Teklu Hagos Lodge

Debre Nazret Lodge [ ]
1|P age Ato Teklu hagos

Contents page
1 Executive summary ............................................................................................................................. 4
2 INTRODUCTION ................................................................................................................................... 6
2.1 Background ................................................................................................................................. 6
2.2 Key Success and Risk Factors; Risk Mitigation and SWOT Analysis ............................................. 9
2.2.1. Key Success Factors ............................................................................................................. 9
2.2.2. Risk Factors ....................................................................................................................... 10
2.2.3. Risk Mitigation Measures .................................................................................................. 10
2.2.4. SWOT Analysis ................................................................................................................... 10
3 The project ........................................................................................................................................ 12
3.1 PROJECT RATIONALE ................................................................................................................. 12
3.2 PROJECT DESCRIPITION ............................................................................................................. 13
3.3 Project Objectives ..................................................................................................................... 14
3.3.1 General Objectives ............................................................................................................ 14
3.3.2 Specific objectives ............................................................................................................. 14
3.4 IMPLEMENTATION STRATEGIES ................................................................................................ 14
3.5 Conceptualization of Tourism ................................................................................................... 15
3.6 Importance of Tourism Development ....................................................................................... 17
3.7 Factors that can induce or Impede Tourism .............................................................................. 19
3.8 National and Regional Environments Related to Tourism Development .................................. 20
4 TECHNICAL ANALYISIS ....................................................................................................................... 24
4.1 PROJECT AREA ........................................................................................................................... 24
4.2 SITE LOCATION .......................................................................................................................... 24
5. ECONOMIC OVERVIEW ..................................................................................................................... 25
5.1. Introduction .............................................................................................................................. 25
5.2. MARKET ANALYSIS; ................................................................................................................... 25
5.2.1. Local Competitive Accommodation Market ...................................................................... 25
5.2.2. Regional Competitive Accommodation Market ................................................................ 25
5.3. MARKETING STRATEGY ........................................................................................................... 26
5.3.1. TARGET CUSTOMERS......................................................................................................... 26

5.3.2. MARKET POTENTIAL .......................................................................................................... 26

5.3.3. PRICING STRATEGY ............................................................................................................ 26
5.4. PROMOTION MECHANISUM ..................................................................................................... 27
5.5. MARKET APPRAISAL .................................................................................................................. 27
5.6. Demand Side Indicators ............................................................................................................ 27
5.6.1. National and Regional Performance.................................................................................. 29
5.7. Governmental Supports Provided to the Sector ....................................................................... 32
5.8. Domestic Demand and Supply Analysis .................................................................................... 33
5.8.1. Demand Situation Analysis .................................................................................................... 33
5.8.2. Demand and Supply Gap Analysis ......................................................................................... 40
6. GENERAL INFORMATION OF THE LODGE (PROJECT DESCRIPTION) .................................................. 41
7. ORGANIZATION AND MAN POWER................................................................................................... 47
7.1. Human power ........................................................................................................................... 47
7.2. Training Requirement ............................................................................................................... 48
8. INVESTMENT AND FINANCIAL ANALYSIS........................................................................................... 49
8.1. INVESTMENT COSTS .................................................................................................................. 49
8.2. Production/Service cost ............................................................................................................ 50
8.3. Pre-operation Capital expenditures: ......................................................................................... 50
8.4. Working Capital ......................................................................................................................... 50
B. Source of finance ............................................................................................................................ 51
C. Operation and Maintenance Costs................................................................................................ 51
9. BENEFIT AND COSTS ...................................................................................................................... 53
9.1. PROJECTS COSTS ..................................................................................................................... 53
9.2. PROJECT BENEFITS .................................................................................................................... 53
9.3. TEST CRITERIA FOR FINANCIAL VIABILITY OF THE PROJECT ...................................................... 53
I. Financial internal rate of return (FIRR) ................................................................................... 53
II. Payback period ........................................................................................................................... 53
10. CONCLUSION ........................................................................................................................... 55

1 Executive summary
Tourism and hotel sector is one of the leading and fastest growing sector and the smokeless and
biggest industry sector in the world. The sector that contributes the lions share for the economic
development of the nations of this sector hotel and tourism sector has indispensable connection
in the day today activities of human life. The movement of people definitely calls for the use of
modern hotel, particularly accommodations in order to deal their respective assignments
properly.
In this regard constructing Cultural Lodge particularly in the Southern Eastern zone of Tigrai
Region Enderta Wereda, Debre Nazret Tabia, kushet Meam Atali, Specific area of Gogon
Aqubay which is going to help for conference tourism, investors, national and international
tourists, and the center of the historical, cultural and natural attractions of Tigrai, will have a
great opportunity in the coming future development. The lodge is going to be constructed at the
best locational view of the town (best hill side in the entrance of the town). The proposed lodge
is going to serve various services such as best quality bed rooms¸ modern with the bar and
cocktail bar, modern restaurant, meeting hall and different business centers, the and will be
constructed in the town with group of cultural buildings with modern internal facilities. The
project will have parking area, water source and reservoir in the compound of the project. The
total initial investment cost of the proposed Cultural Lodge estimated about birr 10,696,433. This
investment of cost is proposed to finance by personal own equity and bank loan. The rate of
financing for the proposed project is set at 70% of the maximum attainable capacity service
provision in its first year of operation. Full capacity service is expected to be attained in the 4
year and then after by increasing its capacity by 10% per annum.
The project will create permanent employment opportunities for 59 persons in permanent and
more than 20 citzens in temporary starting from the construction phase and many more indirect
job opportunity by supplying of inputs for the lodge, tour guides and other relevant activities.
The project is financially viable with an internal rate of return (IRR) of 38% and a net present
value (NPV) is Birr 55.9 million discounted at 11%. The project has been proved feasible from
technical, financial, social economy and environmental perspective.

The Project will generate around 0.5-1 million USD annually from foreign tourists and the
promoter have his own Diaspora Account to purchase the Equipment from Abroad.
1.1 General Information
Name and background of promoter/Entrepreneur:
Owners: Negasi and Tesfay Cultural Lodge and Recreation
• Address: Enderta Wereda, Debre Nazret Tabia, kushet Meam Atali, Specific area of
Gogon Aqubay
• Tel:- 0914314444
• Specific Project Cultural lodge
• Legal form of business: partnership
• Status of the Project: New
Required Land Size: above 4,001 m2 {0.4 hectare}
Initial Investment in Birr: 10,696,433
1.2 Promoter (Company Profile)
Debre Nazret cultural Loge is a project to be established by a business person, Ato Teklu
Hagos who is engaged in the distribution of building materials and hotel and restaurant
service. He has the vision to promote the culture of the area to the world through cultural
conservation and development.

2 INTRODUCTION
2.1 Background
Ethiopia is located in the northern part of Africa known as the „Horn of Africa‟ at the cross roads
between Africa, the Middle East and Asia. The country is bordered by Djibouti and Somalia to
the east, Eritrea to the north, Sudan to the west, and Kenya to the south. It has a total area of 1.14
million square km (7444km2 of which is water), and extends between 30 -150 north of the equator
and 330-480 east of the Greenwich meridian. Ethiopia has a total population above 80 millions
(CSA, 2007/8) growing at a rate of 2.3% per annum and reach above 120 million in 2023.
Africa as a continent is growing fast, with Ethiopia reflecting a significant part of this progress.
In the past five years economy has been growing fast. However backed by credible democracy.
The economy is growing faster than at any time in history. It needs to keep it up a strong pace of
growth.
Ethiopia is endowed with spectacular and diversified tourist attraction sites that include
historical, wildlife, cultural, religious and natural gifts that extend from north to south, east to
west corners of the country. Similarly, Tigrai Region is rich with various antiquities and
fascinating landscapes. The most picturesque part of the region is endowed with worth visiting
heritage sites, chains of mountains, semi and entirely rock-hewn churches, monasteries,
archeological findings, very impressive religious and cultural festivities, etc. Nevertheless, the
gains generated from the sector are very low compared to its huge potentials. Although an
increasing trend is documented in the number of tourists and the income earned from the sector
in the past years, it is still very low compared to performance of other even East African
countries.
The democracy, peace and development in Ethiopia are giving investors look Ethiopia as suitable
country for investment trade and tourism in general and Tigray in particularly. The experience of
the civilized nations and these with the lion ‟s share of service sector standard hotel services
among others in curial. Therefore in developing nations like Ethiopia, where the service sector is
not contributing as it should be, and the status of quality hotel service provision coverage must
be improved to a great extent. It is only when, we can make avail good standard hotels in places
where foreigners and potential local residents can get access to Ethiopia can be benefited from

the sector. Given the favorable government policy good environment for investors who are
willing and able to get in hotel venture, this proposed project can be one of those hotels intended
who provides quality services.
The government of Ethiopia has introduced the free market economy policy, which enables the
private sector to involve in the economy development efforts of the country. With the
introduction of economy policy, a number of policies that are more sustainable to the private
sector are issued where the private business enables to enjoy in its day business activity. Among
many the incentive packages with Hard to tax free important facilities, income tax exemption,
The situation in Tigrai Region is no better than the national situation. Average annual growth
rate of the past 10 years is about 8.27% which is a bit lesser than that of the national average.
Share of Tigrai region from the national visitors does not show significant differentiation which
is found within the range of 19-23%. This is comparable with information documented by the
Ministry of Culture and tourism in Tourism Marketing Strategy for Ethiopia (2016-2025) which
indicates share of Tigrai Region to be 24%. Both are more or less in line with another source that
states as the gateway of all international inbound, outbound and transit tourists/ passengers,
Tigrai has been taking the good share in the county‟s tourist arrivals hosting an estimated 22-
25% of the total international tourist arrivals.
The active economy which is explained by investment in various developmental projects has
intensified the move of people from place to place to deal on the trade and exchange vies, share
experience and discuss on developmental issues. Other than the business people and government
officers, some other people like tourists, business promoters move from place to place basically
from semi urban to regional towns and from the center of country to regional towns. This move
people definitely calls for the use of modern hotels, particularly accommodations in order to deal
their respective assignments properly, in this regard constructing Cultural Lodge, particularly in
Debre Nazret Tabia, which will help for investor‟s attractions with both domestic and foreign,
will have a great opportunity in the coming future development.
Nowadays the role the tourism sector plays in the overall development of countries is well
recognized. It has essential contributions in strengthening the process of economic development
of countries. Tourism benefits not only to those engaged in it but to the economy of counties as

whole. Due to the practical multifaceted contributions of the sector, countries who have already
considered tourism as inseparable ingredient of the economic development are now reaping a
rich reward from this newly emerging industry.
The United Nations (UN) identified tourism to be a key contributor to the economy of countries
in its conference of 1992. The conference realized that effective management of tourism could
lead to sustainable development. In addition, the conference pointed out that there has been
social and ecological development in tourist destinations. Lastly, the conference cited tourism as
an effective means of conserving the environment and natural resources. Consistent with that
UNWTO in its document named as “Tourism Highlights 2018 Edition” has schematically
depicted the multi-faceted contributions of tourism to include cultural preservation,
environmental protection, peace and security, job creation, economic growth and development in
general. Smanta & Mohanty (2008) also explain that governments across the world have been
urged to embrace tourism because it appreciates culture, heritage and the natural environment.
Ethiopia is endowed with spectacular and diversified tourist attraction sites that include
historical, wildlife, cultural, religious and natural gifts that extend from north to south, east to
west corners of the country. Nevertheless, the gains generated from the sector are very low
compared to its huge potentials. Although an increasing trend is documented in the number of
tourists and the income earned from the sector in the past years, it is still very low compared to
performance of other even East African countries. Nevertheless, the potential of the sector to
contribute to economic growth and development of the country in general and to the reduction of
food insecurity in particular is widely recognized. With this perception broad-based tourism
development policy is developed and made operational.
Ethiopia is said the “Land T h e o r i g in o f

of Origin” because of a T h e o rig in o f
u n iq u e
s p e c ie s T h e o r ig i n o f
s p e c ta c u la r
number of valuable and la n d s c a p e s
h u m a n it y
unique features and

T h e o r ig in o f
properties. In connection c u lt u r a l
T h e o r i g in o f
a new na on
with this a paper gathered to le ra n c e
S p ir it o f
from Regional Bureau of O r ig in a lit y
T h e o rig in o f T h e o rig in o f
Tourism has interestingly p o w e rfu l c o ffe e
r iv e r s c u lt u r e
schematically presented
the features of the country T h e o r ig i n o f T h e o r ig in o f
u n re se rv e d w ri e n
by which it deserves to be h o s p it a lit y T h e o r ig in o f la n g u a g e
a n c ie n t
called as the “Land of e m p ire s
Origin”.
Chart 1. Adopted from Tigray Region Tourism Bureau.

Despite the fact that Ethiopia is blessed with so many historical, cultural and natural
endowments, unfortunately it could not get the economic benefits it deserves from the sector.
Nevertheless, in recent years, due to the development of infrastructures like road and hotels and
the crucial role the government pursues in marketing and image creation through its embassies,
the gains from the sectors have shown significant growth despite the economic crisis in the
world. But still there is a long way ahead to exploit efficiently the benefits of tourism sector and
secure its right position in the economic sectors.
Similarly, Tigrai is rich with various antiquities and fascinating landscapes. The most
picturesque part of the region is endowed with worth visiting heritage sites, chains of mountains,
semi and entirely rock-hewn churches, monasteries, archeological findings, very impressive
religious and cultural festivities, etc. Bringing together all the endowments, Tigrai evidences a
dazzling history that goes back as far as the time of King Solomon and the Queen of Sheba. It is
a place of devout religionists. Yet, it evokes the memories of the unmatched bravery and
sacrifices paid to defend the country‟s freedom and independence. Truly, Tigrai is the Alpha and
Omega of Ethiopia‟s ancient and remarkable history.
Nevertheless, similar to the situation of the country, Tigrai too could not exploit the potential of
the tourism sector. Various reasons are explained in this regard where inability to provide quality
services and limitations in the availability of accommodations are among the factors. It is also
reasonable to claim that weak promotional work should be considered as one of the top
limitations that have constrained the opportunities to tap the potential of the sector. This is
therefore sufficient rationale for the initiation of the project. Having adequate understanding on
the existing opportunities of the sector and prevailing limitations, therefore, promoters of the
project have planned to establish a lodge in the Gheralta and surrounding areas. This is therefore
a feasibility study conducted on the establishment of lodge in the stated area.
2.2 Key Success and Risk Factors; Risk Mitigation and SWOT Analysis
On top of literature reviews related to the subject, exchange of ideas was made with experienced
persons in the process of undertaking the feasibility study. Based on the discussions made with
persons who have been practically involved in the provision of lodge services and knowledgeable
in the tourism sector development the following points are derived.
2.2.1. Key Success Factors
The following are taken as key success factors for the realization of objectives of the lodge that
importantly contribute to the development of the tourism sector.
 Ensuring that quality services that are expected from lodge are provided with especial
emphasis on the issues related to hospitability and cleanness of accommodations.
 Diversification of the services to be provided by the lodge by continuously assessing
interests of tourists.

 Establishment of linkages with domestic and international tourists and tourist agents to
sale the service provided by the lodge and its basic features of identification.
 Establishment of good relationship with the communities in the localities so as to win
their support in hospitalizing and safeguarding incoming tourists.
 Deployment of well oriented and skilled man power in all the affairs of tourism in
general and the respective specific services to be provided to tourist in particular.
 Incur costs on those activities that upgrade images of the lodge such as greening the
surrounding areas and others.
 Be well oriented and have good understanding periodically on prevailing governmental
policies so as to use the opportunities that can be created as the result and to make the
lodge function accordingly.
2.2.2. Risk Factors

 Situations that may make tourists feel sense of insecurity. The situations can be at
national, regional and locality level.
 In ability of the lodge to compete with firms that provide similar services in the items of
the market mix and other factors that have implications on the satisfaction of tourists.
 Limitations in knowledge and skills as well as commitment of the staff and leadership of
the firm to carry out their respective assignments in the provision of the services needed
by tourists.
2.2.3. Risk Mitigation Measures

The following measures have the potential to mitigate the risk factors.
 Establish good relationships with relevant stakeholders that include the security organs of
the government in general and the community in particular to ensure safety of tourists. In
collaboration with similar organizations pressurize the governmental bodies to ensure
security if the situations are beyond the capacity of the local levels.
 Enhance capacity to compete through assessing prevailing situations and interests of
tourists.
 Build knowledge and capacity of staff through continuous orientations, trainings of staff
on the requirements of tourism and their respective role in realizing objectives of the
firm. The leadership should practice strict supervisory role that at the same time helps to
give supports to the staff in carrying out their assignments.
 Design incentive systems to motivate and enhance commitment of staff.
2.2.4. SWOT Analysis

SWOT analysis is about exploring the internal situations explained in terms of strengths and
weakness and scanning the opportunities and threats considered as external factors of a certain
firm or organization, be it business entity or service provider. The first group is controllable to
the organization while the latter is beyond the control of the organization. With this perception
SWOT analysis is made on the proposed project as follows.
10 | P a g e Ato Teklu hagos

Table 1 SWOT Analysis

Strengths Weaknesses
 Most of the owners of the firm are organized as a Share  The number of membership being relatively high
Company residing abroad which gives good opportunity to creates difficulty to establish common
establish relationship with perspective tourists. From practical understanding on issues that need fast decision.
experience of others engaged in the sector is also learned that  Residence of most of the shareholders is abroad
the ability to create relationship with tourists plays important that may make decisions to be delayed on issues
role in the flow of tourists to lodges. that need immediate response.
 The number of the members is relatively high from whom  The big number of shareholders is obviously
some may have knowledge in the area of tourism development accompanied with diversified interests and
and its requirements on top of all being exposed to the different level of commitment. The difference in
international environment which per se is important input to the level of commitment and practical
the development of the lodge. participation often leads to dissatisfaction of
 Attributable to the relatively high number of membership those that show special effort that eventually
assumed to be associated with the members to have ability to affects progress of the firm.
raise financial requirements would enable to mobilize  Residence of the members being abroad has
adequate financial resources. limitations to create strong leadership at the
 The concern and commitment of the Share Company members Board of Directors level that makes frequent
to involve in the ongoing development process of the country follow up, supervision and meeting on the
in general and Tigrai in particular. activities and progresses of the firm.
Opportunities Threats
 Growing awareness at national, regional and local levels on  Ethiopia being reach with tourism products and as
the socio-economic importance of tourism development that good tourism destination is not well known by the
as the result causes efforts and attentions to increase for the international community to the extent it deserves.
promotion of the sector.  There are weaknesses or limitations in the
 Ethiopia and Tigrai region as well are endowed with diverse tourism infrastructure and service provision in the
tourism resources that include a number of World Heritage country and the regions as well.
Sites, cultural wealth, natural resources, unique cultural and  The share of the country from leisure visitors is
religious festivals, etc. that are good foundations of tourism limited and the earning it gets from each visitor is
assets on which to build the tourism sector. moderate.
 Faster economic growth with an important growth rate of the  Relatively weak or limited promotional initiatives
service sector, offering a good basis for the development of at all levels and lack of digital promotion.
the tourism business.  Marketing operations are mostly geared at
 The growing trend of the tourism sector realized in the past traditional segments, methods and channels.
years reflected in consistent flows of visitors, though  Weaknesses on travel trade awareness and
difference among seasons exists, and elongation of average knowledge.
length of stay has become encouraging for the government  Immature local tour operator channel.
and the private sector as well.  Continued poor internet connectivity and inability
 Existence of an expanding excellent air connectivity through to adapt to communication technologies.
the Ethiopian Air Lines - an organization that at the same time  Inability of the sector to build competitiveness in
is working on building images of the country and serving as the global market.
promotional organization through its well-known
achievements and global acceptances.
 The friendliness attitude of the Ethiopian people in general
and the Tigrai society in particular and the hospitality it
provides to tourists gives competitive advantage that at the
same time builds safety confidence of visitors.
 Telecom infrastructures are expanding that give the
opportunity for networking and provision of internet and
communication services at all levels.
 Increase of domestic visitors that are assumed to steadily be
enhanced attributable to the economic improvement and
creation of relatively large number of better income groups
with better purchasing power.

3 The project
3.1 PROJECT RATIONALE

The democracy, peace and development in Ethiopia are giving the untamed rich tourism
potential of Ethiopia‟s treasury in general and Tigray in particular. Tigray has reach history and
ruminants‟ of the ancient civilization of the Axumite kingdom. The many rock hewn churches
and beautiful landscapes are found in the region and most of them are like Axum Tsion,
mountains of Geralta, rock hewn churches of Slasse Debre Nazret, Abreha we Atsbaha, Wukro
cherkos, micheal emba mariam korkor, Mariam Wukro, Al-nejashi, Debre Nazret slasse,
Abayohani, Tsibet mountains, Michew- Italian battle, Hashenge lake, Hugumbirda Forest,
Grakahsu mountain and curves, the Tembien Awres, Atsbi Hura, Raya culture etc. are among the
others. The experience of civilized nations and those with a lion‟s share of tourism income
suggest that provision of tourist standard hotels services, among others is crucial. Therefore, in
developing nations like Ethiopia, where the tourism sector is not contributing as it should be, the
status of quality hotel service provision and coverage must be improved to a greater extent. It is
only when, we can make avail good standard hotels in places where foreigners and potential
local residents can get access to the tourist attraction area and Ethiopia can be benefited from the
sector. Given the favorable government policy good environment for investors who are willing
and able to get in hotel and tourism venture, this proposed project can be one of those hotels
intended who provides quality service.
The ever increasing number of tourists, town dwellers and economic growth of the residents, is
demanding modern Hotel, cultural amenities and entertainment. The promoter engages and
facilitates social interaction within community; to establish, new style of living, modern standard
recreational areas and entertainment service.
This project profile is therefore, prepared in the line with the government policy to encourage
private investors‟ base on the economic changes that is very attractive and inviting for both
national and foreign investors to participate in the countries development programs through free
competitive markets. The newly designed and under implementation of growth and
transformation plan (GTP II) gives a great focus to the development of this sector to support the
industrialization process. There is also a greater initiative that the government of Ethiopia

introduced and underway, Tourism Transformation Council, that intended to transform the
tourism sector so as to benefit the country.
3.2 PROJECT DESCRIPITION
Enderta (Tigrinya: እንደርታ) is one of the Districts of Ethiopia or woredas in the Tigray Region
of Ethiopia. It was named for the former Enderta province, which was later merged into Tigray
Province. Located in the Southeastern Zone at the eastern edge of the Ethiopian highlands
Enderta is bordered on the south by Hintalo Wajirat, on the west by Samre, on the northwest by
the Degua Tembien, on the north by the Eastern Zone, and on the east by the Afar Region; the
city and special zone of Mek'ele is an enclave within Enderta. Towns in Enderta include
Aynalem and Qwiha;
Based on the 2007 national census conducted by the Central Statistical Agency of Ethiopia
(CSA), this woreda has a total population of 174,297, an increase of 8.02% over the 1994 census.
With an area of 3,175.31 square kilometers, Enderta has a population density of 36.00, which is
less than the Zone average of 53.91 persons per square kilometer.

3.3 Project Objectives

3.3.1 General Objectives
The overall objective of the lodge is to provide well diversified and quality lodge services that
satisfy its customers and would contribute importantly to tourist development of the Tigrai
Region in particular and Ethiopia in general. Meanwhile it generates sufficient income that
ensures sustainable operation of the lodge and creates income to the promoters.
3.3.2 Specific objectives

The overall objective is assumed to be implemented through realization of the following specific
objectives.
• To provide modern and relatively quality and diversified lodge services at reasonable price
to local and foreign tourists and residents.
• To reduce the prevailing limitations in the tourism sector related to the gaps in
accommodation in the region.
• To create permanent employment opportunities particularly for the local community.
• To generate revenue for the local government through profit tax, employment tax, etc.
• To generate additional income in the region through direct and indirect linkages that would
be created among the different sectors and influences of the tourism development as well as
creation of foreign currency.
• To enhance and maintain safety and security of incoming visitors through establishing
strong relationships with the local communities that enhances image of the country and
region.
• To intervene in natural resource development that at the same time serve as exemplary
for the local community.
• To generate foreign currency.
• Generally it will have a forward linkage on the development of Chalekot and surrounding
area.
3.4 IMPLEMENTATION STRATEGIES

To achieve the above immediate objectives, the promoter has decided to implement
following strategies depending .
 The service to be rendered is based on the technical recommendation in order to

provide quality services with minimum costs to maximize profit through customer
satisfaction.

 Follow closely the actual and potential customers behavior reaction to the service
delivery quality and respond accordingly
 Conduct market research to look for other opportunity for expansion, integration,
competition and specialization.
 Using all marketing channels step-by–step focusing in the short run marketing
contractual agreements with sport clubs, tour operators and the like.
3.5 Conceptualization of Tourism

Tourism is one of the fields of social sciences that has got multiple of definitions and this is related
with its dynamic nature. The first definition was given in 1910 by Herman Van Scheullard, an
Austrian economist. According to him, “The sum total of operation mainly of economic nature which
is directly related to entry, stay and movement of foreigner inside or outside a certain city or region is
tourism”, (Basic concepts of tourism, htm). Mathieson and Wall (1982) on their part have defined
tourism as “The temporary movement of people to destinations outside their normal places of work
and residence, the activities undertaken during their stay in those destinations, and the facilities
created to cater to their needs.” According to this definition tourism is a movement in and outside a
country of origin that involves activities by the tourist and use of facilities. Another definition
broadens the second definition in a certain way and it states that “Tourism is a collection of activities,
services and industries that delivers a travel experience, including transportation, accommodations,
eating and drinking establishments, retail shops, entertainment businesses activity facilities and other
hospitality services provided for individuals or groups traveling away from home.”
These kinds of definitions abound and there seems no end and no consensus has been reached.
Understanding the reality, therefore, the international body in charge of tourism, the United Nations
World Tourism Organization (UNWTO) had to come up with a definition that could serve as an
official one. So after serious discussions that took almost two years, 2005-07, it came up with the
following definition: "Tourism comprises the activities of persons traveling to and staying in places
outside their usual environment for not more than one consecutive year for leisure, business, and
other purposes." This definition includes the word „staying‟ and suggests that tourists stay at least
one night. In similar ways the international organization has also defined tourists as persons who are
"travelling to and staying in places outside their usual environment for not more than one consecutive
year for leisure, business and other purposes not related to the exercise of an activity remunerated
from within the place visited".

Both definitions of the UNWTO contain three important concepts that characterize tourism:
displacement, purpose for travel and duration of stay. From the outset tourism involves displacement
from the usual environment be it within the same country or outside. The purpose of displacement
may include most of the usual reasons for travel such as for observing nature, for adventure, for
pilgrimage, for business, for medical/health reasons, for leisure, etc. but the travel must not involve
any remuneration from the place visited. The displacement is time bounded, a minimum of twenty-
four hours and a maximum of one year. Therefore, a displaced person seeks substitute facilities to
successfully accomplish his/her purpose and in general terms these can be categorized as
accommodation, food and beverage services, recreation and entertainment facilities and
transportation.
The hotel industry has long history that goes back to the BC era. As a record accounts “In the
beginning, there was a fire at the hearth, a warm meal and a roof over one„s head. Thus begins the
history of the hotel industry. People have been providing hospitality for weary travelers since our
ancestors inhabited the earth about 100,000 to 200,000 years ago.”
In medieval times, it was mostly cloisters and abbeys that provided travelers with accommodation. It
was also during this period that more and more inns and guesthouses were opened on popular trade
routes to provide food and lodging for travelling merchants and their horses. The hotel industry,
which always strove to meet a changing society‟s needs and demands, has meanwhile developed into
a highly complex branch of the economy.
Today, the hotel industry includes all categories of establishments from inexpensive guesthouses to
luxurious five star hotels. Hotel management strategies have had to adapt to these developments.
Technological, economic and social developments in the 19th and particularly the 20th century led to
huge changes in the hotel industry. Travelling was no longer just for the privileged upper classes.
The invention of trains and automobiles as well as social benefits such as holidays and reduced
working hours made it possible for the average person to indulge in travel.
The second half of the 20th century saw a huge economic boom in industrial nations which led to
increased travel amongst the larger populace. It wasn‟t just newly acquired wealth that promoted
more travel; the population explosion, urbanization and demographic developments all contributed to
an increased desire to travel and the growth of the tourism and hotel industry. As a consequence of
this increased demand, many more guesthouses, hostels, motels or international hotel chains that
catered to various target groups and in different price categories opened all over the world. Another

development in the hospitality industry was the categorization of different types of hotels; to name
just a few, there are now spa and wellness hotels, sports hotels, seminar hotels, resorts, casino hotel
and motels. The expansion of international air travel gave the hotel and tourism industry a further
boost. The cost of flight tickets has been on the decrease since the 1970s and, since the age of the so-
called “cheap airlines”, travel all over the world has become more affordable.
Improvement in life and technological advancement not only made travel easier and cheaper but also
stimulated demand for unusual types of accommodations. This is not an exceptional case; even the
demand for tourism destinations has changed through time. The desire to visit exotic nature and
culture has been substituted with the demand for relaxation in an open sea, with vast beach area of
sand and good sunshine/heat. This was the cause for the development of beach resorts of many kinds.
The current trend is towards unspoiled culture and eco-friendly tourism. Thus this has necessitated
the establishment of cultural lodges and eco-lodges. Such lodges are supposed to manifest the culture
and tradition of the immediate and the neighboring communities, be friendly to nature and nature
conscious, and be community friendly and benefiting communities.
Lodges of this kind are advised to follow the following principles in their investment venture.
 Provide comfortable rooms and common areas that reflect the designs and heritage of the
local culture.
 Offer a natural setting that has been carefully preserved and contains local plant life.
 Use locally harvested and sustainable and/or recyclable building materials.
 Purchase food from local farmers
 Use environmentally-friendly energy, water and waste systems
 Offer opportunities for interaction with local owners, managers, staff and guides
Currently the demand for such lodges is increasing and in Ethiopia there are about twenty-two lodges
that are scattered across the country where visitors could enjoy culture, traditions and simple but
basic way of life. In Tigrai there are some five lodges that are fully functional and two of them are in
the project area. The demand for lodges is still growing and according to the information obtained
from pertinent government bodies in Enderta, this year a number of investors have shown interest in
lodge construction.
3.6 Importance of Tourism Development

Importance of tourism arises from the numerous benefits and advantages it brings to any host
country. But real importance of tourism comes from its nature and how it is defined and structured.
Tourism contributes towards complete growth and development of a country: first, by bringing
numerous economic value and benefits; and, second, by helping in building a country's brand value,

image and identity. These being the general notion some specific advantages that signify the
importance of tourism are also outlined by scholars in the field. These are: employment, increased
spending in the local economy, diversification, infrastructure, social advantages, environmental
advantages and opportunities. Brief explanation is due for each of them.
Employment: One of the advantages of tourism that can be identified easily is the jobs tourism
brings. This ranges from directly influenced positions like tour guides, hotel staff, coach services,
and restaurants. What‟s great about all these businesses is that they not only hire people and pay
wages to their staff, but source goods and products locally, giving a boost to local industry. Tourism
also benefits other industries like retail and food production although it mostly occurs behind the
scenes.
Increased spending the local economy: This comes twofold. Firstly, a tourist spends money directly
in to the economy. Services required by tourists like food, clothing, hairdressing, medication, and
transportation, amusements are some of those a tourist purchases. Secondly, the money earned by
both businesses and individuals is often re-injected into the local economy. So, because of tourism
money is earned and spent in the local economy. This is why tourism revenues are often referred to
as having a multiplier effect, because a large percentage of every tourist dollar earned is reintroduced
back into the economy, again and again. Ultimately, the more tourist dollars coming in, the larger the
economic benefit for everyone.
Diversification: Tourism allows the diversification of income by creating more local businesses.
Additional income coming in can help support traditional industries. This is especially important for
communities that rely on a single industry, or where there is a concentration of industry that is
environmentally damaging such as mining or manufacturing. It‟s also important for rural
communities, where there is significant risk based on the farming conditions and global commodity
prices. Tourism allows communities to diversify their sources of income, and rely less on a single
industry.
Infrastructure: economic diversification and more income of society obviously bring in additional
revenue for a government. Tourism requires the expansion of basic infrastructures and government
needs money to do so. So the development of tourism induced income generates more revenue for a
government in the form of tax and this allows for public projects to be launched or developed. This
means that infrastructure; public spaces and the likes could be improved. Better facilities on their

turn bring in more visitors. Such a cycle could ultimately result in the expansion and improvement of
social infrastructures like schools and hospitals.
Social advantages: Tourism through its income generating power could inspire local communities to
be proud of their legacies. It also allows them to look back at their history and cultural heritage and
develop their own community identity. This helps the local residents to maintain their traditions and
culture, while also showcasing it for all the visitors. This advantage of tourism is what has saved
many local heritage sites from destruction, in addition to giving tourists a wonderful insight into the
local ways of life. Generally, it could be said that tourism helps in preserving the history of a region
that may be at risk of being lost.
Environmental Advantages: Current global trend on environment is encouraging ecotourism. This in

turn has induced tour operators with a motto of protecting the global environment to get good market.
The combined interest and efforts of both tourists and operators has started to bring the desired
effect. This has its influence on host communities in creating awareness and practical exercise.
Opportunities: Beyond the advantages explained above, tourism can also create opportunities. For
instance, bringing tourists into a community gives it new life, and creates opportunities for
entrepreneurs to establish new services and products, or facilities that would not be sustainable based
on the local population of residents alone. Tourists are all potential customers, and with the right
approach can be targeted in a business strategy that allows for fantastic success.
Tourism has also its negative side effects and unless it is approached with care, it could be disastrous.
Some of the negative consequences are it could damage or deplete an environment and spoil culture.
The jobs created through tourism are usually affected by seasonal fluctuations and unlike other
economies tourism is the one that is highly and immediately affected by the absence of peace. So it is
always advised that countries should not rely on tourism as sole economic source. Besides, when
tourism is owned by international firms, it may cause leakage in a national economy and may also
outshine and kill domestic competitors.
3.7 Factors that can induce or Impede Tourism

Tourism has been consistently shown to have a positive link to economic and social growth for
communities. In spite of this, there are two opposing schools of thought about how this growth
occurs. These two views are known as the Tourism Led Economic Growth or TLEG approach,
and the Economic Development Led Tourism Growth or EDTG approach. The factors that could

induce or impede tourism are referred to as enablers and barriers of tourism. Their effective
implementation induces tourism but failure to do so impedes tourism. These are common factors
for every country that endeavors to develop tourism. Such factors are:
 Political will and commitment to develop tourism

 Peace and stability of the region and the specific country
 Economic performance
 Technology/ICT
 Policies and strategies
 Learning and growth
 Public private partnership
There are also institutions that divide the enablers and barriers into factors of travel
competitiveness and external change drivers. Factors of travel competitiveness include the
following:
 Affinity to travel and tourism  Environmental sustainability
 Prioritization of travel and tourism  Safety and security
 ICT infrastructure  Tourism infrastructure
 Health and hygiene  Policy rules and regulations
 Human resource development  Natural and cultural resources
 Air transport infrastructure  Price competitiveness in travel and
 Ground transport infrastructure tourism

The external change drivers are enumerated as follows:
 Disruptive events  Political instability
 Regional demand shits  Aging population
 Economic downturn  Digitization/mobile devices
 Natural disasters  Inflation/exchange rates
 Terrorism
In any case any tourism development venture should understand and strategize for
competitiveness and for mitigating measures.
3.8 National and Regional Environments Related to Tourism Development

Ethiopia‟s stride in the sector of tourism, in terms of arrivals and receipt, in the last few years has
been remarkable. Peace and security of the country was able to maintain, the remarkable two-
digit economic growth for successive years, and the diplomatic recognition it gained, etc. were
some of the drivers of the fast growth of tourism in Ethiopia. Cognizant of the fact that tourism‟s
contribution could be big provided sufficient attention is given and the playground is laid down,
the Ethiopian Government had introduced policies and strategies to enhance its progress. The

Ethiopian Tourism policy, the two successive Growth and Transformation five year plans of the
government and Ethiopia‟s sustainable Master Plan are worth mentioning.
The Ethiopian Tourism Policy, adapted in 2009, has stipulated a national vision that states “To
develop tourism in a responsible and sustainable way, enabling it to play a leading role in the
economic development process of the country by executing its activities on a community based
principle.” This has clearly indicated that tourism in Ethiopia would be developed in a
responsible manner in order to play its crucial role in the economic development. The policy also
contains objectives that clearly state how the sector will be led and what it is intended to achieve.
The stated objectives are:
 To develop the country‟s comparative advantage and enable the industry to compete in
international tourist markets.
 To develop a tourism industry that can play a major role in generating and retaining
international exchange.
 To create increased employment opportunities for communities around the sites of
attractions and distribute tourism income to improve living standards of the people.
 To build a tourism industry that can improve the image of the country and advance the
growth of the sector in a sustainable manner.
 Promoting the country‟s tourist attractions and encourage expansion of local tourism.
 Making the sector competitive in the world and Africa in its best destination for tourists
and source of income for host country in direct and indirect economic benefit will be ensured.
 Bringing both culture and tourism to development so that the industry would contribute
to the poverty reduction strategic plan and the Millennium Development Goals (MDG).
The Growth and Transformation Plans, broadly known as GTP1 and GTP2, have given major
consideration for the development of tourism. GTP2 especially has stipulated clear strategic
directions, objectives and targets for tourism development. The plan has evaluative paragraph of
GTP1 which states “During GTP1 period, efforts have been made to realize goals set so as to
develop the tourism sector. To this end, national tourism transformation council, tourism board
and tourism organization have been established and have become functional. Marketing and
promotional activities have been widely carried out to enable both domestic and foreign tourists
visit the country‟s tourist attraction areas. In order to improve service delivery related to tourism,

supervision and certification activities have been undertaken as per the plan and this has helped
improve service provision. Criteria have been developed to establish rankings for hotels across
the country and accordingly 206 hotels have been graded in Addis Ababa and Oromia Regional
State. It was planned to increase the number of tourists to 1 million and existing data shows that
780,000 tourists have visited the country. The tourism sector has contributed to foreign currency
generation and employment creation.”
The Strategic direction for culture tourism reads “During the plan period, the strategic directions
of the culture and tourism development sector are to enable citizens benefit from the sector
through conserving and developing cultural and historical heritages and expand cultural and
tourism services and products. In this regard, expanding employment opportunities for women
and youth, equitable protection and development of cultural diversities and promoting their
values, using research outputs to strengthen the capacity of the sector by establishing strong and
reliable information system and undertaking image building and promotion activities to enhance
the sector‟s contribution to foreign exchange earnings as well as increase the share of the sector
in the overall economy to 5% of GDP will be another strategic direction to be pursued during the
plan period.”
The objectives of the plan are also outlined clearly. “The main objective of culture and tourism
sector is to enhance the contribution of the sector to overall sustainable socio-economic
development of the country by creating coordinated and integrated system and enhancing
community participation. Accordingly, the main objectives of the culture and tourism sector
during the second Growth and Transformation Plan period are to improve the utilization of
information resources, enhance the development of cultural industry and market networks,
increase the conservation and development of cultural heritage, improve the market system of
tourism sector and increase the variety and number of domestic tourism service providers.”
Based on the above strategic directions and objectives the plan sets the following targets:
 To improve tourist destination sites, 33 existing and 111 new tourist attraction sites will
be developed in line with international tourism standards and 10 new tourism investment sectors;
 With regard to developing the market system of the tourism sector, implementing the
marketing and branding strategy, participating in 60 international tourism trade and road
shows, preparing 58 introduction trips, organizing 272 national tourism trade shows,

increasing foreign exchange revenue from the sector by 10 percent, increasing the
number of foreign tourists to 2.02 million and domestic tourists to 15 million, increasing
revenue from the tourism sector to US $6 billion and increasing the share of the tourism
sector to the overall economy (GDP) to 5%;
 In order to produce capable human resources in culture and tourism sector, working in
collaboration with higher education institutions, TVET colleges, research and
development institutions and professional associations to develop integrated training
programs and ensure the system of evaluating competence and ensuring manpower
development by establishing one model hotel which can be used as a teaching center will
be undertaken.
On the other hand, the Sustainable Tourism Master Plan of Ethiopia (2015-25) has the vision of
making Ethiopia one of the top five tourist destinations in Africa by 2025. Investment is also
taken as one of the pillars of the strategy and towards this end the following will be given due
attention: enhance the capacity of the existing tourist services and facilities, create conducive
environment to encourage investments in the tourism sector and promote investment
opportunities for tourism services and facilities. The document has also the following
quantitative targets. International arrival is forecasted to reach 2.57 million by 2020 and 4.95
million by 2025. Similarly receipt from international tourism is forecasted to reach 14 billion
ETB by 2020 and 18 billion by 2025. Direct contribution to GDP from tourism is estimated to be
181 million ETB in 2020 and 325 million ETB by 2025. Direct employment is forecasted at 2.5
million for 2020 and 4.8 million for 2025.
All the above documents have clearly shown that the Ethiopian Government is keen to develop
tourism in the coming few years. This is an encouraging prospect for any hotel or lodge
projection.

4 TECHNICAL ANALYISIS
4.1 PROJECT AREA

The Cultural Lodge will be built in a total area of 4,000m2 of land. All details about
structural drawings and other related civil works are found in the bill of quantity
proposed by professional engineer.
 Main buildings including 10 Bed rooms =1000m2
 Two restaurants =800m2
 Conference (multi porpoise) Hall =400m2
 Outdoor recreation area and concert area =1000m2
 Green area (Forest) =800m2
4.2 SITE LOCATION

Debre Nazret is a village in the Tigray Region, of Ethiopia. Located in the Enderta woreda, 20 kilometers
west of Mekelle, the village has an approximate elevation of 2100 meters above sea level.

5. ECONOMIC OVERVIEW
5.1. Introduction
The market potential of the lodging properties are influenced by National, Provincial and local
economic conditions. Accordingly, the analysis has included a review of recent economic
performance in Ethiopia, for the local area specifically, in order to assess potential implications
for the accommodation market and the subject Cultural Lodge.
5.2. MARKET ANALYSIS;

The proposed Cultural lodge is to be located in a very astonishing view and would compete
within three competitive accommodation markets; the local Hotels accommodation market;
the regional accommodation market, and on a national scale accommodation market, which
includes a mix of hotels in various locations across the province.
5.2.1. Local Competitive Accommodation Market
The local Lodging accommodation market is comprised of normal to standard lodges in the
region and the surrounding. the greater part of the existing accommodation supply in Area is
considered to be tired and does not satisfy the needs of transient guests, especially for corporate
demand and meeting/conference groups or sports teams.
5.2.2. Regional Competitive Accommodation Market
The proposed subject lodge development would compete regionally with all Hotels and
lodges in all parts of Tigray. This combined regional market is considered to be the primary
competitive market for the proposed Cultural lodge.
The economic vitality of the market area and neighborhood surrounding the subject site is an
important consideration in forecasting lodging demand and future income potential. Economic
and demographic trends that reflect the amount of visitation provide a basis from which to
project lodging demand. The market area is determined the local market will undergo economic
growth and stabilize.
The demand for the recreational and entertainment service in modern Accommodation that
includes Hotels, Motels, Resorts and Standard & Cultural lodges are an aggregate demand of
the target, group of the Regional population, foreigners who visit the region, businessmen

and other tourists. As the size of the city population raises from time to time. So does
the demand for recreational amenities and entertainments will increase. this promotes the
investor to build and established modern with its full facilities so as satisfy the demand.
5.3. MARKETING STRATEGY

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

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

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

 Adjusting competitive price and quality of service to generate more income on

sustainable bases .
 Making contractual agreements with big potential customers such as training centers,
military institutions , university, college and others
 Providing diversified hotel service with full accommodation of food and beverage items
5.4. PROMOTION MECHANISUM

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

The general assessment conducted in the region shows that exists no more sufficient hotels
which satisfy the need of customers in all aspects of diversified services especially this
one is near to the rock hewn churchs and rocky mountains of the wereda. During the
assessment, many travelers Using the bus station, university lecturers and students,
merchants, tourists and couple youths were approached if their demand for hotel service
is satisfied or not but most of them responded that the major problem is not only the
availability of service but also they suffered with poor quality service and higher price
rate. Therefore; this phenomenon assures that the promoter is quite more reliable as there
is no exists amount of standardized Cultural lodge that render satisfactory services in the
naturally gifted area.
5.6. Demand Side Indicators

Arrivals
Literatures compiled by the UNWTO indicate that tourism, in its modern form, was started in the
1950s. Following this development, the world tourism body started to collect international data,
where available, in the 1960s. Gathering data, though limited in scope, enabled the organization
to start analyzing aspects like tourist flow, origin of tourists, tourist expenditure, favored
destinations, travel period and the likes. Not only this, the availability of consecutive data has
also made forecasting and projecting possible.

Tourist arrivals
Chart 2 Actual and forecast international tourist arrivals from 1950 to 2020 (data source: WTO, 2003b, WTO, 2003a).
Over the years since the 1950s tourist arrival has shown remarkable growth and even in the event
of economic decline or crisis, the growth continued unabated. In the 1960s arrivals were only in
some millions and the countries benefiting out of it were very few. However, some fifty years
later, the number of arrivals reached billions, making tourism an economy to be vied for.
According to the projection of UNWTO, in 2020 the number of arrivals would reach about 1.6
billion. When the projection was made official many scholars and economists contested it as
ambitious. However, the progress registered ever since the projection has developed optimism.
The international arrival registered in 2018, which is 1.4 billion, has convinced pertinent bodies
that the projection could be realized.
Furthermore, despite occasional shocks, international tourism has continued to experience

expansion and diversification that has seen the industry becoming one of the largest and fastest-
growing economic sectors in the world. According to the UNWTO, international tourist arrivals
have been rising steadily from 25 million in 1950 to 278 million in 1980, 528 million in 1995
and 1,087 million in 2013. Further, as per UNWTO‟s long term forecast towards 2030, an
increase of 3.3% a year from 2010 to 2030 to reach 1.8 billion by 2030 is envisaged.
Actual reports indicate that the number of countries benefitting out of this tourism growth are the
economically developed countries of Europe, the USA and Asia. Though the share of Africa is
still negligible, since the beginning of the new millennium remarkable progress has been
registered. Tourism arrival to Africa has been growing by 5-8% annually since then. North
African countries have the lion‟s share followed by South Africa. The report of UNWTO for
2018 is as follows:
 International tourist arrivals in Europe reached 713 million in 2018, a notable 6%

increase over an exceptionally strong 2017.
 Asia and the Pacific (+6%) recorded 343 million international tourist arrivals in 2018.

 The Americas (+3%) welcomed 217 million international arrivals in 2018, with mixed
results across destinations.
 Data from Africa points to a 7% increase in 2018 (North Africa at +10% and Sub-
Saharan +6%), reaching an estimated 67 million arrivals.
 The Middle East (+10%) showed solid results last year consolidating its 2017 recovery,
with international tourist arrivals reaching 64 million.
Receipts
According to UNWTO international tourism receipts
(ITRs) include all tourism receipts resulting from
expenditure made by international visitors on lodging,
food and drinks, fuel, transport in the country,
entertainment, shopping, etc. It includes the receipts
generated by overnight as well as by same-day trips.
But it excludes receipts related to international transport

contracted by residents of other countries (for instance ticket receipts from foreigners travelling
with a national company). Corresponding with arrivals, tourism receipt was also progressing in
the past years.
B. Job creation
In terms of job creation tourism plays vital role. According to the report of the World Travel and
Tourism Council (WTTC) tourism is a driver of job growth and economic prosperity, accounting
for 1 in 10 jobs worldwide and delivering 1 in 5 of all new jobs created in 2017. By its very
nature Travel and Tourism is labor intensive. Many of the jobs it offers are all about working
with people; they‟re often low skilled so they are ideal for less developed countries where lack of
formal education holds many people back. Table 3 Tourism created jobs (in 000)
In both developed and less developed economies, Travel and Year Total Male Female
Tourism typically employs a far higher proportion of women 2008 540,300 244,000 296,300
2009 543,900 247,300 296,600
than other sectors. Women make up over 60% of the labor 2010 550,600 256,100 294,500
force in the hotel sector. Not only are more women employed 2011 548,000 251,100 296,900
in tourism, they have more opportunity for advancement. 2012 553,500 252,900 300,600
2013 553,400 254,600 298,700
Therefore, successful tourism would enhance the 2014 574,100 264,400 309,700
achievement of the Millennium Development Goals (MDG). 2015 580,700 268, 800 311,900
According to OCED, tourism created jobs globally is shown 2016 598,200 275, 900 322,200
in table 3.
5.6.1. National and Regional Performance
5.6.1.1. Demand Side

Arrivals
Tourism as an economic activity was started during the period of Emperor Haileselassie in the
1960s. However, because of the regime change in 1974 and the ensuing political and ideological
shift, actual tourism business stagnated for about 17 years. Starting from the second half of the
1990s it started to revive, mature and progress steadily. The organization that leads the sector has

been promoted to a better portfolio, tourism policy was drafted and ratified, successive strategies
were drafted and implemented and GTP 1and 2 have given considerable attention to the sector.
Consequently, striking progress has been registered, especially in the last ten years, and for the
first time in its history Ethiopia was able to accommodate nearly a million tourists.
Table 4 International Tourist Arrivals in Ethiopia and Tigrai Region

Year National Growth Tigrai Region Growth Share of
Visitors (%) Visitors (%) Tigrai (%)
2008/09 356989 10.57 81,374.00 22.79
2009/10 460639 29.03 88,678.00 8.98 19.25
2010/11 508656 10.42 99,501.00 12.20 19.56
2011/12 566227 11.32 113,303.00 13.87 20.01
2012/13 633245 11.84 120,317.00 6.19 19.00
2013/14 723007 14.17 137,370.00 14.17 19.00
2014/15 792877 9.66 150,642.00 9.66 19.00
2015/16 870,597 9.80 172,924.00 14.79 19.86
2016/17 933,344 7.21 168,511.00 (2.55) 18.05
2017/18 954,552 2.27 177,635.00 5.41 18.61
Total 217.18 82.73
Annual Average Growth Rate 10.34 8.27
Source: Culture and Tourism Bureau of Tigrai Region; Averages own manipulation
On the other hand, Ethiopia‟s share from the global and regional market is still negligible. The
country‟s performance becomes even worse when it is compared with its tourism potential.
Tigrai cannot be an exception in this regard. That is why the Ministry of Culture and Tourism
has planned to accelerate the pace with a clear target of ranking Ethiopia among the top five
destinations in Africa by 2025.
Receipts
The importance of tourism in terms of its economic significance is expressed in the receipts
gained out of it. It is a source of foreign currency earning and it is one of the best channels for
income distribution. That is why competition for a better growth has become so intense.
Table 5 Receipts from Tourist Arrivals at National and Tigrai Region Levels
National Tigrai Region
Year Revenue in Revenue Revenue in
Growth Revenue in Birr Growth Growth Growth
USD in USD Birr
2008/09 198719273 2148755774 18716020 202376726.9
2009/10 298198020 50.06 3960594658 84.32 20395940 8.98 270893988.5 33.86
2010/11 382099127 28.14 5614124175 41.75 22885230 12.20 336249192.7 24.13
2011/12 810276323 112.06 13830146655 146.35 26059690 13.87 444798057.5 32.28
2012/13 1854431122 128.86 35794674574 158.82 27672910 6.19 534149150.2 20.09
2013/14 2706936343 45.97 54138726865 51.25 31595100 14.17 631902000.1 18.30
2014/15 2968531488 9.66 59370629760 9.66 34647660 9.66 692953200 9.66
2015/16 3259515168 9.80 91266424704 53.72 39772520 14.79 1113630560 60.71
2016/17 3494439936 7.21 97844318208 7.21 38757530 -2.55 1085210840 -2.55
2017/18 3573842688 2.27 100,067,595,264 2.27 40856050 5.41 1143969400 5.41

Contribution to GDP
According to the Ministry of Culture and Tourism, the contribution of the sector to GDP has
never been recognized for long. However, starting from the period of GTP 1 its contribution
started to be considered and since then increase from 2% to 5% has been registered. The
Ministry of Culture and tourism, in its Sustainable Tourism Master Plan, has stated that “…
economic prominence of the industry is illustrated by its direct contribution to the country‟s GDP
which in 2013 was 4.2%, translating to ETB 35,766.6 million. This is forecasted to rise by 4.5%
to ETB 37,373.6 million in 2014 (WTTC, 2014). This primarily reflects the economic activity
generated by industries such as hotels, travel agents, airlines and other passenger transportation
services (excluding commuter services). But it also includes, for example, the activities of the
restaurant and leisure industries directly supported by tourists. The direct contribution of travel
and tourism (T&T) to GDP is expected to grow by 4.8% translating to ETB 59, 495.2 million
(i.e. 3.6% of GDP) by 2024 (WTTC, 2014).” Data for Tigrai is not available.
Length of Stay
Length of stay refers to the number of days that a tourist stays at a destination. This is mostly
calculated on average basis. Arrival by itself has a good meaning to receipts. But when arrival is
accompanied by length of stay, receipts give more meaning. In short the more the length of stay
is the better receipts would be. According to the information obtained from Tigrai Culture and
Tourism Bureau, the average length of stay in Tigrai is about six days and by the end of the
GTP2 it has projected to reaching eight days.
5.6.1.2. Supply Side Indicators

On the supply side, one of the common parameters to measure the economic importance of
tourism is to understand the expansion of accommodation and catering services. These are the
major service facilities where receipts get meaning. Ethiopia‟s major weakness, to which Tigrai
is of no exception, had been substandard accommodation and catering. However, marked
improvement has been registered in the last decade because of the huge private investments in
hotels and lodges. Currently, it is not uncommon to talk of star designated hotels in major urban
centers of Ethiopia and standard lodges in culturally and naturally important sites of the country.

Table 6 List of Star Hotels and Lodges in Ethiopia (2018)

Hotels Lodges
No. of No. of No. of No. of No. of No. of
Regions Hotels Rooms Beds Lodges Rooms Beds
Addis
Ababa 79 5343 6519
Oromia 30 1321 1558 9 181 450
Tigrai 11 760 914 1 10 20
Amhara 19 1225 1405 3 69 117
SNNPR 20 932 1011 9 145 256
Dire Dawa 5 275 292
Total 164 9856 11699 22 405 843
Source: MoCT, Tourism Statistical Bulletin, 2012-2018, No. 11.
5.7. Governmental Supports Provided to the Sector

Hotel business investment is said to be a long term investment return venture. Unless an investor
has other businesses to support hotel investment, then it could be difficult to handle. This is why
government support through incentive mechanisms and other outlets is highly essential. The
government of Ethiopia has been taking measures to encourage hotel investment. Incentive types
and procedures were introduced years back and regular improvements, based on objective
reality, have also been witnessed. The Ethiopian investment guide, 2017, states that “Investment
incentives are mainly provided under the regulation for Investment Incentives and Investment
Areas Reserved for Domestic Investors No. 270/2012, as amended by Council of Ministers
Regulation No. 312/2014.”
Accordingly, the following incentives are provided for illegible investors in the sector.
Investments in tourism can benefit from the following incentives granted by the Federal
Government:
 Exemption of Customs duty for capital goods and construction materials
 Exemption of Custom duties for motor vehicles
 Remittance of profit, dividends, principals and interest payments on external loans
 Access to land at competitive price (land is public in Ethiopia and the government offers
long term leases).
Investments in eligible star rated hotels and accommodation are also allowed to import duty free:
 One pickup vehicle for one or two star properties and two pickup vehicles for three and
above star hotels;
 In addition, hotel businesses already operational with 25-50 permanent employees can
import free of duty 2 mini buses or 1 bus, those with 50 or more permanent employees
can import duty free 3 minibuses or 2 buses.
The Sustainable Tourism Master Plan of MOCT has clearly stipulated what ought to be done to
encourage investment. The document states “To ensure Ethiopia‟s tourism investment climate
becomes more positive and transparent, and be seen as such by the investor market, the

following strategies will be implemented: a) The creation of official procedures that will
encourage investment in all aspects of infrastructure and remove the need for corruption as a
means of getting things done. The procedures created by the Ethiopia Investment Commission
will need to be elaborated to feature specific procedures for the tourism sector. b) Improvement
of the investment environment on a continuous basis, for example, by alleviating administrative
regulations and providing efficient support for information distribution. c) Making incentives
more flexible, through consultation or negotiation if necessary, with individual foreign investors
rather than by the uniform criterion that may not recognize specific needs and local conditions.
d) The provision of strong protection for foreign investment, backed by the force of law. e)
Making revolving lines of credit available to the private sector for tourism projects that support
strategic societal objectives.”
It also envisages of developing investment zones to where investment incentives and clearly
understood procedures are in place for tourism development. This will be done in line with the
proposals on the establishment of flagship projects. Further it states that “In addition to the
already existing incentives targeting the tourism sector, further possible incentives will be
pursued including: a) Financial incentives, through which the government will provide grants or
loans from its own resources or through a government financial institution. This is in line with
the proposed Investment Fund targeting the domestic investor. b) Fiscal incentives, through
which the government will provide tax holidays and deductions, customs duty exemptions,
concessions or capital expenditure allowances.”
5.8. Domestic Demand and Supply Analysis
5.8.1. Demand Situation Analysis

An attempt is exerted to look in to the demand situation from the point of those important
features of the tourism domestic demand situation. Briefs supported with pertinent data are
presented breaking the demand in to the flow of tourists in general, purpose of visitors, source
market of visitors and the future perspectives of the demand situation.
Flow of Tourists
Data of about 53 years is collected on the flow of tourist to Ethiopia (Table 27 - annexed).
Similar to the tourist flow growth rate of global record, growing trend has been taking place in
Ethiopia too but at a higher average rate. The data of the long period reveals an annual average
growth rate of about 8.66%. Taking the number of flow of international visitors of the last 21
years also show average growth of about 10.34% per annum. On the other hand, records of the
last four years (2014/15-2017/18) show a steadily declining trend. This might be attributed to the
unrest that has been prevailing in the past latest years in the country. The growth rate has
difference of significance than what has been internationally taking place. Nevertheless, it
should be underscored that the flow of tourists is very insignificant comparing to the experiences
of the glob and much lesser than even that of many African countries. It is also incomparable to
the potential it should have been exploited considering its resource endowments related to that.
In line with this, documents state that compared with other Sub-Saharan African countries, total
visitation to Ethiopia (demand) is weak: Ethiopia ranked 20th (2004 data) in terms of visitor
arrivals.

The situation in Tigrai Region is no better than the national situation. Average annual growth
rate of the past 10 years is about 8.27% which is a bit lesser that the national average. Share of
Tigrai region from the national visitors does not show significant differentiation which is found
within the range of 19-23%. This is comparable with information documented by the Ministry of
Culture and tourism in Tourism Marketing Strategy for Ethiopia (2016-2025) which indicates
share of Tigrai Region to be 24%. Both are more or less in line with another source that states as
the gateway of all international inbound, outbound and transit tourists/ passengers, Tigrai has
been taking the good share in the county‟s tourist arrivals hosting an estimated 22-25% of the
total international tourist arrivals. Taking in to account the diversified fascinating touristy
features of the region, the share itself should have to be questioned. It is not within the scope of
this paper to deal with the factors, but is reasonable to state probably it can be due to the
limitations in the supply side in the region other than the features which may include
accommodations and others.
Table 9 International Tourist Arrivals in Ethiopia and Tigrai Region

Year National Tigrai Region Share of Tigrai
Visitors Growth (%) Visitors Growth (%) (%)
1997/98 139927
1998/99 101437 -27.51
1999/20 131242 29.38
2000/01 142791 8.80
2001/02 151281 5.95
2002/03 161676 6.87
2003/04 185214 14.56
2004/05 195785 5.71
2005/06 274375 40.14
2006/07 293745 7.06
2007/08 322865 9.91
2008/09 356989 10.57 81,374.00 22.79
2009/10 460639 29.03 88,678.00 8.98 19.25
2010/11 508656 10.42 99,501.00 12.20 19.56
2011/12 566227 11.32 113,303.00 13.87 20.01
2012/13 633245 11.84 120,317.00 6.19 19.00
2013/14 723007 14.17 137,370.00 14.17 19.00
2014/15 792877 9.66 150,642.00 9.66 19.00
2015/16 870,597 9.80 172,924.00 14.79 19.86
2016/17 933,344 7.21 168,511.00 (2.55) 18.05
2017/18 954,552 2.27 177,635.00 5.41 18.61
Total 217.18 82.73
Annual Average Growth Rate 10.34 8.27
Source: of Culture and Tourism Bureau of Tigrai Region; Averages Own Manipulation
The increase of tourists from time to time was also well felt at the grass-roots where the lodge is
planned to be located by organizations engaged in the business, woreda administration office,
regional bureau and woreda office of the tourism sector and others consulted in the process of
undertaking the feasibility study that include tourism agents. The lodges have responded that
they are full particularly during peak season that embraces the months from September up to
January. One of them has further stated that the incoming tourists during this period are
sometimes even beyond their capacity to accommodate and as the result are forced to look for
other options going as far as to Adigrat and other places. All consulted individuals and offices
endorsed on the encouraging trend that include emphasis given by the government to the sector
and the images created by tourists.
Purpose of Visit
People visit countries away from their homes for various reasons. The current categories of
“purpose of visit” established by UNWTO and measured throughout the developing world on
arrival declaration cards are holidays, business, visiting friends and relatives, education, religion,
sports and transit through one country to another. Each of these categories of visitor has different
characteristics related to their demographics, behavior, spending, expectations and length of stay
in the country visited.
Beyond the efforts exerted to organize data and analyze the demand, the data documented above
is further categorized according to the purpose of the visitors at national and Tigrai region.
Literatures that further segment tourists by “purpose of visit” and “country of origin” give a
more accurate picture of tourism demand. Some documents imply in terms of driving demand
there is very little a country can proactively do about visitors who come on business, to visit
friends and relatives or for sport, religion or education as these visitors tend not to have choices
to make about where they take their trips. The only category, therefore, that can really be
influenced is the holiday (vacation) or leisure visitors. In fact, the consultant has reservation in
some respects on the statements. It is quite important to underline that a country should do all
possible ways to be a choice of tourists in terms of dealing a business with, in terms of being
conducive and peaceful and politically stabilized, in terms of quality education provision and
what not so to be competitive in the global environment. Existing conducive environment can be
a pulling and inducing factor for the increase of visitors of various purposes.
An attempt is made to see the purpose of the international visitors of Ethiopia and Tigrai Region
of the past 11 years. As could be understood from the table that follows there seems some
difference in the recording of the visitors based on the categorizations stated above though not
with wider gap. The recoding at national and regional levels also does seem to have some

differences. Nevertheless, vacation visitors appear to dominate proportionally at both levels. At

national level this category shares that range between 26.5 – 46.36% from yearly visitors while
the situation in Tigrai appears higher than that though some doubts exist on the reliability of the
data for the fact the proportion is found constant in all the years. Transit stands second at
national level which may imply that Ethiopia is serving as corridor particularly for regional air
travel reflecting the development of Addis Ababa and reputability of the Ethiopian Air Lines. In
many of the years the not categorized group indicated as „not stated‟ stood third at both levels
but tends to be more at Tigrai level when evaluated proportional to their respective visitors.
Business transactions appear to be disproportionately concentrated in other parts of the country

most probably in Addis Ababa which may not be surprising for the fact the city is incomparable
in terms of urbanization with cities of regions. But Tigrai region have an important share from
the vacation tourists. No conference and transit visitors in Tigray while the highest average
annual growth rate of 29.85% is realized in conference visitors at national level. On the other
hand, there is no record on pilgrimage at national level while the highest growth rate (11.66%) is
observed in this category at Tigrai Region. Annual average of 13.20% and 13.22% has taken
place at national level in vacation and business tourists respectively. The annual average growth
rate observed in the region in the remaining category of visitors is within the range of 7.67% to
8.27%. All the national average growth rates are above the Tigrai region performances except in
the not stated group which depicted the same figure. The nonexistent of performances in some of
the categories at both levels appear to be difficult to accept as dependable information. It might
have taken place because of lack of common understanding and practice on the system of
categorization of the visitors at the levels.

Table 10 Number of National and Regional Arrivals by Purpose (2007/08 – 2017/18)

Purpose by Location 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17 17/18 18/19 19/20
Conference
 National 14818 38850 40125 47100 43388 71746 66076 73885 55,650 16,909 47,060
 Tigrai Region
 Share of Tigrai
Vacation
 National 121037 94864 152,224 184,431 200,301 191,420 251,111 271,922 325,501 432,687 384,615
 Tigrai Region 51,394 56,197 62,862 71,560 75,989 86,760 95,147 109,216 106,427 112,191
 Share of Tigrai 0.54 0.37 0.34 0.36 0.40 0.35 0.35 0.34 0.25 0.29
Business
 National 42171 61452 78,227 86,116 116,800 126,169 134,792 148,997 98,789 54,899 98,479
 Tigrai Region 4,282 4,683 5,234 5,963 6,332 7,230 7,923 9,101 8,869 9,349
 Share of Tigrai 0.07 0.06 0.06 0.05 0.05 0.05 0.05 0.09 0.16 0.09
Transit
 National 68365 74194 92,415 77,231 92,860 91,326 126,235 127,452 256,250 325,844 280,689
 Tigrai Region
 Share of Tigrai
Visit Relatives, Friends
 National 28507 35766 33,636 31,422 40,527 52,941 51,061 55,480 60,752 47,685 65,267
 Tigrai Region 8,567 9,366 10,468 11,926 12,664 14,460 15,857 18,202 17,739 18,698
 Share of Tigrai 0.24 0.28 0.33 0.29 0.24 0.28 0.29 0.30 0.37 0.29
Pilgrimage
 National
 Tigrai Region 2,510 2,657 3,450 3,765 4,673 5,456 6,123 6,456 6,832 7,335
 Share of Tigrai
Not stated
 National 47967 51863 64,012 82,356 72,351 99,643 93,732 115,141 73,655 55,320 78,442
 Tigrai Region 14,621 15,775 17,487 20,089 20,659 23,464 25,592 29,949 28,644 30,062
 Share of Tigrai 0.28 0.25 0.21 0.28 0.21 0.25 0.22 0.41 0.52 0.38
Total
 National 322865 356989 460,639 508,656 566,227 633,245 723,007 792,877 870,597 933,344 954,552
 Tigrai Region 81,374 88,678 99,501 113,303 120,317 137,370 150,642 172,924 168,511 177,635
 Share of Tigrai 0.23 0.19 0.20 0.20 0.19 0.19 0.19 0.20 0.18 0.19

As stated earlier taking average of the years depicted above, conference outweighs importantly as
reason for visitors to come to Ethiopia. But the data of the latest years reveal that travel for
leisure holds the number one rank from among the remaining reasons. This is in line with the
information documented in the tourism statistical bulletin of the ministry for year 2015. The
bulletin states visitors for leisure and holiday take share over 35 per cent of all international
tourist arrivals in 2015. The following graph that is incorporated in the statistical bulletin clearly
shows the comparative share of the purposes of visitors of the year.
Chart 5 Tourists by Purpose of Visit

Source: Adopted from Statistical Bulletin of the Ministry of Culture and Tourism
It could not be easy to get regional data categorised in such manner. But its importance has to be
appreciated since it can highlight the areas of focus and hence to design pertinent strategies
considering prevailing situations in connection with that. However, it is worth reminding that
some differences between the data put for the respective years in the above table and the graph exist
though do not have much influence on the results of the analysis. It is often than not to see such
recording problems in the country and the region as well which should be an area of concern for all.
Sources of market
Ethiopia‟s set of source of markets is also well diversified and less dependent on international
leisure flows. Earlier documents imply the top source market overall for Ethiopia to be Africa
justifying driven in part by growing number of business and conference tourists. Within Africa,
the top three source markets for Ethiopia are said to be Kenya, Sudan, and Nigeria. The averages
manipulated based on the data documented in the table below, however, Africa and Europe are
found to have very close contributions that amount on average of the four years 30.2% and 30.1%
respectively. America follows sharing annual average 19.5%, importantly far from the remaining
market sources. But in terms of average annual increase, East Asia and Pacific takes the leading
with 12.35 followed by Europe with 9.79%. Africa and Middle East hold the subsequent ranks
with 8.67% and 8.27% as of in order. Annual average of American visitors is about 8.25%. It is
also important to note that this could be further broken down based on purpose type so to identify
the areas of focus when interest arises to make relationships.
Table 11 Tourist by Source of Market

2014 2015 2016 2017 2018 2019 2020
Africa 160311 180294 216787 232416 260305.9 248647 281590
America 96246 117082 129695 150367 168411 175241 182464
Europe 162784 170653 200745 231407 259175.8 272440 280268
East Asia and Pacific 34758 51882 51907 60653 67931.36 67836 73548
Middle East 47583 53472 58750 68075 76244 77053 82234
South Asia 20746 19182 23365 27510 30811.2 29416 32340
522428 592565 681249 770428 862879.4 870633 932444
Source: Adopted from Tourism Statistics Bulletin (2012-2015) NO.11
From the point of the project at hand, it is good to know that Americans flow to Ethiopia as
tourist with, of course, different purposes. Probably this may help to establish relationships with
American tourists and agents as well since initiators and owners of the project are living abroad
particularly in America. Because establishing networking with customers and perspective
customers is among the important marketing strategies for successful lodge performances as
evidenced from what actually is happening in the business.
It is also important to highlight that due consideration should be given to domestic tourism also. It
helps to create a more sustainable foundation for tourism development for it helps to diversify
tourism segments and to counterbalance seasonality, volatilities, and dependency on international
tourism flows. Still, domestic tourism, especially religious domestic tourism, can also be very
seasonal. Previous studies estimated domestic tourism in Ethiopia may account for roughly 20%
of total arrivals. Domestic tourism is believed to be predominantly business-oriented and
concentrated mainly in Addis Ababa, but it is also believed to increasingly have a leisure and
religious dimension.
Future Demand
The analysis made in the above sections imply that steadily growth have been globally and
nationally registered in most of the years in the past decades. Similar trend is realized in Tigrai
region too particularly in the past two decades. At the same time contribution of the sector from
the point of social and economic factors is internationally well recognized. With this perception
Ethiopia as a nation and regions have given emphasis to the development of the sector manifested
in the development of strategic plans and other supportive policy frameworks. This per se implies
availability of demand in a more strengthened manner in the country and Tigrai Region as well.
To the effect of the general understanding and interest, Ethiopia has set a high target of almost 5
million international visitors by 2025. Based on this high growth scenario, receipts from
international arrivals is projected to increase from a baseline of ETB 13.101 billion in 2013 to
ETB 180 billion in 2025. On top of that, tourism-related jobs are envisaged to rise from 985,500
to 4.8 million. On the other hand, documents indicate that Ethiopia has important size of middle
class that can serve as a proxy indicator in terms of the potential for the future domestic tourism
development. Ethiopia is expected to be one of the African countries together with Nigeria and
South Africa, which will have the largest middle class by the year 2030. Ethiopia has a
considerable upper-middle class, both in relative terms (3%) of the total population and in
absolute terms (2.4 million), more sizeable in fact than those of close competing destinations such
as Tanzania and Kenya. The upper-middle sub class is especially important for domestic tourism
development because it is supposed to be the most likely both to save and to consume non-
essential goods and services, such as entertainment and tourism services.
39 | P a g e Ato Teklu Hagos

Taking in to account the projections of national level, a paper collected from Tigrai Tourism
Bureau taking 10% share of the region as the basis states about 600,000 tourists to visit the
region. In fact, it further indicates that the regional government has planned to get three folds of
that which is 1.8 million tourists for the year 2025. This appears not only optimistic but
exaggerated as well. Of course it is safe to conclude based on the trends of past performances of
the sector and the attention given by the government reflected in policy directions and targets set
that there will be steadily growth in the number of tourists coming to the country and Tigrai
Region. With this perception the paper has concluded that the existing facilities cannot
accommodate the future flow of tourists arguing that there would be about 1517 beds in the
region considering the existing star hotels and including those in the process while the demand
for beds for the above number of tourists is estimated to be about 3333 beds daily. For the
manipulation six months of peak season that amount 180 days are used as the basis.
The same source highlights that Adigrat and the surrounding areas including the specific site
where the lodge is going to be erected, share 35% from the regional visitors that brings share of
the area to be about above 200,000 tourists in the stated year based even on the 600,000 number
of tourists putting aside the three folds expectation. It is again valuable to state that the estimation
is inflated but helps us to see the potentials and possibilities. Nevertheless, taking even half or
less of the estimation is quite enough to make the envisaged project feasible.
Receipts
Tourism receipts have internationally been increasing similar to the trend realized in tourism
arrivals in the past years. Due to the rise of the arrivals, tourism has been able to increase its
contribution to the GDP as a foreign exchange earner. UNWTO has documented the global
receipts for the years 2015-2017 by region as looked in the following table. The lions‟ share of
the receipt of the year 2017 is taken by Europe and Asia and the Pacific amounting 39% and 29%
respectively followed by America having the portion of 24% of the international receipts. Africa
shares only about 3% led by the Middle East of 5% of the cake.
5.8.2. Demand and Supply Gap Analysis

Existence of demand including globally and at national level is well established through figures
documented and explanations presented. Tourist arrival has been growing in the past years and it
is expected similar trend to exhibit in the future too. One can confidently derive existence of gap
where supply is not and would not be in a position to accommodate the tourist flow from the
quantified and qualitative analyses presented so far. It is clearly explained under the future
demand side of the analysis where, for example, there are only 1517 beds in the region
considering the existing star hotels and including those in the process while the number of beds
required for the projected number of tourists for the year 2025 is estimated to be about 3333 beds
daily. Projections on national tourist flow for the years 2020 and 2015 also reveals there would be
2.57 million and 4.95 million tourist arrivals in the country respectively. As of 2015, on the other
hand, the supply side shows 11699 beds of hotels and 843 beds of lodges to have been
operational. The figures indicate huge gap to exist between demand and the supply side.
Contribution of tourism to economic development and addressing social problems through

creation of employment opportunities is well recognized by countries. With this understanding,
Ethiopia has given emphasis to tourism development in its policy direction and strategies. To that
end it has set ambitious targets that highly outshine the existing supply side of the tourism sector.
Domestic tourism is also expected to be enhanced since number of better income groups is
increasing attributable to economic developments that promotes purchasing power of people. So,
wide opportunity exists to engage in the tourism sector.

6. GENERAL INFORMATION OF THE LODGE (PROJECT DESCRIPTION)
Building:
External: The lodge will be well styled handsome with local aesthetic look. The building
will be equipped with Solar Energy Panels for generating electricity and water heating. The
building materials (except of course toilet utilities, masonry, electrical duties, fittings and
other appliances will be imported)
• toilet utilities, masonry, electrical duties, fittings and other appliances will be
imported)
• Internal Decoration
Decoration would be done in such a way as to reflect Ethiopian culture and
particularly that of Tigrai.
• Bar, Restaurant, Kitchen/ and Reception
• Bar: the lodge will have 2 bar the first one is A very good set up of Bar serving
a wide variety of imported and local beverages with a total area of 250 square
meters and the second bar will serve the local beverage like tej and siwa etc.
Restaurant
• The lodge will have 2 big restaurant, the first restaurant will be about 800
square meters in size and will occupied greater than 500 people at a time and
serve very good quality tasteful foreign and national dishes, very comfortably
upholstered size in proportion to number of guests. Extensive choices of wines,
Tej, and other beverages.

• Kitchen: BIO GAS (fuel) system and an arrangement of Hygienic washing

utensils, crockery, cutlery and glass ware. Refrigerator deep freezers and other
cold storage facilities would be used to store all food stuffs at correct
temperature and would be protected from dust and vermin. The details of this
modern kitchens equipment are listed at the end. The kitchen is adjusting with
the restaurant.
Refuse
All refuse, rubbish toilet and garbage would be daily will used to the BIO GAS. The refuse
area and containers shall be kept in all weather proof enclosure and in a sanitary condition.
Reception
There will be in a reception area in a well situated area so that the receptionist can be at the
disposal of the guests. the front office (reception) will have souvenir shop, business area,
different kind of shops and super markets.
Conference Hall/Banquet
There will be banquet/conference hall of about 400 square meters with adequate conference
facilities, language translations, changing room, toilet , air condition services and cloak
room.
Rooms`

o Number of Rooms will be 10 bed rooms in the first phase

o Room Size. The minimum size of the bed rooms including sanitary installation
Entrances and balconies would be 60 Esq. and presidential room would be 120s
Sq.m.
Bed Size: standard Single 150cm.x 200 or 220cm.
Standard Double(king) 200cm.x 250cm.
Other Particulars:
One bed side per guest, one table, one lampshade, one chair for each guest and one
comfortable arm chair per room, reading light.
Cupboard/ Wardrobe with hungers and shelves or chest of drawers.
Full length mirror, waste basket, luggage rack, bed side rungs for each bed.
Bed Room Furniture
All beds would have good quality linen blankets, towels bed spread, curtains, mattresses,
pillows and carpets. Furniture‟s will be both local and imported.
o Heating and cooling system in all bed rooms.
Using Solar Energy hi-Tec devices thermal comfort between 18C-26C or 64.4F-78.8F will be
guaranteed.
• Electric Equipments for bedrooms.

Electric sockets are dual voltage international level with indications of voltage in each room.
Independent light for ceiling and bed side reading lamp for each bed will be supplied.
• Telephone and Light signals for future use
There would be telephones in all rooms for outside and internal communications and light
signals for future use (Depends on Telecommunication Authority)
• Audio visual installations in bedrooms
Satellite T.V, Radio and central music system in each room which can be controlled by the
guest.
Lockable double doors with keys, safety chain and peephole. Each bedroom to be numbered
so as to identify it and show its position in relation to other bedrooms in the premises.
• Drinking water in bedrooms

• Sound proofing of bedrooms
Sound proofing of very good standard will be installed.
• Information and stationery in bedroom
Directory of services, laundry forms, stationeries and other special charge, room tariffs shall
be available. Fire exit guidelines, house rules for guests including meal hours and charges
shall be prominently displayed.
• Sanitary installations in bedrooms
Either built-in bath tab 160cm long/shower fixed or hand shower with fixing device.
Splash ,curtain, wash hand basin with mixing battery, W.C mirror 1m 2, very good tiles and
metal equipment. All toiletry facilities for gent and ladies shall be available. 2/3 of the walls
would be covered with KESELA tiles.
• Bed linen and towels
Bed linen and towels would be changed daily.
 Bath rooms supplies

 Towels: Towel of minimum size of 40cmx 80cm of very good quality. Bath towel
also very good quality minimum size 60cmx120cm.
 Toiletry facilities include soap (big & small) shower cap, shampoo, small towel
(wash towel), toilet paper, waste baskets, sanitary bag, ashtry and shoe clearing
materials.

SERVICES
i. Food & Beverage
Adequate, wholesome and potable 24 hours water supply. It tap water is not guaranteed
wholesome; the hotel would have special appliances for treating the water so as to make it
guaranteed wholesome and potable. All ice used beverages would be made from guaranteed
potable water, certified by health authority.
ii. Breakfast/ room service
Breakfast would be served in bedrooms and in breakfast room, dining room, and restaurant.
iii. Hot meals/snacks
7:00-15:00hours; 18:00-22:00hours
iv. Front office services
Reception
Reception hall with 24 hours service. Paging and immediately. Transportation arrangements
(taxi/car service). Public address system, door-man and information service. The lodge will
give air port settle service
Safe deposit
Safe deposit service would be available.
Porter age & left luggage facilities (concierge)
Porter age & left luggage facilities would be available.
Foreign Currency exchange services
Money exchange services would be available.
Postal, Telegraph, Telex, Fax and Internet
Mailing of corresponds, postal or E-mail, sales of stamps and stationary would be

available.
Tourism service
Information services concerning transport, hotel excursion and entertainment, booking

services for travel tickets, hotels car rental, tours would be handled by our air port shuttle
whose office would be in the same building.

Shops and super marks
Sales of newspapers, magazines, books, postcards, cigarettes, photograph films, souvenir

shop would be available.
ENTERTAINMENT, RECREATION AND INDOOR ACTIVITIES
Facilities like a sizable swimming pool and other indoor games will be available. Most of all
an organized packaged tours or toiler made tours to the rock hewn churches of Tigrai,
climbing, paragliding and other activities will be arranged.
Traditional transportation: the lodge will give traditional horse riding for domestic and
international tourist
Safety, staff and others
Fire fighting facilities and guideline would be established and clearly indicated. Adequate
firefighting equipment, fire escapes and prominent notices for all fire facilities and exits
would be provided and excellent conditions at all times and in accordance with the local fire-
fighting and prevention laws and regulations. All electrical facilities would be installed and
maintained in accordance with local electrical safety and regulations. Adequate safety would
be provided on a 24 hours basis.
Emergency power
Sound proof stand by generator, (to avoid sound pollution) will be made available in
emergency cases.

7. ORGANIZATION AND MAN POWER
7.1. Human power

The proposed project will be managed by well experienced manager through recruited from
the local labor market. The manager shall be responsible for the overall management of the
business and shall plan, coordinate and mange the project activities under the close
supervision of the owner of the understudy project. The manager is also responsible for the
day to day activity of the hotel. Other supporting staffs responsible for different activities are
also listed in the table below. It is expected to create permanent employment for 59 persons.
The total annual salary of the employees is estimated about birr 2,904,000.00 per annum and
the organizational structure and list of human power was described as follows.
Organizational Structure Set Up
Partners
Manager
Legal Section Finance Division
Sales & Marketing

Human Resource
Division
Security Section
Maintenance Section
Food & Beverage

Room Division
Division
Kitchen
Front Office House Keeping Wellness Restaurant &

Banqueting
Chart 19 Organogram of the Lodge
Table 17 Human Resource Requirement

Number Monthly
Man power Requirement (in birr) Yearly Salary
S.N employee Salary
1 General Manager 1 20000 240000
2 Finance& Administration 1 10000 120000
3 Marketing & customer Service 1 10000 120000

Number Monthly
Man power Requirement (in birr) Yearly Salary
S.N employee Salary
4 Personnel officer 1 6000 72000
5 Accountant 1 7000 84000
6 Purchaser 1 5000 60000
7 Cashier 1 3000 36000
8 Store keeper 1 3000 36000
9 Secretary/ operator 1 2500 30000
10 Receptionists 2 3000 72000
11 Coffee machine operator 2 5000 120000
12 Chef cooker 2 10000 240000
13 Assistant cooker 2 7000 168000
14 Waiters 14 2500 420000
15 Cleaners 10 2000 240000
16 Messenger 2 2500 60000
17 Plumber& Technicians 2 4000 96000
18 Greener 3 2500 90000
19 Drivers 3 4000 144000
20 Guards 8 2000 192000
Total 59 2640000
5% Annual Salary Increment 132000
Employee benefit (10%) 264,000
Grand Total 2,904,000.00
7.2. Training Requirement

For Hotel services trained manpower is available in the market and additional training will be
given on site and can be also given by training institutions as required.

8. INVESTMENT AND FINANCIAL ANALYSIS

Major assumptions considered in undertaking the financial analysis of the proposed project are
 The implementation period of the project is assumed to be 2 years

 The project will start its service provision operation at 60% capacity. Then it will
reach full capacity in the fourth years.
 Fixed assets of the plant is assumed to depreciate on the basis of straight line method
o Building depreciations taken 5% per annum
o Machinery and office furniture depreciation 10% per annum
o Vehicles depreciation rate 20% per annum
o Pre operating expenses will be amortized by 10% per annum
 It is assumed that 70% for the project investment will be financed by bank loan and
the remaining 30 % by owner‟s equity.
 Business income tax is assumed 35% from the annual gross profit before tax less the
deductible amount.
 Bank repayment period is for ………….15years
 Bank interest rate is taken 11.5%
 Repair and maintenance rate is taken 5% for building, 10% for furniture, equipment
and machineries and 5% for project vehicles.
8.1. INVESTMENT COSTS

This cost category comprises capital requirement for the construction of building and
purchase of furniture, machineries and equipment and vehicles.
TABLE-13 CAPITAL REQUIREMENT

Description Total cost (birr)
Land (preparation) 250,000
Construction cost 4,889,747.62
Hotel equipment and facilities 2,801,224.79
Office Furniture and equipment 275,000.00
Fixed total 8,215,972
Working capital (25% as per the financial assumption) 2480461
Total 10,696,433
Loan 60% =6,417,860.64
Owner’s Contribution 40% =4,278,573.36
Total 100% =10,696,433.00

8.2. Production/Service cost

The annual production cost at full operation capacity is estimated at birr 9.92 million. (See
table-below)
TABLE-14 ANNUAL SERVICE COST AT FULL CAPACITY ( IN BIRR)

S.No. ITEMS COST
1 Raw material and Inputs 4,006,208
2 Utilities 431,464
3 Maintenance and repair 250,000
4 Labor direct 2,904,000.00
5 Administration cost 136,400
6 Total Operating Costs 7,728,072
7 Depreciation 1,193,772
8 Cost of finance 1,000,000
Total Production Cost 9,921,844
8.3. Pre-operation Capital expenditures:

The pre-operation expenditure, which have to be capitalized, including the following cost
items that originate during the various stages of the various stages of the project formulation
and implementation
1. Cost of preparatory investigation and pre-investment studies such as feasibility study,
preliminary surveying and designing
2. Detail planning and tendering as well as erection, supervision and coordination of
implementation works
Based on the assumption the pre-operation capital expenditure has been estimated about 4%
of the total investment costs
8.4. Working Capital

Working capital requirement includes for payment of utility expenses, employees salary and
other related recurrent expenditures for the first month of the project operation. Due to the
specific nature of the project under consideration, about 36% of the total capital investment
costs comprise permanent working capital.
The total initial investment outlay of the proposed project is therefore estimated to be birr
20.2 million.

B. Source of finance
It is assumed that the project will be able to obtain about 60% of the total investment costs
through bank loans, which be repaid back within 10 years period with 11.5% annual interest
rate. The grace period is expected to be 2 years, during which time only interest will be
charged on the loan. The remaining balance of the investment cost, which would be around
40%, is expected to be covered by equity contribution of the project promoter.
C. Operation and Maintenance Costs

The proposed new project is assumed to attain its full service provision capacity in its fourth
year of its operation, the total annual service cost at full capacity utilization of the hotel is
estimated and details cost component with its respective amount is given the final page table.
Normal depreciation rate has been used on straight line method, which is 10% for machinery
and equipment including office furniture, 5% for building cost and 25% for amortization (for
pre-production expenses) and 20% for plant vehicles interest rate expenses are estimated on
outstanding balance. For the project under reference promotional and incentive expenses have
been estimated at 1% and 1.5% of the direct service cost respectively.
i. Material Inputs:
The basic material input required for the provision of the envisage service are mostly locally
available materials consumed in the process of service production and provision activities.
The current prevailing local and international market price has been used for the estimation of
material inputs. Because of the specific nature of the given project the largest portion of the
direct service cost is estimated to comprise that of material inputs.
ii. Utility
In estimating costs of utility expenses for operation and maintenance of the given project,
costs of fuel and lubricant, electricity and water consumptions have been taken into account,
the rate of which have been estimated on the basis of the proposed capacity utilization
schedule of the project and at the current official exchange rates. The operation of a given
project is based on relatively extensive utilization of electricity and water, when it is needed it
will be install its own reserve generators.

TABLE-15 ANNUAL REQIRMENT OF UTILITIES AND COST

No. Description Number Required Rate Yearly
1 Electricity 50000 kw 2.47 164500
2 Water 2,720 m3 10 22720
3 Postage 2000 24000
4 Telephone 3,000 36,000
5 Others (oil, Gas…) 79,764
Total 431,464
iii. Repair and Maintenance:

Cost estimates required for annual repair costs of structures and civil works as well as repair
and maintenance costs of machinery and equipment including support equipment and office
furniture and facilities. Based on the working conditions of fixed assets, the repair and
maintenance costs have been estimated to rise in the range of 2.59
iv. Salaries and Wages

The cost of salaries and wages has been estimated with its 20% fringe benefits. In the
estimation of salaries and wages the official minimum wages has been taken into account.
v. Overheads
In the expense under this have been included annual land building taxes; building, machinery,
vehicle, and other machinery and equipment insurances; vehicle annual inspection charges,
postage, telephone, e-mail, stationary and office supplies; printing and copying; auditing cash
indemnity, etc. the amount of which have been estimated on percentage and lump sum basis.

9. BENEFIT AND COSTS
9.1. PROJECTS COSTS

The project capital investment cost are the sum of fixed capital investment and net
working capital at full capacity. With fixed capital constituting the resource required
for construction of civil works, purchase, importation and installation of machinery
and equipment, purchase of general service facilities including service , vehicle,
whereas, the working capital corresponding to the resources needed for operation of
the project totally or partially.
The Cultural lodge, which could be modern and cultural bars and restaurant for
recreational and entertainment project, at full capacity operation will entail a total
outlay of birr 10,696,433.
9.2. PROJECT BENEFITS

as the detail sited in the assumption for financial analysis and evaluation for the given
project, the current average selling prices of the products and charging rate for the
Service have been taken as base. Consequently it has been found that at full capacity
the project is expected to generate average gross revenue of 15,020,313 birr and
9,012,188 of profit before tax per annum as it has been outlined earlier the project is
envisaged to reach full capacity operation four year after commencement of production
activates, which are assumed to begin with 60% of capacity and will reach full
capacity in year 4. the financial projection show that the investment of the project is
viable profitable and liquid.
9.3. TEST CRITERIA FOR FINANCIAL VIABILITY OF THE PROJECT
I. Financial internal rate of return (FIRR)

In financial evaluation cash flow is a very important factor to determine the ability of the
project to meet liabilities including service of debt. The rate of FIRR of the project under
11.5% interest rate and 11% discount rate is 38% which is very acceptable.
II. Payback period

Pay back is the period required to recover the initial investment outlay the project through the
accumulated net cash flow earned after tax by the project. Initial investment costs and income
statement projection are used in estimating the payback period. Thus, the detail calculation of

the project payback period is given here below. The pay back period of the project will be
four years.
Form the above indicators, the payback period is far earlier than of the life span of
the project therefore; the project is found to be attractive and remunerative to invest
on it. From the positive trend of profitability analysis, it can be inferred that the project
can operate in the frame work of free market mechanisms on a commercially feasible
and financially viable basis and it is remunerative .

10. CONCLUSION
The project is designed to operate in the framework of free market system on
commercially feasible and financially viable basis to expand the commercial building
to modern star hotel for recreational and entertainment. With the project promoters
contribution of equity capital and loan expected to be obtained from credit suppliers,
it is strongly believed that the proposals contained and conclusions drawn in this
feasibility study can be reliable implemented with the estimated time schedule and
calculated profitability margin. Furthermore, in addition to its contribution to enhance
national economic development endeavors, the project will also open employment job
opportunities to 59 permanent employees & more than 30 temporary employees during
construction.

Annexes
Estimated NPV @ 11%
Project cost Gross Gross Net Discount NPV @ 11%

year Fixed Recurrent costs benefit benefit rate @
investment investment 11%
0 8,215,972 - 8,215,972 0 -8,215,972 1 -8215972
1 60% 5953106 5953106 14965294.2 9,012,188 0.901 8119981.57
2 70% 6945291 6945291 17459509.9 10,514,219 0.812 8537545.75
3 85% 8433567 8433567 21200833.45 12,767,266 0.731 9332871.77
4 100% 9,921,844 9,921,844 24,942,157 15,020,313 0.659 9898386.27
5 9,921,844 9,921,844 24,942,157 15,020,313 0.593 8907045.61
6 9,921,844 9,921,844 24,942,157 15,020,313 0.535 8035867.46
7 9,921,844 9,921,844 24,942,157 15,020,313 0.482 7239790.87
8 9,921,844 9,921,844 24,942,157 15,020,313 0.434 6518815.84
9 9,921,844 9,921,844 24,942,157 15,020,313 0.391 5872942.38
10 9,921,844 9,921,844 24,942,157 15,020,313 0.352 5287150.18
11 9,921,844 9,921,844 24,942,157 15,020,313 0.317 4761439.22
12 9,921,844 9,921,844 24,942,157 15,020,313 0.286 4295809.52
13 9,921,844 9,921,844 24,942,157 15,020,313 0.258 3875240.75
14 9,921,844 9,921,844 24,942,157 15,020,313 0.232 3484712.62
15 9,921,844 9,921,844 24,942,157 15,020,313 0.209 3139245.42
16 9,921,844 9,921,844 24,942,157 15,020,313 0.188 2823818.84
17 9,921,844 9,921,844 24,942,157 15,020,313 0.17 2553453.21
18 9,921,844 9,921,844 24,942,157 15,020,313 0.153 2298107.89
19 9,921,844 9,921,844 24,942,157 15,020,313 0.138 2072803.19
20 9,921,844 9,921,844 19,942,157 10,020,313 0.124 1242518.81
IRR= 78% NPV 100,081,575

10. ENVIRONMENTAL IMPACT ASSESSMENT, EIA
Even though the hotel/lodge tourism is known as smokeless industry due to its non-pollutant
nature, the following points are considered in our project and design.
• Noise pollution
One of the major elements for a success of a hotel /lodge is its peaceful and unpolluted
environment. Hence, every possible measure will be taken to make sure our guests are not
polluted. This includes: installation of sound proof materials, the installation of solar energy
panels so that the stored energy will be used in case of power shortage instead of using
generator. If we are forced to use generators for emergency cases then we will install sound
proof generators. This is just to mention few of the measures to be taken against sound
pollution.
• Ground and Surface Pollution
For the ground and surface pollution, the project has in its design sewerage and other refuse
elimination methods to bio gas as well as waste recycling methods.
• Air Pollution
Again, even though the hotel/ lodge industry is considered as smokeless industry, care will be
taken as not to pollute the air. This includes the introduction of bio gas and other
technologies.

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Debre Nazret Lodge [ ]

1|P age Ato Teklu hagos

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5.3.2. MARKET POTENTIAL .......................................................................................................... 26

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1.1 General Information

Name and background of promoter/Entrepreneur:

Owners: Negasi and Tesfay Cultural Lodge and Recreation

Initial Investment in Birr: 10,696,433

1.2 Promoter (Company Profile)

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Ethiopia is said the “Land T h e o r i g in o f

unique features and

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2.2.2. Risk Factors

2.2.3. Risk Mitigation Measures

2.2.4. SWOT Analysis

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Table 1 SWOT Analysis

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3.1 PROJECT RATIONALE

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3.2 PROJECT DESCRIPITION

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3.3 Project Objectives

3.3.2 Specific objectives

3.4 IMPLEMENTATION STRATEGIES

 The service to be rendered is based on the technical recommendation in order to

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3.5 Conceptualization of Tourism

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3.6 Importance of Tourism Development

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Environmental Advantages: Current global trend on environment is encouraging ecotourism. This in

3.7 Factors that can induce or Impede Tourism

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 Political will and commitment to develop tourism

3.8 National and Regional Environments Related to Tourism Development

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4.1 PROJECT AREA

4.2 SITE LOCATION

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5.2. MARKET ANALYSIS;

5.2.1. Local Competitive Accommodation Market

5.2.2. Regional Competitive Accommodation Market

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5.3. MARKETING STRATEGY

5.3.2. MARKET POTENTIAL

5.3.3. PRICING STRATEGY

 Keeping the service quality standard as technically recommended

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 Adjusting competitive price and quality of service to generate more income on

5.4. PROMOTION MECHANISUM

5.5. MARKET APPRAISAL

5.6. Demand Side Indicators