Ethiopian Skylight Hotel

Hoteliers Hopping to Break Even

For the past four years, the hospitality industry has been suffering from the impacts of political instability. It has been heavily affected by the COVID-19 pandemic, which caused the local hospitality industry loses over 50Pct of its market. Ethiopia’s hospitality sector is adjusting to taking a share of the recovering market, with travel restrictions gradually easing and vaccination rates rising reflected in higher occupancy rates, as many hotels offer flexible cancellation policies and discounted rates to entice travellers back to their properties.

Despite ongoing marketing challenges, hotels are investing in new technologies and safety measures to provide their guests with a safe and comfortable experience, critical in rebuilding consumer confidence and trust, writes EBR’s Bamlak Fekadu.

Ethiopian Airlines Group celebrated the spectacular opening of its subsidiary Ethiopian Skylight, a five-star hotel development in a great location just five minutes walking distance from Addis Ababa Bole International Airport, on May 05, 2023.

The Skylight’s second phase inaugural was graced by Prime Minister Abiy Ahmed (PhD), Mamo Mihretu, governor of the National Bank of Ethiopia, and Mesfin Tassew, Group CEO of Ethiopian Airlines, among many other high-level officials and business leaders.

The expansion project that incurred over USD155 million raised its occupancy capacity to over 1,000 rooms, which makes it three times larger than the country’s luxurious and largest hospitality establishment, the Sheraton Addis, which has less than 300 rooms.

The hotel is suitable to accommodate business and leisure events and stays. Skylight Hotel has been providing a wide range of luxury experiences, and with the completion of the second phase, more five-star facilities and experiences are open to service.

“With Skylight Hotel having more than 1024 rooms and several other facilities, we can now proudly say that we have the largest hotel in the African continent.” Mesfin Tassew, Group CEO of Ethiopian, said. “We are thrilled as it takes our contribution to Ethiopia’s tourism sector a step higher”.

Ethiopian Airlines opened the first phase of the Ethiopian Skylight Hotel in January 2019. It was erected on 40,000 sqm with 373 rooms, 27 presidential and executive suites, four restaurants, and a conference and banquet hall that can hold 5,000 people.

Skylight’s possession increased to 51,500 sqm with the expansion, nearly doubling its rooms by more than 650. Mesfin also said the hotel has modern underground parking that accommodates over 400 vehicles.

In September 2022, Ethiopia opened another five-star hotel inside the Addis Ababa Bole International Airport. As travel restrictions are easing, the airport will serve a growing percentage of its capacity, over 22 million passengers annually, making it one of the busiest airports in Africa. The hotel features 97 opulent, contemporary rooms, a restaurant, a meeting room, and other amenities. The Ethiopian Skylight Hotel oversees its management.

Some hoteliers, whose businesses heavily rely on transit passengers supplied by the airlines, were unhappy with the big group’s expansion. Bereket Asmelash is an operational manager at one of the hotels in the Bole District, where more star-rated hotels are abundant.

“State-owned enterprises often have access to government subsidies and resources that allow them to offer lower prices and more attractive packages, further putting small hotels at a disadvantage,” he told EBR.

The war and pandemic have caused a significant decrease in demand for hotel services, resulting in reduced revenue and profitability for the hospitality sector. In addition, many hotels have had to lay off employees or reduce their working hours to cut costs, further exacerbating the economic impact of these crises on the industry.

“There were many hotels dependent on transit travellers, which used to take around 600 passengers from the airlines, but the airline has cut that by more than 50Pct,” says Bereket.

Ephrata, whose middle name is withheld on request, is a managing director of the Addis Ababa Hotel Owners Association. She affirmed that the association she leads is receiving similar complaints from hoteliers.

“Our association has appealed to the Ministry of Tourism regarding the issue, and we are waiting for conferences to solve the issue to be held in the coming months,” he disclosed.

As a result of Skylight’s expansion, many small and independent hotels anticipate a risk of declining occupancy. With these changing market dynamics in mind, some hoteliers have decided to permanently convert their establishments to healthcare facilities as the financial strain exacerbated by the pandemic and war has already drained their financial resources.

Others are pursuing the domestic market, which slowly seems to be resulting in an increased occupancy rate. The hoteliers have realized the need to lower room prices to respond to local customers’ lower financial capacity.

Ermias Abate, an expert in the hospitality sector with a little over a decade of experience, sees compliance as a failure for the hotels to undertake their assignments. He argues that hotels should use their marketing strategy to exploit the untapped local market.

“While the expansion of skylights has impacted some hotels, claims of market dominance are morally indefensible,” Ermias says. “The quality of services rendered by these hotels, which are reliant on transistors, was claimed to be poor before the airline came intervened to solve the problem by building its own hotel.”

Ethiopian Airlines has been able to thrive and stay financially stable during the COVID-19 pandemic due to its business diversification strategies and agile management. This situation has enabled them to focus on cargo, hotel, and MRO businesses, allowing them to remain financially stable.

He believes hotels need to be more proactive in identifying and catering to the needs of potential customers rather than relying solely on third-party aid. Hotels need to focus on creating unique experiences for their guests by offering personalized services and amenities that cater to their specific needs. By doing so, hotels can differentiate themselves from their competitors and attract more customers, leading to increased revenue and success in the hospitality industry.

Following the pandemic, the conflict in Tigray has also led to several tourist attractions and infrastructure closures, making it difficult for tourists to access certain areas. The war created a sense of insecurity among potential tourists, leading to declining bookings and hotel reservations, and other tourist accommodations.

Due to this, hoteliers found themselves in hot water as visitor numbers dropped from nearly a million in 2018–19 to 600,000 in 2020 and as low as 100,000 in 2021–2022, the busiest travel season. Since the pandemic outbreak, the number of tourists in the Ethiopian hospitality sector has declined by 74 Pct. The occupancy rate had dropped to as low as 2 Pct and even less, resulting in USD 35 million in revenue losses.

New hoteliers are joining the hospitality industry, including the five-star Haile Grand Hotel, the four-star Grand Palace Hotel, and the three-star Triple E. This move shows an optimistic outlook for recovery from the pandemic, which caused a devastating decline in occupancy rate and operating revenue since April 21, 2020, the declaration of the state of emergence and the war in Tigray.

The post-COVID scene has seen a recovery, with the spread of vaccination, the lifting of travel restrictions, and the growing culture of domestic tourism leading to a 60 Pct average occupancy rate proportional to the pre-COVID stage.

Meklit Samuel is a head waiter at a four-star hotel around Kazanchis, a leading business district in Addis Ababa that witnessed a slight recovery. Currently, the meeting halls of the hotel she works at are booked, and room occupancy, especially during weekdays, is secured wholly or [significantly].

“Our hotel occupancy has reached over 60Pct, and this has led to an increment in our service charge earnings,” she told EBR.

However, she also mentioned that the pandemic had caused a shift in the type of guests they receive, with more local guests and fewer international visitors. Hotels must adapt their services and marketing strategies to cater to this new demographic.

Ermias asserted that the sector had significantly improved, with an increase in domestic tourists contributing to the rise in occupancy rate. The average daily rate (ADR) is one crucial factor that only confirms the progress of the industry’s recovery.

The ADR is the magnitude to measure that hotels are recovering to their pre-COVID state; The occupancy rate reflects how many nights hotels sold, while the ADR is the average of how much the rooms were sold for. A high ADR is generally better because it means making more money for every night sold. “Some hotels’ ADR was below the normal average, as low as USD 25,” Ermias said.

To attract patrons, Haile Resort Hawassa even cut rates for its 126 rooms by half, charging less than USD50 a night for a standard room, down from the usual USD85.

The establishment has returned to normalcy, with business picking up again. Domestic tourism has played a big part in the revival; occupancy rates are climbing, currently sitting near 60Pct. Though the hotels are performing better and registering higher occupancy, industry players say the road to recovery is still long.

Addis Ababa had once led Africa in hotel room rates, Africa’s highest average daily rate (ADR) from 2018 to 2019; Addis Ababa, as of STR data benchmarking, analytics, and marketplace insights for global hospitality sectors founded in 1985, with a presence in 15 countries in North America, stated an absolute ADR of USD163.79 when measured in constant currency, which removes the effects of inflation. That figure was a 1.1Pct increase year over year. The closest STR-defined markets in Africa were Accra Area, Ghana, USD 160.34, and Lagos Area, Nigeria, USD 132.51.

Addis Ababa is considered the third largest diplomatic city in the world after New York and Geneva. The primary drivers of hotels in Addis Ababa are not-for-profit organizations, including diplomatic, aid, and NGOs, along with meetings, incentives, conferences, and exhibition segments.

Over 90Pct of Addis Ababa’s tourists are business travellers, and the city’s average occupancy rate in 2019 was 67 Pct. This indicates that Addis Ababa is a hub for business activities, and the city’s hospitality industry is crucial in supporting the local economy. However, with the recent tourism growth, there is an opportunity for the city to diversify its offerings and attract more leisure travellers.

According to the Addis Ababa Hotel Owners Association (AHA), with over 130 members, the supply position of the capital is constituted by 10Pct of five stars, 19Pct four stars, 38Pct three stars, and 8Pct of two-star hotels. On the report published by AHA on the impact of the pandemic, the occupancy rate during pre-COVID was 69Pct and 64 Pct in 2017/18 and 2018/19, respectively, while the ADR was USD74 and 72, and revenue per available room (RevPAR) was USD 56 and USD46.

For instance, as a sign of recovery, the ADR range on the most opulent hotels, like the Ethiopian Skylight In-Terminal Hotel, is over USD100; the Haile Grand Hotel, which received a 9 out of 10 rating from customers; and the recently opened Grand Palace Hotel in Addis Ababa, has an ADR range of roughly USD90.

The global travel industry is a USD7.6 trillion-service sector, expected to offer job opportunities for 300 million people globally. Before the pandemic, Ethiopia’s travel sector supported 1.2 million jobs. With the fast recovery, the sector’s job creation capacity will show a yearly growth rate of 3.6Pct by 2027.

According to Statista, an online platform specialized in market and consumer data, which offers statistics, reports, and market insights, Ethiopian hospitality revenue in the hotel segment is projected to reach USD0.92 billion in 2023, leading to a growing penetration of 7.7 Pct. The growth rate shall be by 10 Pct until 2027.

An annual growth rate (CAGR) of 9.93Pct, resulting in a projected USD1.35 billion market value, is expected by 2027. In the hotel segment, 13.56 million tourists will be by 2027. In the year, online sales will account 73Pct of the hotel segment revenue.

The average revenue per user (ARPU) shall grow to USD97.58. However, the average amount tourists spent was USD 5,082 in 2019, indicating a significant difference in spending habits between tourists and users. Various factors, such as the duration of stay, purpose of visit, and level of disposable income, contribute to this.

Ethiopia earned USD 2 billion from foreign tourists in the fiscal year’s first half. Domestic tourism also made the nation ETB 44 billion, indicating strong growth after the pandemic. The government’s efforts to promote tourism, including launching a new tourism campaign and developing infrastructure in popular tourist destinations, are credited with this increase. Despite the pandemic’s and war’s challenges, Ethiopia’s tourism industry has a bright future to grow further in the coming years.

11th Year • June 2023 • No. 118 EBR


Leave a Reply

Your email address will not be published. Required fields are marked *

Ethiopian Business Review | EBR is a first-class and high-quality monthly business magazine offering enlightenment to readers and a platform for partners.

2Q69+2MM, Jomo Kenyatta St, Addis Ababa

Tsehay Messay Building

Contact Us

+251 961 41 41 41