ASIBILITY STUDY ON FIVE STAR LUXURIOUS HOTEL

Project Adress Amhara National Regional State, Kombolcha

PROJECT OWNER;Quality General Trading
Project manager; Adem Ali Mohamed
Phone ;+251-911-36-32-75

KOMBOLCHA,
ETHIOPIA

JUNE, 2025
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5
roeconomic.............................................................................................................................................10
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ctor in Ethiopia........................................................................................................................................15
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any and Address.....................................................................................................................................16
n and Licenses........................................................................................................................................16
Promoter..............................................................................................................................................16
ry..........................................................................................................................................................16
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and Rationale........................................................................................................................................19
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ctor........................................................................................................................................................20
he tourism industry................................................................................................................................20
rist Arrivals............................................................................................................................................24
rist Receipts...........................................................................................................................................25
f International Tourism........................................................................................................................27
or Hotel.................................................................................................................................................29
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pia.........................................................................................................................................................30
32
35
p...........................................................................................................................................................36
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gy..........................................................................................................................................................38
n Strategy..............................................................................................................................................38

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on Strategy.............................................................................................................................................39
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46
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ast Food.................................................................................................................................................47
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OUTDOOR GAMES.............................................................................................................................50
er...........................................................................................................................................................50
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es...........................................................................................................................................................51
Engineering..........................................................................................................................................52
ipment...................................................................................................................................................55
nt...........................................................................................................................................................55
5.5.2. Bed Room and Housekeeping Equipment.................................................................................55
nt Equipment.........................................................................................................................................55
vice Equipment......................................................................................................................................56
quet Equipment......................................................................................................................................56
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rogram..................................................................................................................................................56
ure and Management..............................................................................................................................57
cture.......................................................................................................................................................57
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QUIRMENT............................................................................................................................................59
BILITY ANALYSIS..............................................................................................................................62
nd Sources and Finance...........................................................................................................................62
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64
Statements..............................................................................................................................................65

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66
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s..............................................................................................................................................................67
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List of Figures
Figure 1: Top populous Countries in Africa.............................................................................................................10
Figure 2: Ethiopia's Real GDP Growth.....................................................................................................................11
Figure 3: Ethiopia‟s GDP Growth vs. Global Pacesetters........................................................................................12
Figure 4: International tourist arrival and tourist receipt (% change).......................................................................20
Figure 5: Purpose of visit, 2018 (% share)...............................................................................................................22
Figure 6: International Tourist Arrivals & Reception 2018.....................................................................................22
Figure 7: International Tourist Arrivals to Africa (million) (1995 – 2017).............................................................23
Figure 8: International Tourist Arrival 2010 - 2018.................................................................................................24
Figure 9: International Tourist Receipts...................................................................................................................25
Figure 10: Top ten destinations by international tourist arrivals, 2018....................................................................26
Figure 11: International Tourist Arrivals 2018 …………………………………………………………………26
Figure 12: Future prospect of International Tourism ………………………………………………………..28
Figure 13: Tourist Arrival in Ethiopia..............................................................................................................................................32
Figure 14: Projection of Demand Supply Gap 36
Figure 15: Proposed Organizational Structure...................................................................................................................................58

List of Table
Table 1: Top ten exported product from Ethiopia („000 USD).........................................................................................................14
Table 2: Name and address of shareholders.......................................................................................................................................16
Table 3: list of registered world heritage site by unesco in Ethiopia..........................................................................………..29
Table 4: International tourists flow to Ethiopia & demand for bedroom.........................................................................................33
Table 5: Demand Projection for Bed Accommodation (Considering 5 days stay).........................................................................33
Table 6: Tourist Arrivals from Top 10 Markets................................................................................................................................34
Table 7: Categories of Hotels by Number of rooms and bed...........................................................................................................34
Table 8: Supply of Bed Accommodation projection.........................................................................................................................35
Table 9: Number of Rooms by Type................................................................................................................................................46
Table 10: Total Initial investment.....................................................................................................................................................62
Table 11: Source of Fund.................................................................................................................................................................63
Table 12: Estimated Revenue...........................................................................................................................................................64
Table 13: Sensitivity Analysis...........................................................................................................................................................67

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General Information of the Project

Kinds of the Project Five star Hotel
Owners of the Project QUALITY GENERAL TRADING
Address of the Project Ethiopia, Amhara Regional State, Kombolcha Regioplitant City

Manager of the project ADEM ALI MOHAMED

Summary of the Project
Organization of the Project
2 years Months
Period of the Project
Startup Date JANUARY, 2018 E.C.
End Date DECEMBER,2020 E.C.
Project monitor and Evaluator By consultant
Beneficiary of the Project
Direct Beneficiaries Peoples which live in kombolcha, Amhara region and Ethiopia atlarge
Land size 10,000m2
The source of the initial capital of the investment is from Bank
Source of Finance
Loan and owner’s equity
Equity (30%) 135,000,000
Initial Capital of the Project 450,000,000
Bank Loan(70%)= 315,000,000
Number of Employee in the project 210 permanent Employees

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1. Executive summery

Ethiopia has immense natural, cultural and historical resources. In history,Ethiopia is the
birthplace of humanity. Ethiopia has many different UNESCO world heritage sites and is
known for its interesting landscape, ancient religions, and unique alphabet and calendar. There
are also more than 80 different ethnicities, with their own distinct culture and language. Due to
these facts, Ethiopia has huge potential to benefit from tourism sector.
The Ethiopian Ministry of tourism set a goal of 2 million international visitors for the 2024
fiscal year. While the exact number of tourist who actually visited is not specified in the
research results, but the arrival rates have been showing a study growth since the 90‟s, the
numbers has grown from 681,249 in 2013 to 1,148,050 tourists arrivals in 2023. The growth of
the travel and tourism sector contributes to the country’s GDP which in 2013 was 4.2%,
translating to ETB 35,766.6 million and is expected to grow by 4.8% p.a. reaching ETB 59,
495.2 million (3.6% of GDP) by 2024. Aside from the economic contribution the sector
accounts for 3.8% employment in 2013, directly providing nearly a million jobs in the same
year. The country’s GTP guesstimates the tour and travel sector is responsible for 6.4% of
Ethiopia’s total economy. Nonetheless many tourist destinations in the country lack major
hospitality facilities such as hotels.
In order to develop the tourism sector, one of the crucial factors is the country’s socio
economic strength. The socio economic font has four important points that is accessibility,
accommodation, amenities and ancillary services. Most of Ethiopia’s socioeconomic aspects
are not well developed; they fail to meet the industries and the tourist’s requirements. Even if
Ethiopia is endowed with various tourist attractions, the socioeconomic aspects are not
developed as per the international tourist demands and standard. In other way Ethiopian
government considers tourism a key sector for economic development.
In terms of providing good accommodation and catering facilities, Kombolcha city has a
number of hotels that can provide as per the tourists lives-style, standard of living, capacity to
spend money and nature of services expected. Local and International tourist should have a
choice of accommodations based on their lifestyle, spending capability and preference of star
level. However, the number of five star hotels as compared to the number of tourist arrivals is
not satisfactory.

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The growth trend of tourist inflow and the growing income level of the population demands
adequate facilities in different sectors to meet the requirement of both domestic and
international tourists. Viewing the above facts, the project promoter reviewed the performance
of the existing star rated hotels and their service quality. The results recognized unsatisfied need
in the sector and failure to meet the demands of the tourists by the required standards. In
addition, the service offered by most star rated hotels in Kombolcha is not up to the
international standard which creates a lot of dissatisfaction. Currently there are a few
international and high quality service offering hotels in Kombolcha, by considering this gap,
Quality general trading decided to construct a modern five-star hotel in Kombolcha city.
Tourists who come to business meetings, conferences and visit Ethiopia’s historical and cultural
attractions demand high quality standard accommodation during their stay in the country. The
market demand and supply gap projection reveals there is high demand for the envisaged
project.

By considering the potential demand for such kind of hotel services with in the area, the
promoter of the project decided to establish five-star hotel having high standard rooms,
conference halls, aquarium, swimming pool, hair salon, gym, children’s playground, restaurant,
fitness center, spa, guest house and other related services. The promoter also considered the
existence of tourist flow to the country in general. There is an enormous lack of high standard
five-star hotels that render high quality service for international and local tourists. There is a
huge shortage of five star rated hotels in Kombolcha. The promoter has proven experience in
constructing 5-star hotel; the promoter constructed five start loge hotels.

The hotel will be located in Kombolcha city. The project was established with the objective of
providing high quality hotel service for international guests and tourists, dwellers, the
international community and other people who live around the vicinity and guests who come to
attained conferences, visit historical attraction or temporarily work in different organizations.
The total investment cost of project is expected to be Birr 450,00,000 Meanwhile the lion‟s
share is devoted for the building and construction, which is about Birr 200,000,000 whereas the
remaining balances allotted for the purchase of hotel furniture and fixture, machinery;
equipment Vehicles, generator, working capital requirements and pre operating costs.

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The suitability of the site for development and operation of the proposed hotel is an important
consideration affecting the viability of the project. Factors such as location, site topography,
accessibility, visibility, entrance, surrounding area characteristics, ability to serve transient
trade, proximity to business and trade centers, proximity to travel services and the function of
the area as a hotel have a positive impact on the proposed hotel. Accordingly, the Hotel
acquired suitable location near major infrastructure and market. The selected location can be
accessed within short distance from the historic Bahirdar city, religious monasteries and other
UNESCO registered tourist attractions in Amhara region.

The project building structure will be designed by qualified architects including the interiors,
exteriors, bed rooms, hall ways and other functional service areas. All facilities will be
designed by qualified international design teams. The hotel will have elegant rooms with
excellent furniture and room amenities. The hotel complex will have 260 bedrooms, wide-
ranging conference halls with private meeting rooms, swimming pool, gym, hair salons, fitness
center, restaurants, spa, guest house and other standard facilities for a five-star hotel. The
rooms will have five categories which are Twin rooms, King Bed Rooms, King Bed Rooms,
Family Rooms, Conference Suite, Deluxe Suit Rooms and Presidential Suite. The bed rooms
will be equipped with bed, mattress, cupboard, stay easy sofa, dressing table, chest of drawer
etc… The bed rooms will provide the best service offerings and luxury service to all gusts.

In addition to the rooms the hotel will provide high standard meal service via a number of
international kitchens with experienced chefs. The first three floors will have aquarium, spa,
gym, hair salon, luxury shops, banks, and restaurant. In the garden area, the children paly
ground and swimming pool will be developed. The basements will serve as a parking, laundry
service, cold storage, warehouse, boiler room, water tankers & treatment etc... The Gym and
Sauna service will enable guests to relax and have a chance to see the cities magnificent view.
The hotel will also have state of the art guest lifts, security system, electrical and firefighting
systems which ensures guests safety. The Last floor will include VIP rooms with a dedicated
lift and number of special amenities. The roof top will be serving as a helicopter pad which
provides a direct landing and takeoff for the VIP guests. In general, the hotel will include all
the requirements of a five-star hotel for international and local guests.

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ty general trading. Five-star hotel has the vision to become one of the iconic land marks for Kombolcha
through luxurious hotel service. The project is envisaged being an autonomous entity in its
operations supervised by the Chief Executive Officer (CEO), who will be appointed by the
shareholders and the CEO, and supported by experienced hotel managers that will be recruited
from the local and international labor market.

Quality general trading five-star hotel plans to create permanent employment opportunities for
210 workers. These opportunities include management and supervision personnel along with
skilled and unskilled workers. The project will also generate substantial amount of income for
Kombolcha city Administration in the form of tax. After commencement of operation the
project is expected to generate Birr 71.1 million every year.

The Hotel service has been growing significantly over the past decade. With a rapidly growing
GDP, the share of Hotel services has been increasing from around 10.1% in the late 2017/18s
to
15.6 % in 2020/21.
Therefore, Quality general trading. five-star hotel strives to contribute to the overall economic
condition of the country. The total initial investment required of the establishment of the five-star
hotel is approximately Birr 450,000,000. This will cover initial fixed investment costs, working
capital requirements as well as project start-up costs. Of the total estimated initial costs, Birr
200,000,000 is allocated for building and construction works, approximately Birr 200,000,000
for hotel furniture, machinery and equipment and Birr 50,000,000 for vehicles. 75% of the
project cost is expected to be financed by Bank Loan and the remaining from Equity.
The survival of any firm depends up on the profitability of its business units; accordingly, the
project will be profitable throughout the project life. The envisaged five-star hotel will generate a
net profit of Birr 95,517,377 during its first year of operation and Birr 174,631,392 during the
tenth year of operation. Net Capital of the company will grow from about Birr 260,493,008 in
year one to Birr 1,178,594,631 by year ten.
The cash flow projection shows cumulative cash balance of Birr 115,313,087 at the end of the
first year, which is expected to grow to Birr 906,020,334 at the end of the 10th year, indicating
the company will have surplus cash over the first ten years of its operation. The total investment
internal rate of return over the projected period is 29%.

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The project found to be technical and financial viable, besides the project will have huge
impact in reduce the shortage of five-star hotel with in Kombolcha city and the country,
generate foreign currency from international guests. The project will also generate high amount
of revenue to the country in the form of tax and create employment opportunities for 210
individuals. Providing investment land and Finance for such kind of project highly
recommendable by considering technical financial viability and socio economic befit to the
country and guaranteed return on investment for lending Bank.

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1. Background and Macroeconomic 1.1.Population

Ethiopia is a populous and potentially rich country in Africa sharing border with Kenya,
Somalia, Djibouti, Eritrea, Sudan and South Sudan. According to 2007 Population and Housing
census of the country, the total number of population was 73,918,505. Of these, 37,296,657
(50.5%) were males and 36,621,848 (49.5%) were females. The population of the country in the
previous censuses of 1984 and 1994 were 39,868,572 and 53,477,265, respectively. The 2007
Population and Housing Census results show that the population of Ethiopia grew at an average
annual rate of 2.6 percent between 1994 and 2007.
The population projection figures reached based on the results of May 2007 National Population
and Housing Census of Ethiopia. Therefore, the projected figures for the year 2018 expected to
be more than 120 million.
Nigeria is the most populous country in Africa and accounts for about 16% of the continent's
total population. Ethiopia ranked second place in Africa and 12th place in the World. The top
five populous countries in Africa accounts 44% of the continent's total population.
Figure 1: Top populous Countries in Africa

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Real GDP growth

Since the economic liberalization declared in 1992, a large number of foreign and national
investors injected huge capital into agriculture, construction, chemicals, hotel, mining and
manufacturing projects thereby providing sustainable employment, income and other economic
benefit to thousands of people.

Ethiopia is one of the most populous countries in Sub-Saharan Africa with more than 120
million people. It is also one of the lowest economies with a per capita GDP (USD 619.169).
The last ten years the Ethiopian economy has been showing a tremendous growth. According
to the Ministry of Finance and Economy Development (MOFED), the data shows that Ethiopia
has been growing for the last twelve years (2003/2004-2014/15) with average growth rate of
10.825 percent.

World Bank statistics for the country also confirms that Ethiopian economy has been growing
for the last twelve years however; the data from World Bank and the data from MOFED have a
variation. The World Bank data shows that Ethiopia has been growing for the last twelve years
(2003-2015) with average growth rate of 10.843. The following figure shows Real GDP
Growth for Ethiopia based on WorLd Bank statistic and MOFED statistics.
Figure 2: Ethiopia's Real GDP Growth

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verarching objective of the Second Growth and Transformation Plan (GTP II) is the realization of Ethiopia‟s
vision of becoming a lower middle income country by 2025. Thus, GTP

II aims to achieve an annual average real GDP growth rate of 11 percent within stable
macroeconomic environment while at the same time pursuing aggressive measures towards
rapid industrialization and structural transformation.
Figure 3: Ethiopia‟s GDP Growth vs. Global Pacesetters

The rapid and broad based economic growth, which has been registered in the last twelve
years, has also generated new job opportunities. Accordingly, in urban areas unemployment
rate has declined from 18.9 per cent in 2009/10 to 18 per cent in 2010/11 and further to 16.8
per cent in 2015/16. In the same period, delivery of basic services such as education, health,
drinking water, transport, etc. has expanded significantly. The achievements in this regard
indicate that by sustaining the economic growth and strengthening the implementation of the
undergoing social and economic programs, it is possible to achieve most of the social
development SDG goals by 2030.

The expansion of road networks, communication media, and education, transport and trade

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activities has positively contributed to changes in life style, use of transportation, construction
equipment’s and generators.

The urbanization trend has been showing increasing momentum because of the rural to urban
exodus because of the marginalization of farmland, the search for better job and education
opportunities, and the availability of improved living and security conditions in most urban
areas. In view of the above, the demand for all consumer goods has been growing at the rate of
13 percent per year.
Industry
Agricultural Development Led Industrialization is the fundamental building block of industrial
development in Ethiopia. The Government of Ethiopia developed Industrial Development Road
Map by setting the vision of “building an industrial sector with the highest manufacturing
capability in Africa which is diversified, globally competitive, environmentally-friendly, and
capable of significantly improving the living standards of the Ethiopian people by the year
2025” In order to reach the 2025 vision six major programs has been designed, these programs
are
2. Priority Sectors Expansion Program;
3. New Manufacturing Sectors Development Program;
4. Industrial Enterprise and Entrepreneurship Development Program;
5. Local (Private) and Foreign Investment Promotion Program;
6. Government (Public) Sector Investment Program; and
7. Industrial zone (Industrial park) Development Program.

The Government is implementing an industrial parks development program to address

investment climate-related issues to land access, infrastructure, and logistic and customs
processes, and to further the attraction of Foreign Direct Investment. Combined with
comparatively low labor costs in Ethiopia, the industrial parks program is beginning to attract
Foreign Direct Investment especially in the manufacturing sector.
In Year 2013/14, the industrial sector contributed 2.8% to the real GDP growth, grew by 13.6
percent. The total number of large and medium scale manufacturing industries reported in
2013/14 (2006 E.C.) was 2,758. From the total manufacturing industries, about 33% of them
located in Addis Ababa followed by Oromia almost 30% and Amhara with 12% of industries.

Trade

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Ethiopia is the 103rd largest export economy in the world and the 103rd most complex economy
according to the Economic Complexity Index (ECI). In 2015, Ethiopia exported $5.44B and
imported $17.6B, resulting in a negative trade balance of $12.2B. In 2015, the GDP of Ethiopia
was $61.5B and its GDP per capita was $619.169. The top exports of Ethiopia are Coffee
($899M), Refined Petroleum ($693M), Cut Flowers ($605M), Gold ($576M) and Other
Vegetables ($569M).
Table 1: Top ten exported product from Ethiopia („000 USD)

The top export destinations in 2017 for Ethiopia are China ($288M), Somalia ($246M), USA
($227M), Saudi Arabia ($206M), the Germany ($195M) and Netherland ($189M). The top
import origins are China ($14.7 B), USA ($1.2B), India ($1.09B), Japan ($680M) and Italy
($645M).
Ethiopia’s top imports are Machinery, mechanical appliances ($2.66B), Vehicles ($1.41B),
Electrical machinery and equipment ($1.3B), fuels ($1.24B), Iron and steel ($799M) and
Cereals ($639.9M).

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Labor force
According to Central Statistical Agency (CSA), total urban population figure in 2018 is
about 18.8 million, out of which 14.97 million are above the age of 10 years. Out of the total
population aged ten years and above, the size of economically active population based on the
current status approach was 9,289,150 (62 percent), the number of citizens who are active and
participate in the labor market is increasing from time to time.

The Hospitality Sector in Ethiopia

The Hotel services have been growing significantly over the past decade. The Ethiopian
hospitality sector has grown rapidly over the last few years, and there remain a lot of
unexploited opportunities. Taking advantage of these resources with the assistance of new
technologies, and accommodation service providers will support the country‟s initiative to
become one of Africa's top five destinations in the coming four years. With a rapidly growing
GDP, the share of Hotel services has been increasing from around 10.1% in the late 2011/12s
to 15.6 % in 2015/16. The direct contribution of Travel & Tourism to GDP was ETB 51.3
billion (USD 2.26 billion) - 4.1% of total GDP in 2015 - and is forecast to rise by 5% by 2026
to ETB 85 billion (USD 3.7 billion). This largely reflects the economic activity generated by
industries such as hotels, travel agents, airlines and other passenger transportation services,
restaurant and leisure industries.

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2. COMPANY VISION, MISSION AND VALUES

Vision
“TO BE ONE OF THE ICONIC LANDMARKS IN DEBREBERHAN THROUGH LUXURIOUSE SERVICE”

Mission
Our hotel will provide high quality and luxurious five-star hotel service beyond guest
expectation through luxurious hotel amenities, talented staffs and strong world class
management system.
Value
1. Luxurious service is one of the icons for our hotel and service

2. Service Quality and consistency is the main future of our product

3. Customer centered service is the core value of our business

4. Service professionalism is the core value of our business

5. Our Business will adopt international customer service management systems

6. Our Employees are the core values of our business

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The company will hire international and local experts to get professional services. Some
of the services are:
1. Project Site selection and validation

2. Hotel design for exterior and interior of the Building

3. Hotel equipment, furniture, fixture and material selection

4. Staff recruitment and training

5. Hotel ERP system selection and implementation

Quality general trading five-star hotel provides the following opportunities

1. The planned hotel location will be close to major international organizations,

tourist attractions, commercial centers, transportation centers etc.

2. The Hotel design will be added as one of Kombolcha’s land marks,it is near to Djbouti port

and has air transport currently.

3. The hotel will have a good appearance, enjoys convenient transportation and there are

dining and business facilities in the surrounding area

4. The number of rooms and size satisfy International standards

5. The hotel fulfills the building standards of five-star hotel

6. Black star HP plc. has business qualification and experience

Objective
The business aspires to accomplish the main objectives listed below, but without limiting itself.
 The main purpose of the project is to establish modern five-star hotel.
 Provide excellent service for local and international guests by serving Ethiopian traditional
and international dishes, drinks with professional chefs as per five-star hotel standard

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 Become the top destination for tourist that need high-class bed room service, the rooms
 To provide full rounded hospitality service for international and local gusts
 To minimize the shortage of five-star hotels in the country, especially in
K o m b o l c h a city.
 To open employment opportunities for unemployed hard working youth.

Project Description and Rationale

The rationale behind establishing the project is the existence of tourist flow to the country, and
the lack of high standard star rated hotels that can provide high quality service for international
tourists and local guests. The prevailing government investment policy provides a favorable
environment for the fully functioning of such projects that participate in hotel and hospitality
sectors. Even if Ethiopia has a lot to offer to international tourists, the effort to develop this
sector from private sectors is low. By realizing this gap, Black star plc. decided to establish a
modern five-star hotel. The company plans to increase the number of international standard
hotels in Kombolcha; in return Amhara's unique historical and cultural heritages will be
promoted. The magnificent scenery, the ideal climate conditions, the rich flora and fauna,
important archaeological sites and hospitable people are major assets for the project.

Currently the flow rate of international tourist to the country shows an increasing trend. For
guests that prefer five star luxury and good quality service however, the service quality in the
existing hotels is inadequate and confined to Addis Ababa city. The main reason could be lack
of standard hotels that serve high quality hospitality service. As a result, the company decided
to establish a modern luxurious five-star hotel that can be considered footprint to the project
area. The Hotel will provide service like bedroom, catering, meeting rooms, multipurpose
assembly hall, SPA; children play ground, swimming, shopping, and gymnasium service to
international and local guests.

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3. Market Study

3.1.Overview of the Sector

Global trends of the tourism industry
The world of travel and hospitality has entered a new era of growth and transformation. Global
business travel spending hit $11.1 trillion in 2024 and in the 2023/2024 fiscal year, Ethiopian
tourism sector generated $ 4.3 billion in revenue. Favorable economic environment (3.6%
growth of World GDP), strong outbound demand from major source markets, consolidation of
the recovery in key destinations affected by previous crises, enhanced connectivity and
increased visa facilitation are the drivers of growth. Healthy booking trends in the business
segment, as well as growth in some of the world‟s largest leisure markets, will fuel global
travel growth in 2018. Direct travel & tourism GDP growth is projected to reach 3.6%,
outpacing broader global GDP growth of 2.5%.

International tourist arrivals grew by 11% in 2024 to reach 1.401 billion tourists, according to
the latest United Nations World Tourism Organization World Tourism Barometer. Emerging
economies (+5%) regained the lead over advanced economies (+3.6%), with Asia and the
Pacific showing the strongest results.

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th is expected to continue in 2019 only slightly above the 2019 level (+3% to +4%) and in line with United
Nations World Tourism Organization long term forecast. The positive expected drivers for
2019 growth are fuel prices stable leads to affordable air travel, better air connectivity and
strong outbound from emerging markets. Some of the risk factors are economic slowdown,
Brexit uncertainty, geopolitical and trade tensions and wait and see” attitude among investors
and travellers.

This statistic shows international inbound tourism by purpose of visit in 2018. Leisure or
recreational travel comprised the largest share of inbound tourism in 2018 with 56 percent.
Four percent of inbound tourism did not have a specified purpose, the remaining 13% are
Business professionals travel and 27% are health, religion and other.

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Figure 5: Purpose of visit, 2018 (% share)

According to international visitor expenditure data reported by countries visited, international

tourism receipts by destinations grew by 4.4% from year 2017 to 2018, and hit a new record of
US $1.4510 trillion worldwide. This much growth in international tourist arrivals; which also
advanced 5.4% to 1,401 million and underscores the strong correlation between the two key
measures is an indicator of international tourism trends.
Figure 6: International Tourist Arrivals & Receipts 2018

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saw an extra 121 billion USD in export revenues from international tourism (travel and passenger transport)
compared to 2017. Export earnings from international tourism are an important source of
foreign revenues for many destinations in the world. Receipt earned by destinations from
international visitors grew by 7% to reach US$ 1.5 trillion, while an additional US$ 256 billion
was earned by international passenger transport.

Statistics show that the growth in tourist arrivals has been faster in developing countries like
Africa than in the developed countries as a whole. As depicted in the table below, international
tourist arrival to Africa has registered a continuous growth rate for the period under
consideration. While reviewing the growth trend of tourist arrivals in 2022 to 2023, Sub-
Saharan Africa performed the best out of all the regions in the world. In the years 1995 to 2017
the compound annual growth rate of tourist arrivals in Africa is 5.4% and Sub-Saharan Africa
are almost same 5.7% in particular. With respect to market share, Africa contributes only 5%
to the world market of tourism.
Figure 7: International Tourist Arrivals to Africa (million) (1995 – 2017)

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International Tourist Arrivals

In recent years, tourism has been increasingly recognized for its economic potential to
contribute for the reduction of poverty in developing countries, since a diverse group of
industries which are essential component of the economy are included in tourism such as air
lines, travel agents, tour operators, tour agents‟, car renters, planners, restaurants, resorts, parks,
camping and recreational areas, natural attractions found in parks and forests.

Based on United Nations World Trade Organization (UNWTO) report, International tourist
arrivals grew 34% in 2023 compared to 2022 , the highest increase since the 2009 global
economic crisis and well above UNWTO‟s long-term forecast of 3.8% per year for the period
2010 to 2020. A total of 140 million international tourist arrivals were recorded in destinations
around the world, some 71 million more than in 2017. Results were driven by sustained travel
demand for destinations across all world regions, including a firm recovery of those suffering
from security challenges in recent years. Growth was fueled by the global economic growth,
resulting in strong outbound demand from virtually all source markets.

The recovery of outbound demand from Brazil and the Russian Federation after a few years of
decline and the ongoing rise of India, also contributed to inbound growth in many destinations.
By region, Africa and Europe grew above average. By sub-region, North Africa and Southern
and Mediterranean Europe led results in 2018, reflecting strong demand for destinations along
the Mediterranean.
Figure 8: International Tourist Arrival 2010 – 2018

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International Tourist Receipts

In 2023 international arrivals stood at 83% of 2019 levels, with 18.3 million annual visitors.
Strong outbound demand from both traditional and emerging markets fueled growth in global
receipts, which follows the positive trend recorded in international tourist arrivals (+13%). By
region, the Asia and the Pacific led growth in receipts, as some destinations rebounded strongly
after weaker results in 2023. By sub region, growth was significant in eastern Europe, as well
as in united states of America. While in 2023, several African countries experienced a
significant surge in tourism, with Ethiopia, Tanzania, and Morocco leading the way in
exceeding pre-pandemic visitor numbers. Overall, Africa saw a strong recovery in tourism,
reaching 96% of 2019 levels for international tourist arrivals, the highest recovery rate
globally.
Figure 9: International Tourist Receipts

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When ranking the world’s top international tourism destinations, it is important to consider
both international tourist arrivals and international tourism receipts. Seven out of the top ten
destinations appear on both lists, despite showing marked differences in terms of the type of
tourist they attract, as well as the average length of stay and spending per trip and the night. In
2018, four destinations moved up in the top ten ranking by international tourism receipts and
three in the ranking by international tourist.

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In 2023 also the same data to 2018 2018 was the ninth year in a row of sustained growth in
Europe, the world‟s most visited region. Arrivals grew 5% in 2018. Growth in arrivals was
mirrored by receipts which also increased 5% with international tourist receipt of 570 billion
USD. Growth in Asia and the Pacific (+7%), results were driven by South Asia, with double-
digit growth in Iran, Nepal, Sri Lanka and the sub-region‟s largest destination India. Growing
purchasing power in emerging economy markets, increased air connectivity, more affordable
travel and enhanced visa facilitation continue to fuel tourism from within and outside the region
arrivals. Arrivals to the Americas have increased by 2% with no growth of international tourism
receipts. The Middle East showed growth in 2018 with a 4% increase in income generated by
international tourism. International tourist arrivals in Africa increase by 7% and with low
receipts growth of 2%.

Figure 11: International Tourist Arrivals 2018

Growth was led by North Africa, as Tunisia continued to consolidate recovery thanks to the
lifting of negative travel advice and an increase in visitor flows from European source markets.
Morocco, the sub-region‟s largest destination, grew at a robust rate.
In Sub-Saharan Africa, island destinations Reunion, Cabo Verde, Comoros, Mauritius and
Seychelles posted robust growth. Kenya recorded positive results, thanks to improved security
and more air connectivity, as well as Togo, Uganda, Côte d‟Ivoire and Zimbabwe. The sub-
region‟s most visited destination South Africa reported moderate growth, partly due to a strong
currency and a drought crisis in Cape Town in 2018.

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Future Prospect of International Tourism

International tourism will continue to grow in the period 2010-2030, but at a more moderate
pace than the past decades, with the number of international tourist arrivals worldwide
increasing by an average 3.3% a year. As a result, an average 43 million additional
international tourists expected to join the tourism marketplace every year.

At the projected pace of growth, arrivals will pass the 1 billion mark by 2012, up from 940
million in 2010. By 2030, arrivals are expected to reach 1.8 billion, meaning that in two
decades‟ time, 5 million people will be crossing international borders for leisure, business or
other purposes such as visiting friends and family every day.

International arrivals in emerging economy destinations are expected to continue growing at

double the pace 4.4% year of advanced ones 2.2% a year. In absolute terms, the emerging
economies of Asia, Latin America, Central and Eastern Europe, Eastern Mediterranean Europe,
the Middle East and Africa will gain an average 30 million arrivals a year, compared to 14
million in the traditional destinations of the advanced economies of North America, Europe
and Asia and the Pacific. By 2015, emerging economies will receive more international tourist
arrivals than advanced economies, and by 2030, their share is expected to reach 58%.

There will be increases in the global market shares of Asia and the Pacific to 30% in 2030, up
from 22% in 2010, the Middle East to 8% from 6% and Africa to 7% from 5%, and further
declines in the shares of Europe to 41% from 51% and the Americas to 14% from 16%, mostly
due to the slower growth of North America.

By 2030, North East Asia will be the most visited sub region in the world, representing 16% of
total arrivals and taking over from Southern and Mediterranean Europe, with a 15% share in
2030.

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Figure 12: Future prospect of International Tourism

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Ethiopian Market for Hotel

Introduction
Business initiative in tourism sector especially in nature and heritage tourism in Ethiopia has
been very impressive. This has created favorable conditions for the development of tourism and
in return demands the establishment of competitive hotel. Increasing awareness of the potential
of tourism associated with the economic development of the country as well as the growing
recognition of the inter-relation of natural and heritage attractions, tourism gave impulse to
assess a hotel business in Ethiopia.

Ethiopia is one of the African countries that possess the highest number of UNESCO World
Heritage Sites in Africa, with nine sites spread throughout the whole country, and therefore has
great potential to develop itself as a tourist destination. Ethiopia tourism introduces to a mystic
destination of discovery; a land of brilliance and beautiful; a country boasting an extraordinary
antiquity with a rich culture dating back more than 3,000 years.
Table 3: list of registered world heritage site by UNESCO in Ethiopia
 Lalibela rock-Hewn churches
 Aksum
 Fasil Gebbi/ Gondar/
 Lower valley of the Awash
 Simien national park
Ethiopians Sustainable Development Goals /SDGs/ in tourism are largely focused on using
tourism to drive economic growth, create jobs, and promote cultural preservation while ensuring
environmental sustainability. The country’s Sustainable Tourism Master Plan/STMP/ 2015-2025,
aligned with the SDGs, outlines key strategies and actions for achieving these goals.

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pia is a strategically important country in the Horn of Africa for most countries and therefore, many
international meetings and conferences are held in Ethiopia. This creates a huge demand for
accommodation at an international standard and even an increase in such a demand is
expected in the future because the importance of Ethiopia has been growing and any
international organizations have been continuously strengthening their institutions and
augmenting their personnel in Ethiopia.

Often described as the „real Africa, Ethiopia has something for every tourist and never fails to
impress its visitors. First time travelers should expect many options for tourism while
celebrating holidays on their travel to Ethiopia. Most Ethiopia tours are flavored adventurous
travel experiences that create everlasting and pleasant memories for many of the country’s
visitors.

A hotel is an establishment offering lodging, food, beverage, and, as may be necessary,

recreational facilities to the public. Ethiopia with diversified natural and manmade tourists‟
potential needs to increase its share of foreign exchange earnings has to improve its tourist
facilities to a level of internationally acceptable standard. In view of this, the Ethiopian
Tourists commission, which has powers and duties to establish and supervise organizations
engaged in the business of providing tourists facilities, has prepared a criterion for the standard
classification of hotels. All business entities in the catering service industry will therefore be
classified under the following two categories.
 Star category: - Existing and future hotels, which satisfy the criteria for the standards and
classifications of star category, will be graded as one; Two, Three, Four, or Five star
categories. Our proposed hotel belongs to this category for five star Hotels.
 Basic level category: - Hotels that is below the star category, but provide
acceptable service will be classified as “Basic level Hotels.”
Tourism in Ethiopia
Ethiopians Sustainable Development Goals /SDGs/ in tourism are largely focused on using
tourism to drive economic growth, create jobs, and promote cultural preservation while ensuring
environmental sustainability. The country’s Sustainable Tourism Master Plan/STMP/ 2015-2025,
aligned with the SDGs, outlines key strategies and actions for achieving these goals.

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Tourism, a smokeless industry, is gaining importance in the economic development of a

country. The hotel industry is the backbone of tourism activity everywhere in the world. It is
an industry of huge dimensions in its own right. The hotel industry is both capital as well as
labor intensive. In Ethiopia, the Ministry of Tourism of Ethiopia supports the Hotel industry
and makes plans to cover various operational aspects of the industry.
This is further testified by the increasing flow of international tourists into the country and by
the growing share of the Ethiopian tourism in Africa tourism. Ethiopia with diversified
natural attractions, wild lives, archeological sites, and cultural values can benefit much from
the sector. The country needs to increase its share of foreign exchange earnings and has
to improve its tourist facilities to a level of internationally acceptable standard to be
benefited from the sector.
A growth in tourist flow normally paves the way for subsequent growth in tourist
accommodation facilities that require high investments that usually involve a prolonged
period for a healthy financial return. Consequently, providing incentives for investors who
engaged in tourism accommodation facilities has become popular in countries with notable
sites of tourist attraction. Like any other countries with special interest in tourism, Ethiopia is
also encouraging tourism related and other investment activities.
That is why, the federal government and regional states issue various investment and
monetary regulations and policies to support and create favorable atmosphere for hotel
investments to avoid obstacles for smooth operation of the tourist accommodation facility
projects.
However, it is clearly known that the financial return from resort, star rated hotels and motels
may take longer time and high investment costs when it is compared with basic level
category hotels. However, the international experience has shown that the situation is
different from what we have in mind.
Thus, well-conceived investments in tourism accommodation facilities can really result in
satisfactory financial rate of return, if it is supported by good economic policies rules and
regulations and by the major stake holders (Federal Government, Investment offices
Municipality offices, lending institutions and etc.) for economic, social and cultural
development of the country. Based on the information contained in the unpublished Tourism

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Statistics Bulletin of world tourism Organization; the International Tourist Arrival in

Ethiopia continued to grow from both in International Tourist Arrival (ITAs) in Ethiopia and
International tourism receipts during 2007 to 2017.

Figure 13: Tourist Arrival in Ethiopia

Tourists have various reasons to visit different places. Accordingly, the tourists have arrived in
Ethiopia having various purposes. Tourists who became for vacation took the lead, followed by
tourists who purpose was not stated. Transit & business visit registered the third & fourth place
respectively.

Moreover, Kombolcha city is considered the tourism center of the country as it hosts multiple
UNESCO heritage sites like lalibela rock hewn churches, simian national park and Fasiledes
castle. This creates a huge demand for accommodation at an international standard. Further
increase of such demand is expected in the future since the standing of Ethiopia is growing and
many international organizations have been strengthening their institutions and augmenting
their personnel in Ethiopia.
Demand Situation
According to the data obtained from Ethiopian Tourism Commission, the compound annual
growth rate of tourist arrival from year 2007-2017 was 9% per annum.

Being Kombolcha is one of the most attractive cities of Amhara region, host of various National

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offices and one of the main gates for tourists according to different aspects; it is considered that
most of the tourists at least stay three days and maximum of five days in Kombolcha.
Considering five days as maximum and three day as minimum stay of each tourist stay in
Kombolcha the total demand interims of bed nights is also indicated in the table below.

Table 4: International tourists flow to Ethiopia & demand for bedroom

Table 5: Demand Projection for Bed Accommodation (Considering five

days stay)

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ollowing table gives the percentage share and rank of top 10 source countries. The top 10 tourist generating
countries for Ethiopia were USA, UK, China, Germany, Kenya, Italy, Sudan, France, Nigeria,
Table 6: Tourist Arrivals from Top 10 Markets

The Ministry of Culture and Tourism has adopted a system of approving and classifying the
hotels based on the facilities and services provided by them. The category-wise details
regarding the number of hotels and hotel room available during the years 2018 are presented
below
Table 7: Categories of Hotels by Number of rooms and bed

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Supply Situation
Currently, the hotel industry in Ethiopia is developing in an incredible pace. Now a day Many
star hotels have been start to built in Kombolcha and other state cities. The hotels are
contributing a lot for tourists staying in the city and other nearby cities.

According to the Ethiopian Tourism Organization (ETO), the Ethiopian tourism sector has
shown tremendous success over the last few years. The direct contribution of tourism and
hospitality service to GDP was 51.3 billion birr (USD 2.26 billion) which is 4.1 per cent of the
total GDP in 2015. In the same year, the sector had contributed 8.4 per cent of the total
employment by creating 2,326,500 jobs. The hotels, restaurants, leisure industries, travel
agents and airlines have enhanced the sector significantly. The Ministry of Culture and
Tourism recently revealed that the political unrest that broke out seven months ago had
slightly affected the tourism and hospitality service. However, after the declaration of the state
of emergency, the dust has settled. Tourists from different corners of the world are coming in
droves to Ethiopia without any security concerns. As per the data, the average bedroom
increment in Kombolcha is around 8%. Accordingly, to let other factors, which may increase
bedroom supplies, the study considers 8% annual increase of bed nights in the following
supply projection.
Table 8: Supply of Bed Accommodation projection

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Demand Supply Gap

In the coming years, the country is working to open over 58,000 hotel rooms. Currently 12
international chain hotels are in the pipeline with a total of 2,460 room‟s capacity. Demand
supply gap projection reveals that there is high demand for the intended project in the country
that is 847,602 bed nights in the year of 2018 and this increase to 2,531,882bed nights at the
final year of (2028) the projection period. Thus, the study concludes from this that an investor
who invests his/her capital in this venture can exploit a large amount of revenue besides to
employment opportunity and generation of income to the government treasury.

Figure 14: Projection of Demand Supply Gap

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Marketing Strategy
Service prices
The rental price for hotel rooms under consideration expected to be between Birr 5400- 14,400
(80 USD-400 USD), which makes the project more competent than its rival does while
maintaining it quality service though its location.

The price of the star rated hotels is regularly adjusted based on the tourist and conference
season. The price used for projecting revenue of room is low as compared to other international
branded and local branded five star hotels. The price list for some of potential competitor‟s
hotel is presented as follows:

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Marketing Strategy
The hotel will be managed by international expert that will be recruited from local and
international labor market. The expat will train and manage the marketing staff, in addition
most of the marketing activity will be done all over the world through international booking
agency. It is believed that the achievement of sales and profit targets set out in this study
depends largely on the prevalence of sound marketing strategy. Since hotels are sensitive to
quality in order to achieve its efficiency, it will be imperative to improve its quality services.
Hence to maintain fair market shares and further win more market share in the competitive
market, due emphasis must be placed on improving the quality and efficiency of the services to
rent at the competitive prices. In order to facilitate the marketing activity, the hotel will hire
qualified marketing staffs.

Market Expansion Strategy

A market development strategy implies that the means of the marketing mix of an enterprise
are primarily geared towards the creation of a new market or the enlargement of the existing
market volume, along with an improvement of the service in sales volume at the prescribed
reasonable market price. The company will invest substantial amount of money for attracting
potential hotel guests. Detail of marketing expense for project is presented in the following
table:

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Market Penetration Strategy

The envisaged project under consideration will aim to intensify its market efforts. The tools are
advertising and promotion. The international marketing activity will be performed by
International companies and the local marketing activity will be handled by the Hotel
managements.

The Hotel will launch an interactive website, booking system, currently majority of
international customer evaluate hotels price, service quality and other hotel amenities online
before checking. The booking of rooms and services is also handled by such kind of websites.
The hotel service also can be advertised by a number of popular social media’s by specifically
targeting potential customers.

Advertising to stimulate demand usually attracts many tourists. The proposed project can
therefore commission specialized agencies, which design the advertising and select proper
media for promotion like the trip advisor website, Trivago, lonely planet, Kayak etc….

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Public relation is more concerned with how to reach and influence key persons in relevant
positions in public and private institutions. The management of the project will also use public
relation to promote its service and expand its market.

Since 85% of travelers use mobile device to book traveling activity and 74% of travelers use
social media while in vacation having active social media marketing is a matter of survival in the
Hospitality business. The hotel will use international experts and talent in managing the social
media marketing of the Hotel. Since Social media is becoming so important in everyday lives of
consumers, there is no doubt that it presents a significant opportunity for hotels to capture the
attention of potential guests. In order to attract local guests, the local marketing team will also
advertise the hotel service using social media, newspapers Ethiopian Airlines Selameta
Magazine, and primetime TV commercials.

4. Technical Study

4.1. Location and Site

The suitability of the site for development and operation of the proposed hotel is an important
consideration affecting the viability of the project. Factors such as location, site topography,
accessibility, visibility, entrance, surrounding area characteristics, ability to serve transient
trade, proximity to business and trade centers, proximity to travel services and the function of
the area as a hotel have a positive impact on the proposed hotel.
The neighborhood surrounding a lodging facility often has an impact on a hotel's status, image,
class, style of operation, and sometimes its ability to attract and properly serve a particular
market segment. Accordingly, the experts deeply asses the project location from all available
location in Kombolcha city by considering the following factors:
 Availability of tourist attraction to project location
 Total available open space for intended project and expansion
 Closeness to main road
 Neighborhood condition
 Availability of infrastructure
 Proximity to Kombolcha Airport
 Proximity to Business and Trade Centers

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 Proximity to Travelers Services

Accordingly, the selected site fulfills the above criteria’s. The hotel will be located in
Kombolcha, in the central part of the city around. Quality general trading Five Star Hotel
fulfills the above criteria, as the hotel is located in Kombolcha city which is a hub of local and
international tourist destinations due to different factors. This is due to Neighboring cities,
Lalibela, regional Conference centers, a number of national organizations.

In addition, the City has interconnected internal roads, airport, telecommunication network,
electric power and water works etc. Kombolcha residents are tourist friendly, trustworthy and
welcoming which is a crucial criteria for tourists travel selection.
Land Area
Accordingly, quality general trading Five Star Hotel is expected to obtain additional /0.25m2/
investment land from Kombolcha city administration, because the promoter hand over
7,500m2 land before, to mixed building service.
Water Supply
Continues flow of tap water supply is the life line of hotel businesses. Continuous tap water
flow is important for guest room shower, toilets, laundry service, room cleaning, cooking,
washing, spa service and other services. The water source the project will get from the
municipality is a piped water supply that would provide adequate source of water for the
project. In addition, the company will develop its own borehole and buy a number of large scale
water tankers as a reserve.
Power supply
Since the project is located in central part of Komblcha city, there are high voltage
transmission power lines near the project site. It is believed that Ethiopian Electric Utility will
provide the necessary electric power for the hotel.
Five Star Hotel
Quality general trading Five Star Hotel will be located within short distance from Dessie,
Semera, Shewarobit and other towns which are located on the main road of adiss abeba to
Asmera. The hotel building will have five basements and G+8 stories.

The hotel will be designed to provide five-star hotel services for international and local guests

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who wish to enjoy the international luxury experiences and feelings. The selected hotel will be
located near to the main road and airport that enables guests to find it easily and provide quite
set up during night time.
All basic factors like lighting, ventilation, functional draining system, visibility, safety, exists
and functional rooms are considered.

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The Interior design will be impressive with its quality, attention to detail, comfort and
elegance. Services will be high standard, well supervised and flawless in attention to guests'
needs, without being disturbing. The restaurant will demonstrate a high level of technical skill,
producing dishes to the highest international standards. Staff will be knowledgeable, helpful,
well versed in all aspects of customer care, combining efficiency with courtesy. The hotel has
lift for guests and service lift for staffs. The rooms will have the necessary service facility that
meet the requirement of five star hotel standards.

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In addition to the first class lodgings, Quality general trading Five Star Hotel will offer
attractive trimmed landscape. The Reception will be open 24 hours and the hotel will hire
sharp multilingual staff to make guests feel at home.
o Doorman service,
o valet Parking/Concierge,
o spacious reception halls with several luxurious sofa seats and beverage service,
o Personalized greetings that will create long lasting memory to local and
international guests visiting quality general trading Five Star Hotel.

All rooms feature a generous work surface, remote-controlled color television, attractive
cultural furniture that show different nationalities culture, artistic paintings, overhead and
reading lights, fire place (chimney) and telephone facility. “No Smoking” and handicapped-
accessible rooms will be available. The rooms will also feature high-security guest locks as an
added safety feature.
 Twin Bedrooms > 30-meter square

 King Sized Bedrooms >32-meter square

 Handicapped (2 - 3%) > 36-meter square

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 Double bed rooms >32-meter square

 Conference Suite >65-meter square

 Executive Suite >120-meter square

 Presidential Suite > 150-meter square

Whether on business, pleasure, or a weekend break, the Hotel complex will have comprehensive
conference centers that have the capacity to accommodate 350-400 guests at a time. Other
facilities include excellent fitness center, Steam and sauna for both genders, restaurants that
serve local and international dishes.
The Hotel will be designed by considering the international standard; it meets the need of
international tourist who requires a clean and cozy accommodation and other hotel services.
Services will be high end, well supervised by the Hotel Managers that will be recruited from
local and International markets.
The Hotel Manager expected to bring international best practices in managing the hotel. The
manager is anticipated to provide flawless attention to guests' needs and high standard service
delivery. The restaurants will demonstrate a high level of chef skill, producing dishes to the
highest quality and test. Staff will be well-informed, cooperative, well versed in all aspects of
customer care, combining efficiency with courtesy.
Lodging
The most profitable source of income for a project is the revenue generated through sales of
rooms. These accommodations set the five-star hotel level of class and are the primary
contributor to guest satisfaction. The Hotel will have 200 different types of bedrooms. The
five- star hotel has the following room type
Table 9: Number of Rooms by Type

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All rooms feature a generous work surface, remote-controlled color television, attractive
furniture, artistic paintings, overhead and reading lights, working desk and Chair, safe box, tea
and coffee preparation material, telephone facility, stay easy sofa, glass shower and bathroom.
The bed rooms will be located starting from fourth floor until the 20th floor.

Spa Service
High-end spa will offer therapeutic massage services, steam & dry sauna, body treatments,
facials and anti-aging treatments. Licensed therapists and aestheticians will provide services.
Further high - end beauty products including cosmetics, creams, candles, and other beauty
products will be sold in the massage area.

Services that will be offered incudes ultra-comfortable treatment rooms with the finest spa
linens and equipment, Hot Stone Massage, reflexology, Sports, Pregnancy and others. The spa
will have the latest in anti-aging products and techniques. The service will be provided in the
first floor of the hotel with both gender massage area, steam, Jacuzzi, rest area, locker room
and changing area.

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Restaurant and Fast Food

The restaurant will be an upscale specializing in a combination both Ethiopia and foreign dish
based on distinct menu that covers western, Asian, African, Middle east, Europe and Latin
foods and beverages. The most enduring live Ethiopian music entertainment will be offered in
restaurant including live Jazz & contemporary music. The restaurant will serve you with full
bar for private use for a number of Celebrations including Birthday Parties, Graduation party
and private events.
 Two Specialty restaurants each.
International cuisines open for Lunch and Dinners even days a week. Every week the
international restaurant will serve signature dish around the world.

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 Main Restaurant
The main restaurant will have 200 regular settings and depending up on the number of gusts the
seats can be expanded to 400 seats. The restaurant shall have a theme representing the linen,
artwork, walls, uniforms, etc. The restaurants should take advantage of the outdoor environment
and transpire the beautiful landscape of the city. The Main restaurant features continental
cuisine and it is open 24/7.
 Pastry and Café
The Pastry and café features pastries made in the hotel with tea, coffee, ice cream, sandwiches,
light snacks and soft drinks all day. The café will be located in the ground floor and will have a
capacity of accommodating between 120 guests at a time.
 Bar/Lounge
The Bar/Lounge features cocktails, liquors, beers and wines with light snacks and sandwiches.
The lobby bar can accommodate 40-60 guests.

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Kitchen
Main Kitchen: Provides the main food preparation for the entire hotel including banquet
functions. Pastry and bakery are part of main kitchen. The main kitchen has broilers, grill,
sauté area, walk-in fridges (different purposes) chillers, food preparation area, banquet
preparation area, dry storage, cold storage, dishwashing area, etc.

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ite Kitchen: Provides specialized food service for each restaurant (i.e. if it is a Steak or Seafood Restaurant the
grill or the sauté is done satellite kitchen). All the specialty items for the restaurant will be
found in the satellite kitchen.
INDOOR AND OUTDOOR GAMES
The recreation center will have different kinds of indoor options comprise of aquarium, Games,
simulator games and indoors amusement games. Outdoor services can be classified as children
play grounds, various outdoor game, Joy lands, swing inflatable playground etc.

Conference Center
Quality general trading Five-star hotel will have conference rooms and related services. The
main Ballroom lobby will have a capacity to accommodate 2000 people and used as exhibition
center for selling Ethiopian artist painting and sculpture. The ballroom shall accommodate
smaller group by partition divider.

In addition to the main meeting room, there are board-meeting rooms that serve for small
meetings. Four small conference rooms that can accommodate up to 80 people with
configurable conference set up for any event. All meeting rooms supported with essential
facilities for function spaces like sound system station, translator room, storage, projection
booth, toilets, business centers and phones.

Swimming pool
The swimming pool is designed to be 300-meter square with all accessories and
supporting facilities. The pool will be equipped with standard diving board and water chutes.

The pool will be well equipped with constant water supply system, and chlorination plant. The
source of water is a borehole within the site and its capacity will big enough to change the
water once a week. The type and standard of the plant will follow norms set by the Ministry of
Health. The swimming pool will have the following support structures
 Reception area
 Swimming Pool equipment and storage
 Lockers, showers, toilets

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 Children's area
 Pool bar and Coffee Shop

Fitness center
The Hotel will have high standard gymnasium for hotel guests and Kombolcha city residents.
The Gymnasium will have spacious view to the garden and outside.

Additional services
In addition to the above, the center will have the following additional facilities and services:
 Barber Shop
 Jewelry shop
 Ladies Hair Salon
 Shopping

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 Shuttle service
 Laundry service
 Bank
 Ticket office and
 Luxury product shops

Project Design and Engineering

The hotel rooms‟ is designed to fit the international and Ethiopian Ministry of Tourism and
Culture standard. According to the ministry of culture standard, generally five-star hotel should
have the following style and amenities and Black star plc. Hotel surpasses the following
standard.

Kinlibe trading plc.

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As depicted in the table below, the total cost of building and construction estimated to be Birr
306,377,006. The detail is included in the bill of quantity document.

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Machinery and equipment

Kitchen Equipment
In order to serve best quality food, having standardized kitchen equipment is vital. Accordingly
Quality general trading Five Star Hotel will procure best quality kitchen equipment as per the
international standard. The equipment will be procured from known International hotel
equipment suppliers; the suppliers will provide customized kitchen equipment requirements as
per the space available and Chef's requirements. The company allotted Birr 19,533,177 for
procurement of Kitchen Equipment. Detail is attached in the annex part of the study.
Bed Room and Housekeeping Equipment
All rooms feature a generous work surface, remote-controlled color television, attractive
furniture, artistic paintings, overhead and reading lights, working desk and Chair, safe box, tea
and coffee preparation material, telephone facility, stay easy sofa, glass shower and bathroom
cubicles.

In order to have clean, comfortable, safe and aesthetically appealing environment having 24/7
housekeeping personnel and equipment is essential. In Addition, reliable service from all staff
of the department, ensure a high standard of cleanliness and general upkeep in all areas for
which the department is responsible. The Hotel will have central laundry room as per the
standard that cater to the laundering requirements of hotel linen, staff uniforms and guest
clothing. Accordingly, the company will procure different type of housekeeping equipment,
bed hotel furniture and equipment at a cost of Birr 79,963,337. The detail attached in the annex
part of the study.
Bar and Restaurant Equipment
The machinery and equipment comprises round table, leisure chair, three-seat sofa, long desk,
double seat sofa, double seat sofa (no back), single seat sofa, square desk, coffee machine, soft
outfit, electric oven, fruit blender, blender, the ice machine, ice crusher, freezer,
cashier equipment, microwave oven, bean grinding machine, the popcorn machine, dining-
table, dining- chair, different type of water glass, wine glass, beer glass, spoons, forks,
knives, plates bowls etc… An estimated amount of Birr 59,226,379 will be invested as
cost of bar and restaurant equipment for the project.

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Gym and spa service Equipment

The hotel will have spa service and high standard gymnasium for hotel guests and surrounding
residents. The gym will have treadmill, the bicycle, tension machine, barbell portfolio, sit up
bench, dual adjustment plate, shoulder press etc… The total budget allocated for gym and spa
equipment is Birr 34,664,830. Detail is attached in the annex part of the study.

General and Banquet Equipment

General and Banquet Equipment includes corridor equipment (wall covering, Carpet and
hanging pictures), laundry room equipment (Fully automatic eluent, heating dryer and Ironing
machine), Lobby equipment (shoe polisher, rods umbrella with bent handle, utility basket, 18-
hole umbrella frames with Locks, bookshelf in lobby, lobby Soft outfit, LCD AD PLAYER)
and Other (Air energy equipment, monitoring system, 250kw electric generator, entrance of
security inspection, Luggage security Inspection Instrument). The total cost of general and
banquet equipment expected to be Birr 43,520,741. In addition, the company will procure
different materials for meeting rooms, office and decorating equipment like chair, chair cover,
desk, audio system, lighting System, projector, screens, computer, printer, fax, photocopier,
scanner, monitoring system, audio system hall audio system etc… The total budget allocated for
these activity is Birr 100,391,509.
Vehicles
In order to provide hotel shuttle service and employee transportation service especially for night
shift staffs having different type of bus is important. Accordingly, the company planned to
procure min buses and coater bus. In addition, Pickup, FSR Truck and closed body truck will be
procured, the total cost of these vehicles estimated to be Birr 12,000,000.
Implementation Program
The proposed five Star projects is expected to have a two-year construction period and
expected to be operational in 2023.

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5. Organizational structure and Management

5.1.Organizational Structure
A business is established primarily with the objective of making a profit. Regardless of the
product or service provided, every business owner needs to decide the appropriate
organizational structure is most appropriate.
In order to accomplish organizational objectives structuring human and physical resources
dividing tasks into jobs, specifying the appropriate department for each job, determining the
optimum number of jobs in each department, and delegating authority within and among
departments is required. It is basically a system of tasks, reporting relationships and
communication that links the work of individuals and/or groups. Hence, a good organizational
structure supports quality general trading. Five Star hotel strategy and objectives and can be a
competitive advantage. Quality general trading Five Star hotel will adopt the international best
practice in designing the organizational structure.
Organizational effectiveness is also largely influenced by the type and level of human resource
the organization employs. This in turn is related to the existence of competitive remuneration
scheme. Furthermore, setting suitable organizational structure and clear tasks and duties of
those involved would allow the organization to maintain a competitive position, allocate its
resources efficiently, avoid redundancy of tasks and duties, reduce risk of fraud and
embezzlement, allow efficient and clear communication between those involved, properly
coordinate resources that would lead to the achievement of goals and objectives, plan activities
on the basis of its conditions and needs, avoid overlapping of authorities, minimize or
eliminate misunderstanding between authorities; and avoid omission of planed activities.
Organizational set-up basically emanates from different business directions or vision, In the
case of quality general trading. Five Star Hotel has the vision is to grow and hold a significant
market position in the hospitality industry of Ethiopia. The project is envisaged being an
autonomous entity in its operations supervised by the CEO, who will be appointed by the
shareholders and the CEO will be supported by the hotel managers that will be recruited from
International and local labor market.

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Figure 15: Proposed Organizational Structure

MANAGEMENT
The CEO is responsible for defining and interpreting the policies established by top
management. The manager follows the day-to-day management of a facility. The Hotel
manager is the main responsible person in managing the day to day operation of each service
units of the hotel and its staff and has commercial accountability for planning, organizing and
directing all services.

The overall operation of the center directed and controlled by the operation departments. To
perform these many duties effectively, the operation department is divided into three of
specialized divisions namely; Rooms division, Spa & gym division, and Restaurant & kitchen
division.

The primary responsibility of the marketing and promotion department is attracting potential
tourist, corporate clients like Embassy, NGO‟s to use quality general trading Five Star Hotel’s
service and the facilities. The department sells rooms, spa, food, and beverages to potential
clients through advertising, attendance at association and conference meetings, and direct
contacts.

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The Administration department develops, advises on and implements policies relating to the
effective use of personnel within the facility. It is responsible for planning, directing, and
coordinating human resource management activities to maximize the strategic use of human
resources and maintain functions such as employee compensation, recruitment, personnel
policies, and regulatory compliance. It also needs to ensure that the project employs the right
balance of staff in terms of skills and experience, and that training and development
opportunities are available to employees to enhance their performance in order to achieve the
objectives.

The Accounting department’s role is recording financial transactions, preparing and interpreting
financial statements, and providing the managers of other departments with timely reports of
operating results (line functions). Other responsibilities, carried out include payroll preparation,
accounts receivable, and accounts payable (staff functions). Another dimension of the
accounting department’s responsibilities deals with various aspects of operations, cost
accounting, and cost control throughout the facility.

MAN POWER REQUIRMENT

Even though the core operation of the company requires having knowledge, skill and experience
on the part of employees it could be fulfill by having on job training by the Managers that will
be recruited from International and local workforce. In addition, since the envisaged project is
to be established in Kombolcha city where there is a huge potential of work force, there would
be abundant skilled and semi-skilled job seekers in the labor market who will be willing to join
the company.

Quality general trading Five Star Hotels have planned to create employment opportunity for
about 210 workers including management & supervision personnel skilled & unskilled workers.

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6. FINANCIAL FEASIBILITY ANALYSIS

Financial Feasibility analysis provides a basis for a decision as to whether to proceed or not
with the establishment of the project. The basic issue is to establish the financial viability of the
envisaged facility. The discussion below presents a summary of major financial projections.
Investment Costs and Sources and Finance
The total initial investment required of the establishment of the five-star hotel is approximately
Birr 450,000,000.00 as shown in Table below. This will cover initial investment costs, working
capital requirements as well as project start-up costs. Of the total estimated initial costs, Birr
450,000.000 is allocated for building and construction works, for hotel furniture, machinery and
equipment and Birr 12,000,000 for vehicles. The rest of the investment cost is allocated for and
Working capital requirement and pre – operating cost.

Financial Feasibility analysis provides a basis for a decision as to whether

to proceed or not with the establishment of the project. The basic issue is
to establish the financial viability of the envisaged facility. The discussion
below presents summary of major financial projections.

6.1 Underlying Assumption

The financial analysis of the hotel project is based on the data provided in
the preceding chapters and the following assumptions.

A. Construction and Finance

Two year
30% equity and 70 % loan
14 %
Loan repayment in Year 10
Grace period repayment period 1
Based on lease rate of ANRS
Repair & Maintenance Building 1%
Machinery & office furniture 3%
Vehicle 4.8%
Machinery & Equipment 5%
Vehicle 10%
0.75% of Fixed Assets
Building & Machinery 1.50%
Vehicle cost 4%
0.02 of wages & salaries

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B. Working Capital (Minimum Days of Coverage)

Raw Material-Local 30 days
Raw Material-Foreign 120 days
Factory Supplies in Stock 30 days
Work in progress 10 days
Finished goods 15 days
Account receivable 30 days
Cash in Hand 30 days

D. Working days
Number of days in the year 365
Working days per month 23
Working days per year 276

E. Occupancy rate
Project year Percentage Period
Year 1 70% Annum
Year 2 75% Annum
Year 3 80% Annum
Year 4 85% Annum
Year 5 90% Axum
Year 6& then after 95% Annum

It is true that any feasibility study should be backed by financial analysis and with this
understanding; pertinent cost and revenue estimations are done for the project under
consideration along with illustrations of various indicator.

While conducting the financial analysis and evaluation for this project, the following various
national and international assumption have been used.

 The hotel is assumed to work 365 days per year.

 All revenue assumptions are excluding VAT and service charge.

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6.1.1 Revenue
The hotel is expected to generate revenue from different services it provides, which includes:
 Bed rooms rental,
 Restaurant and bar,
 Health and fitness center (Sauna and Steam, Massage and Gymnasium services), as well
as;
 Conference rooms rental

As tried to depict earlier, revenue from the hotel is estimated based on real experiences and
expertise opinion as well as by using few data on catering related service users’ trend in
Kombolcha.

6.1.1.1 Revenue from bed rooms

It is planned that the investigated hotel will have 200 well- furnished rooms of which 100 single
standard, 90 double rooms. Since the major revenues of such hotels are generated from rooms
service proper attention should be given in determining the room rates. Nonetheless, the pricing
policy of the company must be very dynamic in order to cope with the elasticity of the demand,
since it is a common practice in the hotel and tourism business to offer different prices for pick
and slack season according to the prevailing demand.
Taking into account different room rates of similar hotel around Kombolcha, the room rates for
this hotel are therefore assumed to range between 900 to 1500 for single, double and suites
respectively. This would enable the hotel to effectively compete with comparable hotels in the
city and surrounding vicinity.
A drastic increase on room and bed rates might seriously discourage customer.It is therefore,
preferred parallel to the effective promotion of the hotel and close observation of the demand, to
make a slight decrease. Based on the demand forecast and the quality of service to be rendered
the bed rates shall be as follows at full capacity operation.
Average price per Room Annual
of Rooms Number of Rooms per night(Birr) Revenue

e Bedrooms 160 900 52,560,000

le Bedrooms 40 1,500 21,900,000
200 2,400 74,460,000

own in the above table, the gross revenue is estimated to be birr 74,460,000 birr per

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m at full capacity operation.

6.1.1.2 Revenue from Bar and Restaurant
nd restaurant service to be provided in the proposed hotel is classified into two major categories namely;
European bar and restaurant and traditional bar and restaurant. The average price for each
categories and annual income at 100% capacity is depicted in the table below.

European Bar and Restaurant

No. of Customers
Average Unit Charge
Daily Revenue Annual Revenue
Category

Morning 35 40 1,400 511,000

Lunch 60 60 3,600 1,314,000
Dinner 50 60 3,000 1,095,000
Total revenue from European bar & restaurant 2,920,000
Traditional bar and Restaurant
No. of Customers
Average Unit Charge Daily Revenue Annual Revenue
Category
Morning 35 35 1,225 447,125
Lunch 60 50 3,000 1,095,000
Dinner 50 50 2,500 912,500
Total revenue from traditional bar and restaurant 2,454,625
Total revenue from restaurant at full capacity 5,374,625

Beverage Income (Birr)

Average Number of
Description Beverages
Average Daily Income Yearly
Served perPrice
Day Income
100 1,500 547,500
100 1,500 547,500
50 1,000 365,000
150 1,200 438,000
100 6,000 2,190,000
Total 4,088,000

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6.1.1.3 Revenue from Health and Fitness Center

Beverage Income (Birr)
Average Number of
Services BeveragesAverage
Served Daily Income Yearly
per Day Income
70 24,500 294,000
50 15,000 180,000
Sauna and Steam Bath 150 22,500 270,000
Total 744,000

6.1.1.4 Revenue from Conference Room Rent

The hotel will have one conference halls, with capacities of 400 persons at a time. It would be
expected to be rented for wedding and other events and will generate Birr 8,000 per events.

Number of Occupancy days Charge Monthly Annual

Description Conference rooms per month per day Revenue Revenue

Conference Hall 1 2 8,000 16,000 192,000

Total Revenue 192,000

6.1.1.5 Total estimated Revenue at full capacity

No Description Yearly estimated Income

1 Revenues from Bedrooms 17,885,750
2 Revenue from Conference 192,000
3 Health center 744,000
4 Bar and Restaurant 12,382,625
Total 31,204,325

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The hotel would be commencing operation on average 70% capacity for the first year with annual
increment of 5% until it reaches 95%.

6.1.2 Operating Cost

 Raw materials and supplies
The cost of raw materials and supplies is assumed based on experience of similar hotels.

criptions Revenue Percent of Revenue Amount of direct Costs

d and Beverage 12,382,625 40% 4,953,050

t Revenue(Bed) 17,885,750 20% 3,577,150
ers 936,000 15% 140,400
al 31,204,375 8,670,600

Utilities in this case refer to costs of electricity, water and cylinder gas used for cooking.
Accordingly utilities are estimated to be birr 2‚494‚400 and expected to increase 10% every year.

Uniform expense is assumed to be birr 85,000 for year one with annual increment for 10%.

Professional fee:
o Audit and consultant fee is assumed to be Birr 80,000 per annum.
o Travel agent commission is assumed to be 0.5% of room income.
o Lawyer fee is assumed to Birr 40,000 per annum all of them are expected to increase of 5%.
Repair and maintenance cost will be Birr 45,000 and it is expected to increase by 5% every year.

Insurance expense is assumed to be Birr 40,000.

As it has been depicted in the organizational and management structure of this study costs of
salary and wages are estimated at Birr 2.01 million per year and expected to increase 5%
every year.

The hotel has expected to have two vehicles one coaster, and one min bus. Fuel and lubricant
expenses is assumed to Birr 600 per day and expected to increase 5% per year.

Interest expense on bank loan is calculated at 9.5%, also one year grace period is assumed.

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Straight line method of depreciation is applied.

ription Value Rate Depreciation amount
Civil work and building 40,000,000 5% 2,000,000
Furniture, Equipment & 16,909,535 20% 3,381,907
Generator
Vehicles 6,000,000 20% 1‚ 200,000
Pre Operating Expense 3,000,000 10% 300,000
Sub Total 65,909,535 4,881,907

Promotional (advertisement) expenses is estimated to be Birr 150,000 at initial year principally

for advertising the hotel on TV and Radio broad cast and expected to decrease by 5% every year.
Miscellaneous expenses will be 20,000 per year

6.1.3 Working capital requirement

The working capital requirement mainly used for the procurement of food and beverage material
and to cover other hotel supplies, the working capital requirement of the hotel project has been
calculated by accounting a minimum days of coverage on current assets and current liabilities.
Initial working capital of the hotel is computed as birr 25.8 million for the first year.

6.1.4 Investment breakdown

The total initial investment required to establish the proposed hotel project is estimated birr
91.73 million. These costs include buildings, furniture and equipment’s, vehicles, pre-operating
expenses and working capital requirement.
ription Promoter’s contribution Creditor’s contribution Total
Civil work and building 46,200,000 107,800,000 154,000,000
Furniture, Equipment & 12,000,000 28,000,000 ,40,000,000
Generator
Vehicles 3‚600,000 6,400,000 12,000,000
Working Capital 10,500,000 14,500,000 35,000,000
Pre Operating Expense 2,700,000 6,300,000 9,000,000
Sub Total 75,000,000 175,000,000 250,000,000
% age contribution 30 % 70 % 100%

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250,000,000

Table 10: Total Initial investment

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Source of Finance
The project’s investment cost is assumed to be covered from owner’s equity contribution and
Bank term loan. The bank to equity ratio is expected to be 75 to 25%.
Table 11: Source of Fund

260,493,008

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Revenue
Projected annual revenue from sales are estimated based rooms rental service, food and
beverages service, sales and gym, and sales of other services. The sales revenue generated from
all service presented in the following table.
Table 12: Estimated Revenue

The project will have 200 guest rooms and in the first three years of its operation it will have
80%, 85%, 90% and 95% occupancy rates, it will attain its maximum occupancy rate on its
fourth year onwards the detail financial analysis can be seen in the Annex.

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Projected Financial Statements

The envisaged five-star hotel will generate a net profit of Birr 95,517,377 during its first year of
operation and Birr 174,631,392 during the tenth year of operation.

Quality general trading plc.

five star hotel project

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Balance Sheet
Net Capital of the company will grow from about Birr 260,493.008 in year one to Birr
1,178,594,631 by year ten. Detail of projected balance sheet is attached in annex part of the
business plan.

Cash Flow
The cash flow projection shows cumulative cash balance of Birr 115,313,087 at the end of the
first year, which is expected to grow to Birr 906,020,334 at the end of the 10th year, indicating
the company will have surplus cash over the first ten years of its operation. The total investment
internal rate of return over the projected period is 29%. Detail of projected cash flow is attached
in annex part of the business plan.

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Sensitivity Analysis
As shown below, the project not sensitive in terms of revenue decrease and operating cost
increase, the management of the should monitor the selling price of output and they have to be
cost conscious in every activity of the project to keep the project less sensitive to those
changes.
Table 13: Sensitivity Analysis

Net Present Value

Net Present value for the project computed after tax at 11.5% discount rate shows a positive
balance of Birr 586,415,054 implying the project's ability to cover what is invested over its life
span.

CONCLUSION AND RECOMMENDATION

Conclusion: The Project is found to be operationally profitable & has significant socio-economic
benefits. According to the projected income statement, the envisaged project starts earning profit
from the first year of service. The income statement and other profitability indicators show that the
project is viable. The project is believed to have significant social and economic benefits that
accrue to the society beyond those financial returns to its owner. The most remarkable social
benefits can be expressed in terms of job creation that leads to reduction in the level of
unemployment and provide other benefits.

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Recommendation: The project directly employs 210 permanent worker; therefore, considering the
attractive financial and economic benefits the project is to produce, the promoter has made the
necessary preparation hoping that all the concerned offices & financial institutions should give
their support to facilitate the implementation of this plan due to the project owner experience.

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