PROJECT PROPOSAL

ON SHAGER GELAN SUB -CITY

Hotel AND RESORT BUILD

Promoter: - BILEN MICRO ENTERPRISE

April, 2023

Shager, Ethiopia
 TABLE OF CONTENTS

I. EXECUTIVE SUMMARY

1. INTRODUCTION………...................................................................................................…..4
2. Background…………………..……………………………………………………………..…5
2.1 The Industry of the Project……………………………………………………..……........5
2.2 The project Sites..................................................................................................................6
2.3 Project Benefits/Project Justification………………………………………………..….…9
2.4 The Promoter…………………………………………………..………………….…......10
3. General Description of the Area………………………………………………………...…...10
3.1 Location…………………………………………………………..……………………...10
3.2 Topography…………………………………………………………………..…...……...10
3.3 Soil Type…………………………………………………………………..……………..11
3.4 Economic Activity………………………………………………………………......…...11
4. The project description……………………………………………………………………....11
4.2 Object of the Project…………………………………………………………………......11
4.3 Technology and Techniques to be used……………………………………………….....12
4.4 Service Provision capacity and capacity Utilization…………………………………......13
5. Market study and plant capacity
5.1 International and Domestic demand for Hotel services………………………………….13
6. Land use plan and action plan……………………………………………………………..…15
6.1 Land Use Plan……………………………………………………………...…….………15
7. Organization and management………………………………………………………...….…16
7.1 Organizational structure …………………………………………………………………16
8. Financial study………………………………………………………………………….……19
8.1 Project capital and sources of finances…………………………………………..………19
8.2 Initial working capital estimation of the project …………………………………...……22
8.3 Estimated costs of salary expense…………………………………………………...…...22
8.4 Revenue and Revenue projection…………………………………………………..……24
8.5 Depreciation of the Fixed Assets……………………………………………………...…25
8.6 Basic Assumption’s ……………………………………………………………...…...…26
9. Financial Analysis……………………………………………………………………………27
10. Brief Environmental Impact Assessment (EIA) …………………………………………….28
Anne x I: 4-Star International Hotel Project Action Plan/ Gantt chart………………………29
EXECUTIVE SUMMARY

1. Project title – Hotel and Resort building

2. Promoter – BILEN MICRO ENTERPRISE
3. Project Location:

 Oromia Regional State

 Shager city Gelan sub-city
4. Total Proposed Land Area (M2) = 5000m2
5. Employment Opportunity = 40 Per. and 60 tempi. Workers
6. Total Capital = Br. 5,000,000
a. Working Capital = Br. 1,500,000
b. Fixed Capital = Br. 3,500,000
c. Contingency (Lump sum) 10% = Br. 3,500,000
7. Source Fund
a. Own Equity (30%) = Br. 1,500,000
b. Bank loan (70%) =Br. 3,500,000

Hence, the project is feasible and important to be undertaken being the first of its kind in the sub-urban
area of the country having international quality and standard. Furthermore, the project would contribute
immensely to the development of tourism industry in particular and the country in general.
1. Introduction

I
n history of mankind and in no measure a particular country or society subdue itself to a humiliating
and grinding poverty as poverty is the indication of deprivation of basic necessities. Ethiopia, the
country with immense natural resource potential, is always cited as one of the home of the people on
the face of the earth stricken with famine, drought and poverty. What so ever the past and whether it was
desecrate or blessing, the existing situations in this country is the most important one. Today in Ethiopia
the gleaming hope for development is quite encouraging, the government policies concerning the private
investments are invigorating and to indicate some major steps taken the country in private investment
policy endeavors;

 Capital goods and building materials may be imported duty-free by star designated hotels and
international standard restaurants.
 Buses for tourist use may be imported duty free.
 Four-wheel-drive passenger vehicles of the Land Cruiser type may be imported duty-free subject to
the conditions that Five brand new vehicles must be purchased within a period of one year in a
maximum of two consignments.
 Any investor may employ duly qualified expatriate experts required for the operation of the business
and so on. Furthermore, to some extent the living standards of country’s citizens are improving. In
line with social changes people are trying to pull out themselves from primary economic activities to
civilized activities and improving their income. As income increases many people start to change their
living habits and tastes: with social changes facilities and type of social services should be changed
and modernized. One of the modern versions of social services is the development of modern hotels
and tourism sector. But due to known reasons there is no or very few hotels in many medium and
small towns of the country in general and the region in particular. A few existing ones are with
backward or poor facilities which are nuisance to customers and undesirable for country’s image.
Owing to this realities and the increasing demand for such facilities, this project is proposed to be
established in the area where there is no such hotel at all.
 The Project Description
 The Building
The Hotel and resort building originally is designed by the sister business enterprise of Bilen micro
Enterprise The splendid monumental property, which occupies almost the entire block between the
entrance to Gelan sub from hight way road from Addis Ababa and Bishoftu City. The construction has
been started in three years before and construction is carried out accordingly.
Currently, Bilen micro enterprise has planned to finalize the construction task in this year and inaugurated
the coming Ethiopia New Year.
The building has a total of 5000 square meter with having a potential area for expansion for further
development of the hotel building with additional facilities such as swimming pool and other services for
the customers.

The whole project site encompasses approximately 5000 square meters. The estimated net floor space of
5000 square meters is spread over three floors above ground floors. The following overview illustrates
the elements foreseen within the framework of the project:
5.2 Main Entrance and Lobby
The main entrance established at the main road from the high way from Addis Ababa to Shager city.
The main road provides a highly exclusive access to the main city entrance with having all facilities
banking hall and to the lobby (see Diagram 11). The integration of a generous lounge into the lobby will
serve guests either arriving or departing but also visitors as a “meeting point” of a special atmosphere due
to the outstanding ceiling height and the imposing stairs which lead to the restaurant in the mezzanine
floor. Furthermore, the attractiveness of the ground floor is enhanced by the integration of a state-of-the
art best design of bar & café.
The ground floor contains the following different rooms internally & externally; the rooms are:

Internal Rooms are listed below

1 Rentable rooms for bank and other service provision

2 Restaurant
3 Kitchen
4 Reception

Externally

1 Verenad
2 Toliet

5.3 The Restaurant

In the mezzanine, a restaurant, a lounge and a bar will be integrated into the historic
setting of architecture of the building with grand interior design providing guests with
a magnificent atmosphere. The cozy medium size restaurant will offer the highest
standards in terms of a comprehensive, contemporary arrangement of food and
beverages in combination with an outstanding and unique service on a total of
approximately 240.678 square meters, including the bar with an integrated lounge
area. A historic mezzanine floor plan is shown below.
Externally, this ground floor contain two parts verenda & toilet with having a total
area of 51.1 square meter .

Fig 1.

5.4 First Floor Residential Bed rooms

The first floor of the building has a total area of 264 square meter surface with having
total of 10 rooms on the floor with full facility 8 rooms for residential and 2 salon room
irrespectively to give full fledged service for the clients. The two rooms has wide area
than the other 8 rooms on the floor with its own salon for family stay or guest area,
bed room, washing and balcony for having fresh and over view the other side of the
hotel. The rest 8 rooms are planned to occupy an impressive view for the customer
with a well built with b well-designed balcony and other private provision facilities for
private reason.

The floor contains the following rooms in the floor.

1 Private bed rooms

Bed room
Shower
Balcony
Built cupboard

2 Salon rooms

Salon
Bed room
Balcony
Bath Room
Kitchen
Built cupboard

5.5 Second Floor Residential Bed rooms

The second floor of the building has the same set up as first floor design and has a
total area of 264 square meter surface with having total of 10 rooms on the floor with
full facility 8 rooms for residential, and 2 salon room irrespectively to give full fledged
service for the clients. The two rooms has wide area than the other 8 rooms on the
floor with its own salon for family stay or guest area, bed room, washing and balcony
for having fresh and over view the other side of the hotel. The rest 8 rooms are
planned to occupy an impressive view for the customer with a well built with b well-
designed balcon and other private provision facilities for private reason.
The floor contains the following rooms in the floor.

1 Private bed rooms

Bed room
Shower
Balcony
Built in cupboard

2 Salon rooms

Salon
Bed room
Balcony
Bath Room
Kitchen
Built cupboard

5.6 Roof Conference, Meeting Film show area

In addition to previously mentioned gourmet facilities, the hotel will integrate a
splendid roof top bar on the attic floor of the building, providing a magnificent view of
the new growing city .
The conference and banqueting facilities are planned to be located, which has an
exceptionally high ceiling, hence providing space as well as unique atmosphere for
glamorous and grand events and festivities (See Diagram 12). Moreover, parts of the
meeting hall is also designed and will provide a variety of smaller conference and
banqueting rooms in order to assure private and exclusive
Accommodation for medium, but also small, meetings.
The majority of the conference and banqueting rooms will possess balconies providing
attractive views onto Gelan sub city. Furthermore, this meeting room is designed to
serve not only for meeting purpose but also for film shoe reason for guests and nearby
dwellers will be featured with a generous pre-function area with the assembly hall has
a capacity of 218 people for meeting and film show. The rooms on this floor are:

1 Assembly hall
2 Cafeteria
3 Lobby bar
4 Rest room
5 balcony
5.7 Executive Rooms
From the first floor and second floor, the hotel will be equipped with 4 special guest
rooms and suites, all featuring the highest international luxury standards in terms of
size, layout, furnishings and equipment. Approximately 75 per cent of the total
amount of guest rooms will be designed as superior double rooms with an average size
of approximately 26 square meters. Apart from that, these 130 superior double rooms
are planned to be distributed over the floors one to three providing interiors of the
highest international luxury standards in terms of size, layout, furnishings and
equipment.

Furthermore, the remaining 25 per cent of all guest rooms will be designed as suites.
In order to attract the very high-end clientele, these 43 suites will be of classic and
timeless design in accordance with the historic features of the building. Depending on
type and size, the suites will feature spacious living and dining areas, one to three
bedrooms, state-of-the-art bathrooms equipped with wellness and spa facilities as well
as splendid balconies. Furthermore, the terraces of the presidential suites will be
equipped with outdoor whirlpools and lounges.

5.8 Spa & Wellness Area

Plans to include in coming one year time in the place allotted for the expansion. In
future exclusive spa and wellness area offering all types of treatments, therapies and
further amenities as well as recreation facilities such as sauna and herbal steam bath.
The generous spa and wellness area is planned to be spread across the entire so
terrain floor on approximately 1,850 square meters. An indoor pool and a whirlpool
will be integrated on the same floor, but separated by a reasonable distance from the
“Health club”. This area will cover approximately 700 square meters. In addition, an
exercise room including a gym will be attached, which will occupy some 570 square
meters.

5.9 Car Parking Facilities

In order to guarantee advanced service for the luxury seeking guest, a drop-off zone
will be integrated in the generous drive-up zone in front of the hotel entrance. Car
parking possibilities will be provided in the neighboring public garage occupying
approximately all room rented clients parking spaces. This garage will be directly
connected to the property via a throughway on the underground floor.
5.10 Hotel Area Programming
The following table summarizes the general outline of rooms and suites with the
percentage of the total number of rooms, the square meters of each room and suite as
well as the total square meter number of all rooms and suites. In total the hotel will
occupy 173 keys including 130 rooms and a total of 43 suites. The foundations for
this layout are recommendations and guidelines introduced by the hotel owner and
the responsible architect.

No No of Rooms % covered Sq. meter Total

1 Ground floor & restaurant
2 8 residential room
3 4 executive rooms
4 Meeting & Cinema hall
(Top)

Justifications of the Industry:

As explained by Roe, Ashley, Page & Meyer (2004, the following points are deserving attention for
justifying what the sector for poor countries mean;
 Tourism is generally labor-intensive – although less than agriculture – and therefore can impact on a
large number of lives through the labor market;
 Tourism has considerable potential linkage, especially with agriculture and fisheries, which can
minimize the ‘leakage’ effect. Due to the high income elasticity of demand for international tourism,
it can offer a relatively rapidly growing market;
 Tourism provides opportunities for off-farm diversification, particularly in areas that do not attract
other types of development options;
 Tourism can provide poor countries with significant export opportunities where few other options are
viable;
 It may create initial demand for a good or service that can itself develop into a growth sector;
 Tourism products can generate demand for assets such as natural resources and culture, to which the
poor often have access;
 Tourism delivers consumers to the product rather than the other way around; and
 Infrastructure including hotels associated with tourism development can provide essential services for
local communities.
 The project
2.1. Project description
As mentioned above, the envisaged project is to establish international standard hotel and resort in
Gelan sub-city on 5000m2 of land to be secured from regional Investment Board.
International standard hotel and restaurant is high class hotel where services like
bedroom, catering, meeting rooms, multipurpose assembly hall, swimming pool, Spa
(Hot Spring), gymnasium, sauna and massage, other sports facilities like tennis or
squash court, min- golf or badminton, bowling, table tennis and children playground,
night club with dancing to live music or discotheque or cabaret etc.
A hotel is an establishment that provides paid restaurant on a short-term basis. Facilities
provided may range from a modest-quality mattress in a small room to large suites
with bigger, higher-quality beds, a dresser, a refrigerator and other kitchen facilities,
upholstered chairs, a flat screen television and en-suite bathrooms. Small, lower-priced
hotels may offer only the most basic guest services and facilities. Larger, higher-priced
hotels may provide additional guest facilities such as a swimming pool, business center
(with computers, printers and other office equipment), childcare, conference and event
facilities, tennis or basketball courts, gymnasium, restaurants, day spa and social
function services. Hotel rooms are usually numbered (or named in some smaller hotels
and B&Bs) to allow guests to identify their room. Some boutique, high-end hotels have
custom decorated rooms. Some hotels offer meals as part of a room and board
arrangement. In the United Kingdom, a hotel is required by law to serve food and drinks
to all guests within certain stated hours. In Gelan , capsule hotels provide a tiny room
suitable only for sleeping and shared bathroom facilities.
2.2. The promoter
The promoter of the project, Bilen micro enterprise is an Ethiopian residing and others business
activities, now he has decided to contribute in his country’s development endeavors by investing in the
sector he selected. Her vision is to make the country one of the best tourist destinations in the world
through promoting the country’s tourism industry by being linked with tour operators elsewhere.
Project Objective
The main objective of the project is aimed at to maximize the return on invested capital in the
form of profit for the promoter. However, its implementation will benefit the employee, the
consumer society and the government at different levels. In this respect the project is aimed
to promote the following objectives:-

 To maximize the return on invested capital through modern Hotel services

 To raise the significance and importance of the sector and thereby
raising its contribution to the national economic development
 To give quality and standard hotel service

 Effectively use local inputs and strengthening the linkage between

agriculture and other sectors of the economy
 To provide gainful employment to a large segment of the population of the
project area and augment earning capacity at the grassroots level,
 Increase government revenue through the different forms of taxes,
which in turn used to facilitate social and economic development.
 rd tourist hotel and give quality service.
 To establish and run modern a two-star hotel
 To help develop the tourism sector of the region/country
 To generate profit from invested capital
 To create job opportunities for local community
 To generate revenues for the country in the forms of taxations and rents.
 Keeping food cost fewer than 35% revenue.
 Keeping employee labor cost between 24-29% of revenue.
 Stay as a small restaurant with excellent food and service.
 Averaging sales between birr10, 000-50,000 per year.
 Expand our marketing and advertising in Gelan sub city.
Achieve 12% return on investment to investors for the first two years and 15% for the next three years

In general, the project is believed to have significant social and economic benefits
that accrue to the society, the region and the country beyond the financial returns
to its owner.3.4. Mission and goal
Mission
 Mission of the particular project is to expand the standard star hotel system
and to give quality service.
 To prove to other people that struggle for a better life and economic
independences can do business and bring change and can make a difference if
opportunities are given.
 To become financially liquid and guaranteed more than ever.
 Goal
Objectives are the goals toward which activities of the business are directed and
one of the most important functions the business owner must perform is setting
objectives. This important aims of this sole proprietorship business among
others include the following highly interrelated general goals with each other.
 To create employment opportunities for 40 permanent and 60 causal
 To achieve standa
 Our Vision
In the next three years Bilen micro enter prise Hotel and Restaurant will become the first modern food
provider in Shager city with fresh and healthy foods backed by quick service.

Our Mission

Shager Gelan sub-city is a great place to eat, combining an intriguing atmosphere with excellent,
interesting food. Our mission is not only to have great tasting food, but have efficient and friendly service
because customer satisfaction is paramount. We want to be the restaurant choice for all families and
singles, young and old, male or female. Employee welfare will be equally important to our success.
Everyone will be treated fairly and with the utmost respect. We want our employees to feel a part of the
success of Hotel and Restaurant. Happy employees make happy guests. We will combine menu variety,
atmosphere, ambiance, special theme nights and a friendly staff to create a sense of 'place' in order to
reach our goal of overall value in the dining/entertainment experience. We want fair profits for the
owners, and a rewarding place to work for the employees.

Our Strategy

Our strategy is simple; we intend to succeed by giving people a combination of healthy, fresh and quality
foods in an environment that appeals to a wide and varied group of successful people. We will focus on
maintaining quality and establishing a strong identity in our community. Our main focus in marketing
will be to increase customer awareness in the surrounding communities.

We will direct all our tactics and programs toward the goal of explaining who we are and what we do. We
will keep our standards high and executes the concept so that word of mouth will be our main market
force

2.3. The project

The envisaged project is the development of hotel services in Shager Gelan sub city of Oromia regional
State. The development of hotels in the country is now gaining momentum as more focuses are being
given to the sector. Beyond the envisaged perceptions, development of standard hotel facilities in all
towns of the country in general and the region in particular would enhance the development of domestic
 and foreign tourist flow in all areas of the country as the country is endowed with numerous historical and
natural tourist attraction sites.
IN Additional ,the project concepts, facilities, and Services plan
 TB- auto belay
 QJ – jump system
 Zip stop magnetic break
 Petzl Hardware
 Kanopeo continues belay systems
 Rodeo stop rope access
 Other products for adventure installations
RESORT COURSES: This climbing will have minimum between 6 – 8 courses with 10-12 elements on each course.

Example of
Adventure
clamping park
design

INFRASTRUCTURE: Sales point, storage for equipment, toilets and preferably a visitor facilities (building lavou, tent, sheds, etc)
depending on nearby locations, climate

. Base jump

It will be built at 35 m high jumping pole. We will use different types of braking systems. Høyt & Lavt are
authorized constructor and provide service centre or several different devices.
2. 4.1.e. Indoor adventure center
Weather is always a challenge either to wet, cold or even warm. Off course the indoor
experience differs from being outside in the nature, but still the excitement of challenges,
physical activity and mastery are in ingrediences. We will developed a center with
diversity and activities for broad range of users. Sport climbers, families, kids, beginners,
corporates.

2. 4.1.f. Adventure park in pure wood

A free standing construction of wood made purposely for adventure park courses. 13,5 m high, 25 long, 14 m
wide. Capacity of 80 -100 people simultaneously. The wood is 100% recyclable and can be used with or without
treatments.

LAYOUT PLANNING
The following are the proposed layout required for the Hotel and Resort:
Hotel
 Rooms & Suites
The hotel will be of stylish, comfortable, well-furnished and air-conditioned
rooms with contemporary luxury and gracious service.

 Banquet and Conference

The Hotel will have a banquet hall with a capacity of 150 and 400 for parties,
banquet hall also be used for exhibitions/events. The banquet hall is very
essential for the hotel and will be done in a western concept. There will be 1
conferencing hall for business meeting, conference and gathering etc. the hall
will be equipped with all the modern conferencing aids

 Restaurant and Bar

The hotel will be having 2 nos. of restaurant, a Lounge Bar and a coffee
shop, which will be offering a choice of continental, Chinese and variety of
food from Indian cuisine, with live piano music, and one open restaurant
with the above amenities for the outside visitors.

The bar will be well stocked with best of spirit and wine where guests can
spend their time with gossiping watching television.

 Other Facilities in
hotel Travel Desk
 The hotel will also have a Travel Desk, which will help visitors to
gather information and sketch a tour for visiting the tourist place.

 Pick up Facility

The hotel will also having a Pick up facility, the company will be
buying vehicles to pick the guests from the suitable place.

 Business Center

The business center is equipped with the latest office automation

equipment to provide secretarial services and allied services like
courier services, E-mail services, Telecommunication services and
other support services.

 Currency Exchange Facility

The hotel will also provide the currency exchange facility to overseas guests.

 Resort Complex Cottages

The Resort will be having good nos. of cottages with a refreshing mix of style
and spacious elegance, our guest rooms and suites will be offering peace and
tranquility as well as the comforts of modern day living.

 Ayurveda Centre

The resort will be having a Ayurveda center. Ayurveda is the

alternative medicine of Indian tradition, originated in ancient times.
It is a natural healing scinece for cure, prevention or rejuvenation of
the body, based on the use of herbs or herbal medicines.
 Kids Arena and Board Games

The Resort Complex will be having a separate area for the kids; Kids
Arena for children to have fun and play all the time while visiting the Resort.
The Resort will be having an area for board games, which will provide
additional options for the guests to spend excellence time in the Resort.

 Banquet and Conference

The Resort will be having a banquet hall with a ca parties of 120 for parties,
banquet hall also be used for exhibitions/events. The banquet hall is very
essential for the Resort and will be done in a western concept. There will be
1 conferencing hall for business meeting, conference and gathering etc. the
hall will be equipped with all the modern conferencing aids.
 Lounge Bar
The resort will be having a Music Lounge & Weekend Disco Theque -
Equipped with the latest sound & a Light system, the disco is for those who
are young at heart. The zeal to dance & enjoy is a welcome thought. A disco
night on every weekend will be arranged.

 GYMNASIUM
 A gymnasium will be surrounded by state of the art equipment from the
Life Fitness, Ethiopia , the World’s undisputed leader in Gym
Equipment. Equipment will be is available to tone up body muscles and
rejuvenate. Visitors can sweat out superfluous body fat and discover the
fresh self
  Garden

In the proposed project there is also a beautiful and decorated Marriage

Garden and its well kept gardens infuses a breath of fresh air and fill both
young and old with vitality, which will be provided on rent for the Marriage
Purpose or Big Parties. The capacity of the garden will be around 1000
people with huge car parking capacity
 Two Star Hotel Project

2.3.1. Expected Standards of Hotels

The hotel is the lowest level of international standard hotel, expectations at this level include a
degree of luxury as well as quality in the furnishings, decor and equipment, in every area of the
hotel. Bedrooms will also usually offer more space than at the lower star levels, and well
designed, coordinated furnishings and decor. The en-suite bathrooms will have both bath and
fixed shower. There will be a high enough ratio of staff to guests to provide services like porter
age, 24-hour room service, laundry and dry-cleaning. The restaurant will demonstrate a serious
approach to its cuisine.

2.3.2. Required notifications in hotel and restaurant designated hotels

The following notifications required due attentions in two star designated hotels.

 Restricted Service
Some hotels operate a restricted service during less busy months. This may be a reduction of the
restaurant service, or some leisure facilities may be unavailable. Please check when booking.

 No Dogs
No dogs allowed in bedrooms. Guide dogs for the blind may be accepted as an exception to this
rule. However, even where hotels allow dogs, they may exclude some breeds, and may exclude
dogs from certain areas of the hotel, especially the dining room. It is essential to check the
conditions before booking.

 Night Porter
At some hotels, the night porter may be there only between certain hours or on certain nights .
However, four and five star hotels must have a night porter always on duty.

 Entertainment
This indicates that entertainment should be available at least once a week throughout the year.
However, some hotels may provide entertainment in the summer season or at other specified
times.
 No children
This indicates that children cannot be accommodated. A minimum age may be specified (e.g. No
children 4yrs - no children under four years old). If this does not appear in the entry, it means

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 Two Star Hotel Project

that the hotel will accommodate children, but may have no special facilities for them (e.g. no
cots or high chairs). It is essential to check when booking.

 Special Facilities for Children

This shows that establishments with special facilities for children, which will include baby
intercom or possibly baby-sitting, playroom or playground, laundry facilities, drying and ironing
facilities, cots, high chairs and special meals.

 Conference Facilities
This denotes that conference facilities are available with maximum numbers that can be
accommodated theatre style; classroom style; boardroom style and the minimum overnight
delegate rate.

 Facilities for Travelers with Disabilities

Intending guests with any form of disability should notify proprietors in advance so that
arrangements can be made to minimize difficulties, particularly in the event of an emergency.

 Meals
Details of the style of food, last dinner orders, and likely price range are given. If there is a fixed-
price menu or menus, this is the price range quoted. V meals indicates that a choice of vegetarian
dishes is normally available.
In some parts of Britain, particularly in Scotland, high tea (i.e., a savory dish, followed by bread
and butter, scones, cake, etc.), is served in the early evening instead of dinner. However, the
alternative of dinner may be available on request. The last time at which high tea or dinner may
be ordered is shown, but there may be some variation at weekends. On Sunday some hotels serve
the main meal at lunch time, and only a cold supper in the evening.

 Morning Coffee/Afternoon Tea

Indicates that morning coffee and/or afternoon tea are served to chance callers. All two and three
star hotels serve morning coffee and, normally, afternoon tea to resident guests.

 Credit and Charge Cards Other Payment

The payment policies of hotels should be made clear to patrons on the point of booking. Not all
hotels will accept travelers' cheques, even those from leading banks and agencies. If a hotel

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 Two Star Hotel Project

accepts credit or charge cards, the information is shown in its entry. It is advisable to publish and
notify customer the policy regarding the use of credit cards.

 Booking and cancellation procedures

These should be noted to all customers, inclusive of confirmation numbers. The cancellation
policies of the facility also have to be clearly stated.

 Complaints
A crisis management procedure is a must especially in the case of guest complaints. Fire and bad
weather

 Smoking Regulations
Hotel should state clearly its policy on smoking. Ensure that where smoking is allowed there are
designated areas for non-smokers inclusive of rooms away from smokers.

 License to Serve Alcohol

Most Hotels and other accommodations with bars are licensed to serve alcohol. On many
properties this permission is clearly stated on entry to the bar area. Where there are exclusions
for minors under 18 or 21 this should be pointed out to the relevant patrons.

2.4. Project Benefits

The envisaged project can be justified by the benefits it delivers to the country, the promoter and
the local communities. The main justifying points are explained as follows;

The project will contribute immensely to the tourism industry in particular and changing of
country’s image in general by creating internationally accepted standard facilities,
The investment will benefit the country in generating hard currencies and in boosting the
GTP program,
The project will benefit the local communities through creating job opportunities and markets
for their products to be supplied for the hotel.

Increase investment with multiplier effect to the national economy,

3. General description of project area

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 Two Star Hotel Project

3.1. Location

The envisaged two star hotel and restaurant service project is to be located in the Oromia
regional state, shager Gelan sub-city . The envisaged town is one of the growing towns in the
region and is found adjacent to Addis Ababa, the Federal Capital of Ethiopia from the north side.
Gelan sub-city has favorable climate, topography ad people with rich diversified cultural values
creating high potential for tourist attraction. Theses attraction can be clearly categorized and
understood as natural science environmental historical and man cultural and ethic.
The above mention facts are the strong basis to think that the town will developed being an
attractive town for investment and commerce.
However such center of block and other cement product is one of such facility intended to help
the development of Gelan sub-city as center of manufacturing interaction.

4. The project Area.

4.1 Location
 In project under consideration will be implemented in Gelan sub-city city
administration. Gelan sub-city is found at distance of about 20 kms a way from
Addis Ababa on the main road to Adama.
The reason of selected the location for the proposed project is:
Its proximity to Addis Ababa city administration with good scenery and weather condition.
 Its proximity to serve as and facility like road, transport and utilities like electricity, water
and telephone line.
 The existing conductive social and investment situational and increase number of private
investment in the area.
 Its accessibility and easy of future development are some of the reasons behaved selecting
the area for the propose project.
 Attractive policy incentives and administrative procedures of the region.
 Proximity to new dry port around Mojo town.
 The existences of high demand for the envisaged service.
 Personal preference of the investor.

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4.2 Physical Characteristics

Most part of the Gelan sub-city town is covered by manufacturing projects. The rest part is also
covered by different commercial centers, hotel & recreation, social services residential areas and
so on.
The town has elevations that range from 1,500 – 2,300 with the exception part of Yarer
Mountain (3,100m) as far. The climate is woinadega (98%) and dega (2%).Government
protected forests of Yerer and Addis Ababa are partly found around Akaki and Galaan
towns.There are also community forests in different parts of towns.
4.3 Soil type
Soil is the most important natural restore in the world for human beings. It also used for
construction of houses and its rocks parts is used of reconstruction of roads.
Gelan sub-city has two different kinds of soils. Red soils & black soils. The 1 st one is the very
important for constructions of houses & rods in town the black one is also used a especially for
environmental formers in their production.

For construction big villas building & ware houses in sub-city Gelan is simply possible because
the most parts of soil in Gelan sub-city is red soil.

4.4. Population
The total population of the town was 201,956 in 2009.Out of the total population 133,351 were
rural and 68,605 were urban populations. The economically active population (15-64) constituted
44.2% of the total population. The average family sizes for rural and urban areas were 5.0 and
4.6 persons respectively. The9 crude population density was 235 persons/km2 in the mentioned
year.

4.5 Economic Activity

Considering the overall developmental measures the country is request ring development. In
addition to mitigating poverty, efforts have been enhanced to make poverty a past history.
Considering the international market situations and the case of foreign currency the government
is taking various measures in respect these problems.

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The majority of the populations of the town are engaged in different commercial activities
including agricultural activities. There are also peoples who are employed in
Various governmental & non-governmental organizations. Currently private investment
activities are also widely undertaken in the town.
own for its real-estate development and future establishment of industrial city.

1.1 Area and site of the project implementation

The company's location is very favorable, providing high visibility, high traffic, and a high flow
of customers (travelers) wishing to stop at our restaurant. Accordingly, the rent that was
accounted for in this plan is higher than in other areas of the zone.

The restaurant will be located just minutes from down town, which provides shopping, dining, and
entertainment. The restaurant is also conveniently located, just three blocks from Local Bay shopping center.
Other advantages of the chosen location include:
 Plenty of parking, garages, and additional storage area available
 Excellent central location with easy access to major destinations, freeways and other
transportation means
 A recent new commercial complex opening, just across the street, that will attract many
potential customers to our immediate vicinity
 Strategically located on one of the busiest streets in downtown.
 High profile area with easy access from all parts of town
 Proximity to the business community; there are more than five hundred businesses in the
area
 Proximity to trendy, upscale restaurants and recreational facilities
 All utilities required for operating a restaurant are available
Facility location is determining the best geographic location for a business’s facility.
Facility location decisions are particularly important for two reasons.

First, they require long-term commitments of investing in the facilities, which means that
mistakes can be difficult to correct. Second, these decisions require sizable financial investment
and can have a large impact on operating costs and revenues. Poor location can result
in high transportation costs, inadequate supplies of raw materials and labor, loss of

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competitive advantage, and financial loss. Businesses therefore have to think long and
hard about where to locate a new facility.

Location is a critical factor in planning a restaurant. The ability to capture sufficient customer
volume from existing residents, day-workers and tourists is essential in estimating the feasibility
of restaurants and other culinary venues.

Traffic patterns can provide an important indicator of the level of exposure a new business or

Eating venue (such as a farmer’s market) might receive at a specific downtown location. It is
also important to identify "demand generators," such as company offices and manufacturing
firms, hospitals, colleges and retail stores. These types of businesses typically generate a
significant amount of food and beverage business, often from nonresidents coming into the
community. Finally, market demand for our restaurant may be impacted by changes in
employment, expansion or new construction of commercial buildings, new Residential housing,
and street and transit improvements.

Our management is expected to use resources wisely, operate profitably, pay debts, and abide by laws
and regulations. Our management philosophy is based on team work, responsibility, and mutual respect.
People who work in other restaurant would want to be part of our team because we operate in an
environment that encourages creativity, diversity, growth, and performance.

Factors affecting location decisions of our restaurant

 Proximity to market demand.

 Proximity to capable customer
 Accessibility and visibility
 Proximity to hotels; and guesthouses
 Traffic volume and direction on main street

3.2. Topography
As the town is found bordering the Addis Ababa city, the topography of the town is almost
similar to that of Addis Ababa. Hence, its is found at the high altitude of the country having an
altitude 2200-2400. The area experiences high rainfall having an annual mean rainfall of 1500-
1800mm. Whereas, its mean annual temperature ranges between 12 and 22C 0 . The scene of the

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area is beautiful having a yerar mountain from the north-west direction and is so attractive for
tourists and visitors.
3.3. Soil type
Soils found around Addis special from the north-east side are characterized with their black-
verty, brownish and scantly red colors. Obviously the black and brownish soils are having
workability problems during rainy and dry seasons alike but the red soils are best for any
agricultural and construction activities as they do not show any expansiveness and shrinkage
characteristics with weather conditions.
3.4. Economic activity
The livelihood of the local community is primarily dependent on agricultural activities like crop
farming and animal husbandry. But now the investment activities are being expanded and hence,
many young people are employed as employee in investment projects or starting their own
businesses through organizing themselves in micro and small Enterprises. As the town is
adjacent of Addis Ababa city, many people are linking their livelihood with the city's trade
activities.

3.5. Technology and Techniques to be used

Obviously, as this is 2-star designated hotel services, the project will utilize two star standard
hotel industry’s technologies as indicated in the background of this project and techniques in
serving the customer. Hence, the following activity flow, technologies and techniques are
common in hotel construction and services operations.

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Preparation Resource
Start Site clearing
of design mobiliation

Supper Sub
Roofing
structure structure Excavation
works
works works

Plastering Painting Doors, windows

works works
and other Finish
fininishing works

Start
Recruitment Furnish
operations

Fig1. Work process flow for hotel construction and service provisions

2.Material inputs
2.1 Raw material
The materials that go into the final product are called raw materials. This term is somewhat
misleading because it seems to imply unprocessed natural resources like wood pulp or iron ore.
Actually, raw materials refer to any materials that are used in the final product; and the finished
product of one company can become the raw materials of another company. Required raw
materials for hotel and restaurant service include food items, beverages (hot and cold), room
clothing, detergents and the likes. All raw materials are available in the domestic market.

An important aspect of technical analysis is concerned with defining the materials and utilities
required; specifying their properties in is some detail, and setting up their supply programmed.

There is a close relationship between the definition of input requirements and other aspects of
project formulation, such as the definition of plant capacity, location and selection of technology
and equipment, as these inevitably interact with one another.

Material inputs and utilities may be classified into four broad categories: (i) Raw materials, (ii)
Processed industrial materials and components, (iii) Auxiliary materials and factory supplies, and

(iv) Utilities.

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The required raw material of our restaurant includes the purchase of imputes such as; meat,
onion, garlic, carrot, paper…etc. of most of these inputs will be brought from the Shager city.

The remaining inputs’ such as carrot, onion, key-sir, oil… etc. will be purchased from different
region in the morning from low bid suppliers who deliver these supplies reliably.

4.2 The restaurant supplies

Most of our supplies will be sourced from the local farmers, and will be purchased from
surrounding shager city in the morning from low bid suppliers who deliver these supplies
reliably. Other supplies include stove, oven, pan, dish, table, refrigerator and mixer.

4.3 Auxiliary Materials and supplies

In addition to basic raw materials and processed materials, the restaurant project requires various
auxiliary materials and factory supplies. Among those needed are: -

 Decoration
 Attractive lamps
 Modern food pictures
 Cleaning Material (Detergent, Mop, Broom, Towel, Garbage Can etc.)
These auxiliary materials and supplies will also be supplied from

4. Market prospect
Marketing opportunities for hotel services are directly linked with the level of the
country’s/regional/ economic and tourism development. As the region’/Country’s economy
develops, the citizens’ income improves and as income of the citizens improves they certainly
start looking for knowing their surrounding and their whole nation historical and natural
attraction hence the domestic tourist travelling culture will be developed. Similarly, as the
country’s infrastructure developed and its stability and security issues are insured, international
tourist will develop interests in travelling in the country visiting its historical and natural
attractions. Currently, the country’s economic and social development is on the right track and
the future of this nation is shimmering and the hotel and tourism market development will also
do the same.

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4.1. International and Domestic demand for Hotel services

4.1.1. International Demand For Ethiopian Hotel and Tourism
As aforementioned, Ethiopia is home for nine world historical and natural heritage sites and
these sites are to be visited by tourists coming from all-over the world. Based on the current
information on tourism market in the country, the demand for Ethiopian tourism market has been
increased by more than double as compared to the last ten years demands. This is because of;
1. Infrastructural development including quality hotels
2. Peaceful conditions of the country
3. Identification and promotion of more tourists attraction sites
4. Development of domestic tourists and so on. It is believed that this trend will continue for the
years to come and hence no marketing problems for Ethiopian tourism industry as long as
strong promotion works will continue for complete changing of the country’s image.
For example as study showed that the Inbound Tourist Arrivals in Ethiopia continued to grow
from 76,844 in 1989, to 115,000 in 1999, 184,078 in 2004, 427,286 in 2009 and reaching
523,438 in 2011. During the year 2011, Ethiopia witnessed a positive tourist growth of 11.8 %
over 2010. The compound annual growth rate in Inbound Tourist Arrivals in Ethiopia during
1989 to 2011 was 9.7%. Table 1 indicates the trends of tourist flows into the country and the
growth rates over the period (1989-2011).
According to Ministry of Culture and Tourism (MOCT) Tourism Statistics Bulletin of 2009, the
total number of hotels in Ethiopia in the year 2009 was 426. Recent data on the number of hotels
in the country was unavailable. As a result, to estimate the total number of hotels taking 20%
growth rate, it can be estimated as 511 hotels in 2012, and 613 hotels in 2013 the country. This
number includes all five stars, four stars, Five stars, two stars, one star and not classified
categories of hotels. Though it is clear as can be seen from an annual growth of 20% in hotel
industry, there are still a lot is to go at least to compute with some African countries who are
equally or less resource endowed as compared to Ethiopia. If we see only Kenya and Morocco,
we notice a big difference in number. According to The Embassy of Japan in Ethiopia (2008),
even by 2004 data the hotel stock amounted to more than 140,000 in Egypt, in Morocco 80,000
and more than 65,000 in Kenya. Even though the international hotel classification system is

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adopted in Ethiopia and hotels are classified into categories with stars from one to five and hotels
without stars as other countries do.
It is possible to see the number of hotels, the rooms they have and the number of beds they
constitute in the following table.
Table2: Existing Hotels in Ethiopia
No of Average Room/Bed per

No Category of Hotels No of Hotels No of Rooms Beds hotel category

1 Five Star 3 794 1264 265Rooms & 422beds

2 Four Star 13 921 1197 71Rooms & 92beds
3 Five Star 37 1691 2314 46 Rooms & 63beds
4 Two Star 40 1465 1898 37 Rooms & 47beds
5 One Star 23 698 941 31 Rooms & 41beds
6 Not Classified 310 8549 10322 28 Rooms & 32beds
Total 426 14118 17936
Source: MoTC magazine

4.1.2. Domestic Demand For Ethiopian Hotel and Tourism

The domestic market for tourism industry is untouched and not promoted as required. In the
country with more 80 million populations, there are less than 5000 domestic tourist coming to
the industry in a year. Hence, this trend should be changed through strong promotion works by
concerned organs and by the same token, the infrastructures form domestic tourists like
reasonably priced hotels and accommodations, tour guide with adjusted domestic tours and
strong collaborations among tour guides and the hotel systems should be tantamount for the
development of this industry and increase in domestic market demand for the industry.

The promotional tools are;

A) Advertising – is any paid form of non-personal communication regarding goods, services

or ideas that is transmitted through various media by a business firm or not for profit
organizations. Advertising provides opportunities for dramatizing the company and its product
through the artful use of printed, sound and color.

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There are different advertising Medias. Some of them are:

 Newspaper – As an advertising medium, newspaper are flexible and timely. Newspaper

can be used to reach an entire citizen. It also provides very intensive converge of a local
market because most people’s read them. Their limitation is they are usually discarded
after being read.
 Television – Advertisement through television use combination of motion and sound
where by product or service can be demonstrated as well as described. It provides a wide
geographic coverage but it is relatively expensive.
 Direct mail – It reaches only to precise audience i.e. to the people the advertising wishes
to conduct. So, there is almost no waste of circulation. Printing and postage fees make the
cost of direct mail per person quite high.
 Magazine – It is an excellent medium when high quality printing and colors are described
in advertisement. It can reach a national market at a relatively low cost per reader.
 Radio – It is frequently selective and has low cost. It makes only an audio impression
relying entirely on the listener’s ability to retain information after hearing it.
B) Personal selling – It is a face-to-face interaction with one or more prospective purchaser
for the purpose of making presentation, answering question and processing orders.
One the positive side, personal selling is the most flexible tool because the seller can see or
hear the buyer’s reaction. Feedback is immediate and precise since the customer can generally
assess the impact of sales presentation. On the negative side personal selling is costly that
means the costs of operating a sales force is high.

C) Sales Promotion – are those promotional activities that are intended to stimulate customer
demand and improve the marketing performance of sellers.

Companies use sales promotion tools to create a stronger and quicker response. Some of the
sales promotional tools are;

 Trade shows or exhibitions

 Samples
 Demonstrations
 Coupons

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Public relation and publicity – public relation is a broad overall communication to influence
various groups attitude towards the organization and/or its product.
The old name for public relation was publicity, which was seen simply as activities to promote
a company or its product by planning news about it in the media not paid for by the sponsor.
The appeal of public relation and publicity is based on their three distinctive qualities.

1 High credibility – news stories and features are more authentic and credible to readers
than advertising.
2 Ability to catch buyers off guard – it can reach many prospects who prefer to avoid
salespeople and advertising. The message gets to the buyer as news rather than as a sale
directed communication.
3 Dramatization – like advertising, public relation has the potential for dramatizing a
company or product.
E) Direct Marketing – use of mail, telephone, fax, e-mail and other non-personal contact tools
to communicate directly with or solicit a direct response from a specified customer and
prospects.

Finally, companies must consider several factors in developing their promotion mix the type of
product, market in which they are selling, whether to use a push or pull strategy, how ready
consumers are ready to make purchase, the product’s stage in the product life cycle and the
company’s market rank.

TECHNICAL STUDY

1.2. Design and particulars

The project owner interest, as regards to how the overall building design
looks like and the level of service to be rendered by the envisaged project, is
dependent on the area at which the buildings to be placed. The owner has
already decided to commit himself to construct a hotel and resort having the
full knowledge what is required by the national and international standard of
Hotels in Ethiopia. The standard by the way its exhaustiveness as well as
being explicitly specific on the level of the service expected under the
selected category, determines also the physical and financial requirement of

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the project. Hence, in effect the contents of project components to be

described below are the derivatives of the requirements mentioned above.

5. Land use plan and action plan

5.1. Land use plan
The envisaged project is considered to be established on an area covering 5000m 2. This land size
will be distributed as per international hotels’ standard and be utilized for main building of hotel
services and other accessory works. Hence, the following land use pattern is proposed for the
project.
Table3: Land use Plan for Hotel Project

No Types of Land Use Proposed land size (m2)

1 Main Hotel building 1500

2 Parking, Loading/ unloading area 2000
3 Storage for hotel services 500
4 Cozy conference hall 200
5 Generator room 100
6 Incinerator 200
7 Guard/Janitor room 200
8 Green area 300
  Total 5000
*Please see Annex I for action plan

6. Organization and management

6.1. Organizational structure
An organization is an entity established to organize activities, resources and manpower so as to
achieve the intended objectives in a given time.
Organizational structure is a tool designed to allocate the planned activities, responsibilities and
accountabilities to manpower of the organization based on their qualifications and experiences.
Hence, the following organizational structure is designed for the proposed project management.

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Fig2.  Organizational Structure for  Hotel Project

General Manager

Reception

Hotel manger Administration &

Finance

Marketing manager Human resources

Catering
Accountant

Accomodation Procurement
and sales

Hotel Security

6.2. Manpower requirement with qualification & level of education

Based on the volume and weight of the job to be assigned the following manpower with relevant
qualification is proposed.

Table4: Manpower and specific qualifications for Hotel

N Description of Required Level of Unit Required Monthl Annual

o manpower qualification education Number y salary salary
(Br.) (Br.)
1 General Manager Management BA & above No 1 6000 72000

2 Hotel manager Hotel management BA. “ 1 4500 54000

3 Receptionist Reception Dip. “ 2 2000 48000

4 Admin.& Finance Management BA 2 3000 72000

head
5 Human resource Personnel Dip. :” 3 2000 72000
officer management
6 Accountant Accounting or Dip. “ 2 2500 60000
Business

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7 Marketing manager Hotel management BA “ 2 3000 72000

8 Cashier Accounting/ Dip. “ 2 1500 36000

Business
9 Hotel/bar operators Catering Level III “ 12 1200 288000

10 Maintenance workers TVET Level III “ 3 1500 54000

11 Security workers Literate 8th “ 6 800 57600

12 Logistic and TVET Dip. “ 2 1500 36000

Procurement workers
13 Store keeper TVET Level I “ 2 800 19200

14 Cleaner/Janitor Literate 4th “ 5 600 36000

15 Driver Literate 8thand> " 2 1500 36000

16 Health Professional Nursing/ HO Dip/Bsc " 1 4000 48,000

17 Laundry and salon Literate 4th and > " 2 1800 43,200
worker
Total 50+50 1104000

NB:- No of manpower is estimated considering two shift (24hrs) services as it is star designated hotel

7. Financial study

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7.1. Project capital and sources of finances

The project capital estimations are done based on procurements, building and civil works, and
routine operating expenses. The fixed costs are estimated from machineries and equipment
procurement and buildings and civil works and variable costs (working capitals) are estimated
from routine day to day activities of the project. Both costs are estimated in the following sub-
sections.
7.1.1. Fixed costs
As mentioned above, fixed capital is estimated from machineries and equipment procurements
and building and civil works and hence estimated in the following tables.
7.1.1.1. Machinery and equipment of the project
 The major costs for star designated hotel are purchase of world class utensils, equipment
and furniture. These are estimated in the following table.
 The first and major expenses of the investor will be construction of esthetically attractive
world class 4 story building. In fact this will be given to contractor and experienced
consulting firm having rich experiences and exposure in the area. These costs are estimated
in the next table below.

Total investment capital required to establish and run the envisaged project is estimated at birr
5,000,000 Million, the project will be financed Owner equity contribution 30% that means
1,500,000 and Bank loan 70% (3,500,000) Detail financial analysis of the project is depicted in
the table blow
Table Total Initial Investment Capital

No Description Cost  
1 Fixed Investment    
1.1 Land, Building and Construction 5,600,000 0.00
1.2 Machines and Equipment’s 4,400,000 0.00
1.3 Vehicles and Motors 600,000 0.00
1.4 Office Furniture and Equipment 400,000 0.00
Total Fixed Investment Cost 11,000,000 0.00
2 Operating Expense   0.00
2.1 Raw Materials Purchase and Products 4,000,000 0.00
2.2 Salary Expense 2,000,000 0.00
2.3 Other Operating Expense 600,000 0.00

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2.4 Pre-operating Expense 400,000 0.00

Total Operating Expense 7,000,000 0.00
  Contingency (Lump sum) 10% 2,000,000  
Total Investment Cost 5,000,000 0.00

Table6: Building and Civil works for Hotel

No Particulars Unit Size Unit cost Estimated

required (Br.) total cost (Br.)

1 Main Hotel G+4 building 500 1,500 2,250,000

M2
2 Parking, Loading/ unloading 200 1,000 200,000
“
area
3 Cozy conference hall “
100 1,000 100,000

4 Storage “
100 1,000 300,000

5 Other accessory buildings “

200 1,000 200,000

6 Generator room “
50 1,100 55,000

7 Incinerator “
80 1,100 88,000

8 Area to be taken by fence “

100 1,050 105,000

9 Guard/Janitor room “
70 1,050 73,500

10 Green area development 200 1,050 420,000

“
11 Deep well drilling “
1 36,000 36,000

12 Purchase of water tanks “

6 115,000 690,000

13 Intra-road construction km
1 800,000 800,000

14 Power/ water installation Ls

1 350,000 350,000

Total 1,500 5,600,000

Table5: Estimated costs of Utensils, Equipment and furniture for

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Unit cost
No Particulars Unit Qty Total cost (Br.)
(Br.)
I Equipment and Machines        
1 Boiler Pcs 1 250,000 250,000.00
2 Assorted Kitchen utensils and - -  
equipment 500,000.00
3 Beds and bed clothes Psc 100 40,000 50,000.00
4 Bar and restaurant furniture - - 600,000 60,000.00
5 Bed room chairs (2 in each) Pcs - 1,750 89,000.00
6 Bed room tables “ - 2,250 79,000.00
7 Lobby equipment “ -   55,000.00
8 Bathing room, Jacuzzi and psc -  
swimming pool equipment 750,000.00
9 Sauna, steam bathing equipment       400,000.00
10 Massaging equipment       175,000.00
11 First aid equipment       250,000.00
12 Mini Refrigerator " 100 2,500 250,000.00
13 Communication apparatus " 100 1,250 125,000.00
14 Other related expenses “ -   300,000.00
15 Security equipment "     200,000.00
  Sub. Total “     4,400,000.00
II Vehicles and related machines        
1 Van carrier pcs 1 600,000 600,000.00
  Sub Total       3,675,000.00
III Computers and Office furniture “ -   400,000
  Sub Total       400,000.00
  Total       5,400,000.00

4.1. INITIAL WORKING CAPITAL

The initial working capital is established to be 7,000,000.00 birr
4.1.1. Material and Inputs
A. Raw and Auxiliary Materials

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The major raw materials and auxiliaries required for the production shown in Table 4.1 below.
All the raw and auxiliary materials are to be imported

Raw material purchase for cafeteria service

No Description Costs per month Annual

1 Raw materials including, bread oil, meat, egg, 333,333.25 4,000,000

vegetables fruit, soft drink, sugar, milk tea, coffee

and others

4.1.2. Salary Expense

As indicated in part three of this study, the total cost of salary and wage is estimated to be
2,000,000.00 birr.

4.1.3. Other Operating Expenses

SN Description Annual Cost in Br. Assumption Used
1 Property Insurance 10,091.95 10% of Fixed investment cost

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2 Audit and Legal Fee 10,000 10% of Salary

3 Uniforms 1,600 1% of FC
4 Telephone, Fax and Postal 1,000 1000per month
5 Cleaning Gods Supplies 2,000.00 70*60br
6 Repair and Maintenance 10,229.88 900 per month
7 Advertisement 2,000.00 1000 per month
9 Stationery and other office 1,000.00 700 per month
supplies
10 Electricity 1,000.00 0.45*150,000W per year
11 Water 5,00.00 2*1000 m3 per year
12 Fuel 10,000.00 6500 lit*20 per year
13 Oil and lubricant 1,000.00 10% of fuel cost
14 Miscellaneous Expense 1,000.00 3,000 br month
15 Other related reserved 100,000
  Total 600,000.00  
4.1.4. Pre -Service Expense
SN Description Cost in br.
1 Project proposal 10,000.00
2 Promotion and adverting 1840,000
3 Workers capacity Building 50,000
4 EIA 66,560
  Total 400,000.00

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4.1. Financial Analysis and Statements

4.1.1. Underlying Assumption

The financial analysis of the envisioned Two star hotel G+4 is based on the data provided in the
preceding sections and the following assumptions.

A. Construction and Finance

 Construction Period ………………………………………………………….…18 Months

 Source of finance……………………………………………..…30% equity and 70% loan
 Bank interest rate …………………………………………………………..…………10 %
 Tax holidays ………………………………………………………………………2 years
 Operating costs increase by……………………………………………..………………2%
 Operating costs and raw material increased by………………………………...………5%
 Utilities and operation expense …………………..…increase 3% per annum after 2ndyear
 Wages and Salary increase…………………………Increase 3% Per annum after 2 nd year

 Sales …………………………………………..increase by 5 % per annum after 2nd year

B. Depreciation
 Building…………………………………………………………………………….5%
 Machinery and Equipment ………………………………………………………..15%
 Office Furniture……………………………………………………………………20%

 Vehicles ………………………………………………………………………..…..15%

C. Working Capital
 Accounts Receivable…………………………………………………………….30 days
 Raw material Local …………………………………………………………..…..30 days
 Work in progress…………………………………………………………………5 days

 Finished Production ……………………………………………………………..30 days

 Cash in hand ……………………………………………………………………...5 days
 Accounts payable …………………………………………………………….…..30 days

No Description % share Amount(in birr)

1 Owners Share 30 1,500,000

2 Bank Loan 70 3,500,000

Total   100 5,000,000

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4.1.2. Loan Repayment Schedule

Yea Principal Interest Total Annual Remaining
r Payment (10%) Payment Balance
0 0 0 0 3,500,000
1 3500,000 1,500,000 2,800,000 12,600,000
2 3500,000 1,260,000 2,660,000 11,200,000
3 3500,000 1,120,000 2,520,000 9,800,000
4 3500,000 980,000 2,380,000 8,400,000
5 3500,000 840,000 2,240,000 7,000,000
6 3500,000 700,000 2,100,000 5,600,000
7 3500,000 560,000 1,960,000 4,200,000
8 3500,000 420,000 1,820,000 2,800,000
9 3500,000 280,000 1,680,000 3500,000
10 3500,000 140,000 1,540,000 0

4.1.3. Annual depreciation schedule of the fixed Asset ( birr)

S Original Value Depreciation Depreciation Per

Description
N In Birr rate in % year
Construction and
1 2,600,000 5 280,000
Civil Work
Machines &
2 400,000 15 660,000
Equipment’s
3 Vehicles 600,000 20 120,000
4 Office Equipment 400,000 15 60,000
  Total 1400000   1,120,000

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 Two Star Hotel Project

2.1.1. Revenue and Revenue projection

Table14: Project Revenue and Revenue forecasting for Hotel

Product/Service and Revenue forecast

Services Selling Revenue from sales (Br.)
No Particulars
YI YII YIII-XI price/Unit YI YII YIII-XI
-50% -75% -100% (Br.) -50% -75% -100%

Accommodations
1              
service
1.       Deluxe/Suit/ rooms
15 23 30 2500 11250000 16875000 22500000
(No)

  2.       Standard rooms(No) 20 30 40 1800 10800000 16200000 21600000

3.       Economic
15 23 30 1400 6300000 9450000 12600000
rooms(No)

  Sub total 50 75 100   28350000 42,525,000 56,700,000

2 Hotel services              
1.  Alcoholic beverages
1000 1500 2000 2000 2000000 3000000 4000000
(lit/year)

  2.  None alcoholic

2500 3750 5000 50 125000 187500 250000
beverages (lit/year)

3.  Hot beverages(lit/year) 15000 22500 30000 20 300000 450000 600000

  4. Foods (Dish) 40000 60000 60000 120 4800000 7200000 7200000

    7,225,00
Sub Total       0 10,837,500 12,050,000

Other services              
1. Meeting services 6 9 12 3000 18,000 27,000 216,000
(occasion)
3
2. Weeding 12 18 24 2500 30,000 45,000 720,000
services(occasion)

Sub Total         48,000 72,000 936,000

  Total         35,623,000 53,434,500 69,686,00

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 Two Star Hotel Project

4.1.4. Balance Sheet (Beginning)

Asset

Current Asset  

Cash 1,500,000

Inventory of raw materials and inputs 3,500,000

Total Current Asset 5,000,000

Fixed Asset  

Land, Building and Construction 2,600,000

Machineries and Equipment’s 400,000

Office Equipment 400,000

Vehicles 600,000

Total fixed Asset 5,000,000

Total Asset  

Liability  

Account payable 3,500,000

Owners Equity 1,500,000

Capital  

Total Liability & Owners’ Equity 5,000,000

Promoter: - Tsigu micro enterprise Page 45

 “A Two Star Hotel”

Income Loss Statement

Revenue Year 1 Year 2 Year 3-10
Sales 35,623,000 53,434,500 69,686,000
Sales expenses (5%)* 1,781,150 2,671,725 3,484,300
Purchase of Raw Material 4,000,000 265,075,095 265,075,095
- -
Gross profit 31,623,000
211,640,595 195,389,095
Expenses    
Salary Expense 2,000,000 2,100,000 2,205,000
Operating Expenses 600,000 630,000 661,500
Pre-operating Expense 400,000 420,000 441,000
Deprecation Building 280,000 280,000 280,000
Deprecation machine 660,000 660,000 660,000
Deprecation Vehicles 120,000 120,000 120,000
Deprecation office Equip 60,000 60,000 60,000
Lease Expense 1,000 1,000 1,000
Interest Expense 1,500,000 1,260,000 140,000
Total Expense  5,521,000 5,531,000 4,568,500
Profit Before Tax 35,623,000 53,434,500 69,686,000
Tax(30% ) 10,686,900 16,030,350 20,905,800
Net Profit 24,936,100 37,404,150 48,780,200

Cash Flow Statement        

Particulars Year0 Year I Year II Year III-XI
A. Cash Inflow 0      
·  Own equity 1,500,000      
·  Bank loan 3,500,000      
·  Depreciation 0 1,120,000 1,120,000 1,120,000
·  Net profit 0 24,936,100 37,404,15 48,780,20
0 0
Total inflow 38,524,15 49,900,20
5,000,000 26,056,100 0 0
B.  Cash outflow 0      
·   Fixed capital 3,000,000      
·  Working capital 1,000,000      
. Contingency (Lump sum) 3000,000    
10%  
·  Loan repayment   1,500,000 1,260,000 140,000
Total outflow 5,000,000 1,500,000 1,260,000 140,000
Net inflow (A-B) 0 24,656,100 37,264,15 49,760,20

Tsigu M.E
age 46
 “A Two Star Hotel”

0 0
Cumulative balance 37,264,15 49,760,20
0 24,656,100 0 0
C. FINANCIAL EVALUATION
1. Profitability

Based on the projected profit and loss statement, the project will generate a profit through out
its operation life. Annual net profit after tax will grow from Birr 24 million to Birr 49.20
million during the life of the project. Moreover, at the end of the project life the accumulated
cash flow amounts to Birr 133.27 million.

2. Ratios

In financial analysis financial ratios and efficiency ratios are used as an index or yardstick for
evaluating the financial position of a firm. It is also an indicator for the strength and weakness
of the firm or a project. Using the year-end balance sheet figures and other relevant data, the
most important ratios such as return on sales which is computed by dividing net income by
revenue, return on assets ( operating income divided by assets), return on equity ( net profit
divided by equity) and return on total investment ( net profit plus interest divided by total
investment) has been carried out over the period of the project life and all the results are found
to be satisfactory.

3. Break-even Analysis

The break-even analysis establishes a relationship between operation costs and revenues. It
indicates the level at which costs and revenue are in equilibrium. To this end, the break-even
point of the project including cost of finance when it starts to operate at full capacity ( year 3)
is estimated by using income statement projection.

BE = Fixed Cost = 27 %

Sales – Variable Cost

4. Payback Period

Tsigu M.E
age 47
 “A Two Star Hotel”

The pay back period, also called pay – off period is defined as the period required to recover
the original investment outlay through the accumulated net cash flows earned by the project.
Accordingly, based on the projected cash flow it is estimated that the project’s initial
investment will be fully recovered within 7 years.

5. Internal Rate of Return

The internal rate of return (IRR) is the annualized effective compounded return rate that can be
earned on the invested capital, i.e., the yield on the investment. Put another way, the internal
rate of return for an investment is the discount rate that makes the net present value of the
investment's income stream total to zero. It is an indicator of the efficiency or quality of an
investment. A project is a good investment proposition if its IRR is greater than the rate of
return that could be earned by alternate investments or putting the money in a bank account.
Accordingly, the IRR of this porject is computed to be 19.28 % indicating the vaiability of
the project.

6. Net Present Value

Net present value (NPV) is defined as the total present ( discounted) value of a time series of
cash flows. NPV aggregates cash flows that occur during different periods of time during the
life of a project in to a common measuring unit i.e. present value. It is a standard method for
using the time value of money to appraise long-term projects. NPV is an indicator of how
much value an investment or project adds to the capital invested. In principal a project is
accepted if the NPV is non-negative.

Accordingly, the net present value of the project at 8.5% discount rate is found to be Birr
30.09 million which is acceptable.

Tsigu M.E
age 48
 “A Two Star Hotel”

D. ECONOMIC BENEFITS

The project can create employment for 100 persons. In addition to supply of the domestic
needs, the project will generate Birr 51 million in terms of tax revenue. The project creates
backward linkage with cement, gravel and sand producers and forward linkage with the
construction sector.

Tsigu M.E
age 49
 “A Two Star Hotel”

age 50
Tsigu M.E