Ethiopia Tourism Potential

 

As a service sector, tourism can provide a large number of jobs, especially for women and young people. In the medium term, the Ethiopian Government aims at making tourism one of the leading sectors of its economy and one of the top-five tourism destinations in Africa (Ministry of Culture and Tourism, MoCT).  The increase in global tourist travel, especially from a number of emerging market economies with a growing middle class, together with growing interest in tourism in Africa certainly offer opportunities for Ethiopia.  On the other hand, tourism is generally vulnerable to geopolitical disturbances and political insecurity in the region. Therefore, while the tourism industry can be an important element in the overall process of structural transformation, its development should be well-balanced with that of the manufacturing sectors, in order to avoid over-reliance on foreign exchange income from tourism.

In 2015, the tourism sector accounted for about 34 per cent of Ethiopia’s exports of goods and services, for 4.2 per cent of its GDP and for 3.8 per cent of its formal employment.  There is thus, already a relatively solid base for further scaling up tourism in Ethiopia. Ethiopia’s tourism expansion efforts meet with favourable trends and dynamics in global tourism, and successful results have been obtained in this country in recent years. Further progress, as planned in the 2nd Ethiopia’s Growth Transformation Plan (GTP II), will have to be achieved in a highly competitive environment at both the global and regional levels. This will require a great deal of private capital as well as substantial public expenditure for both investment (tourism infrastructure, facilities, new attractions, site preservation) and operational support.

Tourism Capacity

In recent years, Ethiopia has considerably increased its overall capacity to host foreign guests. According to data from the MoCT the number of rooms of hotels and similar establishments grew at an annual average rate of 8.5 percent between 2008 and 2013, and accommodation rooms of all kinds by 10.3 percent between 2009 and 2012. Today, there are over 595 hotels, with 19,998 rooms. However, it is important to recognize that it is not only the number of accommodations that matters, but also the extent to which these respond to the exigencies of travellers and to international quality standards. Moreover, the capacity to attract tourists to Ethiopia also depends on the availability of accommodation across the country; at present, two thirds of all star-designated hotels are in Addis-Ababa.

After a modest attempt to streamline the granting of licenses to tour operators, the number of licensed tour operators in Ethiopia has risen to over 300, with about 2,500 employees. The quality of the services provided by these licensed operators is again at least equally as important as their number and some efforts there seem to still be expected.

As in other sectors, foreign direct investment (FDI) can make an important contribution to Ethiopia’s capacity of providing tourist services, in terms of both quantity and quality. So far, FDI has made a smaller contribution to the expansion of the country’s tourism industry than it has in the Ethiopian manufacturing sector.Up to date, only four[1] international hotel chains are present in Ethiopia, and all these hotels are in Addis Ababa. Recently HILTON has planned to build another hotel of 190 rooms for 2018 in Awassa, Southern region major city located 285Km South of Addis Ababa.

In terms of infrastructure needed for a well-functioning tourism, Ethiopia has made, and continues to make, rapid progress. Access to the country is ensured by air connection to the capital. But with about 20 regional airports, Ethiopia also has the highest density of domestic flight network in Africa, and this makes air travel also by far the most convenient mode of tourist transport within the country, at affordable prices. Ethiopia has also made major advances in expanding its railway [2] and road networks. The density of the latter has tripled in the thirteen years between 2000/01 and 2013/14, which is a great achievement by any measure. Moreover, the proportion of areas more than 5 km away from all-weather roads declined from 64.1 percent in 2011/12 to 40.5 percent in 2013/14.

Although theses infrastructures may not have been built primarily with a view of enhancing the tourism infrastructure, its contribution to the tourism industry expansion is undeniable.

Tourism performance

Ethiopia’s overall competitiveness as a tourist destination has improved in recent years. However, it continues to lag behind a good number of other countries, including in Africa. For example, in the Travel and Tourism Competitiveness Index of the World Economic Forum, which measures a country’s readiness to attract tourists against 14 criteria, in 2015 Ethiopia only ranked 118th among the 141 countries included in Index(table 1).[3]  Nevertheless, the expansion of tourism in Ethiopia has been quite remarkable in recent years.

 

Table 1:

Ethiopia’s Ranking

in the Travel and Tourism Competitiveness Index, 2009 and 2015

Indicator Ranking Direction of change
2015

(141 countries)

2009

(133 countries)

Natural Resources 63 36 ↘↘
Price Competitiveness in Travel and Tourism 69 15 ↘↘
Environmental Sustainability 76 109 ↗↗
Cultural Resources 79 83
Safety and Security 80 117 ↗↗
Air Transport Infrastructure 90 97
Affinity for Tourism / International Openness 93 121 ↗↗
Health and Hygiene 104 133 ↗↗
Policy Regulations / Business Environment 116 100
Prioritization of Travel and Tourism 118 111
Ground Transport Infrastructure 123 117
Human Resources 126 124
Tourism Infrastructure 134 122
ICT Infrastructure 137 132
Overall ranking 118 123
Overall ranking among African countries 19 (out of 36) 22 (out of 31)
Overall ranking among sub-Saharan countries 16 (out of 31) 15 (out of 24)
Overall ranking among LDCs 11 (out of 26) 12 (out of 19)
Note: The number and composition of countries included in the ranking has changed between the two comparator years. For more information about the methodology, see the source.

a) excl. South Africa

Source: World Economic Forum, Travel and Tourism Competitiveness Index, 2009, 2015

 

 

 

 

The first Growth Transformation Plan (GTP I) had established ambitious targets for the tourism sector during the period 2010 – 2015. These were not fully attained, but to a much larger extent than the export targets set for the other prioritised sectors.Tourism arrivals were expected to more than double during this period, to reach one million in 2015. The figure for 2014 indicates 770,000 (table 2), an increase of more than the double compared to 2008, with tourist arrivals for holiday purposes registering an impressive growth (more than 170 per cent). This is also reflected in the rapid increase in visits to Ethiopia’s protected areas (World Bank 2012: 30-31). Compared to 2013, the number of visitors grew by 13%. As a result of a continued growth, total tourism arrivals are expected to be confirmed as close to reach 900,000 in 2015.

European visitors have increased by 72 % between 2008 and 2014 while Americas (mainly USA) have even grown by as much as 160 %. These 2 markets undoubtedly represent the main target tourism markets for Ethiopia, with China also growing fast.

Revenue from tourism has grown even faster than the number of tourist arrivals (table 2). In 2012, it amounted to US$ 1,980 million, 77 per cent more than in 2009, and it reached US$ 2,880 million in 2014, which is already surpassing the GTP I target for 2015. Revenue from domestically provided services for foreign travellers, i.e. accommodation, restaurants, domestic passenger transport and other tourist services, rose by 85 per cent between 2009 and 2012 to US$ 607 million. Yet, more than two thirds of income from tourism in 2012 was generated by international inbound passenger transport, reflecting the key role of the Ethiopian Airlines company in tourism development.

 

Table 2:

Tourist arrivals and revenue, 2008 – 2014

 

2008 2009 2010 2011 2012 2013 2014
All arrivals(thousands) 330 427 468 523 597 681 770
of which:  arrivals by air 268 371 403 450 513 586 n.a
  by origin of traveller:  
Africa 116 150 140 160 169 217 232
Americas 58 78 95 96 121 130 150
East Asia and the Pacific 14 31 39 36 52 52 61
Europe 134 119 137 163 181 201 231
Middle East 7 37 42 47 51 59 68
South Asia 1 12 15 21 22 23 28
  by purpose of travel:  
Holidays / leisure 99 138 171 183 191 232 269
Other personal purposes 166 170 183 199 217 261 287
Business and professional 65 119 114 141 188 189 214
Revenue (US$ million) 765 1119 1434 1998 1980 2551 2884
by type:
Travel 283 329 522 758 607 n.a. n.a.
Passenger transport 482 790 912 1240 1373 n.a. n.a.
  Source:  UNWTO, e-library, November 2015[4]  

 

The work of the World Bank in its Ethiopian Sustainable Tourism Development Project (ESTDP Feb 2010- Dec 2015) should be commended for offering for the first time a holistic development approach including roads construction, destination/site development, capacity building of tourism actors, visitors’ service enhancement, product development, and marketing.

All those known bottlenecks have been attempted to be addressed in three prime tourist destinations, namely Axum, Lalibela, and Addis Ababa, with the possibility of developing other secondary destinations in the country.

More and better education and training will be necessary to improve the level of hospitality services and make sure that there is availability of manpower for the new investments to come, both in quantity and quality.

Some exchange programmes with European/American universities, exposing the young professionals to foreign experiences and bringing some international expertise will certainly be key in that respect.

Qualified by Ethiopian tourism actors as hopeful moves, two new tourism entities – the Tourism Transformation Council (ETTC) and the Ethiopian Tourism Organisation (ETO) (see below) –were recently created and charged specifically of addressing those issues of education and training, in addition to product development, strengthening of existing attractions and development of new ones (especially for families), marketing, and  the effectiveness of collaboration among tourism actors, with sizeable challenges for 2016 and beyond.

Ethiopia’s election for the World’s Best Tourism Destination Award 2015 by the European Council for Tourism and Trade represents however a major success for the Ethiopian government in its effort to promote the country. The choice of Ethiopia suggests that the country’s potential for tourism, while in competition with other countries, is increasingly being recognized internationally.

Investment in star-designated hotels (including resort hotels), motels, lodges and restaurants and tour operations is open for foreign investors (regulation 270/2012).  However, FDI in the tourism sector does not enjoy the same advantages as in other sectors. There is an import-duty exemption for imports of capital goods and spare parts (with a value of up to 15% of the value of the initially imported capital goods), but this exemption is granted for a maximum of five years, whereas there is no such time limit for investments in manufacturing and agriculture. Moreover, for hospitality establishments, including star-designated hotels and establishments in remote and protected areas, there is no temporary exemption from corporate income tax.  This exemption would however be a much desired incentive to boost quality hotel development and increase tourist attraction in those naturally and culturally endowed regions.

By mid-2015 there were 5322 licensed hotel and restaurant projects, of which around 5 percent were FDI projects.  Of these licensed projects 823 (or 9.8%) were in the process of implementation or already fully implemented. Among these, the share of FDI is considerably higher (20.5 per cent), suggesting that, for various reasons, foreign investors are more effective in implementing their projects than potential domestic investors.

The Ethiopian Tourism Transformation Council (ETTC) and its secretariat, the Ethiopian Tourism Organization (ETO) were established in March 2014 to provide strategic support to the tourism sector through capacity building on destination management and product development. The ETTC reports directly to the Prime Minister. Their tasks also include to identify and close pressing value-chain gaps, while working closely and jointly with the private sector and the international tourism community.

In the past, coordination among different stakeholders in the Ethiopian tourism sector has been less than optimal. For example, local governments from different regions have been quarrelling over the settlement of communities in national parks and the use of the parks; tour guides accompanying tourists from Addis Ababa to the regions enter into disagreements with local tour guides as to who is legitimate to show tourists around; and the church has taken decisions of great interest for tourism, such as fees for visiting church heritages, without proper consultation with other stakeholders. Over time, the activities of the ETTC and its supportive bodies may lead to improvements of coordination among the different actors in Ethiopian tourism. Fifteen professional and trade associations engaged in tourism do also conduct regular consultative meetings through the coordination of the MoCT.

In addition to the policies contained in that 2009 document, it would also be advisable to elaborate and put in place a public policy for the redistribution of tourism revenues to ensure sites preservation and conservation.

Tourism ambitions and planning

The Second Growth and Transformation Plan (GTP II, 2016-2020) projects that by 2020 Ethiopia will collect 6 billion USD from 2.1 million tourists for tourism to reach 5% contribution to the GDP.

With the Ethiopian government now throwing its full weight behind tourism, the plan indicates the will to make Ethiopia a top five tourist destination in Africa by 2020, starting from a current position beyond the top ten behind strong leaders like Morocco, South Africa, and Egypt.

Now, according to the top ten African destination rankings issued by the UNWTO in 2013, the fifth place was occupied by Algeria with 2.7 million arrivals.

Hence, Ethiopia’s ambition to reach the fifth position in five years from now looks quite challenging, with an aimed number of arrivals that is still 600,000 below the achievement of the fifth ranked country in 2013.

The ETO has also been setting targets in GTP II with regards to destination management, marketing, and capacity building for tourism services.

As a result, 20,000 people who indirectly or directly give services to tourists in governmental, non-governmental and private sector organisations are expected to be trained over the next five years.

The ETO also plans to upgrade 15 destinations to world-class standards and to promote the Ethiopian National Tourism Brand to 250 million people, using all promotional mixes and outlets.

To spearhead the GTP II, the Ethiopian Sustainable Tourism Master Plan (STMP) aims to establish a national framework for sustainable tourism development with a view to contributing to socio-economic development and poverty alleviation. The STMP therefore sets out 10 Strategic Pillars, priority projects, and activities in a long-term implementation framework covering 2015–2025, for a total budget of ETB 5,3 billion (Ethiopian Birr), which roughly corresponds to USD 250 M.

List of abbreviations

 

AFDB                   African Development Bank

ECTT                    European Council for Tourism and Trade

ETO                     Ethiopian Tourism Organisation

ESTDP                 Ethiopian Sustainable Tourism Development Project

ETTC                    Ethiopian Tourism Transformation Council

FDI                       Foreign Direct Investment

GTP                      Growth Transformation Plan

MoCT                  Ministry of Culture and Tourism

STMP                   Sustainable Tourism Master Plan

 

 

 

REFERENCES

AfDB (African Development Bank) (2013a, 2014). African Tourism Monitor.

African Development Bank (2013b). Visa Restrictions and Economic consequences in Africa (blog), 10 June. At: http://www.afdb.org/en/blogs/afdb-championing-inclusive-growth-across-africa/post/visa-restrictions-and-economic-consequences-in-africa-11987/

MoCT (Ministry of Culture and Tourism) (2009). Tourism Development Policy.Addis Ababa, August.

MoCT (Ministry of Culture and Tourism) (various issues). Tourism Statistics Bulletin.

MoCT (Ministry of Culture and Tourism) Sustainable Tourism Master Plan, Final Draft, April 2015.

The Eminence. All Eyes on Ethiopia. 2015 World’s Best Tourist Destination. Issue 11. August2015.

UNWTO (United Nations World Tourism Organization) (2013). Annual Report 2013.

UNWTO (United Nations World Tourism Organization) (2015). e-Library, November 2015.

World Bank (2012). Ethiopia’s Tourism Sector: Strategic Paths to Competitiveness and Job Creation. Washington, D.C., October.

World Economic Forum (2009, 2015). The Travel & Tourism Competitiveness Report. Geneva.

[1]The four hotels are HILTON, SHERATON, RADISSON, and MARRIOT.  INTERCONTINENTAL uses the name of the international hotel without a proper prior authorization from the hotel chain and hence cannot be considered as international hotel.

[2] The Ethiopian government has built in Addis Ababa and its suburbs the only existing sub-way infrastructure in Africa.

[3]It should be noted, though, that the publication of this index is primarily addressed at potential foreign investors and only partly reflects the perceptions of tourists. Moreover, several of the variables entering into the criteria of the index are arbitrary and cannot be measured quantitatively. However, the index may give however useful information for positioning Ethiopia in the international tourism landscape and help to identify areas in which progress has been achieved over time and others where improvements are particularly pressing.

[4]Data collected from UNWTO e-library were completed with more recent data obtained from MoCT

 

Source

Fabrice Leclercq

 

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