Ethiopia - Addis Ababa
With a “double-digit” GDP growth that is now something of an official mantra, Ethiopia has become the fastest growing economy in the continent and is commonly referred to as “the capital of Africa” for its political, diplomatic and commercial significance.
The increasing number of inbound tourists along with the new supply of offices in the market enhances a significant demand for international standard hotels, which remains for the most unsatisfied. In 2015, 1 million travelers could not find accommodation up to their standards in the city and there will be 3 million in 2020 if new hotels are not built, according to Awash International Bank. In addition, the large diplomatic community and the political activity in Addis Ababa will push MICE activity up significantly.
Addis Ababa concentrates 80% of the Ethiopian's hotel supply much of which is outdated and of poor quality. However, the strong economic fundamentals along with the improvement of the infrastructure attract an increasing number of international hotel groups which will account for 46% of the new supply in the next few years.
Occupancy and rates have been steady in recent years. Addis Ababa experienced occupancy regularly up to 80% and the country has the highest room rate in the continent, according to a survey carried out by STR Global in late 2015.
Hotels' values in Addis-Ababa have been consistent over recent years, rising steadily. They were approximately twice the value of the African Average in 2015. Given the existing level of unsatisfied demand, the new supply is not likely to affect the long term occupancy, and the new branded hotel will push the average rate up, positively impacting the RevPAR. Therefore, value should be sustainable.
The substantial amount of rooms coming into Addis Ababa impacted the occupancy and rate levels in the capital in 2016. Whilst the demand grew by 8%, occupancy grew by only 4 points and the average rate barely followed inflation. However, values reached a peak at US$356,000 per room, proving the investors' confidence and the potential of the market to grow significantly.