Jan.16 – Feb.15 2019 • No. 70