Emirates is both an inspiration and a competitor for Ethiopian Airlines, which seeks to benefit from a major government drive to promote investment in tourism.
There is no shortage of customers flowing in and out of Addis Ababa’s Boston Day Spa.
When owner the Boston Day Spa Tadiwos Belete built it 12 years ago, he was a lonely voice promoting Ethiopia as a tourism destination.
Today, hotels and spas are mushrooming all over the capital, but some old preconceptions persist.
“My biggest challenge is to convince the rest of the world to visit. Ethiopia is still known for hunger and starvation,” says Belete, now one of country’s most celebrated hospitality entrepreneurs.
Ethiopia’s tourism sector has much to offer.
Between its nine UNESCO World Heritage Sites, including the 12th century monolithic rock-cut churches at Lalibela, the breathtaking Simien Mountains in the north and the Omo Valley in the south, Ethiopia is endowed with a combination of cultural heritage sites and natural beauty that is unequaled on the continent.
Despite these treasures, the East African country attracted just 596,000 tourists in 2012, putting it in 15th place on the continent. Things are changing though.
In 2014, the Ethiopian Tourism Organization estimated arrivals at more than 800,000. The country’s ambitious Growth and Transformation Plan includes the goal of boosting that number to more than one million by the end of 2015.
With Africa expected to be the second-fastest-growing continent in economic terms in 2015, it comes as no surprise that Belete expects the demand for tourism in Ethiopia to be fueled not so much by Western travelers but by the African middle classes.
“Intra-continental tourism in Africa is growing. Our Nigerian and Congolese brothers are coming to Ethiopia, for example on a stopover en route to China,” Belete explains.
African airline managers are well aware of the demand for intra-African air travel, but few have been able to tap the potential.
Ethiopian Airlines is making progress. Opening up new routes on the continent and linking them to emerging markets in China and India has translated into growth rates of 20% per year.
Going forward, the government-owned carrier, already the biggest airline in Africa in terms of revenue and profit, plans to triple the number of passengers from six million today to 18 million by 2025.
Ethiopian Airlines chief executive officer Tewolde GebreMariam concedes that growing from a larger base will be more challenging, but he is confident that his airline is well positioned.
“We have a competitive advantage in terms of labor cost, and we are self-sufficient in sourcing professionals through our own aviation academy,” he explains.
Ethiopian is also buying Boeing’s long-haul Dreamliner aircrafts, eyeing stakes in other African carriers and aiming to become a diversified aviation group by 2025.
All of this is enshrined in the Growth and Transformation Plan, which could help to transform Ethiopia into a middle-income country within a decade.
Much of this sounds reminiscent of the early days of Emirates, which is also a main competitor, GebreMariam admits.
The Dubai-based airline built its success on a strategic location coupled with a global network of routes, including 27 destinations in Africa.
Competition is likely to intensify as Emirates continues to add more destinations in Africa.
The feasibility of creating a regional hub in Africa similar to the one in Dubai is difficult to gauge in the absence of reliable historic data, but experts argue that offering new routes will create new demand.
Ethiopia’s geographical location places it ahead of competitors such as South African Airlines.
But as with many African countries, Ethiopia lacks the capital of the oil-rich Gulf states to invest in world-class airports.
“You have to have very high-quality infrastructure to be successful as a hub, and generally there is a lot of room for improvement on this. A few African airlines have the potential, and I think we will see some developments here very soon,” says Bruno Boucher, head of market for North, West and Central Africa at Lufthansa Consulting.
With the current terminal at Bole International Airport almost at full capacity, an expansion program is underway that should allow Bole to receive more than 20 million passengers per year, up from seven million currently.
The government argues that a new and more modern airport will be needed to support Ethiopian Airlines’ expansion.
However, it is only one of many pressing large-scale infrastructure projects already stretching the government’s capacity and finances.
Another factor slowing down the growth of air traffic is the long outstanding liberalization of African skies set out in the 1999 Yamoussoukro Declaration.
A recent study outlining the economic benefits of the agreement suggests that lifting current restrictions between 12 countries could generate 4.9 million new passengers per year.
While Ethiopia has been relatively quick in liberalizing its airspace, it remains protective of other parts of the economy, most notably the financial sector.
This has made some foreign investors wary of pumping their money into big tourism projects. Moreover, the underdeveloped banking system has hampered broad-based, local investments in tourism.
Recognizing this, the government now wants to provide incentives to tourism entrepreneurs, foreign and local alike.
Solomon Tadesse, chief executive of the newly established Ethiopian Tourism Organization, says that investors from the Gulf and the United States “have shown great interest” in hospitality projects, although few discussions have been converted to actual deals.
The government also plans to offer better access to financing to Ethiopians keen on building hotels outside of Addis Ababa.
But capital is only one part of the equation.
Tadesse says that “raising the capacity and the standard of the offering” is another challenge of the nascent sector.
This could thwart Ethiopia’s ability to lure less adventurous travelers as well as long-haul passengers away from competitors such as Emirates.
Belete, however, argues that it is just a matter of time.
His new project features a pan-African themed hotel with 54 presidential suites, each to be decorated by a different African leader ac- cording to their traditional style.
The hospitality magnate says he will replicate the concept in other African capitals.
“People are asking for African service and hospitality. We usu- ally import concepts, but we never export. I want to be the first one to do that,” he says.
With the necessary financing, quality and proper execution, that may just be possible.
Source: The Africa Report