Ethiopia is becoming East Africa’s new economic giant. The country has become the biggest economy in the region thanks to the dominating agriculture and service sectors which account for much of the country’s gross domestic product.
According to Ethiopian Ministry of Finance and Economic Development, in the current phase of the Growth and Transformation Plan, Ethiopia has planned to reduce the share of the agricultural sector in its Gross Domestic Product in favor of industry and service sectors.
The overall growth of Ethiopia’s economy has come from the expansion of the service and agricultural sectors, while the performance of the manufacturing has been relatively modest.
According to World Bank research, private consumption and public investment have been increasing, assuming increasingly important roles in recent years.
Currently, Services accounts for more than 40 % of Ethiopian GDP and the sector expansion is expected to continue across the country. Some experts believe the service sector will dominate the economy in the near future.
The growth of Ethiopia’s hotel expansion has been truly impressive. But what is the reason behind the boom service sector, most particularly the hotel business?
Tesfaye Amenu, sales and marketing Director at Elilly International Hotel, showed us the not-so-secret reason regarding the growing demand behind the Expansion of the service sector. According to him, the development in the service sector is the result of growing demand and under supply. ‘The hospitality sector is poised for further growth in the wake of increased number of inbound travelers into the country. For example, the number of hotels in Addis Ababa has tripled. The booming competition in this market could potentially double in the near future, ‘ he said.
The fact that Ethiopia being home to the third largest diplomatic community in the world, after New York and Geneva, the country, and Addis Ababa in particular, has become home to several new star hotels.
Even though most of the hotels are 3-star, unbranded hotels, with the anticipated further economic growth and the increase in international corporate entry into the market, more branded hotels are coming to Ethiopia to serve business travelers from all over the country and the world.
Conferences in the African Union and the United Nations Economic Commission for Africa have increased the demand for branded hotels, bringing foreign currency to the tourism economy. And most of that demands are for 4- and 5-star hotels which are mainly driven by demands from the aid and diplomatic community.
From Sheraton Addis Hotel, to AU Grand Hotel, Jupiter International Hotel, Radisson Blu, Intercontinental and many other hotels, Ethiopia is now the host of many international as well as local hotels with different stars status.
As one of the lead markets, the corporate hotel market on the other hand is primarily domestically driven, with a few presences of international companies.
In addition to the upcoming entry of branded hotels to Addis Ababa, there is a large stock of unbranded hotels under construction, but many are stalled, looking for investors to help them finish construction.
Associated with the hotel business is the catering business sector, which is expected to flourish taking advantage of cheap labor in Ethiopia. The catering sector has a strong job generation capacity, which by far exceeds that of the other labor-intensive sectors such as leather, floriculture and construction. Growth of this sector should therefore provide some relief to the high unemployment situation prevailing in the country today.
The country is also welcoming major investors from Africa and beyond. Carlson Rezidor Hotel Group recent management agreement with two local developers to open hotels in Bishoftu and Addis Ababa could be illustrative.
Carlson Rezidor Hotel Group signed an agreement to open a Radisson Blu in Bishoftu and the first Park Inn by Radisson in the capital city, Addis Ababa. Carlson already operates Raddisson Blu in Addis Ababa, which opened in 2011.
To increase the number of hotels and lodges, the country has encouraged investors through tax and land incentives, to bank loan arrangements. This bearing fruit with the erection of new hotels all over the country.
The Kuriftu Resort, which extended its existence from Bishoftu to Bahir Dar, is one of the talked about luxury hotels in Ethiopia. The resort’s first ever largest Water Park in East Africa reflected how the Hotel Business is creating attractive strategies through the existing of strong competition.
The capital city, which until very recently had few branded hotels, is now home to many of them, including the recently inaugurated Hyatt Hotel and Ethiopian Airlines 4-star Hotel, Bole Skylight Hotel.
More Hotels are expected to be operational in the next few years, bringing the number of branded hotels to dozens soon.
Despite the government’s commitment to hotel development and tourism to reap the full benefits of this sector, there are still unsolved issues in the Hotels and Catering Business in Ethiopia.
In a follow up article, we will talk with the Vice General Director of Catering and Tourism Training Institute to discuss these and other issues.