PROJECT

PROPOSAL
ON

Lodge
PROJECT TO BE IMPLEMENTED IN AMHARA REGIONAL
STATE BAHIR DAR CITY

MELIHIK LODGE
June, 2022

Bahir Dar, Ethiopia

TABLE OF CONTENTS
MELIHIK LODGE
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

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 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-lodge Project Action Plan/ Gantt chart………………29

EXECUTIVE SUMMARY

The project feasibility study proposed on lodge investments has been promoted by MELIHIK
LODGE in Amhara regional state ,Bahir Dar city,sub city Tana,kebele ,Hidassie district. Bahir
Dar is a fast growing regional economic center and the capital of Amhara region.

The total area of the Lodge investment is about 10000 meter square the area covered and
develop the following infrastructures such as main building lodge service and, store, gourd house,
parking area and other necessaries facilities

The total investment capital of the project is estimated at birr 73,571,629 of which birr
47,797,310 (65%) is for fixed investment cost of which 65 % of the fixed cost is need foreign
currency while the remaining balance of birr 25,774,318 (35%) will be working capital.

Profitability: The financial analysis of the envisaged project is carried out for the following ten
years. Based on the 10 years financial projections using the income statement, cash flow
statement and financial internal rate of return (FIRR), the following results are obtained.
 Income statement: According to the projected income statement, the project will generate
profit beginning from the first year of operation. Based on the 10 years financial
projections the projects average annual net profit after payment of bank interest,
depreciation and tax amounts to birr 13,593,732
 Cash flow statement: The cash flow statement also shows a substantial amount of cash
surplus right from the first year of project operation life. The cash balance grows from
birr 21,685,936 in the first year to cumulative balance of birr, 384,396,352 during the

MELIHIK LODGE
 10th year of operation indicating the capacity of the project to finance itself and generate
cash surplus for further investments.
 FIRR Computation: The computation of the project FIRR shows that the project will
profitably generate reasonable return on investment. Before tax financial internal rate of
return is calculated to be 33.9%. This indicates the project is financially viable with an
internal rate of return (IRR) of 33.9 % and net present value (NPV) 102.2 million at
discount rate 35 %.
 Socio economic benefits: The socio economic benefit of the project is also very high. The
project will provide:- 125 permanent employs, Generate revenue to government in the
form of taxes, Facilitate and give a good service for local and international tourists
 Conclusion and recommendation: The Project is found to be operationally profitable,
viable & has significant socio-economic benefits. We recommended that according to this
attractive financial and economic benefit of the project all concerned offices & financial
institutions should give their support to facilitate the implementation of this plan.

MELIHIK LODGE
1. Introduction

More than 80% of the population in Ethiopia is living in rural areas; where people depends on small scale
agriculture, securing food and livelihood is inseparably linked to the exploitation of natural resources
(Wassie, 2020). The intense pressure from various human activities, and the application of improper
farming and management practices had been posing serious threats to the sustainability of natural
resources and maintenance of balanced ecosystems (Gebreselassie et al. 2016; Marques et al. 2016). On

the other hand, the new project concept called Melihik lodge promotes development of existing natural
resources of lake tana in to an eco-tourism sites, and form a multifunctional landscape with added
social, economic and environmental values. Moreover, these projects are aimed at developing a show case
for similar potential places in Ethiopia.

Lake Tana eco-tourism project is one of the tourism projects. This project aims to reclaim, preserve and re-
appropriate already existing natural landscape features and create a more sustainable eco-tourism site.
Which can provide multiple benefit for the society and the city at large without compromising
environmental sustainability of the place. In order to ensure realization of the project aim, establishment
of policy level regulations and project level design guidelines is very important. Therefore, this document
is organized to be used as a standard for any kind of intervention and design planned in the project site.

This guideline provides design principles, inspiration, and ideas that can help planners, designers, and
decision-makers equitably integrate aspects of sustainability in to the project. It includes sustainable
design principles, show case international best practices in relation to social, environmental, and
economic sustainability, and outline specific standards that should be monitored by involved stakeholders.
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PRINCIPLES OF WANCHI DANDI WATER FRONT DEVELOPMENT

When arranging a lakefront improvement, these are core standards direct the arranging lake front
improvement

• Include the lakefront as the front door.

• Grandstand the lake‘s history.
• Enact the lake front.
• Restrain impediments and interface to the lakes
• Lock in with the water.
• Interface consistently along the lakefront and into neighborhoods.

Site Development
Eco-tourism experiences are characterized by a respect for the integrity of the resource,
which also instill a sense of appreciation for the visitor. Within this context, certain site
development principles are important to implement. These are applicable to any site and are
regarded as essential to maintain the integrity of the resource and offer a quality experience
to the visitor.

The most important design consideration is the quality of the experience offered;
 The experience offered must not compromise the integrity of the resource and
must impart a sense of respect for the resource through site treatment and
interpretation activities;
 The experience must also consider the needs of the visitor for ancillary
services, again without compromising the integrity of the resource; and
 Interventions on the site to create the experience must follow internationally
accepted practices and/or standards for resource management and protection as
appropriate and must clearly demonstrate resource sustainability.
 Increased ecological knowledge is the key therefore to eco-tourism design.
Instead of human functional needs driving the site design, site components need
to respond to the special character, climate, topography, soils and vegetation as
well as be compatible with the existing cultural context.

MELIHIK LODGE
2. Background

2.1. The industry(Lodge and Tourism sector)

The term ―eco-tourism‖ was first coined in July 1983 by Hector Ceballos-Lascurain, an architect,
environmentalist, and eco-tourism consultant from Mexico (Planeta). The original definition was as
follows: Eco-tourism is environmentally responsible travel and visitation to relatively undisturbed natural
areas, in order to enjoy and appreciate nature (and any accompanying cultural features - both past and
present) that promotes conservation, has low negative visitor impact, and provides for beneficially active
socio-economic involvement of local populations. (Ceballos-Lascurain, 2005)

A true eco-tourism development will have a low impact on its surrounding environment, as well as offer
best practice in its design and operation. It will involve and educate the local community and guests, as
well as provide a meaningful experience to visitors. The aim of these guidelines is to promote sustainable
tourism in and around lake Tana crater eco-tourism areas lakes and the New development zone in
between the two lakes, which are unique and diverse.

This Guideline should be used in the planning, design, environmental impact assessment and construction
of an eco-lodge. The Eco-lodge and other development permit granted will be conditional on satisfactory
completion and approval of this guideline and EIA which should incorporate a Water Conservation Plan,
Waste Management plan, and Energy Conservation Measures and Monitoring Plan, waste disposal,
structural material design and approach etc
OBJECTIVE OF THE PROJECT
General objective
The main objective of lake Tana eco-tourism project is to make the area one of the best eco-tourism
destination in the World by respecting , protecting and enhancing natural and cultural value of the area.
 Socio-cultural objective
 Enhancement of the local community well-being through numerous and concrete actions, fair
wages and treatment of employees, direct participation of the locals in the business operations.
 Provide a sense of belonging and ownership among the tourists.
 Provide relaxing environment for tourists by facilitating different infrastructure.
 Provide opportunities for the demonstration of lake tana crafts and traditional arts of the region.

Environmental objective
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  Preservation and improvement of the Lake Tana surrounding ecosystem and minimal
environmental impact of the lodge and its activities
 Provide awareness and education for visitors on traditional and natural features, wildlife, and local
culture.
 Using natural landscaping and indigenous species vegetation. Preservation of existing trees
 Provides careful handling and disposal of solid waste and waste water and sewage treatment and
recycling
THE BIODIVERSITY FOOTPRINT OF ECO-LODGE AND ACTIVITIES IN WANCHI AND
DANDI ECO-TOURISM AREAS
 Despite their dependence on and interconnectedness with biodiversity, eco lodges and other facilities can
have significant negative impacts on ecosystems and natural resources
 An Eco lodge impacts biodiversity at each stage of its life cycle, from planning through to closure:
 At the planning stage, the most important issue in determining the level of impact that a hotel
will have relates to choices about its siting and design. Choices about the materials that will be
used to construct the hotel, where those materials will come from and the total physical footprint
of the lodge will also influence how significant its impacts will be in the operational stage.
 At the construction stage, impact is determined by the size and location of the area cleared for
development and where construction activities are taking place. The construction stage disruption
includes the choice of construction methods, the sources and amount and type of materials, water
and energy used to build the accommodations. The location of temporary camps for construction
workers, inadequate storage facilities for construction materials, the amount of construction waste
that has to be disposed and other types of damage, such as surface soil erosion or compaction
caused by construction activities or disruption of natural water flows and drainage patterns.

 In the operational stage, a lodge‘s impact comes mainly from the energy, water, food and other
resources that are consumed in running the eco lodge; by the solid and liquid wastes it produces;
by the way its grounds are managed and by the direct impacts of its guests. In addition, regular
renovation and replacement of furniture, appliances and facilities can cause impacts through
purchasing choices and increased waste generation. Using energy and water more efficiently;
using organic and sustainably produced food; reducing, treating and disposing of waste
appropriately; making sustainable purchasing decisions and managing gardens with natural-style
plantings can all help a lodge to reduce its adverse impacts on biodiversity and natural feature.
MELIHIK LODGE
 Similarly, an eco-lodge‘s relationship with host communities not only affects the sustainable
operations of the hotel but also the use of environmental resources by communities themselves

 At the closure stage, a lodge‘s impacts come from the disposal of materials removed from the
lodge to refurbish it, convert it for other uses, or demolish it, and from the work involved in these
activities. It should be possible to reuse and recycle some materials, but there may also be some
toxic materials. A responsible lodge operator should also foresee supporting activities of
ecological restoration as required. Biodiversity issues should be a part of decision-making from
the very beginning of any planning phase through to the end of closure.

 Principles for development phasing

 Adopt an ecosystem-based approach in tourism development planning

 Manage impacts on biodiversity from lodge and other facilities development and attempt to
achieve an overall positive contribution
 Design with nature and adopt nature based solutions respect, involve and support local
communities, build collaboration among stakeholders
 Control impacts during different phases that face the ecology and biodiversity
Environmental Preservation and Open-Space Buffer Zone
For open spaces along the lake, a buffer zone ought to incorporate plan and advancement
strategies that will give and improve the following: arrangement of environment administrations,
biological reclamation, conservation and change of biodiversity, expanded territory corridor
potential, made strides open path get to, open-space conveniences, and natural instruction.

Figure 3 Typical lake side stabilization with invasive management. Andropogon 2006

MELIHIK LODGE
  The more extensive the lakeside buffer, the more benefits it gives in terms
of wildlife territory, water temperature balance, security from nonpoint
sources of contamination, surge relief, silt expulsion, and bank stabilization.
 The lakeside buffer ought to be no less than 10 meters at its tightest, with
three zones of buffer from the stream edge inland.
 The primary zone should be undistributed woodland to supply
nourishment, shade for the water body, and slant soundness.
 The moment zone ought to comprise of overseen forest that permits for
infiltration, filtration of dregs and supplements and supplement take-up
by plants.
 The buffer range on the upland side ought to maximize vegetative and
soil contact with the runoff.
 The lakeside passage ought to be continuous, making a difference to
decrease the concentration

2.1.1. 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

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  Infrastructure including hotels associated with tourism development can provide essential services
for local communities.

2.2. The project

The envisaged project is the development of Lodge services in Amhara regional State. The development
of Lodges in the country is now gaining momentum as more focuses are being given to the sector. Beyond
the envisaged perceptions, development of standard Lodge 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.
SITE DESIGN
Aesthetics of building design
Creation should be adaptive to the aesthetics of an environment, in addition to regulatory considerations.
If the visitor facility is visible from a significant location or structure, it should not be taller than the site.
The exterior of the building should also be in keeping with the architectural theme of the surrounding
area. For lake side lodges, a rule of thumb is to restrict height of buildings to the height of the surrounding
vegetation. Building height is generally measured from the finish ground elevation to the peak or highest
ridge of the building roof. Another way of sustainable siting is to step buildings to reflect changes in the
site‘s topography.

Figure 5 Staggered building form to blend into landscape Source:

Sustainable Coastal Tourism Handbook for the
Philippines, 2002

The subsequent tips can help to boom the cost of the panorama in addition to guard the
herbal environment from terrible influences of plants elimination.

 Protect herbal surroundings from public and tourist activities by using

fencing or other means.

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  Be sensible approximately the layout of the panorama with regards to the
potential to hold it.
 Choose bushes and shrubs that root vertically and deeply, in place of
species that root horizontally or shallow, to avoid damage to foundations,
walkways, and so forth.

 Use hardwood species so that there is less hazard of harm to property

or injury to guests from falling branches.

Figure 6 Services provided by trees and vegetation to a coastal

tourist facility Source: Sustainable Coastal Tourism
Handbook for the Philippines, 2002
The term "site access" encompasses not only the method of physically entering the
Eco lodge, but also the journey experience. The en route experience, for example,
may feature gated transitions between origin and destination, or it could give an
interpretative and/or instructive experience.

Other factors to consider for improving the user experience in the developed
region and access are:

 Choose corridors to reduce environmental impacts and keep

development to a minimum along the route to the facility.
 Add suspense and drama to the access path by framing viewpoints

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 or drawing attention to landscape elements.
 Give the impression of arriving at the destination.

The Eco lodge should have car access or be at a reasonable distance of the road for access without a
vehicle. Because various logistics must be carried to the Eco lodges, the location should be close to main
or minor roads.

2.2.1. Required notifications in designated lodge

The following notifications required due attentions in Five star designated Lodges.

 Restricted Service
Some Lodge 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 Lodges 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 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.

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 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 four and five star
Lodges 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 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.

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  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 Lodges 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.

2.3. Project Benefits/Project justification/

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,

2.4. The promoter

The promoter of the project, MELIHIK LODGE is an Ethiopian nationality residing abroad from many
years. Now he has decided to contribute in his country’s development endeavors by investing in hotel and
lodge the sector he selected. His 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.

MELIHIK LODGE
3. General description of project area
3.1. Location
The envisaged Melihik Lodge service project is to be located in the Amhara regional state, Bahir Dar
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. Currently the town is known for its International
lodge development and future establishment of commercial city.

Description of the Study Area

As the information collected from the municipality and elders of the city, Bahir Dar was established
around the 14th century. Beginning from that time as a rural village onwards it has developed and served
as a seat of Awraja center during the monarchs and Dergue regime. Its development and transformation
into a modern city shape was started during the Italian occupation period of 1936 -1941 since it was used
as a major military base for their expeditions in the region. The naming of the city called as Bahir Dar has
a connection with its near proximity to the two water bodies of the surrounding (Lake Tana and River
Abay). It means periphery of a water body, which may be a periphery to one of them or both of them. The
availability of these two water bodies and the foundation of Kidane Mehiret Church in the area were the
major reasons responsible for its foundation.

3.1 Physical characteristics of the city

Location

Fig.3 Location map of Bahir Dar

MELIHIK LODGE
 Source: Ethio. GIS and IDP of Bahir Dar 2006 Edited and Modified

Bahir Dar is located 1060 kms far from Djibouti port and 565 kms north-west of Addis Ababa in the
north western region of Ethiopia at the southern coast of Lake Tana. The geographical location of
Bahir Dar city on astronomy imaginary line is 110 38’ north latitudes and 370 10’ east longitudes.
Bahir Dar is considered as the emerging point of Nile River and is surrounded by ancient
monasteries which are tourist attraction points. The city has an approximated area of 42000 hectare
of which 2258 hectares of the land is covered with water bodies and it accounts 17.2% from the total
area of the land. Three thousand eight hundred and forty two hectares of land is suitable for
construction and the rest is unused land (Bahir Dar municipality strategic plan, 2004).

Topography

The study area lies generally on flat topography at south of Lake Tana which is the largest lake in
Ethiopia. Although there are some domes and ridges at different parts of the city, the general
topography is characterized as an even surface of a slope less than 2 %. The city of Bahir Dar is
located at an average elevation of 1801 meter above sea level. The general orientation of the slope
decreases towards Lake Tana and Abay River. The flatness of the city is a cause for the problem of
flood accumulation during the rainy season and results with swampy wetlands (Bahir Dar City
Administration Magazine, 2004).

Climatic Condition

As the data collected from finance and economic development work process of the city, the climatic
condition of Bahir Dar mostly experiences sub-humid tropical zone (“Woinadega”), which is
suitable for human habitation and investment activities. The monthly mean maximum and minimum
temperature records of Bahir Dar in the year between 1978 and 2008 indicates that the highest mean
monthly maximum temperature occurs in the months of April (30.9oC) and the lowest is in the
months of July and August (25oC). While the mean annual average minimum temperature is
10.3oC.The temperature, in general, may be considered as hot for some day times with some sort of
uncomfortable climatic conditions. Since the city gets a breath from Lake Tana the uncomfortable
climatic condition that0 happens sometimes stabilizes after a short period of time.

The maximum wind speed in Bahir Dar is registered as 1.8 meter per second, which is not that
much difficult to live and undertake any development activities in and around. The prevailing
wind direction of Bahir Dar is towards southeast during dry season and towards northwest during
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rainy season (Bahir Dar Finance and Economic Development Office).

Rivers and Lakes

The major river in Bahir Dar is Abay River. Beginning at the outlet of Lake Tana, across a 30 -
kilometer stretch to Tis-Isat Falls, the Abay River is flowing on younger volcanic, which dammed
off the drainage and formed Lake Tana. Lake Tana is the only lake water in the study area. It is the
source of the Blue Nile, covers an area of 3673 km². It is 60 kilometers from East to West and 75
kilometers from North to South. The Lake is shallow with maximum depth of 14m and mean depth
of 9m has a volume of 28 km3. Bahir Dar city is established following of the lake. Since it is
composed of different monasteries and historical artifacts, tourists are increasing to visit Lake Tana
and the city Bahir Dar as well. Due to its attractiveness for tourists, it is a basic menses on attracting
investors to the city and a means for economical development for the city.

Socio Economic Condition of the City

Demography and Social Services\

Bahir Dar has a relatively high population growth rate that could be recognized from the available
demographic data. According to the 2006-2007 population and housing census result, the population
of the city has 167,261 of this 86,355 are males and 80,906 are females. Fifty eight percent of this
population is in the age group of 15-64 years and this similar population is active labor force. 42%
of the total population is below 15 years and above 64 years, which is unproductive labor force
(CSA, 2006).

The annual population growth rate is estimated to be 6.1%. Among reasons for its rapid population
growth, its being capital of the region and hence residence for various Governmental and
nongovernmental organizations staffs and immigration of people from surrounding zones, woredas
and Kebeles are mentioned as the main ones.

Social services in the city are growing from time to time. The number of schools found in Bahir Dar
till 2004 EC are: 32 Kindergarton schools, 55 elementary schools, 17 high school and preparatory
schools, and also around 10 private colleges. In addition to these Bahir Dar University is one of the
highest educational institutions found in the city. Similarly the health sectors are also growing at
present. There is one referral hospital and many

Tourism and its Trend in Bahir Dar

MELIHIK LODGE
Tourism industry in Ethiopia is a developing sector and not yet properly exploited as per the
potentials found in the country. Ethiopia has different natural and manmade artifacts that attract
tourists throughout the world. Although the tourism industry in Ethiopia is at a premature level, the
trend shows that the number of tourists who came to visit Ethiopia is increasing from year to year

Amhara region is one of the richest states in tourism resources in Ethiopia. Among the UNESCO
Previously registered eighth wonders of the world tourist destination areas of Ethiopia; three of them
are found in Amhara region. Lalibela, the walls of Fassil palace, Northern Mountain inhabit the
Chilada Baboon, Lake Tana monasteries and Tis Abay falls located around Bahir Dar are the main
tourist destination areas in the region. Before five

Years, in the year 2005 - 2006 the number of tourists that made a tour in the region both local and
foreign tourists were 27784. The government collected 204474 Ethiopian birr from these
tourists. After five years by the year 2010-2011 the numbers of tourists (local and foreign) in the
region were growing to 1,455,121 and the government collected 6,043,240 birr and other service
delivery sectors and churches together with museum collected 297,013,431and 11,966,635 birr
respectively. According to the ETV NEWs presented in February 16, 2004 the number of tourists
for the first half year of 2011-2012 reached 67000 foreign tourist and 80000 local tourists in the
region and 200 million birr were collected. It was increased by 20 % compared with the last year.
The trend shows that the numbers of tourists were increasing by 5237.26 % and the revenue
collected by the government was also increasing by 2955.5 %. One of the means’s for tourism
development in the region was the recent concern of the regional and federal government and the
expansion and development of infrastructures especially in the urban centers of the region (Amhara
Region Culture and Tourism Bureau).

The city Bahir Dar is one of the tourist destination urban centers in the country and the region as
well. The existence of tourist attraction sites such as Lake Tana and the monasteries in its islands,
Abay River and the Tis Abay falls can be mentioned as a reason for the increment of tourists from
time to time. The city’s proximity to walls of Fasiledas palace in Gondar and rock hewn churches of
Lalibela also reinforces the growth of tourism in Bahir Dar. Bahir Dar alone visited by 23986
foreign and local tourists during 2005-2006 and collected revenue of 8187889 Ethiopian birr by all
government, service, church and museum sectors. The trend of tourism in the city is increasing
consecutively for the last five years. Last year (2010-2011) the city was visited by 48786 foreign
and local tourists. The revenue collected from these tourists was 72237846 directly and indirectly by
the government church, and other sectors. The expansions of hotels, physical infrastructure and
MELIHIK LODGE
other service sectors in the city were taken as the main reasons for the increment of tourists
according to the information collected in Bahir Dar tourism office (Bahir Dar Tourism Office).

Infrastructure

The city is served with an international airport, digital telephone communication, radio station (Mass
media), internet and mobile facilities, postal services, marine transport, 24 hours hydro electric
power and good network of internal roads. Currently water supply coverage of the city reaches
nearly 83.52% (Municipality Report of, 2004). With regard to road infrastructure, the city is by now
constructing asphalt road as well as cobble stone in different places of the city. The length of
existing road is 145 kms paved road, 48 kms gravel road, 40 kms Asphalt road and 30 kms
pedestrian. The pedestrian walkway includes the access constructed by the municipality of the city
serve as public space found along Lake Tana nearly it reaches 4 KM

Urban Economy in Bahir Dar

The economy of the city is mainly dependent on commercial activities. Service sectors composed of
hotels, cafeterias, restaurants and other small local beverage producing sectors are prevalently found in
Bahir Dar. Those service sectors have a direct link with the growth of tourism industry in the city.
Although the service sector economic activity is the main potential of the city recently industrial activities
are also emerging. There is government and private owned industries that create formal employment and
supply various kinds of products to the city of Bahir Dar, the surrounding people and the country in
general (Finance and Economic Department of the City).
Investment Trend in Bahir Dar
Investment in the urban centers is the main means of creating job opportunities for citizens. The city
Bahir Dar is one among the other big cities found in the region that has been attracting investment for the
last ten years.
The investment policy draw by the Federal Government and adopted by the ANRS made a good
opportunity for investors to engaged in different activities in Bahir Dar and other towns in the region.
Although the trend of investment in Bahir Dar is very slow and lately started activity, there are a lot of
urban lands allocated for investment as well as other activities during the last ten years.

As shown in the table below the trend of investment in Bahir Dar city is not constantly increasing or

MELIHIK LODGE
decreasing rather it was fluctuating in different periods. Before 2005-2006 GC the investment trend was
progressive from year to year. On the other hand for the last strategic years of the FDRE starting from
2005-2006 GC it was shown an increment for about two consecutive years and then it became decreased
by the year 2007-2008 and again it grows in the year 2008. During 2009 again the land allocation for
investment became reduced highly and in the year 2010 and 2011 it raises up especially in the year 2011
much tracts of land was allocated for investment. The demand of land for investment particularly at the
lakeshore of Lake Tana is highly increasing since 2006-2007.Please see the table in the next page.

MELIHIK LODGE
4. PRINCIPLES OF WANCHI DANDI WATER FRONT DEVELOPMENT

When arranging a lakefront improvement, these are core standards direct the
arranging lake front improvement

• Include the lakefront as the front door.

• Grandstand the lake‘s history.
• Enact the lake front.
• Restrain impediments and interface to the lakes
• Lock in with the water.
• Interface consistently along the lakefront and into neighborhoods.
• Repair and upgrade the environment.

Key Concepts in lake side development in Wanchi - Dandi eco-tourism areas

• Connections should be accessible to the public even when they are adjacent
to private development.
• Connections should vary in character, providing both quiet, reflective
threads and lively, inhabited promenades.
• Promenades provide opportunities to experience the lake from a different
vantage point.
• Connections should be usable year-round on a variety of scales,
encouraging activity. In the summer, they will provide tranquil shade along
the lakefronts, while in the winter the sun will penetrate to warm the
surface of the trails and promenades for recreational users and pedestrians
alike.

• Parallel connections between landings, including trails and lakeside roads,

will provide a soft, green foil to the lodges density and activity.
• Riverfront trails should be simple and integrated with the landscape and
defined by the vegetation of the park.
• Each stretch of trail provides unique conditions, needs, and opportunities.
Solutions should be appropriate for each segment in order to plan for
step-by-step implementation, one project at a time.

4.1. Technology and Techniques to be used

Obviously, as this is designated Lodge services, the project will utilize Five star
standard lodge industry ‘s technologies as indicated in the background of this project
MELIHIK LODGE
and techniques in serving the customer. Hence, the following activity flow,
technologies and techniques are common in hotel construction and services
operations.

Preparation Resource
Start Site clearing
of design mobiliation

Supper Sub
Roofing
structure structure Excavation
works
works works

Doors, windows
Plastering Painting
works works
and other Finish
fininishing works

Start
Recruitment Furnish
operations

Fig1. Work process flow for hotel construction and service provisions

4.2. Service Provision capacity and Capacity utilization

The production capacity of the project is estimated based on the services the
envisaged hotel is going to provide and these are indicated in the following table.
Table1. Service Provision capacity of lodge service project
No Main services Unit Full capacity operation
1 Bed rooms pcs 100
Bar
1. Alcoholic beverages Lit 2000
2 2. None alcoholic beverages Lit 5000
3. Hot beverages Cups 30000
4. Foods Dish 80000
Other services
1. Meeting /conference service Occasion 12(once a month on
3 2. Weeding service “ average)
24(twice a month on
average)

The project will utilize 50% of its capacity in the first year of operation, 75% its
capacity in the second year and 100% in the third year of operations.

MELIHIK LODGE
5. Market prospect
Marketing opportunities for lodge 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.

Who stay in Eco Lodge?

Eco lodges will always attract niche market. Eco-conscious travelers that want to lower their
total travel footprint and prefer to visit an ecologically and/or culturally rich place are more
likely to seek out an Eco lodge experience. Eco lodges are more than just a place to sleep for
the night; they are an integral component of the vacation experience. An eco-conscious
visitor's main goal is to absorb nature and being one with nature. They provide tourists a
feeling of place by allowing them to experience and appreciate an area's biodiversity and
culture, as well as the ability to interact with local residents and learn about their customs
People in Eco lodge are not the people that need luxurious services that may impact the
environment. Their first objective is not to stay in comfortable full service instead they want to
observe the nature and culture of the area without left harm. In addition to their need they
also have to be very minimum in number to protect the area from simpler to big damages and
degradation raised with big number of tourist
Some extent most tourists have now become ‗eco - travelers.‘ For example, a 2007 survey by
Tourism Concern in the UK found that 96 percent of travelers would rather stay in an
environmentally-responsible resort than a 5-star property. Other recent travel consumer
surveys have been equally enlightening and support sustainable construction and operations

TYPES OF ECO-LODGE
Eco lodge classification is mostly based on primarily activities exercised by visitors. Four types
of Eco lodge are identified (Osland and Mackoy, 2004):
a. Dedicated
b. Casual
c. Scientific
MELIHIK LODGE
 d. Agri-eco-lodges

Dedicated Eco lodges are designed for ―hard‖ Eco tourists who engage in
specialist activities such as bird watching in areas with little resources or in remote
locations that are difficult to reach.
Casual Eco lodges: Most casual Eco lodges are located in well-serviced, conveniently
accessible areas where the majority of visitors are interested in relaxing and watching
nature. They are mainly affluent travelers looking for comfortable lodging and recreation in
natural settings. The lodge is designed for upscale visitors who want to relax and enjoy
nature in a peaceful setting. Fine dining, a spa, beach sports, guided nature tours in the
forest, and well- furnished cabins and bungalows with porches are all available at the
lodge. This is the most popular kind of Eco lodge that interacts with the ecosystem while
having a low environmental impact.
Scientific eco-lodges: - Educational and exploration exercises are carried out at scientific eco-lodges. Visitors to
science Eco lodges are normally involved in academic or educational events in privately owned premises, with
student groups often present. The station is currently expanding its eco-tourist operations, in an effort to find
innovative ways to combine science exploration, education, and revenue production
Agri-eco lodges are based on eco-friendly agricultural households, ranches, and farms. Most Eco tourists
choose to remain in areas where biodiversity has been protected while still serving an agricultural
purpose, i.e. in rural areas with identifiable cultural and traditional heritage. These loges are located on an
agriculture or ranch environment, and they include farms and ranches that are now mainly denoted to
eco-friendly practices as well as community eco-tourism projects.
Other eco lodge typology includes B and B (bed and breakfast) based, self –catering, holiday homes,
medium and high facility eco lodge typologies. According to this guideline the above typologies are
categorized in other portion depend up on the given site area for eco lodge, topography and the service and facility
they give
Lake Tana Eco-tourism Eco lodges types
In case of Tana lake the need is more focused on casual lodges and small number of dedicated Eco lodges as first
phase. Other types of eco lodges will be developed in future according to the need
SITE SELECTION CONSIDERATIONS
The requirements and environmental characteristics of a sustainable eco-tourism development will vary greatly.
In case of Lake Tans eco-tourism development the consultant will select appropriate site but the following factors
should be considered in site selection in general
Density - The relative merits of concentration over dispersal should be closely considered when locating
facilities. If facilities are dispersed carefully, natural vegetation qualities can be easier to preserve.
Structure

MELIHIK LODGE
Capacity - Any location has a carrying capacity for buildings and human interaction, no matter how
difficult it is to decide. Based on the resilience of site resources and the potential of the land to recover, a
systematic site review should be conducted to assess this capability emphasis, on the other hand, leaves
more natural areas undisturbed
Climate - When locating facilities, the temperature characteristics of the eco-lodge should be considered
in order to optimize human comfort while shielding the facility from climatic forces such as destructive
storms and other extremes
Slopes - Special sitting of buildings and costly building techniques are expected in some areas of the eco-
lodge where steep slopes predominate. Building on too-steep slopes can result in soil erosion and the
extinction of hillside vegetation. In general, more extensive construction should be located on gentle
slopes, dispersed development on mild slopes, and no development should be located on highly steep
slopes.
Views - Are essential to the visitor's experience and strengthen it. Views of natural features should be
maximized, while views of tourist and services should be minimized.
Natural - Natural risks, such as harmful animals and trees, should be considered when planning
sustainable growth. Restricted access to these features should be possible thanks to the site's design
Vegetation - To ensure the integrity of the eco-lodges, it is important to save as much natural vegetation
as possible. Natural flora is frequently an important part of the tourist experience, and it should be
protected. Broad forest areas should be preserved, and habitat fragmentation and canopy destruction
should be avoided
Access to Natural and Cultural Features -Pedestrian access to a wide range of onsite and offsite
facilities and leisure opportunities can be improved with good siting practices. The secret to preserving
critical resource a Traditional Activities - Common farming, pastoralism and bee keeping should be
consistent with siting reas is low-impact growth
Energy and Utilities - In future eco-tourism zones, conventional electricity and utility networks are
either limited or nonexistent. Siting can take into account potential connections to offsite utilities, as well
as the geographic requirements for onsite utilities. Alternative energy systems, especially solar and wind-
based energy systems, have the potential to be used in many ways. These possibilities are taken into
account when planning a sustainable site
Separation of Support Facilities from Public Use Areas - When it comes to locating support services
and equipment, safety, visual appearance, noise, and odor are all important considerations. These
sections must be segregated from areas used by the general population and circulation areas. Utilities,
energy networks, and waste collection areas will also contribute to a better tourist experience in some
situations

MELIHIK LODGE
Proximity of Goods, Services, and Housing - This type of construction also necessitates the
contribution of a wide range of products and services, as well as a broad operating workforce. The supply
of these elements, as well as the costs of delivering them, should be considered while sitting

6. Land use plan and action plan

6.1. Land use plan
The envisaged project is considered to be established on an area covering 10,000m 2. This land size will
be distributed as per international lodge standard and be utilized for main building of lodge services and
other accessory works. Hence, the following land use pattern is proposed for the project.
Table3: Land use Plan for Lodge Project

N Types of Land Use Proposed land size (m2)

o
1 Main lodge building 4,600
Parking, Loading/ unloading
2 1,200
area
3 Storage for hotel services 2,000
4 Cozy conference hall 1,000
5 Generator room 300
6 Incinerator 300
7 Guard/Janitor room 300
8 Green area 1,300
Total 11000

*Please see Annex I for action plan

7. Organization and management

7.1. 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.

MELIHIK LODGE
Fig2. Organizational Structure for Lodge Project

General Manager

Reception

Hotel manger Administration &

Finance

Marketing manager Human resources

Catering
Accountant

Accomodation Procurement
and sales

Hotel Security

7.2. 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.

1. ORGANIZATIONS AND MANAGEMENT

Organizational Structure

The organizational structure of the project is designed by including all the necessary personal
under the right division. At the top of the organizational structure, there will be a general manager
with the responsibility of supervising the overall activity of plant. Depending up on the nature of
the center and the amount of work to be performs under each will be supervised by the unit head
that is accountability for general manager

MELIHIK LODGE
 CEO

Coordinator
Manager/supervisor
Secretary

Sales & technical Unit Marketing Unit Admin & finance

Unit

As clearly shown the organizational structure, the integrated projected center

has CEO three Departments under the general manager, Addition and the
internal Auditing and inspection. The departments are the production
Department, the marketing department and the general service department
under each department there are different section which are undertaking
different activities

MELIHIK LODGE
 1.1. Management

As to the management of the project is concerned the owner will be responsible

for the overall project planning, co-ordination and implementation. After project
implementation the promoter serves as a top management body and frequently
visits and supervises the organization.
Cattle fattening farm a business man who has a long year experience in
managing business activities. Therefore, the extensive experience he has
enables him to organize and properly manage the envisaged International 5 star
Lodge Service.

1.2. Manpower Requirement

For smooth and efficient operation of the organization, it has been

anticipated that each units will have adequate number of qualified and experienced
manpower. The labor component of the Lodge Service G/manager will hire qualified and
experienced in management whose main responsibility is to coordinate the overall activity of the
project. The distinct units have their own operational teams under them. To fill in all these work
units with the required manpower The project will provide 300 employees, 125 permanent
(100 skilled & 25unskilled) and 175 casual skilled and unskilled
workers. For smooth operation of the project, employees will be given on job training, clear
duties and responsibilities under the direct supervision of their respective units.

MELIHIK LODGE
Table 6.1: Manpower Requirement

Annual
S/n Description of Job Qualification No. Monthly Salary(Br)
1 General Manager BSc in Lodge management 1 10000 120000
2 Coordinator/supervisor BSc in Lodge management 5 6000 360000
1 Assistance Supervisor diploma in Lodge management 5 6,000 360000
2 Receptionist diploma in Accountant 5 5,000 300000
3 Pastry and Staff Cafeteria diploma in food preparation 5 7,000 420000
4 Cafeteria supervisor diploma in Lodge management 2 5,000 120000
5 Waiter diploma and Certificate 20 2,000 480000
6 Cooker diploma in food preparation 20 7,000 1680000
7 Coffee machine operator 12th complete 2 3,000 72000
9 Pastry attendant Certificate 5 5,000 300000
10 Coffee machine operator 12th complete 5 3,000 180000
11 Dessert attendant skill professional 4 1,500 72000
12 Massage expert Certificate 5 5,000 300000
13 Physiotherapist Certificate 5 5,000 300000
14 Sauna /steam Bath Certificate 5 5,000 300000
15 Sauna and Steam bath Certificate 5 5,000
attendant 300000
16 life saver Certificate 4 5,000 240000
17 Casher diploma in Accountant 4 2,500 120000
18 Cleaner vice 8th grade complete 10 1,500 180000
19 Plumber diploma in electrical 2 2,000
engineering 48000
20 Electrician diploma in electrical 2 2500
engineering 60000
21 Gardener skill professional 2 1000 24000
22 Guards Gardener 8 1,000 96000
Total 125 - 6,432,000

1.3. Training Requirement

Since the machinery and equipment and services are easy to operate, a special training
arrangement is not needed. But operators, chemists, mechanics & electricians need a two weeks
training during erection, commissioning period on the production process, raw material and
product quality and operation and maintenance of machinery and equipment by the expert of
machinery supplier..

MELIHIK LODGE
 2. FINANCIAL STUDY

Financial analysis of the proposed project of Cattle fattening farm will be projected to test the
financial visibility if the investigated organization. Quantifying both project cost and benefits
over the assumed project life, which is five years, made the project visible. Besides it has been
tried to make a realistic forecasting of costs and the benefits based in current market price of all
necessary materials. Once the anticipated cattle fattening operation has been attained both
projects cost and revenue is estimated to be consumed to be compensated by increasing in sales
revenue

2.1. Classified Investment cost

The cost of the project is classified as fixed incitement cost and initial working capital. With
regards to fixed investment cost of the project, the land lease, building and civil works cost,
machinery and equipment cost office furniture costs and fuel costs will be required. As to
working and operating cost a brief illustration will be given as to utilities, salary expense,
maintenance cost and depreciation cost and the other related costs

7.1.1. Fixed costs

Fixed cost that include Land development, Building and civil work, machinery equipment and
vehicles and office furniture estimated birr 47,797,310.which is 65 % of the total project.
Table 7.1 land development
Description Qty Unit Price Total Price (Br)
S/N (Br)
1 Land clearing and leveling 974 m2 2,500 1,000,000
2 Land lease (5%) 433,917
3 Canal work 1 600000 600,000
4 Water reservoirs 2 250,000 500,000
Total - - 2,533,917

MELIHIK LODGE
Table 7.2 Building and civil works
S/n Description Qty Unit Total Price
Price (Br)
(Br)
1
Main Building 500 5,000 20,000,000
Gust room
Manager office
Supermarket
Bar and restaurant
Bed room (80 rooms,20 will be double
rooms, 50 single rooms and 10 suits kings
room.)
Meeting room
Sauna and steam bath
Gymnasium
4 Store service 250 5,000 1,000,000
8 Parking area 150 1,000,000
9 Generator house 44 500,000
10 Guard house 30 643,475
Total - 23,143,475
974.00
N.B. out of the total cost of G+0 Building construction, steel metal is covered 50 % of the
cost therefore the promoter is must be import from foreign using duty free by the rule of
Investment initiation.

Table 7.3 List of summarized machinery and equipment’s and cost

S/n Description Total cost
1 furniture and equipment for 90 Bed room
Luxury bed room (10 rooms) 688,000 Import from duty
Double bed room (20 rooms) 3,019,000 free
Single bed room (50 rooms) 2,822,500
2 furniture and equipment for office and reception area 1,295,300 Local market
3 furniture and equipment for bar and cafeteria 1,232,900 Local market
4 furniture and equipment for restaurant and dining room 485,750 Local market
5 furniture and equipment for conference room 1,468,250 Local market
6 furniture and equipment for kitchen materials 5,237,428 Local market
7 Sauna and steam bath materials 526,690 Duty free
8 Aerobics and physical fitness 682,100 Duty free
9 Massage service materials 300,000 Duty free
11 Mini market shop establish costs 200,000 Local market
12 Garden and creation area 81,000 Local market
Total 17,069,918

MELIHIK LODGE
Table 7.4. Procurement of Vehicles and furniture’s
Type of Vehicles Unit Qty Unit Price Remark
S/N
(Br)
1 Pick-up (4WD)/ No. 2 1,250,000 duty free
2 Mini bus No. 2 1,100,000 duty free
3 Bus service No. 2 1,800,000 duty free
4 Office furniture’s Ls - 400000 Local market
5 computer and accessories 500000 Local market
Total - - 5,050,000

Table 7.5 Summary of Fixed asset

S/n Description Cost Estimate Remark
(Birr)
1 Land development 2,533,917 100% local market
2 Building & Constructions 23,143,475 50% duty free imported
3 Machinery and equipment 17,069,918 50 % duty free imported
4 Procurement of Vehicles & furniture’s 5,050,000 90 % duty free imported
Total 47,797,310 49.7 % duty free
imported

7.1.2. Operational cost costs

Production cost of the project includes direct production and overhead costs. The major cost item
under this category includes cost of material and labour inputs, fuel and lubricants, repair and
maintenance, employee salary and benefits, insurance, office supplies and other miscellaneous
expenses; the total estimated production cost is birr 6,732,310 million 20.8 % of the total project
capital is.

Direct cost
Table 7.6.Raw materials
S/N Raw materials Quantity cost per per year
per month month
1 Food materials raw costs Lamp sum 500,000.00 6,000,000.00
2 d/t type Beverage raw costs Lamp sum 500,000.00 6,000,000.00
3 massage, sauna bath and other related Lamp sum 15,000.00
cost 180,000.00
4 Cleaning materials and other Lamp sum 15,000.00
Miscellaneous uses 180,000.00
Total 12,360,000.00

MELIHIK LODGE
Table 7.7 Utilities
Description Qty. unit cost Cost per year
Electricity, kWh 500000 1.25 625000
Water, m3 300000 4.5 1350000
LPG, lt 2000 16 32000
Diesel, lt 20000 18 360000
Total 2367000

Administration cost

 Employee benefits : It includes medical expense, uniform and other

incentive package and assumed to be 25% of annual salary expense = birr
1,608,000
 Travel expense: It is assumed to be 10% of annual salary expense i.e. birr
643,200
 Repair and maintenance

Cost estimate/ year

Item
Land development
Building & Constructions
Machinery and equipment
Vehicles & furniture’s
Total
% Price
2 50678.34
2 462869.5
3 512097.552
5 151500
- 1,177,145.39

 Insurance: It is assumed to be 1% of fixed investment cost =

birr 477,973
 Office supplies: Including stationery and sanitary supplies annual
cost of birr 100,000 is considered.
 Miscellaneous expense: It includes cost of land rent, telephone and
postage, audit, legal and license fees and other miscellaneous
expenses. The total annual cost of these cost components is
estimated to be birr 150,000 /year.

MELIHIK LODGE
Summary of Operational cost/ working capital
Table 7.8 Determination of Initial Working capital requirement
S/n Cost item Annual cost
1 Raw materials
1.1 Direct coast 12,360,000
1.2 Utilities 2,367,000
Sub total 14,727,000
2 Administrative costs
2.1 Salary and wage 6,432,000
2.2 Employee benefits 1,608,000
2.3 Travel expense 643,200
2.4 Repair and maintenance 1,177,145
2.5 Insurance 477,973
2.6 Advertising expense 50,000
2.7 Telephone expense 365,000
2.8 Wi fi Internet service 60,000
2.9 Office supplies 100,000
2.1 Miscellaneous expense 150,000
Sub total 11,063,318
Initial W.C. requirement 25,790,318

MELIHIK LODGE
 2.2. Project Capital and financing

7.2.1. Project Capital

The total investment capital of the project is estimated at birr 73,587,629 of which birr
47,797,310 (65%) is for fixed investment items while the remaining balance of birr 25,790,318
(35%) will be initial working capital. The detail of investment capital of the project is given
below
7.9. Project capital and source of income
Investment Source of Income Remark
S/n Description
capital (Br.)
1 Land development 2,533,917 Local Market
2 Building & Constructions 23,143,475 50% foreign currency Duty free
3 Machinery and equipment 17,069,918 45% foreign currency Duty free
4 vehicles and furniture 5,050,000 90% foreign currency Duty free
Sub total 47,797,310 49.7% foreign currency Duty free
5 Working Capital 25,790,318 Local market
32% need foreign Duty free
Total 73,587,629
currency

7.2.2. Financing

The total investment capital of the project is to be financed from the promoter’s equity and bank
loan. Out of the total capital birr 22,076,289 (30%) is contributed by the promoter, Aster Dereje
PLC while the remaining balance of birr 51,511,340 (70%) is to be financed by local banks.
The bank loan will be repaid based on the following terms and conditions:
 Loan amount = birr 51,511,340
 Installment period/ term = 10 years
 Interest on loan (including service charge) = 11.5%

MELIHIK LODGE
Table 7.10 Loan Repayment Schedule
Principal Interest Year ending
Year
Repayment Payment Balance
0 - - 51,511,340
1 5,151,134 5,923,804 46,360,206
2 5,151,134 5,331,424 41,209,072
3 5,151,134 4,739,043 36,057,938
4 5,151,134 4,146,663 30,906,804
5 5,151,134 3,554,282 25,755,670
6 5,151,134 2,961,902 20,604,536
7 5,151,134 2,369,522 15,453,402
8 5,151,134 1,777,141 10,302,268
9 5,151,134 1,184,761 5,151,134
10 5,151,134 592,380 0
Total 51,511,340 32,580,923

Depreciation of fixed investment items

The straight-line method has been used to depreciate/amortize all fixed items of
the project. The depreciation rate applied for all fixed assets is given below:
Table 7.11 Depreciation Schedule

Original Annual Depreciation

S/n Item
Value % Amount (Br.)
1 Land development 2,533,917 10 253,392
2 Building & Constructions 23,143,475 10 2,314,348
3 Machinery and equipment 17,069,918 10 1,706,992
4 vehicles and furniture 5,050,000 10 505,000
Total 47,797,310 - 4,779,731

MELIHIK LODGE
Table 7.12 Summary of project Annual production costs
S/n Cost item Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
1 Direct cost
1.1 Direct cost 12,360,000 12,978,000 13,626,900 14,308,245 15,023,657 15,774,840 16,563,582 17,391,761 18,261,349 19,174,417
1.3 Utilities 2,367,000 2,485,350 2,609,618 2,740,098 2,877,103 3,020,958 3,172,006 3,330,607 3,497,137 3,671,994
Sub total 14,727,000 15,463,350 16,236,518 17,048,343 17,900,761 18,795,799 19,735,588 20,722,368 21,758,486 22,846,411
2 Administrative costs
2.1 Salary and wage 6,432,000 6,753,600 7,091,280 7,445,844 7,818,136 8,209,043 8,619,495 9,050,470 9,502,993 9,978,143
2.2 Employee benefits 1,608,000 1,688,400 1,772,820 1,861,461 1,954,534 2,052,261 2,154,874 2,262,617 2,375,748 2,494,536
2.3 Travel expense 643,200 675,360 709,128 744,584 781,814 820,904 861,950 905,047 950,299 997,814
Repair and
2.4 1,177,145 1,236,003 1,297,803 1,362,693 1,430,828 1,502,369 1,577,487 1,656,362 1,739,180 1,826,139
maintenance
2.5 Insurance 477,973 501,872 526,965 553,314 580,979 610,028 640,530 672,556 706,184 741,493
Advertising
2.6 50,000 52,500 55,125 57,881 60,775 63,814 67,005 70,355 73,873 77,566
expense
2.7 Telephone expense 365,000 383,250 402,413 422,533 443,660 465,843 489,135 513,592 539,271 566,235
Wi fi Internet
2.8 60,000 63,000 66,150 69,458 72,930 76,577 80,406 84,426 88,647 93,080
service
2.9 Office supplies 100,000 105,000 110,250 115,763 121,551 127,628 134,010 140,710 147,746 155,133
Miscellaneous
2.1 150,000 157,500 165,375 173,644 182,326 191,442 201,014 211,065 221,618 232,699
expense
Sub total 11,063,318 11,616,484 12,197,309 12,807,174 13,447,533 14,119,909 14,825,905 15,567,200 16,345,560 17,162,838
Total cost working capital 25,790,318 27,079,834 28,433,826 29,855,517 31,348,293 32,915,708 34,561,493 36,289,568 38,104,046 40,009,249
Note: Production costs are assumed to increase by 5% annually.

Page 56
 2.3. Revenue projection

The project will collect its revenue from the customer service. The selling of
food and beverage and rented rooms has estimated based on the current
market price and Lodge standard of similar service provision in town. The
annual service program is formulated based on proposed plant capacity
considered the following table
Table 7.13 Description of revenue projection

No of bed Price/day
S/N Bed room service per year
rooms /night
1 King standard room 10 1800 4320000
2 Double bed room 20 1400 6720000
3 Single bed room 50 1000 12000000
Subtotal 23,040,000.00
S/N Raw materials No of cost per per year
customer per month
day
1 Food service income 100 850,000.00 10,200,000.00
2 Beverage service income 200 850,000.00 10,200,000.00
3 income from Massage service 40 360,000.00 4,320,000.00
4 Income from Gymnasium 20 180,000.00
service 2,160,000.00
5 Income from sauna bath 45 472,500.00 5,670,000.00
6 Income from Meeting hole 20 150,000.00
service days/month 1,800,000.00
Subtotal 34,350,000.00
Grand total 57,390,000.00

Page 57
 2.4. Financial statements

7.4.1. Projected Profit/loss statement

In ‘birr

Table 7.14 Project Profit/loss statemen

Melihik Lodge
5 star international Lodge
Projected profit/loss statement
Project Year
Description 1 2 3 4 5 6 7 8 9 10
Revenue 57,390,000 60,259,500 63,272,475 66,436,099 69,757,904 73,245,799 76,908,089 80,753,493 84,791,168 89,030,726
Less: Production
25,790,318 27,079,834 28,433,826 29,855,517 31,348,293 32,915,708 34,561,493 36,289,568 38,104,046 40,009,249
Costs
Gross Income 31,599,682 33,179,666 34,838,649 36,580,581 38,409,610 40,330,091 42,346,595 44,463,925 46,687,121 49,021,478
Less: Interest on
Loan 5,923,804 5,331,424 4,739,043 4,146,663 3,554,282 2,961,902 2,369,522 1,777,141 1,184,761 592,380
Less: Depreciation 4,779,731 4,779,731 4,779,731 4,779,731 4,779,731 4,779,731 4,779,731 4,779,731 4,779,731 4,779,731
Profit before tax 20,896,146 23,068,511 25,319,875 27,654,187 30,075,597 32,588,458 35,197,343 37,907,053 40,722,630 43,649,366
Less: Income tax
7313651.22 8073978.79 8861956.08 9678965.58 10526458.90 11405960.22 12319069.96 13267468.52 14252920.36 15277278.13
(35%)
Net Profit 13,582,495 14,994,532 16,457,918 17,975,222 19,549,138 21,182,498 22,878,273 24,639,584 26,469,709 28,372,088

Note: Sales revenue is assumed to increase by 5% annually

Page 58
 7.4.2. Projected cash flow
statement
Melihik Lodge
5 star international
Lodge
Projected cash flow statement
Table 7.15 Project cash flow Statement

Project Year
Description
0 1 2 3 4 5 6 7 8 9 10
Cash Inflow
Equity 22,076,289 - - - - - - - - -
Bank loan 51,511,340
Revenue 57,390,000 60,259,500 63,272,475 66,436,099 69,757,904 73,245,799 76,908,089 80,753,493 84,791,168 89,030,726
Depreciation 4,779,731 4,779,731 4,779,731 4,779,731 4,779,731 4,779,731 4,779,731 4,779,731 4,779,731 4,779,731
Total Inflow 73,587,629 52,610,269 65,039,231 68,052,206 71,215,830 74,537,635 78,025,530 81,687,820 85,533,224 89,570,899 93,810,457
Cash Out Flow
Fixed Cost Initial 47,797,310 - 27,079,834 - 28,433,826 - 29,855,517 - 31,348,293 - 32,915,708 - 34,561,493 - 36,289,568 - 38,104,046 - 40,009,249
W.C 25,790,318 25,790,318 5,151,134 5,151,134 5,151,134 5,151,134 5,151,134 5,151,134 5,151,134 5,151,134 5,151,134
Loan Repayment 5,151,134 32,230,968 33,584,960 35,006,651 36,499,427 38,066,842 39,712,627 41,440,702 43,255,180 45,160,383
Total Out flow 73,587,629 30,941,453
Net Inflow - 21,668,816 32,808,263 34,467,246 36,209,178 38,038,207 39,958,688 41,975,192 44,092,522 46,315,718 48,650,075
Cumulative balance
- 21,668,816 54,477,079 88,944,325 125,153,503 163,191,711 203,150,399 245,125,591 289,218,113 335,533,832 384,183,906

Page 59
 7.4.3. Balance sheet
Current asset
Raw cost and utilities 12,360,000
utilities 2,367,000
Administrative costs
Salary and wage 6,432,000
Employee benefits 1,608,000
Travel expense 643,200
Repair and maintenance 1,177,145
Insurance 477,973
Advertising expense 50,000
Telephone expense 365,000
Wi fi Internet service 60,000
Office supplies 100,000
Miscellaneous expense 150,000
Sub total 11,063,318
Fixed cost
Land development 2,533,917
Building & Constructions 23,143,475
Machinery and equipment 17,069,918
Procurement of Vehicles & furniture’s 5,050,000
Total fixed cost 47,797,310
Total asset 73,587,629
Liabilities
Bank loan 51,511,340.23
owners Capital 22,076,288.67
Total liabilities and capital 73,587,628.90

Page 60
7.5.3. Viability and other measurement
Melihik Lodge
5 star international Lodge
Financial IRR computation
Table 7.16 Financial IRR computation
In ' birr

Year 0 1 2 3 4 5 6 7 8 9 10
Gross income 57,390,000 60,259,500 63,272,475 66,436,099 69,757,904 73,245,799 76,908,089 80,753,493 84,791,168 89,030,726
Total costs 73,587,629 25,790,318 27,079,834 28,433,826 29,855,517 31,348,293 32,915,708 34,561,493 36,289,568 38,104,046 40,009,249
Gross profit -73,587,629 31,599,682 33,179,666 34,838,649 36,580,581 38,409,610 40,330,091 42,346,595 44,463,925 46,687,121 49,021,478
Less: Profit tax 11,059,889 11,612,883 12,193,527 12,803,203 13,443,364 14,115,532 14,821,308 15,562,374 16,340,493 9049001.6
After tax net benefit -73,587,629 20,539,793 13,478,615 13,976,013 14,503,150 15,061,512 14,873,630 15,596,585 16,355,688 17,152,746 17,989,656
DF at 35% rate 1 0.741 0.549 0.406 0.301 0.223 0.165 0.122 0.091 0.067 0.05
Present Value -73,587,629 42,525,990 33,082,466 25,688,625 19,997,266 15,556,013 12,085,557 9,382,787 7,348,568 5,681,008 4,451,536
Net present Value 102,212,186 - - - - - - - - - -
DF at 30% rate 1 0.769 0.592 0.455 0.35 0.269 0.207 0.159 0.123 0.094 0.073
Present Value -73,587,629 44132910.0 35673624.0 28788976.1 23252634.6 18764876.1 15161880.4 12228386.1 9932679.7 7970369.8 6499243.0
Net present Value 128,817,951 - - - - - - - - - -

Page 61
  NPV (Net Present Value)

It is a method of calculating the expected net gain or loss from project by

discounting rate of all expected future cash inflow and outflows to the present
point in time In the above table shoes that NPV at 30% and 35 % discount
rate is 128.8 million and 102.2 million respectively, this figure is positive
value or NPV>0 it is indicate that accepted the project until 30 % and 35 % of
discount rate

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 4)
is estimated by using income statement projection.

BE = FixedCost
= 23 %
Sales – Variable Cost

 Payback Period (PBP)

The payback period is the amount of time required for a firm to recover its
initial investment in a project, as calculate from cash inflow
The investment cost and income statement projection are used to project the
pay-back period

PBP = Initial investment Cost

Gross Profit + Depreciation

= 73,587,629
13,582,495 + 4,779,731

4=5Years
The payback period =4 is less than the maximum acceptable payback period
(10) therefore accept the project.
 IRR
 Project Proposal on 5 star international /tourist Lodge

The internal rate of the project is the rate of discount that radios the present
value of the investigated project to zero. In calculating the IRR, the discount
rate can be adjusted until the NPV becomes Zero or at least as to zero.
Hence, the IRR of this project is calculated as follows
After tax IRR = 35 + 5 (102.2/128.8)
=33.9%
IRR=33.9% of the project returns its initial investment cost within its life

3. SENSITIVITY ANALYSIS

Sensitivity analysis is variant of scenario analysis in which each scenario

represents a change in only one variable, rather than a number of variables.
For the proposed project, the sensitivity of the project has been computed at
30% and 35% for sales reduction, operating cost increase and investment
cost increased accordingly, as described in table 7.16 the result shows that
IRR at 33.9% operating cost increase and 30 and 35% investment cost
increase and 30% service sales reduction. Predicting among these sales
reduction is more sensitive to the project and it should further expand after
the project proposed life time because in this case NPV equal zero at
IRR=33.9
4. RISK ANALYSIS

The major risk of this project shall be high market price fluctuation and
turnover the skilled and trained man power. These risks can be mitigated.
The high staff turnover may be lessened by creating conductive working
atmosphere and providing some benefits. For this project, 25% benefit is
proposed for the permanent employees
Characteristic (Personal) Risk: This is the most important risk, which
should be seriously considered? As to this company, the promoter have
sufficient years of work experience in both government and private
organization (leading private business by engaging themselves), so personal
risk is minimum under this context
Business Risk: The fate of the business is generally found to be dependable.
The demand- supply analysis exhibits the need of the service of the business

63
 Project Proposal on 5 star international /tourist Lodge

organization. According to the overall demand the effect of competitors in

the sector would not be an immediate alarming threat at least for the coming
few years. In additional to this Long year experience of the owner in the field
will help to react against any adverse situation in the business. However, the
reaction of competitors should be attended. In additional to an advanced
promotional work and sustainable goodwill development by creating new and
best quality products with good service deliveries

Collateral Risk: Since the owners of the project are engaged on different
related business, there is no any risk related to collateral. In this regard, the
proposed building and other proposed equipment and the business as a
whole are dependable securities. The experience and skill of the owner as well
as the manager and the other expertise add confidence to the lenders.
Therefore, there is no risk regarding collateral in general.

Construction Risk: Construction risk is one of the most important areas of

risk that need great consideration during project implementation. In the case
of 5 star international Lodge services, the construction work of the proposed
building will be made by phase with self-response supervision. Hence, there
is no as such serious risk related to construction work.

All the identified risks, which are related to the universally accepted lending
policy, are to the acceptable level that keeps the lender’s interest in safe
position. Furthermore, the quality of the assets of the company is dependable
and the projected finical reports show that the company will have a capacity
to pay the principal and interest without any problem with in short period of
time.

64
 Project Proposal on 5 star international /tourist Lodge

5. MONITORING AND EVALUATION

Monitoring and Evaluation (M&E) has long been recognized as a vital aspect
of development projects generally and of industrial and services projects in
particular. The monitoring of project performance consists of the tracking of
human, physical and financial resources and the recording of how they are
converted into outputs (project goods and services), and in turn, outcomes and
impacts.