If one was to have been a tourist visiting Addis Abeba this past week, it was probably the wrong time to do as such. With high price surges, most are bound to feel the brute force of hotel economics.
The end of January brings road closures and heightened security due to the arrival of heads of state and officials from member states of the African Union (AU). The annual AU summit injects life into Addis Abeba as the continent’s leaders, politicians, and media fill the growing supply of hotel rooms.
This presents an ideal opportunity for properties to maximise their room revenues. For seven days, it will be next to impossible to find a room at any of the city’s internationally-branded or prominent hotels. In the rare case one finds a vacant room, it will not do to be alarmed when expected to pay top dollar for it.
To paint a more vivid picture, the Sheraton Addis Hotel, a 293-room luxury five-star hotel, is fully-booked for the entire eight nights of the duration of the summit. Its lowest-priced room goes for a hefty rate of over 1,100 dollars a night – a three-fold increase than on the days before or after the event.
At this price, one can purchase an economy class ticket from Addis Abeba to New York City with Ethiopian Airlines. With the equivalent, one can rent a 20sqm office in the Bole area for up to seven months.
It is a widespread practice for hotels to set higher rates during popular events due to high demand. This is evident during exhibitions, conferences, or major sporting events. A prime example is the Super Bowl, the annual championship game of the National Football League (NFL) – the United States’ largest sporting event – where thousands of fans descend on a host city, driving up occupancy rates and revenue per available room (RevPAR).
RevPAR is a performance metric used in the hotel industry. It is calculated by multiplying a hotel’s average daily rate (ADR) by its occupancy rate. Or it may also be calculated by dividing a hotel’s total room revenue by the total number of available rooms in a period.
Last year’s Super Bowl in Houston, Texas, helped the hotel market experience a 356pc year-on-year weekend RevPAR growth, according to a report from Smith Travel Research (STR), a research company that tracks supply and demand data for the global hotel industry. Expect to see a similar trend next Sunday, February 4th, in Minneapolis, Minnesota, for the next Super Bowl.
The additional revenues generated from rate and occupancy increases during the AU summit, or other large-scale events, will help Addis Abeba’s hotels offset losses incurred during barren periods of low occupancy, as well as, an increase in tourism income for the city. As a result, the Ethiopian government has considered meetings, incentives, conventions, and events (MICE) to be a solution to drive tourism.
The International Congress and Convention Association (ICCA) defines MICE as a type of tourism in which large groups, usually planned well in advance, are brought together for a purpose by organisations.
Last year, Addis Ababa hosted the 29th AU Summit, the Confederation of African Football (CAF) congress, the African Association of Chartered Certified Accountants (ACCA) African Members Convention and the Hotel Show Africa trade show to name a few. These events have attracted thousands of visitors to the capital.
However, Addis Abeba only has a few locations that can accommodate large conferences. These venues are the UNECA and AU conference facilities, with capacities of up to no more than 1,800 and 2,500 respectively. To attract international organisers, though, more venues with larger capacities with superior facilities are required.
With construction commencing on the proposed Addis-Africa International Convention & Exhibition Centre (AAICEC) – a venue that will lie on about 11,000sqm of land featuring a conference hall, two exhibition centres, an amphitheater, and a four-star hotel – will help alleviate the stress on current venues, as well as, improve the opportunity to host large events.
In East Africa, Rwanda is amongst the first countries to establish a Convention Bureau and it has quickly begun shaping the market. The Convention Bureau links the demand for business tourism services with the supply and promotes Rwanda as a viable meeting destination.
Furthermore, the 2016 ICCA business tourism rankings for the continent has listed Rwanda, with 18 meetings hosted, third after South Africa with 127, and Morocco with 37 in terms of the number of meetings hosted. Ethiopia is listed in seventh place with 12. Yet, Addis Abeba is supposed to be the political capital of Africa due to its regional political status.
The appeal of their destinations allows for participants to prolong their stay and explore the country, thus increasing tourism receipts and creating more job opportunities. Nonetheless, there are still factors that go into the decision-making process of selecting a destination to host an event. These factors include sufficient room supply, competitive rates, creative package incentives, smooth visa facilitation, seamless air connectivity, and guaranteed safety.
Regarding air connectivity and visa facilitation, Ethiopia has the luxury of already transporting millions of passengers every year via Ethiopian Airlines. The strategic location of Addis Abeba in respect to Africa, the Middle East, Europe, and Asia makes it a convenient place for business travellers. Besides, the ability to apply for visas electronically was introduced last year. If not that, then travellers from dozens of countries can obtain one on arrival. These improvements have lifted the burden of sending physical applications.
In terms of upcoming room supply, Addis Abeba currently has 20 international chain hotels under-development that will add 3,819 rooms, according to W-Hospitality’s 2017 Hotel Chain Development Pipeline report. This appeal has attracted the interest of international chains to maximise their market share in Ethiopia. Management contracts with Four Points by Sheraton, Hyatt, Wyndham, and the Park Inn have already been agreed upon.
These figures have not taken into consideration the locally-owned, independent hotels in the pipeline to enter the market. Ethiopian Airlines’ star-rated hotels will, for instance, add 1,110 rooms to the city’s room supply within the next few years.
But how will we be able to fill these hotel rooms and what kind of events can be facilitated in Ethiopia?
Firstly, major sporting events can be a massive boost for hotels of the host city. The aspiration of hosting the African Cup of Nations (AFCON) or African Championships in Athletics will be within reach once the 60,000-seater Adey Abeba Stadium and other stadiums throughout the country are completed.
Secondly, based on trends in foreign markets from the ICCA (2016), association meetings, such as international governmental and non-governmental organisations, organise approximately 23,000 different meetings globally on a regular basis. This could be a target market to focus on for the Ethiopian market.
Pushing popular destinations within Ethiopia that can accommodate MICE business, like Addis Abeba and Bishoftu, it will be possible to attract more event organisers to the country. The benefit of creating a structured Convention Bureau would also help develop and market a destination with a focus on conferences and meetings.
Who knows, in time, the World Expo might be within sight!
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