Project Proposal for 4-Star*

International Hotel

LOCATION:-OROMIA REGION BISHOFTU CITY

PROMOTER: GETACHEW TOLOSA JIMA

January ,2025
Bishoftu City, Ethiopia

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Contents
1 Executive Summary .............................................................................................................................. 3
1. Background of the project ................................................................................................................... 4
2. Introduction ..............................................................................................................................................6
3. Objective of the Project .................................................................................................................................7
4. Project Location and Description ........................................................................................................8
5. Market Situation ......................................................................................................................................9
5.1. Market Price ............................................................................................................................................12
6. Location and civil works ...................................................................................................................... 14
6.1. Location & Site .......................................................................................................................................14
6.2. Civil Work ................................................................................................................................................15
7. Internal Facilities/Furniture/equipment for bedroom services................................................21
8. Internal furniture/equipment/ machineries for hotel.................................................................22
9. Running cost ...........................................................................................................................................23
2. TECHNICAL ANALYISIS.................................................................................................................. 23
3. ECONOMIC OVERVIEW ................................................................................................................... 35
TABLE 6 PROJECTED NUMBERS OF TOURISTS..................................................................................... 39
4. TECHNOLOGY AND ENGINEERING ........................................................................................... 44
10. Services & Revenue projection .........................................................................................................47
11. Organization and Manpower ..............................................................................................................48
12. Other expenses......................................................................................................................................50
13. Financial Analysis ..................................................................................................................................51
13.1.Initial Investment Cost .................................................................................................................................52
13.1.1. Initial Fixed Investment .............................................................................................................52
13.1.2. Working Capital ......................................................................................................................... 52
13.2.Source of Finance ........................................................................................................................................53
14. Profitability Analysis ....................................................................................................................................53
14.1.Simple rate of return (SRR) .......................................................................................................................... 56
14.2.Payback period (PBP) ...................................................................................................................................56

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 1 Executive Summary
KEY INFORMATION HIGHLIGHTS

PROJECT OWNER Getachew Tolosa

PROJECT TITLE Four star hotel

NATIONALITY Ethiopia

LAND REQUIREMENT 10000 M2

PROJECT AREA BISHOFTU CITY

PRODUCTION
CAPACITY
PRODUCTS TO BE
International standard tourist hotel is high
SERVICE
class hotel where services like standard
bedroom, catering, conference hole, Spa
(Hot Spring), gymnasium, sauna and
massage, other sports facilities like tennis or
squash court, min-golf or badminton,
bowling, table tennis and children
playground, night club with dancing to live
music or discotheque or cabaret etc.

MARKET Domestic and International

COST OF THE PROJECT Total investment Cost: 100,000,000 ETB is required, from this
amount 30% or 30,000,000.ETB from owner equity and the rest
70% 70,000,000 ETB from bank loan.

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1. Background of the project
The owner of this project, Getachew Tolosa , has been engaged on a number of
investment activities in Ethiopia for a long period of time. His vast and successful
business experience coupled with strong financial position has now initiated him
to establish and run a designated five-star Hotel business in the city of Bishoftu
City. This star-designated and standardized hotel business is going to be
constructed and functional at the heart of the capital city of Oromia region. The
proposed hotel is going to serve various services such as superior quality deluxe
suite rooms (Junior, Executive, Presidential), standard and standard double
guest rooms, Gourmet restaurant and bar, Champagne bar & lounge, Roof top
bar, Wine cellar, Multifunctional meeting and conference rooms, Wellness & spa
area (including treatment rooms, sauna, steam bath, whirlpool, indoor pool) and
Fitness & gym area as well as various related business centers such
International Conference events, Cinema Halls, Children Entertainment
facilities, Wedding Ceremony areas & Ground Tennis court. The proposed
star-designated hotel project has two block building of each with G+6 and G+2.

In Addition, This project proposal is prepared with the objective of establishing a

4-star International/Tourist Standard Hotel in Bishoftu City. The design of the
hotel establishment includes 140 Bedrooms with Health Spa, Beauty Salons, Tour
& Travel Agency, Swimming Pool, Gymnasium, and Cafeteria, Restaurant,
Conference Hall, Supermarket and other services. Our market Study shows that
there seems to be a huge market for tourist standard hotel services in Bishoftu
City.

The owner of the project, Mr. Getachew Tolosa, is a young Entrepreneur, with more than

15 years of experience in managing various related Businesses in outside of the Country

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The total initial investment cost of the proposed designated four-star hotel is
estimated at about birr 100,000,000of which birr 70,000,000will be required for
fixed asset and the remaining birr 30,000,000.00for day to day operation of the
project. This investment cost is proposed to finance both by the long run bank
loan and personal own equity. The rate of financing for the proposed project is
set at 70% by long-term bank loan and the remaining 30% from own source.

The project will be operational as soon as the construction is completed and it is

expected to earn an annual profit before tax Birr 73,128,321.72 during 80%
capacity services operation. The simple rate of return of the project is calculated
at 12.85% and the payback period of the business is estimated about 12 years
if it is operated at 80% capacity services provision if not defiantly it will take
more than the estimated years.

With the opening of the project, it will create Permanent employment opportunity
for about 70 citizens and Temporary opportunity for about 50 citizens total 20
citizens , and will contribute revenue to the local government in the form of tax.

Thus, the project is financially sound and worth investing and needs assistance
in materializing the project.

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2. Introduction
The Ethiopian government has formulated it’s second 5-Year Growth and
Transformation Plan (GTP-II) to carry forward the important strategic directions
in maintaining a fast growing economy in all sectors. Accordingly, the tourism
sector is one of the key sectors set to benefit from the enormous efforts being
made by the government.

Generally, Ethiopia has much to offer to local and international tourists. It has a
unique historical and cultural heritage, natural attraction; it is a possessor of
eight world heritage sites, magnificent scenery, a surprisingly cool climate, rich
flora and fauna, important archaeological sites and hospitable people and their
cultures diversified a combination which makes it suitable for tourism
development.

The northern tourist circuit known as the “Historic Route’’ comprises the most
important tourist sites in country. Ethiopia’s wealth of tourism attractions gives
it great potential for cultural and educational tourism, photo safaris, hunting
safaris, bird watching, water sports including river rafting, desert trekking,
mountain climbing and-ecotourism. Health tourism, on the account of the cool
climate and numerous hot springs, is an additional type of tourism with great
potential. Tour operators of grade 1 have shown considerable growth in recent
years.

Conference tourism, long aided by the presence of a number of international

organizations in Addis Ababa including the African Union (AU) and the Economic
Commission for Africa (ECA) is also an attractive investment opportunity.

The stock of hotel rooms in the country has increased sharply over the last few
years. While some tourist accommodation is already available at all the major
attractions, improvement as well as new construction is taking place. The
tourism industry is growing because of Government commitment to provide an
enabling environment. Enormous opportunities exist for tourism investment in
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star-designated eco-tourism, specialized international restaurants and tour
operation grade one.

Ethiopia is truly a land of contrasts and extremes; a land of remote and wild
places with a wide range of potential tourist attractions, which have not yet been
fully exploited.

Thus, potential investors can take full advantage of these opportunities through
direct investments or joint ventures with foreigners. Opportunities also exist in
this sector in the construction of star designated hotels and resort hotels all over
the country.

Accordingly, Getachew Tolosa is planning to acquire a plot of land in the center

of Bishoftu City. The land is planned to be utilized for the construction of a four-
star hotel building. Plans for this investment include the development of a hotel
which is able to play in at the very top end of the luxury segment.

To further support internal investment decisions in terms of construction &

design and acquire land for its investment, the owner of the project , has
commissioned the preparation of this feasibility study for the proposed hotel
project in Bishoftu City .

The study focuses on the investment environment of the country and location of
the proposed hotel, the assumed competitive market, the local hotel market, the
estimated trading performance of the hotel assuming a position at the very top
end of the market.

3. Objective of the Project

The objective of this designated four-star hotel business project is to: -
 Earn profit for the owner of the project,
 To be of model in the Developmental Private Investment Sectors,
 To provide employment opportunity to the growing labor force, and
 To serve as demonstrative investment venture in the Eastern part of Ethiopia and
contribute toward the development of Tourism sector in Bishoftu City
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  Create employment opportunity for at least 70 Permanent unemployed
citizens and 50 Temporary unemployed citizens totally 20 citizens directly
in the hotel implementation and for other numerous people on the rented
shopping activities,
 To reduce the scarcity of accommodations in the project city in particular
and the region in general,
 To generate revenue for the local government through profit tax, employment tax
etc...,
 To provide star-designated hotel and shopping services at an affordable
price with best quality and diversified services,
 To motivate local and international tourist to the region,
 Generally, it will have a forward linkage on the development of the city.

4. Project Location and Description

The understudy project is the construction of star-designated hotel building at
Bishoftu City in the newly redeveloped and flourishing area assuming to maintain
a position at the very top end of the market by providing customer focused
hospitality services including superior quality deluxe suite rooms (Junior,
Executive, Presidential), standard and standard double guest rooms, Gourmet
restaurant and bar, Champagne bar & lounge, Roof top bar, Wine cellar,
Multifunctional meeting and conference rooms, Wellness & spa services
(including treatment rooms, sauna, steam bath, whirlpool, indoor pool) and
Fitness & gym services as well as various related business centers. The project
has two blocks of each with G+6 and G+2 buildings. At present the owner of the
project has already secured the startup capital in the form of owners’ equity and
begun processing of application to secure land for the investment in Bishoftu City
and the city’s department of land management & development is expected to
respond based on the findings of this proposal and pertinent urban land
management laws and regulations. The construction activities will start soon after

securing the required land for investment.’

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 1.1. PROJECT DESCRIPITION
The concept of this project is contained in five-stars standard hotel in the
project area by fully G+20 constructing modern panoramic with other emergency exit
stairs and installing multipurpose modern and cultural bar and restaurant services,
meeting & conference room services, shopping centers, sauna bath & steam
services, and other facilities to its customers. It is assume that the project
will be implemented and attain a full capacity operation within two years period,
during which time the project is expected to undertake building construction
activates, purchase, import and install the required machinery and equipment in
order to be able to star up the improved service provision activity with 70%
of its capacity, that grows time to 80%, 90% and eventually attaining 100% of the
estimated full capacity.

For financial analysis and evaluation purpose, the average charging rates for similar
service activities in the city have been taken into account. After undertaking detail
computation of costs and benefits, in order to attract customers and penetrate
the market easily, it is suggested to add on the average of 30 % profit margin
and charge for meals and beverages a relatively reasonable price on its standards.

The total estimated initial investment cost of the project is estimated to be about
birr 100,000,000from the total investment cost 70% is assumed to be financed
by long- term bank loan obtained in three phases, of which 49% will be required
in foreign currency and the remaining 30% of the total investment cost will be
covered by equity capital contribution of the owner/investor.

5. Market Situation
All investments particularly that of a private investment are being made in return
of economic benefits both privately and socially. The benefits can also be
expressed in different forms but the economic return in the form of profit is the
basic criteria for determining to invest or not. To do so, analyzing the market
situation of the proposed project becomes indispensable. Thus, before making
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any more financial investment, the market situation of the proposed project
should be dealt critically.

In big projects, undertaking market study is unavoidable task since its future
fate is basically determined by the situation of the market. Similarly, though the
required market study for this particular project may not be as shallow as to that
of complex projects, looking to its market situation is an important step. The
owner of the project has made a lot of study for establishing the project before
deciding to invest money and starting the construction activities.

The demand and supply situation for most business is basically a function of
various economic variables, such as population, income level and taste,
urbanization, overall economic activity and growth, government policies and
strategies and the like. These factors have got an impact on the availability of
market. When we look to the demand and supply situation of a star-designated
hotel basically its demand is highly dependent on the active economy prevailing
in the country and off course in the region where this project is going to be
opened. Taking the prevailing market of the existing hotel businesses in the city,
it can be concluded that a hotel building completed with the latest state of the
art construction technology is highly demanded by customers, like businessmen,
traders and government offices, local and international tourists, local and
international NGOs, national and international delegates, sportsmen, investors,
etc.

Bishoftu City being one of the fast growing city in the country is attracting many
to invest, discuss on economic and political affairs and a center of all activities
undertaken in the region. Such activity would definitely call for the movement of
people from different zones of the region, from the center of the country and
other regions of the country as well as from neighboring countries and some of
these would definitely require the service of the hospitality industry. In addition
to this, most of the inhabitant of the city and the region in general are looking
for modern recreation and sport centers due to increasing of income level and

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growing life styles such demand also call for the establishment of star-designated
hotel services.

To explain the demand & supply situation for this particular project more
qualitatively, it can be said that since this project is going to be constructed at
the center of the city where the economic activity is highly concentrated/ central
business district/ and no other service of same standard is available in the city
and close to this project, it will have an advantage in securing the highest market
share. Moreover, the fact that superior quality bedroom services, Gourmet
restaurant and bar, multifunctional meeting and conference rooms, wellness &
spa area (including treatment rooms, sauna, steam bath, whirlpool, indoor pool),
fitness & gym area are expected to be of the highest standard and with a
reasonable price that can be afforded by most businessmen and governmental
officials, tourists local and international agencies employee etc; it will again enjoy
the market. In addition to this Bishoftu City as a center of the region a number
of regional and international workshops are undertaken and this by itself call for
higher demand for the star- designated hotel services.

On the other side when we look to the supply aspect, there are no enough
buildings giving multipurpose functions in the heart of the city. There are only
few existing hotels with very limited services available in the city. The existing
hotels in the city are few in number as compared with existing demand and did
not provide a full range of services expected from 4 star hotels.

In general, the region is a tourist center and also located at the heart of the
northern tourist route making it attractive and convenient for a number of local
and international visitors which definitely create a huge demand for the hoteling
services.

In conclusion, as there are no enough hotels with standard and full range of star
hotel services at affordable price; the investment of this star-designated hotel is
highly expected to be a preference and taste of many businessmen,

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governmental officials, tourists, international agencies employees and inhabitant
at large. Therefore, the establishment of such kind of star-designated hotel with
satisfying services in the city of Bishoftu City will be more feasible and have a
great contribution for the ever increasing development of the city and the region.

5.1. Market Price

The price for the proposed designated five-star Hotel project services are set out
below, where prices are adjustable to prevailing market and level of affordability
in the city and the country. As noted above, the services of the project include
but not limited to the following:
1. superior quality bedroom services,
2. Gourmet restaurant and bar,
3. multifunctional meeting and conference rooms,
4. wellness & spa services (including treatment rooms, sauna,
steam bath, whirlpool, indoor pool),
5. fitness & gym services
6. Indoor Games
7. Outdoor Amusement park
8. Basketball, Ground tennis and mini football courts
9. Cinema

1. Bed rooms Service

The proposed 4-star hotel has one main four star including another G+5 building.
The bed rooms are categorized in two types namely standard bedroom and suit
bedroom. Basically both bedroom types are with self-contained facilities such as
toilet, hand wash bath; cold and warm bath room, television, refrigerator and so
on. The difference is that: -
 Standard bedroom has an average total area coverage of up to
20000m2 including toilet room
 Standard double bedroom has a total area coverage of up to 200m2
including toilet room

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  Deluxe has a total area coverage of up to 250m2 including toilet room.
 Suit room has a total area coverage of up to 280m2 including toilet room.
 Family suit rooms up to 100m2 including toilet room
 Presidential suit room up to 960m2 including toilet room
 The suit room has living, dining and bed room.
The price per bed per night for each of the bedroom types is fixed at the
following rate/with reference to the market price of similar services in the city
and other similar cities of the country.

o Standard bedrooms (180 bedrooms in number) is birr 1000.00 per night

o Standard double bedroom (100 bedrooms in number) is birr 1400.00 per
night
o Deluxe (50 bedrooms in number) is birr 1800.00 per night
o Suit rooms (30 bedrooms in number) is birr 2500.00 per night
o Family suit rooms (10 bedrooms in number) is birr 4500.00 per night
o Presidential suit room (4 rooms in number) is birr 10000.00 per night

2. Other services
The proposed new designated five-star hotel is going to provide diversified
services related to hotel business such as
 Bar and Restaurant is available in the first and second floor of the
buildings covering an area of 1627.50m2. And the price is roughly
birr 200 per person per dishes.
 Special event and meeting hall located in the second floor of the
building occupying an area of 20000m2. And the price is set to be
birr 700 per person.

 Wellness & spa as well as fitness & gym services for both gents and
ladies independently including changing rooms, shower and toilet
rooms located in the basement of the building with a total area of
520m2 with estimated price of birr 200 per person.
 Office, banking and Business centers occupying an area of 300m 2
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 are also available for renting purpose starting from Birr 200 per m 2
per month.

 Standard Cinema that can hold more than 250 persons a time will
be available in 1500 m2 And the price is set to be birr 100 per
person.
 New and high technology indoor virtual game will be available in
1500 m2 And the price is set to be birr 10 per coin.
The prices of all the above mentioned services are rough estimates of project
average costs and current assessments prevailing in other similar services in the
city and the country but are subject to adjustments and revisions based on future
market prices and level of affordability.

6. Location and civil works

6.1. Location & Site

The proposed four star Hotel is expected to be established at Bishoftu City along
the recently redeveloped areas of the city accessible to major infrastructure and
service outlets. The location shall be accessible from all directions without
difficulty and it is preferably along the main road taking from the downtown of
the city and it is very near to the or around Comercial. With regard to utilities,
the site of the project is expected to be connected with all facilities, such as
power and telephone which makes it more comfortable for operating the
business but the owner will use its own water source from the
ground and install modern treatment plant so as to recycle the water.

As to the size of the project, the proposed project has a total land area coverage
of about 10000m2 in which the detail site analysis is presented below.
SITE ANALYSIS for Total Plot Size area Requirement
Total Entertainme Mini Intern Tem Treatm Gree Open Tot
Built nt area Spo al Parki ent n outdo al
Bloc Swimmi Up rt Road ng Plant Area or Are
Block 1 k 2 ng Pool Area field worki a
ng
Area

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 (m2) (m2) (m2) 9% 22% 22% 9% 6% 10% 11% 10% (m2)

2,400.0 972.0 4,690.0 12,000.0 5,000.0 3,400.0 6,000.0 5,500. 53,990.0

0 0 1,318.00 0 12,000.00 0 0 0 5,400.00 0 0 0
0
6.2. Civil Work
The proposed project building has two blocks where the first block is Ground plus
six (G+5) floors and the second block ground plus two (G+2) with best and state
of the art architectural and civil design and quality finishing. The detail design
and purposes of the buildings are described here below:

Hotel design Program

Uni Tot
No. Category Room Quanti t al Remar
ty Are are k
a a
1 Lobby Flow area 1 75 75
Seating 1 75 75
Concierge desk 1 75 75
Reception 1 75 75
Support area- Toilet 1 20 20
Support area- Store 1 20 20
Support area- Janitors 1 20 20
Total area 360
2 Restaurants and Lobby Bar 1 75 75
Bars
Bar 2 150 300
Pool Bar 1 83 83
Main Restaurant 2 167 333
Specialties Restaurant 1 83 83
Cultural Restaurant 1 100 100
Support area- Toilet 1 58 58
Support area- Store 1 58 58

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 Support area- Bar 1
Kitchenette 458 206
Support area- Janitors 1 58 58
Corridor(20%) 1356 271
Total area 1628
3 Guest Rooms Standard 180 36 6480
Standard Double 100 40 4000
Deluxe 50 50 2500
Suit(10%) 30 60 1800
Family 10 80 800
Presidential 4 240 960
Corridor(20%) 3,308

Total area 610 1654

0
Meeting Room- 50 ppl 2
4 Function areas Capacity 50 100
Meeting Room- 100 ppl 1
Capacity 110 110
Conference Hall 1500- 1
2000 1960 1960
ppl Capacity
Function areas- Airlines Ticket 1
Business 30 30
Car Rental 1 30 30
Tour and Travel 1 30 30
Bank 3 30 30
Internet Center 1 30 30
Boutique( Men, 5 30 150
Women)
Function areas- Pre function area 1
Support 20 20
Banquet Offices 3 15 45
Store 1 30 30
Kitchenette 1 30 30
Toilet 1 20 20
Janitors 1 5 5
Corridor(20%) 324
Total area 1944
5 Recreation Gymnasium 1 70 70
Spa Facility- Massage 2 30 60
Spa Facility- Jacuzzi 2 30 60
Spa Facility- Steam 2 30 60
Spa Facility- Morocco 2 30 60
Spa Facility- Sauna 2 30 60
Swimming Pool
Cable Transport
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Recreation- Reception 1 15 15
Support

Lockers/ Changing 2 12 24
Toilet/ Showers 2 12 24
Corridor(20%) 87
Total area 520
6 Administration Front Office 1 25 25
Back Office 1 25 25
Manager's Office 1 25 25
Manager's Office- 1
Executive 25 25
Secretary
Manager's Office- 1
Toilet/ 25 25
Shower
Finance and 1 45 45
administration
Sales 1 45 45
Human Resources 1 45 45
IT, CCTV and Security 3 25 75
First Aid Clinic 1 50 50
Administration- Staff Lounge 1
Support 90 90
Employee changing 2 45 90
room
Staff Toilet 2 30 60
Store 1 90 90
Janitor's 1 20 20
Kitchenette 1 54 54
Corridor 158
Total area 947
7 Main Kitchen 60%
Preparation area- 1
Vegetable 86 52
Preparation area- Meat 1 86 52
Preparation area- Fish 1 86 52
Cooking area- 1 86 52
Vegetable
Cooking area- Meat 1 86 52
Cooking area- Fish 1 86 52
8 Main Kitchen
Support
Changing Room 1 75 75
Chef's Office 1 75 75

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 Cold Room 3 25 75
Freezer 3 25 75
Stores 1 155 155
Pastry/ Bakery 1 75 75
Butcher 1 75 75
Corridor(20%) 121
Total Area 1036
Laundry and
9 House
Keeping

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Laundry and Washing 1
House 39 39
Keeping-
Laundry
Drying 1 39 39
Ironing 1 39 39
Sewing 1 39 39
Linen Store 1 39 39
Supplies Store 1 39 39
Receiving Office 1 39 39
Executive House 1 39 39
Keeping
Laundry and Workshop 1
House
Keeping- 52 52
Engineering
Section
Engineering Head 1 52 52
Office
Reception 1 52 52
Paint and lock Store 1 52 52
Laundry and Main Distribution room 1
House
Keeping- 45 45
Technical
Rooms
Transformer Room 1 45 45
Generator House 1 45 45
Pump house 1 45 45
Water Reservoir 1 45 45
Boiler Room 1 45 45
Corridor 20% 157
Total Area 944
Grand Total Area 2491
9

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Generally speaking, the building is going to be furnished with high quality
finishing materials and aluminum frame. Accordingly,
 All bed rooms and gymnasium of the building will be decorated using
carpet
 Corridors, lobbies, stair cases and trace by using marble tiles
 All the toilets, kitchen will be finished using ceramic
Based on the above consideration, the engineering cost estimation for
construction activities of both buildings is estimated about birr 80,000,030.00
which is calculated by considering the construction cost of Birr 17,000.00 per
m2. The owner of the project has already availed about 30% of the construction
cost which means the owner of the project is investing a capital investment
equivalent to be Birr 234,000,009.00.

UP LC (ETB) FC TC (ETB)
No Description Unit Qty (ETB)

1 Building Cost m2 40,152.79 17,000.00 42,597,430.00 42,597,430.00

2 Swimming Pool m2 2,400.00 35,000.00 9,000,000.00 84,000,000.00
3 Treatment Plant m3/d 120.00 40,000.00 4,800,000.00 4,800,000
4 Internal Road m2 8,400.00 851.50 7,152,600.00 7,152,600
and Car Park
5 Outdoors m2 2,500.00 280.00 700,000.00 700,000
working Area,
Drying and
sample
preparation
6 Circulation and m2 1,500.00 500.00 750,000.00 750,000
green area
SUB TOTAL 80,000,000.00 0.00 80,000,030.00

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7. Internal Facilities/Furniture/equipment for bedroom services
As explained in the project description part, the proposed star-designated hotel
project is going to furnished and equipped using imported best and standard
materials, furniture, equipment, machineries. The detail required materials and
respective costs are described hereunder.
Imported best and standard materials, furniture & equipment
ITEM DESCRIPTIO UNIT Qty UNIT Total Amount
N PRICE (birr)
1 King size wooden bed pcs 100 35,000.00 3,500,000
2 Wooden cupboard pcs 150 20,000.00 3,000,000
3 Matters and pair pillow pcs 150 2,500.00 375,000
4 Sofa pcs 150 40,000.00 6,000,000
5 Blanket and bed sheet pcs 150 8,000.00 1,200,000
6 Flat television pcs 150 30,000.00 4,500,000
7 Refrigerator pcs 150 18,000.00 2,700,000
8 Set of working table with pcs 150 25,000.00 3,750,000
chairs
9 Safe box pcs 150 15,000.00 2,250,000
10 Small size sofa and table pcs 250 15,000.00 3,750,000
11 Refrigerator pcs 212 18,000.00 3,816,000
12 Wooden bed pcs 370 18,000.00 6,660,000
13 TV pcs 370 20,000.00 7,400,000
14 Cupboard pcs 250 15,000.00 3,750,000

15 Matters and pair pillow pcs 250 2,500.00 625,000

16 Blanket and bed sheet pcs 250 6,000.00 1,500,000
17 Telephone pcs 400 1,500.00 600,000
18 Office Furniture Ls 1 400,000.00 400,000
TOTAL CARRIED TO SUMMARY ...... 57,776,000
Based on the existing market we have adopted that the required furniture
average cost is estimated to be about Birr 15,033.93 per a unit of suit room and
standard bedroom. Thus the total required investment for the internal furniture

and equipment to the bed room service is estimated at about Birr 57,776,000.

Imported best and standard Game machine for Indoor and outdoor

ITEM DESCRIPTIO UNIT Qty UNIT Total Amount

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 N PRICE (birr)
1 Indoor Game Machine 22,400,000.0 22,400,000.00
0
2 Outdoor Game Machine 74,324,000. 74,324,000.00
00

8. Internal furniture/equipment/ machineries for hotel

Apart from the internal facility furniture required for the bedrooms, there is also
a need to buy furniture and equipment for the reception, manager office, bar and
restaurant, meeting halls, GYM & SPA etc. The total investment cost for the
specified furniture, equipment and others is estimated at about Birr
52,275,000.00. The detail required list of items with respective estimated cost
are briefly given here below:

Total estimated
S.No Description cost
(birr)

1 Reception and administrative furniture and 400,000.00

equipment
Bar & Restaurant and furniture and kitchen
2 equipment and 17,875,000.00

Utensils
3 Meeting hall chairs, sofa and tables and other 2,500,000.00
accessories
4 Vehicles 15,500,000.00

5 GYM & SPA 15,000,000.00

7 Others 1,000,000.00

Total 52,275,000.00

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 9. Running cost
The proposed project will require a running budget for the smooth operation all
hospitality services. Accordingly, the project will require a total amount of
311,725,930.00 birr as a working capital.

2. TECHNICAL ANALYISIS

2.1. PROJECT AREA

The G +4
hotel project currently has been constructed in a total area of 20,000m2
of land. All details about structural drawings and other related civil works are found
in the bill of quantity proposed by professional engineer. The hotel is currently under
construction and the ground part of the front building is constructed. The total cost of
construction will be Birr 80,000.000.00

2.2. SITE LOCATION

The city administration of Bishoftu City is located at the center of two cities Addis Ababa
and the Adam which is the second city of oromia region. Bishoftu City has an estimated
distance of 47km south east of Addis Ababa and 47km Bishoftu City is the center of
these two big cities where many local wonderer, tourists, group voyagers and other
different business individuals drives now and then in these two cities. This is one of the
best situations for the business opportunity in order to get rest and do business in
Bishoftu City.

Bishoftu City has developed land area of 3280 hectare in 1976, while currently the land
is developed for further services and activities for the total area of 18,278 hec, which
six fold time than 20 years ago. The land is allocated for different use such as: residence
(15.6%), commercial (1.66%), transport and street network ( 12.6), Social service
(13.6), recreation (17.4), open space for further development (24.44) and other
purposes respectively.

Topologically, Bishoftu City has a buffer zone has been characterized in north and east
by flat land which includes swampy, express road, rail way road and lakes. In south by
undulating lands that is dominated by hills. The elevation is ranged from 1800-1995
meter from mean sea level. It is very important to note that the city is part of the Great
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Rift Valley, which found in between fault of land located from Egypt to South Africa.
Bishoftu City has a very convenient climate that favors the activities of the
society in all seasonal year time. The element includes temperature, rain fall and
winds, in which most of the annual time it has hot temperature that favors the
mobility and business activity of the year. In most case most of the time the
dwellers of central city of Addis Ababa leaves for vacation to live in Bishoftu City
during winter Ethiopia season for their healthy reason. The climate of the city
in general belongs to Woina adega (agro climate zone). The maximum annual
temperature is 26.25 degree Celsius and the minimum is 11.18 degree Celsius.
Annual average rain fall of the city is 762mm. April is the hottest month with
31.1 degree Celsius while December is the coldest with 7.6 degree Celsius.
December is the driest while August is the rainy season with 209mm of the year.

2.3. THE PRODUCT AND/OR SERVICES;

Currently the hotel renders the following services such as bar and restaurant
services, bed room, meeting & conference room services, sauna bath & steam
services indoor and outdoor services, seeming and recreation with all the
standard amenities. Now the owner plans to project hotel into 5* star
Luxurious hotel to render well diversified hotel services. The quality of the
service, color flavor, cleanness and hygiene of the food and drinking items
including the compound will be given greater attention in order to make
their customers happy. Experienced cooks and staffs as well as technicians
will be hired to better service quality according the recommended hotel
management practices.
2.3.1. PROPOSED FACILITIES SUMMARY
S.N FUNCTIO SPACE NO. TOTA
N NOTE REQUIRMENT L
PER AREA
FUNCTION (M2)
(SFT)
1 Public Space
Front Desk 160 01 14.86
Lobby 1000 01 92.90
Lounge 1600 01 148.64
Toilet 5 24.15
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Total (with 30% circulation)
364.74 sq.m
2 Administration
Front Office
Reservation office 150 01 13.94
Front office manager 140 01 13.01
Room manager 140 01 13.01
Secretary 140 02 26.01
Accounting section 100 01 9.29
1600 01 148.64
150 01 13.94
03 14.86
Total (with 30% circulation)
328.51sq.m.
3 Executive office
Secretary 140 01 13.01
General manager 160 01 14.86
Assistance General 160 01 14.86
manager

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 Food & beverage manager 200 01 18.58
Storage 500 01 46.45
Toilet 05 120.77
Total (with 30% circulation)
297.10sq.m.
4 Sales and catering office
Secretary 150 13.94 13.94
Banquet manager 140 13.01 13.01
Conference service 160 14.86 14.86
manager
Catering 500 46.45 46.45
Convention Coordinator 140 13.01 13.01
Storage 500 46.45 46.45
Toilet 03 44.59
Total (with 30% circulation)
250 sq.m.
5 Halls
Lobby + Lounge 2000 1500 139.35
Banquet Hall 500nos 15000 1393.55
Total (with 30% circulation)
1992.77sq.m.
6 Restaurants
Main restaurant 16 350 520.26
Shrimp restaurant 16 200 297.29
Breakfast hall 16 100 148.64
Café 16 80 118.92
Bar 4000 371.61
Storage 500 46.45
Total (with 30% circulation)
1954.12 sq.m.
7 Recreation facility
Swimming pool
Indoor swimming pool 01 1000 92.90
Outdoor swimming pool 01 3000 278.71
Office 150 13.94
Total (with 30% circulation)
501.21 sq.m.
8 Health club
GYM 1000+800 02 167.23
Sauna 200 02 37.16
Steam bath 150 02 27.87
Message 150 02 27.87
Locker, Change room 300 02 55.74
Total (with 30% circulation)
410.63 sq.m. 26/24
9 Indoor Game 2000 01 185.81
Library 4000 01 371.61
Beauty parlor 300 01 27.87

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 Barber shop 200 01 18.58
Total (with 30% circulation)
785.03 sq.m.
10 Outdoor facilities
Tennis 1337.80
Basket ball 436.64
Hand ball 371.61
Squash 209.03
Total (with 30% circulation)
3061.62 sq.m.
11 Business Center
Lobby 74.32
Communication cell 37.16
Conference hall 26 150 362.32
Meeting room 300 05 139.35
Audio visual 18.58
Journalist room 18.58
Exhibition & Trade center 743.22
Total (with 30% circulation)
1811.61sq.m.
12 Guest rooms
Single 350 120 3901.93
Double 450 80 3344.51
Twin 600 30 1672.25
Suites 850 20 1579.35
Executive suite 1500 10 1393.55
Total (with 30% circulation)
15459.06sq.m.
Back of house
Receiving area
Storage area
Dry food Storage 139.35
Refrigerated food Storage 92.90
Non food Storage 139.35
Total (with 30% circulation)
483.1 sq.m.
13 Main Kitchen (Total area of the following)
Restaurant 111.48
Ballroom & banquet 46.45
Cocktail lounge 27.87
Hotel guestroom 65.03
Total (with 30% circulation)
326.09 sq.m.
14 Employee facilities
Security & timekeeping 01 278.71
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Changing & toilet facilities 01 37.16
Dining room 01 92.90
Rest room 300 02 55.74

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 Training & interview room 01 92.90
Total (with 30% circulation)
724.64 sq.m.
15 Laundry & housekeeping
Laundry 150/floor 10 139.35
Housekeeping 250/floor 10 232.26
Supervision 120 10 111.48
Store 160 10 148.64
Total (with 30% circulation)
821.26 sq.m.
16 Engineering & mechanical
Engineers office 37.16
Maintenance workshop 92.90
Electrical areas 278.71
Air Conditioning 557.42
Generator and pump 185.81
Total (with 30% circulation)
1497.6 sq.m.

2.3.2. Internal facilities/furniture/equipment for bed room services

As explained in the project description part, the proposed modern hotel project
will be constructed and equipped using standard material, furniture,
equipments, and machineries bed room services furnished with highest quality
material. The furniture, machinery and equipment required for the hotel will be
imported from abroad. The detail required materials are described here after.

Every bed room shall have imported wooden bed, wooden cupboard, mattresses
and pair of pillow, blanket and sheet, television, telephone, refrigerator

Apart from the internal facility furniture required for the bedrooms, there is also
a need to buy furniture and equipment for the reception, manager office,
restaurant, meeting halls, bar, internet café, laundry business centers etc the
expected cost for those furniture will be 44,801,224.79 Birr and the detailed list
of these items is given here below briefly as follows:

Sr. Unit of
Description Qty
No. Measure
1 Bar & Cafeteria
Coffee machine 10 lt Pcs 5
Armed chair Pcs 600

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Sr. Unit of
Description Qty
No. Measure
Oval shaped table Pcs 200
Umbrella Pcs 50
Juice glass Set 250
Tea spoon Pcs 500
Coffee spoon Pcs 500
Juice strainer pcs 20
Juice glass Set 250
Water glass Set 1250
Coffee cups with saucer Set 250
Tea cups w/saucer Set 250
Ice cream box Pcs 10
Water sprinklers Pcs 30
Water hose nylon rope reinforced 25.4 mm dia, 36 mt Pcs 8
length with
Gardener kit Set 8
Children Play ground set 3
Two chain rope swing with steel site and stand Set 10
Plastic made Slide and hide tower (2- 8 years) Set 20
15ft x 42 in. plastic made play tunnel Set 10
Merry-go-round (made of steel) Set 10
See-saw (made of steel) Set 10
Sand filled pits, 5m2 Set 30
Coin operated toy vehicles Set 20
Coin operated video game machines (different type) Set 16
2 GUEST ROOMS
BED ROOMS Pcs
Bed-2.2*1.90 Pc 260
Bed side armoires-wood with 2 chest Drawers Pcs 260
Sofa- single seat upholstery 2 for each room Pcs 260
Coffee table- round glass top Pcs 250
Chair- wooden Pcs 250
Luggage rack- movable & flexible Pcs 250
Wardrobe – wooden built-in with Partitions Pcs 250
TV set – 43-55 inches , flat screen Pcs 280
Telephone Pcs 275
Bath Pcs 280
Shower Pcs 280
Toilet seat Pcs 280
Washing basin Pcs 275

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 Mirror Pcs 280

Sr. Unit of
Description Qty
No. Measure
3 RESTAURANT Pcs
Tables- round Pcs 125
Chairs Pcs 400
Side service tables Pcs 50
Service trolleys Pcs 20
Cupboards Pcs 20
Main dish Plate with rim- 20 cm Pcs 600
Soup cup with saucer Pcs 180
Salad plate Pcs 200
Bread plate Pcs 100
Salt & pepper –set Pcs 100
Butter holder/dish Pcs 100
Coffee cup with saucer Pcs 180
Tea cup with saucer Pcs 180
Soup spoon Pcs 180
Main dish knife Pcs 200
Forks Pcs 200
Salad knife Pcs 200
Dessert bowl Pcs 200
Water glass Pcs 200
Red wine glass Pcs 100
White wine glass Pcs 100
Champagne glass Pcs 100
Liqueur glass Pcs 100
Cocktail glass Pcs 100
Beer glass Pcs 120
Wine cooler with stand Pcs 12
Ashtray Pcs 40
Cash register Pcs 4
Wine storage shelf Pcs 10
4 BAR Pcs
Tables Pcs 40
Chairs Pcs 160
Bar counter Pcs 2
Beverage shelve/ cupboard Pcs 2
Bar stool (counter chairs) Pcs 8
Bar coffee machine Pcs 1

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 Mixer & Juicer Pcs 2
Beverage dispenser Pcs 10

Sr. Unit of
Description Qty
No. Measure
Water glass Pcs 200
White wine glass Pcs 50
Red wine glass Pcs 50
Wine cooler Pcs 4
Ice bucket Pcs 10
Cash register Pcs 10
5 COFEE SHOP Pcs
Coffee shop counter unit- custom built Pcs 1
Coffee machine Pcs 1
Long-leg counter stool Pcs 5
Chair with coffee table (set) Pcs 20
Coffee cup with saucer Pcs 50
Tea cup with saucer Pcs 50
Sugar holder (for all outlets) Pcs 20
6 KITCHEN
Electrical & gas grill with six burners Pcs 5
Microwave oven-20nos Pcs 5
Salamander Pcs 5
Deep fryer Pcs 5
Mixer Pcs 5
Silcer Pcs 5
Hot – water bath ( bain maire) Pcs 5
Freezer Pcs 5
Stock pot(50 liters) Pcs 8
Sauce pan Pcs 13
Sauce pot(50 liters) Pcs 15
Boiler( 30 liters) Pcs 4
Baking pan Pcs 3
Roasting pan Pcs 5
Scale(portion) Pcs 1
Scale Pcs 1
Measuring spoons Pcs 5
Chef’s Knife (10 in.) Pcs 5
Salad knife (6 in.) Pcs 2
Vegetable knife (2in.) Pcs 3
Boning (6in.) Pcs 4

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 Slicer knife (12in.) Pcs 2
Bucher’s knife(12in.) Pcs 2
Cleaver (4in.) Pcs 1

Sr. Unit of
Description Qty
No. Measure
Vegetable peeler (set) Pcs 1
Cutting Board – hard rubber Pcs 4
Pastry wheel Pcs 2
Kitchen spoon ( perforated) Pcs 4
Kitchen spoon( solid) Pcs 10
Tongs (long) Pcs 2
Grater (normal size) Pcs 1
Can opener Pcs 1
Kitchen counter top, with cupboard Unit Pcs 1
Sink unit (900 / 1600mm) Pcs 2
Wall attached shelves Pcs 2
Refrigerator (self contained)- 1500lt Pcs 2
Hot cupboard (warmer) Pcs 2
Ice cream machine Pcs 1
Dishwashing machine Pcs 2
7 HOUSEKEEPING Pcs
Cleaning trolley Pcs 5
Supplies and linen storage shelf unit Pcs 3
Wet and dry floor cleaning machine Pcs 4
Vacuum cleaner (upright) Pcs 5
Mop trolley with squeezer Pcs 5
Buckets big size Pcs 5
Buckets small size Pcs 10
10 Stand By Generator Set With Canopy And Unit 1
Accessories(100KVA)

N.B the equipments will be bought both in domestic and foreign markets

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3. ECONOMIC OVERVIEW

3.1. Introduction
The market potential of hotel properties are influenced by National, Provincial
and local economic conditions. Accordingly, the analysis has included a review
of recent economic performance in Ethiopia, for the Town of Bishoftu City
specifically, in order to assess potential implications for the accommodation
market and the subject hotel.

3.2. MARKET ANALYSIS;

The proposed hotel is to be located Arround the new developed city
center and would compete within three competitive accommodation markets;
the local Hotels accommodation market; the regional accommodation
market, and on a national scale accommodation market, which includes a mix
of hotels in various locations across the province.

3.2.1. Local Competitive Accommodation Market

The local Hotels accommodation market is comprised of approximately 5 three
star and one four star Hotel. the greater part of the existing accommodation
supply in Bishoftu City is considered to be tired and does not satisfy the needs
of transient guests, especially for corporate demand and meeting/conference
groups or sports teams.

3.3. MARKETING STRATEGY

3.3.1. TARGET CUSTOMERS
The target market of the project is very wide in nature. All the tourists/visitors
whether domestic or international are the major target market for the project.
On the same time, it could also be a facility for the corporate clients who
visit Oromia specifically Bishoftu City on business purposes and want to hold
seminars/workshops etc. Similarly, the local residents of Bishoftu City and
adjacent areas could also be one of the major components of the target
market who could not only stay overnight at the huts but also could enjoy
see view dining, lunch or evening tea.

3.3.2. MARKET POTENTIAL

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As discussed earlier, currently there are no such more facility available in
the whole city, therefore, its uniqueness would attract its customers to have
a different and new experience staying at its family huts and/or enjoy the
palace view meals. Also for corporate culture, its palace view conference hall
would also provide a very unique environment.

3.3.3. PRICING STRATEGY

Since the project has a very wide range of customer class, the pricing
strategy should be appealing enough to give its customers the value of
their money spend while using its services. On the same time, the charges
should neither be very high to compete with nor very low to give negative
impression in the market. After carefully analyzing the current hotel/motel
cluster in Bishoftu City, it is proposed that the customers should be
charged somewhere between birr 850 to 2200 per night. The investor can
always shuffle the charges according to the market situation and seasons.
However, the investor can always attract customers to stay as well adding
more revenue to the project.
To assure continuous and sustainable income, the project has to use different
marketing strategies some of the techniques to be used will be

 Keeping the service quality standard as technically recommended

 Adjusting competitive price and quality of service to ge
nerate more income on sustainable bases .
 Making contractual agreements with big potential
customers such as training
centers, military institutions ,
university, college, others
 Providing diversified hotel service with full accommodation of food and
beverage items

3.4. PROMOTION MECHANISUM

To create initial good imp ration of the hotel, the following promotion
activities will be carried out step by step depending on the stages of
the project .
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  Bill board announcement.
 Hand written posters posted at Visible places
 Advertising during holydays through television, others
 Advertising using brochures, pamphlets, and leaflets.

3.5. MARKET APPRAISAL

The general assessment conducted in Bishoftu City shows that exists no
more sufficient hotels in the city that satisfy the need of customers in
all aspects of diversified services especially this one is near to the main
road that connects the Industry Park and the rail station of Bishoftu City.
During the assessment, many travelers Using the bass station, university
lecturers and students, merchants, tourists and couple youths were
approached if their demand for hotel service is satisfied or not but most
of them responded that the major problem is not only the availability of
service but also they suffered with poor quality service and higher price rate.
Therefore; this phenomenon assures that the promoter is quite more
reliable as there is no exists amount of standardized hotel that render
satisfactory services.

3.6. SUPPLY AND DEMAND ANALYSIS

The developer selected a set of hotels that would compete with the 260-
room of the hotel based on the following factors;
o the standard scale of the hotel (budget, economy, select-service, full-
service),
o its proximity to the site of the Proposed Hotel near to the Industry
park and the newly developed city center “BISHOFTU CITY ”, and
located at the center of business area
o the condition of the hotel, and
o The services levels within the hotel.
o Nationally the second populated city and high urbanization

3.6.1. MARKET DEMAND:

According the year 2016 projection report, the current population of
Bishoftu City inhabitants is 446,315 and this figure assumed to grow 2.3

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% per annum (source: Bishoftu City Administration). Now the city is divided
in 7 sub city, furthermore; the city has many small scale private and
public institutions, factories, tourists and passengers who came to the city
for visit, business and non- business activates or to pass over through the
city to other parts of the region and the general public in Bishoftu City and
around the city are considered as potential customers for the project.

3.6.1.1. DEMAND ANALYSIS

Given the assessment of supply discussed below, lodging demand growth is
analyzed in order to predict the environment for success for the proposed
Hotel. The hotel is able to serve quality and traditional services with fair price
and compete with other centers in the city. These considerations are reflected
in the projections below. A new hotel that induces demand to the market will
not only help absorb existing demand and future growth in the market, but it
will also be a demand generator for corporate and association meeting
business that is currently held elsewhere.

The proposed Hotel would also induce significant demand into the market and
maximize the ability of bedroom facilities. The primary source of this demand
would be group business and recapture of suburban demand.

3.6.1.2. POTENTIAL DEMAND

While there currently does not appear to be much un accommodated demand
in the market, as the economy continues to grow, demand will continue to be
in balance with or outpace hotel room supply for several years, especially
during peak periods of the year and when larger conventions come to the
market and during the popular leisure months. Also expect that there will be
many more groups that can be accommodated in or will consider, especially
if a new hotel with substantial meeting space is provided. This incremental
demand can be partially accommodated by the development of an additional
hotel within close proximity to the hotel. In turn, the addition of the hotel will
induce more demand to the market itself primarily in the group sector and
help maximize the ability of the hotels to host events. An additional hotel will
be able to accommodate a portion of this demand, but overflow demand will
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be pushed to other area hotels, benefiting the market.

3.6.1.3. PENETRATION RATE ANALYSIS

Occupancy penetration is the ratio of a particular property’s actual room
nights captured compared to its fair share. Fair share is defined as the ratio
of the property’s number of rooms to the total rooms in the defined
competitive supply.
The hotel has 260 rooms and the market has 7,562 rooms, its ‘fair share’ of
business would be 2 percent of a market’s room nights. The ratio is then
applied to the total market demand by segment to measure the property’s
actual room nights captured compared to its fair share of room nights. The
largest share of room nights would come from the aggregate of different
demand segments. Characteristics considered in this analysis include, but are
not limited to, location, market orientation, pricing strategies, chain affiliation,
facilities, and amenities.
The Hotel is expected to penetrate the market more than 100 percent from
year one on due to its size, strategic location, standards and rewards
program, and its full-service amenities.

TABLE-5 DEMAND FORECAST HOTEL ACCOMMODATION FOR THE 10 YEAR

Year Demand by Demand by Total demand Remark
residents passengers
2019 277248 2276923 2554171
2020 291072 2390769 2681841
2021 305664 2510307 2815971
2022 230928 2635822 2866750
2023 156192 2761337 2917529
2024 81456 2886852 2968308
2025 6720 3012367 3019087
2026 68016 3137882 3069866
2027 142752 3263397 3120645
2028 217488 3388912 3,171,424
Source: bureau of culture and tourism

Excluding tourists’ number of customer are increasing year to year by 23% including passengers
and local residents.

TABLE 6 PROJECTED NUMBERS OF TOURISTS

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 s.no Year Projected number of tourists % increasing
3 2019 1371202 23
4 2020 1686578 23
5 2021 2074491 23
6 2022 2551624 23
7 2023 3138498 23
8 2024 3860352 23
9 2025 4748233 23
10 2026 5840327 23
Source: bureau of culture and tourism

According to the above table number of tourists’ arrival will increase routinely
by 23% annually and in the near future 2018 when the hotel begin its
operation the number of tourists will reach 1,114,798 excluding number
habitants, passenger and businessmen.

3.6.2. DETERMINATION OF SUPPLY

The market survey in Bishoftu City reveals that there are some public and
privately owned hotels that provide bed room services of which from these
there are only very few hotels that provides reasonable good hotel
facilities otherwise most of the hotels have un satisfactory facilities with
poor sanitation conditions, based on the assessment, the occupation rate
of the bed rooms are found to be between 75% - 90% however, for the
purpose of our study also 75% is considered to be occupied, the existing
and planned supplies are forecasted to be grown by 5% in the same
population for the first ten years.

TABLE-7 INVESTMENT LICENSE of STAR HOTELS

Star Investment Investment Investment Investment TOTAL
Hot project project project project nil
el und und und at the
er operation er er pre- ground
(Actual data) implementati implementati
on on
5 star - 16 0 0 16
4 star 1 9 2 3 15
3 star 14 35 8 6 63
2 star 9 31 18 2 60

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1 star 4 21 11 1 37
TOTAL 31 109 39 12 191
Source: Bishoftu City Investment office 2017

According, to the above data there will be big gap between the supply and
demand only 191 hotels which receive license, 12 hotels are not exist at the
ground. The promoter forecast the demand of 2 star hotels because there is
only 60 hotels under-construction. Strategic plan GTP-2 of Oromia
government bureau of culture and tourism setting a plan of being Oromia
preferable place of tourists, national in 2024 number of tourist arrival and
receipts will be reach 4 million and regionally 1.1 will be visited.

Information from office of culture and tourism the projections assume that
there is no more new hotel in the sub-city area during the two-year projection
period.
Looking back to the same report for December 2014, over 148 hotels are
under construction with almost 191 in the planning and final planning stages.
So while there is slight an increased level of proposed hotels across the town.
The above trend shows that tracking only newly constructed hotel rooms does
not tell the complete story of the changes in hotel supply.
MARKET STUDY
General Market View
Ethiopia’s Growth and Transformation Plan (GTP II), a second five year grand
plan, 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 unlikely 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
countries being China, the US, Nigeria and Sudan. The number showed a 12%
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increase from the previous year. For a country 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.
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 Ababa 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,
according to Ministry of Culture and Tourism, and 118 B & B Inns, and 18
specialty lodgings, according to Trip Advisors, become utterly short of the
demands, forcing conference 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
Ababa,” 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 developers, 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.

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No Year Projected Tourist Room night Demand Gap
Arrival Demand
1 2015 758,039 3,032,156 1,253,876
2 2016 831,569 3,326,276 1,547,996
3 2017 912,231 3,648,924 1,870,644
4 2018 1,000,718 4,002,872 2,024,592
5 2019 1,097,787 4,391,148 2,612,8682
6 2020 1,204,273 4,817,092 3,038,812

8.2 MARKET SEGMENTATION

Using typical markets data from City in Bisohftu we can observe the visitor trends
during the in different periods. Looking at this data, we can analyze the number of
visitors from Addis Ababa & Other nearby cities, first timers, and repeat visitors; as
well as, the number of visitors that use the internet to book trips, weather
information, or learn about the area.

Finally, we can analyze the average amount of spending each household incurs
during their visit and what their spending on. This information will help in evaluating
the market and what customers are willing to pay for which will help us in determining
fair prices and services. Key points are looked at here, while the full data can be
viewed in Exhibit 5.

8.3 MARKET STRATEGY

The market strategy for the Tamirat & Family is essential in getting the name out to
the public and creating demand. In order to do this, the initial advertising budget is
large in hopes to oblige travelers to take notices of the bed and breakfast. The
Tamirat & Family will therefore position itself among comprehension travel sites such
as Expedia, Travelocity, Priceline, Kayak, etc. In registering the business in the city,
it will also apply to be recognized on city and county websites so that travelers who
do not know exactly where they want to go will be able to find us. Magazines aimed
at the target market will also be utilized such as Addis Ababa Hotel Directory, Addis
Ababa Tourism Directory, Ethiopia Tourism Directory and using many similar private
and public promotional Medias, weekly journal and broachers.

Once guests have made reservations or have stayed at the Manor, a quarterly
newsletter will be sent to each guest as a way to let customers know what is going
on, new specials, and continually keep them informed and aware of the Manor.
Looking at typical general spending, we can select rates that are all inclusive and
guests are likely to pay for throughout the year. Finally, it will be important to
establish deals with the mountains, golf course, and local attractions in order to be
able to create packages.

As travelers become more „thrifty‟ this will help to create opportunities for those who
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 may not want to pay for everything on a solitary basis.

The baby boomer generation encompasses the greatest number of travelers that can
share their experience with friends and family. Their referrals will also bring in more
guests giving us the opportunity to give repeat visitors discounts for referring friends
and family.

8.4 Market & Guest Matrix

8.1.1 Promotion
 Personal website
 Travel Sites
 Establishing link or Partnership with Big hotels in Addis Ababa and other area
 Public Media
 Producing booklet & Publication

4. TECHNOLOGY AND
ENGINEERING
The main processes of establishing modern hotels at Bishoftu City include
studying the market, securing land, constructing buildings, equipping and
furnishing the buildings and starting the operations of the businesses.

4.1. MACHINERY AND EQUIPMENT

Machinery and equipment required for a modern hotel could broadly be
classified into four categories. These are;

 Bed room furniture, (includes beds, mattress, blankets, bed sheets,

tables, chairs, cap boards, etc)
 Hotel furniture and equipments (tables ,chairs, glasses etc)
 Restaurant furniture and equipments ( tables, chairs, refrigerator, glasses,
etc)
 Kitchen utensils ( forks, spoons, trays, dish, deep freezer, etc)
 Indoor and outdoor game facilities
 Kids corner facilities
 Conference and concert stages

4.2. CIVIL ENGINEERING COST

The proposed project will have ground plus twenty (G+20) floors with best
architectural and civil design and attractive finishing. The detail purpose of

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the building are described below

 Ground floor café, Bar, beauty salon, laundry, reception office, store,
toilet and shower for gents and ladies
 1st floor Meeting and restaurant,
 2nd, 3rd - 20th floors for bedrooms
 The compound will accommodate sauna and steam bath.

Internal facilities/furniture/equipments for bed room services

As explained in the project description part, the proposed modern two star
hotel project will be constructed and equipped using standard material,
furniture, equipments, and machineries bed room services furnished with
highest quality material the furniture machinery and equipment required for
the hotel will be imported from abroad. The detail required materials are
described here after Every bed room shall have imported wooden bed, wooden
cupboard, mattresses and pair of pillow, blanket and sheet, television,
telephone, refrigerator

Internal furniture /equipment/machineries for hotel services

Apart from the internal facility furniture required for the bedrooms, there is
also the need to buy furniture and equipment for the reception, manager
office, restaurant, meeting halls, bar, internet café, laundry business centers
etc the expected cost for those furniture will be 44,200,000 Birr and the
detailed list of these items is given here below briefly as follows:

7.3. RUNNING COST

The proposed project will require a running budget to operate the hotel and
business center smoothly up to the plan, the running cost will require for the
operation of the bar, restaurant, business centers etc. Accordingly the project
will require a running cost as indicated in the last page table of the modern
hotel services.

7.4. SERVICE AND REVENUE PROJECTION

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When the proposed project is completed, it will provided different services
with better quality and reasonable price to the society, business men, higher
officials and delegates, and local and local and international tourist. The
project will start its services after two years which for acquire and construction
of the hotel accordingly and then to furnish the hotel as per the required
quality.

For the purpose of market test and getting important experiences on the new
modern hotel begins its service operation at 70% capacity services of the
project therefore. Full capacity service operation will start from the fourth
year. Based on the information obtained and assessed from the existing
similar service provider business centers of the town, the annual income to
be generated from each of the services of the project at full capacity operation
is estimated as follows.

A. Bed Rooms
The proposed project has got 260 bed rooms in total out of which 120 of them
are single, 80 double bed rooms, 30 twin, suit, executive and presidential. All
the bed rooms are self contained having bathroom, television and built in
cupboard. In addition to this all the rooms have 2.5x2m imported bed, two
chairs and one table, satellite TV, and internet access.

B. Sauna and Steam bath services

These services will be provided in a more advanced way by constructed a
newly modern construction and equipped with up to date equipments and
machinery. The area of the service is situated in another block out of the hotel
complex around the other corner to provide service to the town dwellers. It
will have independent service for both gents and ladies including modern
changing room, shower with boiler and toilet room.

C. Bar and café services

This will be provided in the ground floor of the building under this service hot
drinks coffee, tea milk etc. and cold and alcohol drinking (soft and mineral
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 water, beer, wine, different alcohol …) and fast foods etc… will be served on
all time and the meeting hall participants will also use refreshment during the
break time.

D. Meeting hall services

The proposed modern hotel has one hall with capacity of more than 150
participants. The meeting halls will serve for special events, workshops,
seminars, wedding ceremonies, cinema show, conference etc…

E. Restaurant services
The proposed hotel project will serve out local and foreign dish in breakfast,
lunch and dinner time to both the local and overseas people. Since the hotel
will be constructed along the main road many domestic and foreign tourist
are expected to dine. The expected income from the restaurant assuming 100
persons use the service at all times of the meal time breakfast, lunch and
dinner.

F. Business Center Services

The proposed hotel will have its own business service centers which are highly
related with the operation of hotel works such as tour operators, internet and
telephone business service, beauty salon and barber service center, cosmetics
and souvenir shop center etc in the ground floor of the hotel building and all
the services will be operated under the hotel management.

G. Sweeming pool
The proposed hotel will have two categories of sweeming pool (of Children
and Olympic size for adults) where it his highly fall below the demand for the
service in the city as well as the region and this will also one source of
income for the project.

10. Services & Revenue projection

When the proposed project is completed, it will provide a variety of stylish
hospitality services with affordable price to the society, businessmen, statesmen
and delegates, and local and foreign tourists. The service capacity program for

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the envisaged project has been worked out assuming the life span of the project
is 20 years and the project will start services soon after the time when finishing
of the construction works and installation and furnishing of the hotel project is
done as per the required quality.

For the purpose of market test and getting important experiences on the new
star-designated hotel services of the proposed project begins its service
operation at 70% capacity service utilization.
Then it will increase its service provision by 5% every year until it reach full
capacity services of the project. Therefore, full capacity service operation will
start from the five (5) years and then after.

Based on the information obtained and assessed from existing similar service
provider businesses of the city the annual income to be generated from each of
the services of the proposed project at the assumed services capacity utilization
is estimated at 247,810,000.00 as indicated in the table below.

UP Annual
No Description of Service Unit Qty Annual Qty Revenue
1 Standard No 180 65,700 1,000.00 65,700,000
2 Standard Double No 100 36,500 1,400.00 51,100,000
3 Deluxe No 50 18,250 1,800.00 32,850,000
4 Suit(10%) No 30 10,950 2,500.00 27,375,000
5 Family No 10 3,650 4,500.00 16,425,000
6 Presidential No 4 1,460 10,000.00 14,600,000
7 Bar & Restaurant No 300 109,500 200.00 21,900,000
8 Gym & SPA No 50 18,250 200.00 3,650,000
9 Meeting hall services No 500 7,800 700.00 5,460,000
10 Shops, banking and office
renting services m2 300 3,600 200.00 720,000
11 Cinema NO 73,000 100.00
200
7,300,000
12 Indoor and Outdoor No 73,000 10.00
200
Games 730,000
SUB TOTAL 247,810,000.00

11. Organization and Manpower

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The proposed project will be managed by well experienced General manager
recruited from the local professional labour market. The General manager is
going to be responsible for the overall management of the business and shall
plan, coordinate and manage the project under the supervision of the owner. The
manger is also responsible for the day-to-day activity of the proposed star-
designated hotel services and other building activities. Other staffs like
Cashier/accountant who is responsible for the management of finance and
accounting, attendants/cleaners, waiter, reception and guards etc..., shall also
be drawn from the market. The proposed project will create a job opportunity
about 20 Permanent unemployed persons and 50
Temporary persons Totally 70 citizens from the existing labour market of the
country in general and in the Oromia administration region in particular. The total
monthly salary expense of the employees is estimated about Birr
2,282,500.00. The detail breakdown is given here below.

Manpower requirement and cost

Required Salary/month/ Annual
S/n Job Title number employee Salary(Birr)
1 General Manager 1 28,000.00 336,000.00
2 Secretary 3 3,000.00 108,000.00
3 Administration head 1 10,000.00 120,000.00
4 Finance head 1 10,000.00 120,000.00
4 Hotel manager 1 15,000.00 180,000.00
5 Head of reception 6 4,000.00 288,000.00
6 Cashier/reception 12 6,000.00 864,000.00
7 Bed room Janitor 4 2000 60,000.00
8 Guards 15 2500 450,000.00
9 Bar waiters 3 2500 90,000.00
10 Restaurant cooker/waiters 5 5000 50,000.00
11 GYM & SPA 1 4000 20,000.00
12 Others 2 4000 40,000.00
13 Temporary Employee 2 1790 20,000.00
Total 57 2,746,000
Employee Benefits (25%
Of Basic Salary)
GRAND TOTAL 70 2,746,000

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12. Other expenses
For smooth operation of the project, it is expected to incur the following major
auxiliary and sundry expense during its operational activities.

Electric power consumption: the service demands 199,840 kwh electric

power. This will be required for lighting purpose and powering the operation of
the basic machineries and equipment power of the project. The project will also
avail a standby power generator to avoid interruption due to power blackouts.
The average yearly electric power consumption cost is estimated at birr
399,680.00.
Water: The hotel is expected to consume relatively much amount of water for
sanitary purposes bed rooms services and also for the preparation of restaurant,
cafeteria, bar services, GYM & SPA services etc... For the purpose of projecting
the water expense, it is assumed to use 120m 3
water per day and when this
water consumption is converted in to cash, it will be birr 219,000.00 per year
(120m3 X 365 days X 5.00birr/m3).

Telephone, mobile and internet service: The Project shall have PBX and other
additional direct line. The PBX shall entertain the calls coming from the rooms
and it is expected to be high quality. In addition to this the hotel is going to
provide 200MB/s broad band internet services and also provide mobile services
for the higher staff members to run the project services smoothly. Thus, on the
average, the yearly telecommunication related bill is estimated at birr
3,390,000.00.

Miscellaneous Expense The project is expected to incur some expenses such

as transportation, stationery, sanitary and detergent materials and so on in order
to operate the hotel services smoothly and properly. For the purpose of covering
such expenses, a lump sum of birr 300,000.00 yearly expenses is considered.
A summary of such expenses is provided in the table below.

Cost

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 S.No Utility Unit Qty UP ( Birr )
. of
Measu
1 re
Electricity kWh 99,840 2.0 399,680.00
2 Water m3 43,800. 5 219,000.00
0
0
3 Telephone, mobile & internet Months 12.00 30,00 3,390,000.
service 0 00
4 Sanitary Months 12.00 20,00 240,000.00
0
5 Stationery Months 12.00 5,000 60,000.00
Total 4,878,680
.00
13. Financial Analysis

Major assumptions considered in undertaking the financial analysis of the proposed project
are: -

 The implementation period of the project is assumed to be 20 years.

 Fixed assets of the plant is assumed to depreciate on the basis of straight-line
method
 It is assumed that 70% for the overall project investment will be
financed by bank loan and the remaining 30 % by owner’s equity.
 Business income tax is assumed 30% from the annual gross profit
before tax less the deductible amount.

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13.1. Initial Investment Cost
13.1.1. Initial Fixed Investment

This cost category comprises capital requirement for the construction of building and purchase of
furniture, machineries and equipment. As shown below, the total initial fixed investment of the
proposed project is estimated to be birr 1,150,000,000. The detail breakdown is given below.

Fixed Capital Requirement

Sr. Cost Items Total Foreign Total

No. Cost Cost Cost
1 Land 1,680,000.00 1,680,000.00
2 Building and Civil Work 780,000,000.00 - 780,000,000.00
3 Furniture(hotel, cinema) $ 154,500,000.00
Game machine
154,563,000.00 -
4 Bar, Restaurant & Kitchen 17,500,000.00 17,875,000.00
Equipment
5 Repair and maintenance 4,602,893.00 4,602,893.00
6 Insurance 500,000.00 500,000.00
7 Business promotion expenses 750,000.00 750,000.00
8 Gym & SPA 15,500,000.00 15,500,000.00
9 Office Furniture 400,000.00 400,000.00
10 Vehicle 15,500,000.00 15,500,000.00
11 Infrastructure 35,070,450.00 35,070,450.00

1,150,000,000 1,150,000,000
Total Fixed Investment -

13.1.2. Working Capital

Working capital requirement includes for payment of utility expenses, employee’s salary and other
related recurrent expenditures for the first year of project operation. The total working capital
requirement is estimated at birr 31,725,930.00. The detail cost breakdown is given in the table
below.
Working Capital Requirement

S/n Specification Total Capital (birr)

1 Manpower 16,282,500.00

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 2 Utilities expense 1,078,680.00
3 Business running costs (raw
materials) 13,680,000.00
4 Contingency 684,750.00

Total 31,725,930.00

The total initial investment outlay of the proposed project is therefore estimated to be birr
537,576,123.33. Which is: -

1. Fixed Capital Investment = 70,0,000,000

2. Working Cap. Requirement= 30,000,000.00
Total Investment = 100 ,000,000

13.2. Source of Finance

The required initial investment cost for the project will be financed by both long-term bank loan and
owner equity at the rate of 70% (birr 70,000,000) and 30% (birr 30,000,000) respectively. The detail-
financing breakdown is indicated as below. 731968841.1

Source of finance
Source Amount (in Birr) Percentage %
Bank loan 70,000,000 70%
Own equity 30,000,000 30%
Total 100,000,000 100%

14. Profitability Analysis

As the projected profit and loss statement shows below, the project will be profitable and liquid
through out its operational life. The following basic assumptions are considered in computing the
profit and loss statement of the hotel project.

Basic assumptions
Building depreciation is taken 15% per annum on a straight line method

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 Machinery and office furniture deprecation 10% per annum
Vehicles deprecation rate 20% per year
Bank repayment period is for 9 years.
Bank Interest rate is taken 11.5%
Repair and maintenance rate is taken 0.5% for building, 1% for furniture, equipment and
machineries and 5% for project vehicles

Accordingly, the net profit after tax in normal year or at assumed capacity service provision is
estimated to be birr 53,445,315.00.

The detail profit and loss statement of the project at normal year of operation or at assumed
capacity services operation is shown in the table below.

Annual Profit and Loss Statement for the 5 Star Hotel Project

Annual Revenue 247,810,000.00

Value Added Tax (VAT) 15% 32,232,043.48

Net
Annual
Sales 215,486,956.52
Bedroom Services 208,050,000.00
Bar & Restaurant Services

21,900,000.00

Multipurpose Meeting & Event Services 5,460,000.00

Wellness & Fitness Services 3,650,000.00

Business Center Renting 720,000.00

Cinema 7,300,000
Indoor and Outdoor games 700,000

Less Operating Expenses

Salaries & Wages 16,282,500.00

Utilities 1,078,000.00

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 Repair & Maintenance 4,602.000.00

Insurance 500,000.00

Business Promotion Expenses 750,000.00

Depreciation & Amortization 35,967,000.00

Other Expenses 2,000,000.00

Bank Interest Rate 85,781,134.8

Total Operating Expenses 142,358,634.80

Annual Gross Profit/Loss 73,128,321.72

Annual Profit/income Tax (30%) 21,938,496.52

Annual Net Profit/Loss 51,189,825.20

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14.1. Simple rate of return (SRR)

SRR = Net profit + Interest rate x 100

Initial investment
SRR = 558,578 + 119,531
5,170,000

Initial investment 100,000,000

Net profit 51,189,825.20
Interest rate 85,781,134.8
PBP=Init inv/(NP+Dep) 12.85%

SRR= 13.8%

14.2. Payback period (PBP)

PBP = Initial Investment

Net profit + Depreciation

Initial investment 100,000,000

Net profit 51,189,825.20
Depreciation 35,967,000.00
PBP=Init inv/(NP+Dep) 12.22

PBP = 12.22 years

The project will recover its initial investment cost almost after 12 years. This is calculated if it
operated at the assumed capacity of service utilization. If it is not operated as per the assumed
capacity of operation the payback period will take more than the estimated years.

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