S H A M S U D I N A B ED U L L A H I H O T E L

Business Plan
For
Establishment of a Four-Star Hotel
At
Bole Michael Area
Addis Ababa City Administration

Project Investor:
Ato Shamsudin Abdullahi

January, 2025
Addis Ababa.

1
 TABLE OF CONTENTS

Project Summary
CHAPTER ONE
INTRODUCTION
1.1 Executive Summary
1.2 Project Description
1.3 Project Objectives
1.4 Project Rationales
1.5 Project Investor
1.7 Government Policy
CHAPTER TWO

MARKET ANALYSIS
2.1 An Overview
2.2 Demand Analysis
2.3 Tourism Sector
2.3.1 Global Scene
2.3.2 African Scene
2.3.3 National Scene
2.4 Supply Analysis
2.41. Nationwide Hotels
2.4.2 Addis Ababa Hotels
2.4.3 Bole Michael Area Hotels
2.5 Target Markets
2.6 Market Prospect
2.7 Completion
2.8 Market Strategies
2.9 Price Structure

CHAPTER THREE

TECHNICAL ANLAYSIS

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3.1 Location and Site
3.2 Physical Layout
3.3 Furniture and Furnishings
3.4 Office Equipment
3.5 Machinery and Equipment
3.6 Motor Vehicles
3.7 Raw Materials and Inputs
3.8 Manufacturing Process
3.9 Utilities
3.10 Service Process
3.11 Project Capacity
3.12 Project Implementation Schedule
3.13 Environmental Impacts
CHAPTER FOUR
ORGANIZATION AND MANAGEMENT
4.1 Organization
4.2 Human Resource
4.2.1 Shareholders
4.2.2 Management Staff
4.2.3 Operative Employee
CHAPTER FIVE
INVESTMENT ANALAYSIS
5. 1 Investment Capital
5.2 Sources of Finance
5.3 Financial Results
5.3.1 Profitability
5.3.2 Liquidity
5.3.3 Net Worth
5.3.4 Net Present Value
5.3.5 Payback Period

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5.3.5 Financial Internal Rate of Return
Schedules
1. Basic Financial Assumptions
2. Working Capital Determination
3. Loan Repayment Schedule
Annexes
I Projected Balance Sheet
II Projected Profit and Loss Statement
III Projected Cash Flow Statement
IV Computation of Present Value
V Present Value Determination
VI Computation of Financial Rate of Return
Tables
1.Shamsudin Hotel Building Facilities
2.World Tourism Rankings by Country in Fifteen
3. Star Rated Hotels in Different Regional States
4.List of Star Rated Hotels in Addis Ababa
5. Existing Decent Hotels at Bole Michael Area
6. Proposed Rental Charges
7. List and Cost of Office Furniture
8. List and Cost of Office Equipment
9. List and Cost of Machinery and Equipment
10. List and Cost of Motor Vehicles
11. Project Implementation Schedule
12. Human Resource Requirement
13. Investment Capital
14. Sources and Pattern of Finance

4
 Project Summary

Project: A 4 - Star Hotel at Bole Micheal Area

Investor: Shamsudin Abdullahi

Investment Capital: Birr 342.00 million

General Manager: Ato Amir Sabit

Nationality: American

Address: Addis Ababa, Bole Sub-city, Wereda 01, House No. New,

Tel. 0924 – 17 44 33/

Addis Ababa, Ethiopia.

Business Line: Hotel and Tourism

Service ranges: 24 spacious rooms and restaurant for servicing foods and beverages,

coffee and tea,

Legal Form of Business: Sole Proprietership

License Issuing Agency: Ethiopian Investment Commission

License No.:

Date of License: ------------

Project Location: Bole Micheal Area, Bole Sub-City, A.A. City Administration

Total Land Area: 515m2

Built up Area: 5,950m2 = (14 X 425m2) = (2 basements + GF + 10F + Terrace)

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Land Use Program and Facilities:

No. Facility

1 2 Basements: For Parking

2 Ground Floor: Commercial Spaces for banks and shops

3 First Floor: Reception, Business center, Restaurant and Kitchen

Second – 10th Floors: Bedrooms – Total Bedrooms 90

 54 Standard Bedrooms

 27 Executive Suite Bedrooms

 9 Premium Suites

4 11th Floor: Terrace

Servicing Capacity: 250,000 persons/year increasing at 10% every year

Raw Materials and Inputs: Foodstuffs, beverages, cleaning stuffs, fuel and

lubricants, linen, changing clothes,

Utilities: Power – 180kw, Water: 10,000m3/day

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Manpower: 46 persons with the following qualifications

No. Positions Employees Qualification Experience

1 General manager 1 BA in Business 10 years

2 Administrator 1 BA in Business 6 years
3 Business developer 1 BA in Business 8 years
4 Electro mechanic 1 College Diploma 6 years
5 Office clerks 4 College Diploma 4 years
6 Accountant 1 BA in Accounting 5 years
7 Purchasers 2 College Diploma 3 years
8 Store keeper 1 College Diploma 3 years
9 Cashiers 2 College Diploma 5 years
10 Receptionists 2 College Diploma 4 years
11 Head waiters 2 College Diploma 4 years
12 Food and beverage officer 1 College Diploma 3 years
13 Head cooks 1 College Diploma 5 years
14 Assistant cooks 2 College Diploma 3 years
15 Coffee machine operators 2 High school 3 years
16 Waitresses 10 10 + 3 Certificates 3 years
17 Supervisor - housekeeping 2 College Diploma 3 years
18 Café workers 2 College Diploma 2 years
19 Cleaners 8 10 + 2 Certificates 3 years
20 Drivers 3 10 + 2 Certificates 3 years
20 Security head 1 College Diploma 3 years
21 Guards 4 10 Certificates 2 years
Total 54

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Market Plan:

No. Market Target No. Customers

1 Foreigners 175,000
2 Local 75,000
Total 250000

Investment Plan: (Birr 000)

No. Asset Amount

1 Working Capital 15,400

2 Furniture and Furnishings 9,197

3 Machinery & Equipment 17,086

4 Building and civil works 241,470

5 Motor Vehicles 18,200

6 Leased land 38,000

7 Pre-production cost 647

Total 38647

Sources of Finance: (Birr 000)

Sources of Finance:
Equity Capital - Birr 136.00 million (40%)
Bank Loan - Birr 204.00 million (60%)

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 CHAPTER ONE

INTRODUCTION

1.1 Executive Summary

This is a business plan prepared to serve various stakeholders for

necessary supports for quick launching of 90 bedrooms Four-Star Hotel

on a plot of land of 515m2 at one of the busiest Bole Micheal areas of

Addis Ababa. The hotel will be owned and managed by Ato Shamsudin

Abdullahi, an entrepreneur who had accumulated an extensive

experience after working in the United States and in country.

The total investment capital of the project is estimated at Birr 340.00

million. The amount is expected by generated from equity capital of

Birr 136.00 million and local bank loan of Birr 204.00 million.

The hotel building will have a total built-up area of 5,950m2 covering 2

basements, ground plus 10 floors and terrace. It is to be located at the

most ideal and strategic location of Addis Ababa, Bole Michael.

The project location is considered to be most ideal for running service

activities such as shops, hotels, pensions and apartment houses. Bole

Micheal where the project to be set up was already flourished due to

high concentration of war displaced and settled Somalis. The area

continues to attract all local and foreign Somalis coming to Addis

Ababa for trade, transiting, visiting families, friends, relatives, and

staying. Furthermore, because of presence of many chat shops,

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merchandise shops, international rated restaurants, and butcheries,

the Oromos, Yemenis and other tourists are more attracted to this

place for business transaction.

According to a survey carries out in the area, there is a lucrative

market for hotel services. The existing hotels, pensions and apartment

houses are enjoying over 80% of their capacities as per market survey

carried out. This clearly show a presence of market for emerging

hotels due to high influx of predominantly Somali Diasporas and

Ethiopian Somalis both of whom noted for their mobility and high

money spending culture.

The hotel will hire competent upper and middle managers,

maintenance technician, supervisor, marketing development expert

and other committed administrative and operative staffs. The 54

persons to be hired and placed in different responsible positions will

operate in an excellent environment to perform finance and

accounting, administration, customer handling, material management,

and food preparation and safety activities.

The basic raw materials and inputs required in the course of hotel

operation are foodstuffs (meats and flour, short and long pasta,

vegetables and fruits, edible oils, sugar and salt, spices, coffee and

tea, etc.), beverages, cleaning stuffs, supplies, among others. All

these materials are locally purchased on competitive bases.

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The hotel servicing processes entail, reservation, client reception,

assigning room, serving foods and beverages, providing various

services, billing, seeing off of potential customers.

The financial projections built under careful market assessment in the

area and realistic financial assumptions revealed that the business is

commercially sound, economically viable and socially desirable. The

business is profitable and liquid with after tax financial internal rate of

return (FIRR) of the project is 21% , Net Present Value of 434.435

million and payback period of 6.2 years.

The project is socially desirable. The establishment and successful

operation of the venture would accrue the following national benefits: -

 Fairly contributes to national foreign exchange earning

potentials,

 Ensuring high quality hotel facilities and services to the

international and domestic tourists mainly Somali

Diasporas, Oromo traders who totally preferred the

envisaged project location,

 Contributes to the betterment of the employees’ incomes,

 Provides employment opportunities to 54 nationals, and

 Contribute to knowledge and skill enhancement of the

employees through provision of appropriate trainings
supported by local vocational and technical training
institutes.

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This report is, therefore, the result of extensive research carried out to

ascertain the background, marketing, management and organization,

technical and financial aspects of the project.

1.2 Project Description

This is a four-star hotel project to be set up at Bole Michael area, not

very far from Rwanda Embassy in Addis Ababa and owned by Ato

Shamsudin Abdullahi. The hotel will come up with 90 well equipped

and furnished, luxury, clean decode standard single and executive and

premium suites bedrooms, restaurants serving local and European

foods with full confidence to provide maximum satisfaction to potential

local and international tourists.

The facilities that the hotel building contain are shown in the following

table.

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 Table 1
Shamsudin Hotel Building Facilities
No. Available Facilities
1 2 Basements for parking
2 Ground Floor for shops
3 First Floor for reception, restaurant and kitchen
4 Second to Ten Floors for 90 Bedrooms with spacious areas
-
 54 Standard Bedrooms @ 20 m2
 27 Executive Suites @ 28m2
 Premium Suites @ 43 m
5 Terrace for water tanks, laundry and store
Total

The hotel building will have its own standby generator, communication

and security facilities. All bedrooms will be spacious and furnished and

equipped with first class finishing materials and a high standard

elevator. This is in desire to render satisfactory services to occupants,

meet four - star class standards and withstand the existing and

evolving competitions in the area.

1.2 Project Objectives

The central objectives of the project are stated as below: -

 To earn a sustainable annual profit that contribute to growth and

survival through provision of quality hotel services,

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  To provide gainful employment opportunities for about 54

persons,

 To ensure that the hotel visitors are given maximum due care and

attention during their stay in the hotel,

 To contribute to the national hotel provision capacity especially in

the Bole area where foreign tourists highly prefer to reside,

 To render useful hotel management skills to the hotel employees,

and

 To funnel revenue to government treasury in the form value

added, personal, and corporate taxes.

1.4 Project Rationales

The rationales for launching this project are:

 Ethiopia is a vast country and endowed with rich culture, history,

archeology, flora and fauna, and varied climate, topography,

vegetation, birds, animals, natural hot springs, etc. These are

major tourist attractions that Ethiopia has to nurture for increasing

its foreign currency earning, job creation, micro and small

enterprises, and so on.

 The Addis Ababa City Administration in general and Bole Micheal

area in particular are still facing with shortages of decent hotels,

resort areas, market places, parks and theatres when compared to

Kenya, Tanzania and Uganda.

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  There are all age groups of Somalis and Oromos that live, work

and temporarily visit Bole Michael and all these require catering

services on daily and regularly bases as surveyed the surrounding

area. This segment forms a large and growing market for decent

places to feed, drink and spare their leisure time and thus the

envisaged hotel is expected to fill this gap,

 Despite the fact that there are many hot hotels, pensions,

apartment houses, tea rooms, restaurants and shops around the

planned hotel, their facilities and management hardly meet the

quality standards of the international tourists,

 There are emphatic interests on the parts of government,

individuals and enterprises to improve the present dismal hotel

conditions and acute shortages of decent accommodation and

resort facilities in the city,

 The construction and smooth operation of well-managed class

rated hotels are believed to contribute to the aesthetic value of

the present low standard Bole Michael area,

 The operation of the hotel is expected to avail options to the

visitors who are faced with shortages luxury villa and hotel rooms,

 The hotel investor has extensive experience in running service

business and exposure to global environment,

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  The tourism sub-sector is a blood vine of development of all

sectors and this invariably require consistent building of hotel;

improvements of transport facilities, quality of foods and

beverages, resort facilities,

1.5 The Investor

The project is to be owned and managed by Ato Shamsudin Abdullahi,

43 years of age and was born and brought up at Bedeno, Wester

Hararghe. He is a married person with 6 children – 3 male and 3

female. Having stayed and worked for about 25 years in the United

States of America, he was able to gain adequate experience and to

made significant saving. These two components paved his way to

make a rational decision in launching this useful hotel project at the

most ideal location of Addis Ababa.

Ato Shamsuddin is now engaged in international business dealing in

import and selling of vehicles in the country. At the same time, he is

running real estate development business. The high rising and star

rated i.e. 2 basements, ground plus ten floors and terrace hotel

building in Adama, Oromia Regional State is the stage of completion is

owned by Ato Shamsudin. The hotel that has a total plot of land of

12,00m2 was obtained on lease base in pursuit of constructing on

building resting on 900m2 area.

1.6 Government Policy

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Valuing the importance of tourism as the sources of foreign currency

and employment; means of promoting of the national culture and

history; development of handicraft and micro businesses, expansion of

tour and transport operations, upgrade the country’s image, accelerate

economic growth, and means of reducing of poverty, the Ethiopian

Government has given a high priority for the smokeless tourism

industry per Growth and Transformation Plan. The plan aimed at

making the country among the top ten tourist destinations in Africa by

the year 2030.

In order to achieve the aims, the Government has taken the following

positive steps:

 In acting tourism policy,

 Establishing Tourism Transformation Council and Ethiopian

Tourism Organization to raise the standards of tourism

industry,

 Developing road and communication infrastructures,

 Upgrading and rehabilitating national parks,

 Protecting wild lives from illegal hunting in sanctuaries and

parks,

 Conserving and improving heritage sites,

 Signing of bilateral agreement with some countries,

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 Privatizing of the public hotels and tourism facilities including

the old Ethiopian Hotel,

 Liberalizing the National Tour Organization and private tour

companies at the result of which tour operators reached to

310,

 Promoting of the tourism potentials through participation of in

international tourism and trade fairs and domestic and foreign

publications, and

 Allowing to hotel investors to import hotel building materials,

furniture and fixture and motor vehicles without tax.

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 CHAPTER TWO

MARKET ANALYSIS

2.1 An Overview

Ethiopia has been witnessing dramatic economic and social changes

with a positive local and foreign tourist inflow trend. According to

various studies, the country’s hosted about one million international

tourists in 2017 and 841,000 visitors in 2019. These figures are

projected to reach to 2.5 million tourist arrivals as indicated by the

report Tourism Ethiopian.

Furthermore, global population explosion, increasing tourism mobility

and improvements in the incomes of the individuals and enterprises

have triggered demand for travel and tour from those searching for

leisure and holidays, entertainment and consumer goods. The

combined effects have been increased mobility of people for site

seeing, refreshment and/or removal of fatigues and job-related

stresses, searching better medical and healthcare treatments, meeting

with family members, friends and relatives, among others.

In 2019, there were 1.5 billion international tourist arrivals worldwide

and a growth of 4.4% as compared to 2018. The top10 international

tourism detitanations and arrivals in 2018 were France (89.4 million),

Spain (82.8 million), United States (79.6 million), China (62.9 million),

Italy (62.1 million), Turkey (45.8 million), Mexico (41.4 million),

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Germany (37.9 million), Thailand (38.3 million) and United Kingdom

(36.3 million) according to their ranking.

As regard to Africa, there were over 62.7 million tourist arrivals in 2017

and this was an increase of 8.5% from 2016. The top 10 African tourist

destinations with corresponding arrivals are Morocco (12.3 million),

Egypt (11.3 million), South Africa (10.5 million), Tunisia (8.3 million),

Algeria (2.8 million), Zimbabwe (2.6 million), Ivory Coast (2.0 million),

Botswana (1.6 million), Namibia (1.5 million), and Mozambique (1.4

million).

Ethiopia has variegated and rich natural, cultural, historical and man-

made tourism attractions, but remained far below of its Kenyan,

Tanzanian and Ugandan neighbors in nurturing the various tourism

benefits. Presently, the Ethiopian Government is paying a high

attention to the development of tourism and travel industry in desire to

generate sustainable foreign exchange through marketing of its

natural and cultural resources, promote the country’s image and

combat the prevailing high unemployment particularly among its

college and university graduates.

The developing, promoting and effective use of the hospitality industry

have many advantages to Ethiopia which is at threshold of

development. These advantages are creation of many gainful

employment opportunities in micro and small, land and air transport

20
systems, hotel and restaurant industry, tour and travel enterprises,

several others with the effect of earning substantial foreign currency.

Because of these, Ethiopian Government and private sector have

pumped huge investment capital on development of physical

infrastructures like roads, airports, telecommunication, hydroelectric

power and parks by the government and hotels, restaurants, clubs and

apartment houses by private sector in major regional cities in general

and Addis Ababa in particular.

Addis Ababa being the commercial, industrial, political and

administration capital. It is also seats of African Union, United Nations

Economic Commission for Africa and many regional, international and

non-government organizations whose significant staffs have fonds of

visiting tourist sites and living in decent hotels thereby developing

sustainable market for the existing and planned hotels and conference

unique hall facilities. Because of these, many meeting, seminars,

workshops, conferences, symposiums are taking place in the country.

The change in lifestyles, emergence of many middle-income group of

the society and the coming of increasing numbers of diasporas and

neighborhood tourists namely from Somalia, Yemen and Sudan are

positive signs for soaring demand for hotel accommodations.

Moreover, the country’s cultural, historical and religious heritages; and

tourist sites for seeing and enjoying wildlife, birds, mountains, water

falls, hot springs, Dallol life volcano, Simien Mountains Parks, Rock-

21
Hewn Church of Lalibela, the Holy City of Harar, Gondar palace, Blue

Nile Falls, Addis Ababa Museums, Axum obliques, and Arba Minch,

National Parks with rare animals in wild and 850 bird species would

perfectly inspire the deep interests of Western tourists provided that

peace and security are not threats and aggressive promotion are

executed at various levels.

The expansion of Ethiopian Airlines’ commercial operations in more

than 81 countries worldwide and covering Asian (Middle East and Far

East), African, American (North and Latin America), Australian and

European continents in time with full uncertainty. This is also another

glaring evidence for existence of bright future for development of

travel and tour operations and promising market for hotels and

restaurants. The Airlines’ local destinations have now reached 44

indicating increasing number of local tourists visiting Addis Ababa for

many reasons.

2.2 Demand Analysis

The demand for hotel accommodations and services are always there

as long as there is mobility of people. The playing factors for presence

of market for these are demography, economic and social realities.

 Changes in global and nationwide lifestyles, mobility and

consumption behaviors of people,

 Size and growth rate of global and national population,

 Increase in consumers’ income,

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 Presence of natural, cultural archeological,

 Direct export earnings generated by tourism in Ethiopia is

projected to continue increasing and tourism seems to be the

third source of export proceed after agriculture and industry as

spelled by the Ethiopian Government officials that laid

foundation for flourishing

of class rated hotels and restaurants, leisure industries,

ownership of latest air plans and services, mushrooming of tour

agents that reached over 200 firms,

 Changes in attitudes, tastes and consumption behaviors of

urban consumers triggering demand for tour and travel across

the country and worldwide,

 Greater influence of urbanization, education and exposure to

exposure and mass media,

 Expansion of accommodation entertainment facilities (star

ranked hotels, restaurants, night clubs, theatres, cinemas,

hospitals, schools, retail and wholesale trades, banking and

insurance companies, tour and ticket offices, hotels and

restaurants, education and health institutions), industries,

trades, public, private, no-government, and international

organizations for sure attract tourists and Diaspora to stay

prolonged periods in the city,

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  Active operation of the Ethiopian Airlines with its increasing

numbers of transit passengers, possession of latest cargo and

passenger airplanes and construction of multi-story African

Union conference facilities by the Chinese Government

supports.

 Government huge investment on physical infrastructures mainly

on roads and airfields in order to attract international tourists

and foreign direct investment and realization of the importance

and

contribution of tourism for enhancing national development and

growth, generation many jobs and curbing unemployment and

poverty,

 Issuing of visa on online and aggressive promotion of tourism

potential by available diplomatic missions, and

 Suitability of the climate and new government policy to pull

tourists, traders and investors from African, Asian, European and

American countries.

In view of the above facts, there will be promising market opportunities

to the envisaged hotel to be operated at Rwanda Area of Addis Ababa.

2.3. Tourism Sector

2.3.1 Global Scene

According to the World Tourism Organization (WTO), international

tourist saw robust growth in 2023 reaching about 1,286 million

24
international overnight visitors. This was an increase of 34% over

2022 and backed by pent-up demand and the lifting or relation of

travel restriction in many countries.

The same source also reported that the total revenues from tourism

(including passenger transport) was estimated at USD 1.6 trillion while

tourism direct gross product (TDGDP) climbed to USD 3.3 trillion in

2023. This amid continued financial and economic crises in Europe,

major political changes in the Middle East and North Africa and natural

disaster in Japan. The table below shows the top fifteen world tourist

destinations.

Table 2
World Tourism Rankings by Country in Fifteen
Total Tourist Arrivals in 2023
Regions Arrivals Receipts Receipt/

No. Countries (Million) (USD million Arrival (USD)

1 France Europe 100.00 68.6 686

2 Spain Europe 85.17 92.0 1,080
3 United States America 66.48 175.9 2,645
4 China Asia 65.00 N.A. N.A.
5 Italy Europe 57.25 55.9 976
6 Turkey Middle East 55.16 30.8 897
7 Mexico Americas 42.15 73.9 731
8 United Kingdom Europe 37.22 37.4 1,986
9 Germany Europe 34.80 22.3 1,074
10 Greece Europe 32.4 25.0 680
11 Austria Europe 30.91 36.0 808
12 Thailand Asia Pacific 28.15 29.7 1,055

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 13 Saudi Arabia Middle East 27.42 36.0 1,312
14 Japan Asia Pacific 25.07 20.2 993
15 Netherlands Europe 20.30 14.8 735
Source: World Tourism Organization

2.3.2 African Scene

Africa is the least beneficiary of global tourism industry. From 48
countries, only 16 countries attracted more than 200,000 tourists as
per the WTO. Moreover, there is significant difference in terms of
arrivals on one hand and receipts on the other hand among the major
tourist attracting countries in Africa.

Continent wise, tourism performance is very strong in North and South

Africa namely Morocco, Egypt, Tunisia and South Africa with 14.52,

11.66, 9.37 and 8.48 million tourist arrivals, respectively; strong in East

Africa; and weak in Sudan, Cape Verde, Mali, Niger, Chad, Congo, Sao

Tome Principe, Comoros, Eritrea, Ethiopia,, Madagascar and Uganda as

reported by WTO.

The travel and tourism market is projected to reach a revenue of USD

23.37 billion from 160 million tourists by 2024 with continued annual

growth of 7.4% resulting in a market volume of USD 35.5 billion by

2029. The largest market and beneficiary in the travel and tourism

industry are the hotels, whose market volume projected at USD 10.60

billion by 2024 as per the same source.

2.3.3 National Scene

26
The Growth and Transformation Plan (GTP) of the Democratic Republic

of Ethiopia gave an important place for tourism sector for its

contribution to national development and growth. The Hotel and

restaurant contribution to the gross domestic product (GDP) at market

value reached to Birr 2,346.64 billion according to the report of

Ethiopian National Bank. of since this is believed fsonce thie or its

contribution s Considered the tourism

2.4 Supply Analysis

2.4.1 Nationwide Hotels

According to the Tourism Ethiopia, presently there are 329 registered

and evaluated star rated hotels in the country. Of these, 9 are five

star, 37 are four star, 70 are three star, 73 are two star and 139 are

one star hotels. The numbers and classifications of these hotels are

shown in the following table.

Table 3
Star Rated Hotels in Different Regional States
Hotel Ranks

Region 9 4 3 2 1 Tota

Addis Ababa 9 21 34 33 53 150

Oromia 1 4 16 22 22 65

Amhara 0 5 14 8 23 50

Dire Dawa 0 1 0 1 7 9

Afar 0 0 1 0 2 3

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Bemi-Shangul Gumuz 0 0 0 1 2 3

Harar 0 0 0 0 3 3

Gambella 0 0 0 0 1 1

Tigray 0 1 2 4 11 18

SNNPR 0 5 3 4 15 27

Total 19 41 73 75 140 329

Source: Ethiopian Tourism

2.4.2 Addis Ababa Hotels

According to Ethiopian Tourism, presently there are 150 registered and

evaluated star rated hotels in the country. Of these, 9 are five star

with total of 1,044 bedrooms and 1,701 beds , 21 are four star with

total of 1,774 bedrooms and 2,063 beds, 34 are three star with total of

1,914 bedrooms and 1,701 beds, 33 are two star with total of 1,405

bedrooms and 1,836 beds and 53 are one star with 1614 bedrooms

and 2,178 hotels. The numbers and classifications of these hotels are

shown in the following table.

Table 4

List of Star Rated Hotels in Addis Ababa

No. Star Grade No. Hotels No. of Rooms No. of Beds

1 5 9 1,044 1,701

2 4 21 1,774 2,063

3 3 34 1,914 2,519

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 4 2 33 1,405 1,836

5 1 53 1,614 2,178

Total 150 7751 10297

Source: Ethiopian Tourism

2.4.3 Bole Micheal Area Hotels

Bole Micheal area located at Bole Sub-city, Woreda 01 of Addis Ababa

is a highly concentrated with hotels, pension and guest houses and

apartment houses. Currently, there are ten decent hotels with no lifts

operating at well over 80% occupancy rate and they are hardly

resembling the planned Shamsudin Hotel. As per market survey in the

area, the following are relatively good and preferred for the Somali

local and foreign tourists. Of these, almost all are Somali Diasporas and

local businessmen and patients.

Table 5
Existing Decent Hotels at Bole Michael Area of Addis Ababa
Rent/Bed Night
(Birr) Telephone
No. Name of Hotel Single Double No.
room Room
1 Ye Afoli International Hotel 011-6

610203

2 River View Luxury Apartment 0933550421

3 Filmon Guest House 011-6662229

4 AAran Hotel 0929-102507

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 5 Mubarak Hotel 011 6-

392727

6 Bole Safari Hotel 011-6392745

7 Darasalam Hotel 011-6

932600

5 Golis Hotel

6 OSOB Hotel & Restaurant 0911086231

7 TZ Hotel 0924-005477

8 Weka Addis Hotel 0937-793426

9 Nati Hotel

Source: Own Survey

According to survey, there are three planned hotels including the hotel

in concern that will come up with better qualities and facilities.

2.5 Target Markets

The major market targets for Shamsudin hotel are domestic and

international tourists, investors, businessmen, and Diaspora whose

mobility and numbers have been increasing from year to year as well

as officials working in surrounding cities and towns, trainers and

workshop attendants, and local and foreign contractors,

2.6 Market Prospect

The importance of hotels at Bole Michael area can be further evaluated

from being a transit and commercial center of Somali diasporas

travelling to different countries with the Ethiopian Airlines. Area is

30
serve as a terminal for private big buses that go to and coming from

the Somali Regional State cities, towns and villages for trade and

medical treatments and getting passports. Besides, the area is hitting

market, residential places for those a good number of Somalis waiting

for chance to travel overseas, chewing chat and taking traditional and

Oriental foods as well for Somalis working in non-government, public

and private organizations.

2.7 Competition

The hotel is will face a fair competition with two new hotels under

completion with a leverage of having latest lift. All the exist are old

and non has lift.

31
2.8 Market Strategies

The investor planned to focus on the following market strategies to

excel in the market.

 Provision of excellent accommodations with quality management

and elevator facilities which none hotel has,

 Coming up with new internal décor that appeal to customers,

 Ensuring maximum utilities value and customer services to the

hotel customers,

 Establish and promote cordial business relationships with

domestic, regional and international tour operators based on

common understanding and sharing benefits,

 Provide good customer service, security and prompt handling of

complaints.

2.9 Price Analysis

The prices for hotel accommodations and services are determined by

several factors such as location, qualities of the building and furnishing

works and materials and service standards, and intensity of

competition.

Table 6
Proposed Rental Charges
(Birr)
Price/Bed/night Rate/Bed/ night
No. Bedroom Types (In USD) (In Birr)
1 Standard 30 3,600
2 Executive Suites 40 4,800
3 Premium Suites 55 6,600

32
Considering the newness of the hotel, having parking space and lift,

and good location and service components, the proposed hotel room

charges are quite reasonable when compared with its competitors

elsewhere in Addis Ababa city.

33
 CHAPTER THREE

ORGANIZATION AND MANAGEMENT

3.1 Location and Site

The project is located at popularly known Bole Micheal area, a distance

from Rwanda Embassy and put under its custody a total plot area of

515 square meters sharing a built-up area of 425 square meters for the

purpose of constructing a well-planned four-star hotel building.

The site has not only easy access to basic utilities such as water,

electricity, sewerage system and asphalt roads, but also considered

the .

most ideal and strategic location for running hotel, pensions and

apartment housing businesses and having close proximity to Bole

International hotel and government and private offices, , restaurants

and recreational centers in the hub of growing Addis Ababa city.

The area noted for its being a high concentration site of Somali

Refugees, diasporas, patients, businessmen and transit passengers

coming all over the European, American, African, Asian, and Middle

Eastern countries. Because of this there are many banks and

insurances; forex offices; butcheries; barbers and beauty salons;

garment, cosmetic and electronic, foodstuffs and chat shops; clinics;

tea rooms and restaurants that all attract and suit Somalis, Muslem

Oromos and Yemen tourists with high mobility, trade and expending

34
cultures. The area ss also possesses a well-developed infrastructure

and is one of the vibrant commercial centers in Addis Ababa.

3.2 Physical Layout

The planned hotel building will have 2 basements, ground and 10

floors and terrace. The basements will provide adequate space for

parking of customers’ cars; ground floor for shops for commercial

operations; first floor serves as reception, restaurant and kitchen; and

second to tenth floors allotted accommodations with 54 standard

bedrooms, 27 executive suites, and 9 premium suites; while terrace

will used for placing laundry, water tanks and keeping important stuffs.

The hotel building was beautifully designed involving and will be built

by experienced and competent architect, and civil, electrical and

sanitary engineers of high integrity. The architect has paid serious

attentions to functionality, efficiency and aesthetic value of the

building without ignoring the air circulation, ventilation and intensity of

light required for the building. The construction cost of the building is

estimated at Birr 241,469,984.22.

3.3 Furniture and Furnishings

The building will be furnished with high quality local and imported

office, bedroom, restaurant and kitchen furniture. This is in desire to

render quality accommodations and clean environment for serving

foods and beverages to potential customers. The table below portrays

35
the list and cost of furniture and furnishing materials required for the

hotel.

Table 7
List and Cost of Furniture and Furnishings
(Birr)
No. Description Quantity Unit cost Total cost

I Office Furniture

Executive tables 3 60,000 180000

Executive chairs 3 30,000 90,000

Secretary table 1 15,000 15,000

Secretary chairs 1 6,000 6,000

Office tables 16 5,000 15,000

Office chairs 16 3,000 10,000

Guest chairs 32 2,000 64,000

Shelves 4 20,000 80,000

Coffee tables 5 2,000 10,000

Sub-total 81 470000

II Reception

Counter 1 150,000 150,000

Receptionist table 1 20,000 20,000

Receptionist chairs 1 10,000 10,000

Sofa sets 2 120,000 240,000

Key booth 1 15,000 15,000

36
 Stools 4 2,000 8,000

Sub-total 10 443000

III Kitchen

Shelves 3 40,000 120,000

Bench 2 20,000 40,000

Long tables 4 15,000 60,000

Chairs 5 2,000 10,000

Kitchen Cabinets 2 120,000 240,000

Sub-total 16 470000

IV Restaurant

Counter 1 80,000 80,000

Tables 50 4,000 200,000

Chairs 200 2,000 400,000

Shelves 4 30,000 120,000

Trolleys 4 5,000 20,000

Sub-total 259 820000

V Café

Display 1 60,000 60,000

Tables 10 5,000 50,000

Chairs 40 2,000 80,000

Sub-total 51 19000019

0000

37
 VI Bedrooms

Beds with mattresses 90 40,000 3,600,000

Side drawers 180 3,000 144,000

Desks 90 6,000 540,000

Cupboards 90 20,000 1,800,000

chairs 180 3,000 540,000

Carpets 90 2,000 180,000

Sub-total 720000

Total 1440000

The total cost of furniture and furnishing materials is estimated at Birr

9,197,000.00.

3.4 Machinery and Equipment

The project requires the following machinery and equipment to provide

necessary hotel services to consumers.

Table 8
List and Cost of Machinery and Equipment
(Birr)
No. Description Quantity Unit cost Total cost

I Office Equipment

Personal computers 5 60,000 300,000

Desk top computers 10 80,000 800,000

Printers 6 20,000 120,000

38
 UPS 15 10,000 150,000

Photo copiers 2 150,000 300,000

Safes 2 50,000 100,000

Metal cabinets 6 10,000 60,000

Sub-total 4646 1830000

II Reception

Television 54” 1 300,000 300,000

Computers 1 80,000 80,000

Printer 1 20,000 20,000

Telephone switch board 1 1,200,000 1,200,000

Trolleys 4 100,000 400,000

Sub-total 8 400000

III Kitchen & Restaurant

Heavy duty stoves 2 200,000 400,000

Deep freezers 3 120,000 360,000

Refrigerators 2 60,000 160,000

Mincer 4 30,000 120,000

Food processor 4 40,000 160,000

Juicers 4 10,000 40,000

Pans 20 20,000 400,000

Cutleries 400 500 200,000

Glass wares 400 400 160,000

39
 Kitchen wares 20 3,000 60,000

Sub-total 859 2060000

IV Café

Coffee machines 2 400,000 800,000

Forks 600 50 30,000

Teas spoons 600 50 30,000

Spoons 600 50 30,000

Sub-total 1802 89000089

0000

V Bedrooms

Televisions 32” 90 40,000 3,600,000

Refrigerators 90 30,000 2,700,000

Kittles 90 600 54,000

Flower vas 90 300 27,000

Glasses 180 50 9,000

Dust pins 180 1,200 216,000

Sub-total 720 306000

VI General Purpose Equipment

Standby generator 1 1,500,000 1,500,000

Lighting system 1 300,000 300,000

Security system 1 1,200,000 1200,000

Sub-total 3 1500000

40
VII Miscellaneous 700,000

Total 17,086,00

41
3.5 Motor Vehicles

The hotel will require the following motor vehicles to execute its day-

to-day routines.

Table 9
Required Motor Vehicles
(Birr)
No. Description Quantity Unit cost Total cost

1 Manager’s car 1 2,600,000 2,600,000

2 Mini bus 2 2,850,000 2,850,000

3 Medium bus (coaster) 1 3,950,000 3,950,000

4 Land Cruiser 1 8,800,000 8,800,000

Total 5 182000001

8200000

3.6 Raw Materials and Inputs

The raw materials and inputs required in the course of running the

hotel project are foodstuffs, beverages, supplies, cleaning stuffs, and

consumables.

3.7 Utilities

The required utilities for smooth operation of the project are electricity,

water, accessible road and telephone. The site selected has easy

access to all these utilities. The total power required is about 80 kW. In

case of power interruption, the hotel is required to have standby

generator to provide light and run the machinery and equipment.

42
43
 3.8 Service Processes

The services processes involved entail recording reservation, receiving

and registering customers, providing rooms and required services such

foods, beverages, sauna, gym, etc. receiving and rectifying

complaints, seeing off the customers.

3.9 Project Capacity

The annual servicing capacity of the project is 27,000 bed nights at full

capacity. The hotel, however, assumed to start at 70% of its capacity

and this increases at 10% every year until 90% capacity is attained.

3.10 Project Implementation Schedule

The project implementation would take six months for completing the

on-going hotel project as shown in the following schedule.

Table 10
Project Implementation Schedule

No. Activities Months Yr. mo

F M A 2 3 A

1 Preparation of project proposal

2 Trade registration

2 Loan Processing

3 Building Construction (2 years)

4 Machinery Purchase (3 months)

44
5 Employee recruitment (one

month)

6 Machinery installation (one

month)

7 Office arrangement (one month)

8 Start of operation (2 days)

3.11 Environmental Impacts

The project does not have negative impacts that can affect the human

being, animal lives and vegetation existing in the project area. Rather,

the project will contribute to the aesthetic value of the surrounding

community in a number of ways. It will contribute to increase to the

national hotel accommodation capacity, job creation, development of

tourism industry, and blooming of handicrafts and micro enterprises.

There is nothing that comes out of the project in the processes of

cooking, water discharges and visit of visitors from different corners of

the country.

45
 CHAPTER FOUR

MANAGEMENT AND ORGANIZATION

4.1. Organization

The business is functionally organized with clear duties and

responsibilities for each organization, section or person. The hotel

structure typically includes the following core components. These are:

 Executive Management
 Administration and Finance
 Marketing and Sales
 Front Office Operations
 House Keeping
 Food and Beverage
 Engineering and maintenance
The main organs of the organization would be general manager, three

sections. The section heads will be responsible to the General Manger.

The section heads will be placed as per their qualification and interests

to efficiently execute their day-to-day works.

4.2 Management

The project is owned and managed by Shamsudin Abdullahi, 52 years

of age. He is an entrepreneur who passed his major life in American

while tiredly worked in transport operation and then management.

The promoter has the necessary educational qualification, adequate

46
experience and business insight to smoothly run the planned hotel

business.

Besides, the hotel will provide productive employment opportunities

for 54 citizens. The employees will be picked in the area based on their

qualifications, experiences and aptitudes.

Table 11
Human Resource Required
No. Positions No. of Monthly Annual Salary
Persons Salary/person
1 General manager 1 80,000 960,000
2 Administrator 1 60,000 720,000
3 Business developer 1 50,000 600,000
4 Electro mechanic 1 25,000 300,000
5 Office clerks 4 20,000 960,000
6 Accountant 1 30,000 360,000
7 Purchasers 2 20,000 480,000
8 Store keeper 1 10,000 120,000
9 Cashiers 2 15,000 360,000
10 Receptionists 2 15,000 360,000
11 Head waiters 2 10,000 240,000
12 Food and beverage officer 1 25,000 300,000
13 Head cooks 1 20,000 240,000
14 Assistant cooks 2 10,000 480,000
15 Coffee machine operators 2 6,000 144,000
16 Waitresses 10 5,000 600,000
17 Supervisor - housekeeping 2 6,000 144,000
18 Café workers 2 5,000 120,000
19 Cleaners 8 3,000 288,000
20 Drivers 3 5,000 180,000
20 Security head 1 5,000 60,000

47
 21 Guards 4 5,000 240,000
Total 54 8256000
CHAPTER FIVE

FINANCIAL ANALYSIS

5.1. Investment Capital

The total investment cost of the project is estimated at Birr 340.00

million. The breakdown of the investment is shown below: -

Table 12
Investment Capital
(Birr 000)
No. Asset Amount

1 Working Capital 15,400

2 Furniture and Furnishings 9,197

3 Machinery & Equipment 17,086

4 Building and civil works 241,470

5 Motor Vehicles 18,200

6 Land Leased cost 38,000

7 Pre-production cost 647

Total 38647

The main investment components are building and civil work, land

lease cost, motor vehicles and machinery and equipment which

48
together amounts Birr 314.756 million or about 92 percent of total

investment capita of the project.

49
5.2 Sources of Finance

The total amount of Birr 340.00 million will be generated from equity

capital of Birr 136.00 million and local bank loan of Birr 204.00 million.

The pattern of financing of the investment components is shown herein

below.

Table 13
Sources and Pattern of Finance
(Birr 000)
No. Asset Equity Loan Amount

1 Working Capital 15,400 0 15,400

2 Furniture and Furnishings 9,197 0 9,197

3 Machinery & Equipment 17,086 0 17,086

4 Building and civil works 55,670 185,80 241,470

5 Motor Vehicles 0 18,200 18,200

6 Land Leased cost 38,000 0 38,000

7 Pre-production cost 647 0 647

Total 136000 0 38647

5.3 Financial Results

Financial projections are made basing some realistic assumption,

accordingly project balance sheet, and income statement and cash

flow statement are shown as follows: -.

50
51
5.3.1 Net Worth

The initial equity capital of Ato Shamsuddin Birr 136.00 million will

increase to Birr 333.885 million in the fifth year and Birr 604.616

million by the end of tenth year.

5.3.2 Profitability

The project is found out to be profitable throughout its life span. It is

expected to register a net profit of Birr 25.927 million rights from the

start of its commercial operation. This amount is expected to gradually

increase to Birr 55.374 million in the fifth year and Birr 62.468 million

by end of the tenth year. The average annual profit during the project

life would be in the range of Birr 51.115 million.

5.3.3 Liquidity

The project cash flow statement indicates that the project will not face

liquidity problem. It will have modest cumulative net cash inflows of

Birr 58.349 million in the beginning year. This amount will steadily

grow to Birr 214.395 million by the end of the fifth year and Birr

468.967 million by the end of tenth year. This, therefore, show

business ability to meet its financial obligations. Besides, it will

undertake future expansion program from its own internally generated

fund.

5.3.4 Net Present Value

52
The computation of Net Present Value (NPV) of the hotel project is Birr

434.435 million.

5.3.5 Financial Internal Rate of Return

The computed after tax financial internal rate of return of the project is

turned to be 21%. This is well above the prevailing cost of capital

charged by private and public banks for commercially sound and

economically viable development projects of this kind.

5.3.6 Payback Period

The projected financial statement confirmed that the project will

recoup its total investment capital of Birr 340.00 million in about 6.2

years’ time.

53
 Schedule 1
Shamsudin Hotel Project

Financial Assumptions

1. Annual working days -365

2. End of fiscal year - June 30, ---

3. Service Capacity Annual Bed Night - 32,850 Bed Night

4. Revenue centers and expected Annual income

No. Revenue center No. of Unit Annual
rooms price Income (Birr)
1 Commercial Space (80%) 720m2 /800m2 6,912,000
/month
1 Rentable Rooms

1.1 Standard rooms 54 3,600 70,956,000

1.2 Executive Suites 27 4,800 47,304,000

1.3 Premium Suites 9 6,600 21,681,000

Sub-total 90 146853000

2 Food stuffs (% of room 9% 12,594,690

income)

3 Beverages (% of room 6% 8,396,460

income)

Sub-Total 314697150

Total 167,844,15

5. Capacity utilization and Annual Income

Year Utilization rate Annual Income
(%)

54
 2027 70 117,490,905
2028 80 134,275,320
2029 90 151,059,735
2030-2034 100 167,844,150

6. Room, Food and Beverage Materials costs at Full Capacity –

No. Revenue center % of Income Material Cost

Income (Birr 000) (Birr 000)
1 Rooms 10% 0 13,941

2 Food stuffs 65% 12,595 1,511

3 Beverages 25% 8,396 8,187

Total 23639

7. Material Costs at Different Capacities

Year Capacity Utilization (%) Cost of Materials

2027 70 16,547

2028 80 18,911

2029 90 21,275

2030-2034 100 23,639

8. Wages and Salaries - Birr 8,256,000/year increasing at 5% p.a.

9. Provident fund - 15% of wages and salaries

10. Power and light -Birr 800,000/year

11. Fuel and Lubricants - Birr 500,000/year

12. Cleaning Stuffs -Birr 250,000/Year

55
13. Supplies -Birr 150,000/year

14. Repair & Maintenance -Birr 100,000/year

15. Insurance -Birr 800,000/year

16. Utilities - Birr 350,000/year

17. Uniforms -Birr 240,000/year

18. Audit & Legal fees -Birr 200,000/year

19. Advertising - Birr 600,000/Year

20. Depreciation & Amortization

Original Depr. Annual

No. Asset Cost(000 Rate (%) Depreciation

1 Furniture & Furnishings 9,197 10 920

2 Machinery & Equipment 17,086 10 1,709

3 Building and civil works 241,470 5 12,074

4 Motor Vehicles 18,200 20 3,640

5 Leased land 38,000 2.5 950

6 Pre-production cost 647 20 129

Total 38647 19422

21. Miscellaneous -Birr 100,000 /year

22. Project Life - 10 years

23. Loan Repayment Period - 8 years

24. Interest - 12.5% p.a.

56
25. Value Added Tax is beard by Customers -15%

26. Profit Tax -35% of Profit before tax

27. Withdrawals - Birr 2,400,000/year

57