Getachew Tesfa....

FEASIBILITY STUDY CONDUCTED FOR Ato GETACHEW
TESFA GUEST HOUSE
APRIL 2022
Getachew Tesfa Guest House Feasibility Study
Table of Content
I. EXECUTIVE SUMMARY..................................................................................... 4
The project 4
Market Potential 4
Technical Considerations and Implementation..................................................................................................8
Organization and Manpower...........................................................................................................................8
Financial Analysis 9
Conclusion and Recommendation..................................................................................................................10
II. BACKGROUND INFORMATION......................................................................11
Project promoter 11
The promoter Ato Getachew Tesfa is among the known engineer of Ethiopian. He take his first
from Italy in the field of civil engineering. He worked with different international road constructors
in Uganda and Tanzania. Now he is going to invest at guest house business...........................11
Project Description 11
2.1 Project Rationale/Justification of establishment/........................................................13
III. MARKET STUDY 17
General Consideration 17
Overview of Trends of Tourism in Ethiopia.....................................................................................................19
Demand and Supply Situations......................................................................................................................21
Overview of Tourism Potential of in Addis Ababa............................................................................................21
Demand Considerations 21
Supply Considerations 24
Future Market Prospect 26
Marketing Strategy 27
Price Determination 28
IV. TECHNICAL STUDY......................................................................................... 29
Location 29
Building and Layout 30
Bedroom Furniture, Fixture and Equipment’s..................................................................................................32
5. Utilities..................................................................................................................33
Water 33
5.6. Electricity............................................................................................................................ 33
Environmental Impact Assessment................................................................................................................34
Project Implementation 35
V. ORGANIZATION AND MANAGEMENT...........................................................36
Organization 36
General Manager 36
Accountant 36
Receptionist 36
Cleaners 37
Security guard 37
Manpower Requirement 37
Training 38
VI. FINANCIAL STUDY 39
Planned Investment 39
Source of finance 40
Anticipated Financial Developments...............................................................................................................41
VII. CONCLUSIONS AND RECOMMENDATION...................................................42
Conclusions 42
Recommendation 42
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W/RO WOINESHET TILAHUN
VIII. ASSUMPTIONS EMPLOYED IN THE FINANCIAL PROJECTIONS..........43
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I. EXECUTIVE SUMMARY
The project
This investment project envisages to establish a tourist standard guest house in

total area of 280 m2. The project is planned to be established in Addis Ababa
bole mickeal. The project’s building facility is designed to comprise guest rooms
only. The promoter, ATO Getachew Tesfa has decided to establish the guest
house encouraged by the existing favorable economic conditions and
increasing demand for tourist standard guest house in the country at large and
in Addis Ababa and surroundings areas in particular. The proposed guest
house, after establishment, has planned to deliver international standard
accommodations and will be devoted to delivering an elevated guest
experience. Various types of services are included in the plan to be able to
provide quality and professional services to both domestic and international
tourists.
Market Potential
Ethiopia is one of the African countries that possess the highest number of
UNESCO World Heritage Sites in Africa, with 13 sites spread throughout the
country. The country also has more sites that could be potentially developed to
be additional tourist destinations. The government of Ethiopia has given due
attention to the tourism sector in its development strategy, to optimize the
existing tourism resources as a driving force for economic growth and
development.
Furthermore, Ethiopia is a strategically important country in the Horn of Africa

and as a result many international meetings and conferences are held in the
country. This creates a huge demand for accommodation at an international
standard and even an increase in such a demand is expected in the future
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because of the growing importance of Ethiopia in hosting international

conferences. The market assessment on guest house that have accommodate
tourist standard guest house that have indicated there is acute shortage of
guest rooms in Ethiopia. Review of the general economic environment
indicates that favorable conditions exist in the country for service providers
such as guest house. Tourists that stay for a shorter duration, such as less
than a month, have a preference for guest house accommodation in standard
rooms. The increasing trend of business and other tourists is expected to
accelerate the demand for hotel accommodations in the future. The demand
supply gap is anticipated to grow even increasingly wider. This is believed to
create business opportunities for investors to enter the market.
The busting capital of Ethiopia, Addis Ababa is very much the center of this
divers and delightful country. For start it is geographically sites in the middle of
this large nation and at 2355 m above sea level, occupies an elevated position
overseeing large swaths of the rest of the country. The city itself has a
population of about 5 million people Addis Ababa is also the culture hub of
Ethiopia, with several important museums stationed here, as well as major
universities and many Ethiopia orthodox sites and treasury. And Addis Ababa is
also the business hub of this otherwise very rural country. As such, it’s home to
the movers and shaker of this quick developing nation, the young and educated
as well as a small but growing middle class. This means if one wants to eat,
drink or party in Ethiopia Addis Ababa is definitely the spot to head for. But
there much more to the city. One of the interesting things about Addis Ababa is
that this city really does seem to lack a center, instead of all its attraction,
markets, churches and museums are spread out across different zones,
making a discernible tourist hub something of a misnomer here. Were there to
be one central region to this city however, it would probably be meskel square.
Home to one of the most important Ethiopian orthodox festivals of the year,
meskel square is normally filled with traffic and ratting metro overhead, but on
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the 26th of September each year, the meskel religious festival takes places right
here…. And it’s one of the most important dates in this faiths calendar. Top
things to see and do in Addis Ababa meskel squer, red terror ethnological
museum, national museum, holy trinity, st George cathederal, debre libanos
monastery, entoto mountain, addis merkato and others.
Stelae are one of the oldest historical heritages of the zone which are found in
Tutit (anthropological and archeological site) and Tutifela site. The stelaes are
differently shaped; some have cylindrical shape (indicate male sex organ) while
others are flat with engravings. Among 900 stelae found in East Africa about
600 are exist in Gedeo zone. There are also several caves, cold and hot
springs, mineral waters and water falls (Goto, fall in Bule wereda with 31
meters high). In the zone there are lower and medium hotels which give
services for the tourists and society.
With nearly five million inhabitants, Addis Ababa , the capital city of Ethiopia is
rich in cultural and historical tourist attractions. It's the city of culture, the city of
the heart of history, and the city of welcoming people. This vibrant city is
located at the intersection of 8.9806° N, 38.7578° E and on the geographical
center of the country. The 1880s was the decade which marks the beginning of
the establishment of Addis Ababa. From a modest beginning of ten scattered
long mountain tops, Mount Entoto is where all began providing a panoramic
view both the old and new city of Addis Ababa. Addis Ababa is a city
characterized by remarkable diversity and contrasts. It is a city that has
maintained its natural setting. There is a wide range of modern shopping malls
and supermarkets and full range of international restaurants, shops specializing
in Ethiopian handicrafts and various souvenirs of interest of the visitor, open
markets where art designers sell their home made fabrics and other crafts,
delightful tiny shops where one can discover and buy traditional modern
clothing, different kinds of jewelry, handicrafts and all kinds of things are also
important attractions of Addis Ababa. Tourist attractions in Addis Ababa
Ethiopia tourist attractions which include Ethiopia historical tourist
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attractions, Ethiopia cultural tourist attractions, religious festivals and events in

Ethiopia and adventure attractions and activities in Ethiopia are amazing and
more diverse. They are like nothing you will find anywhere else in the world.
And Addis Ababa, Ethiopia is one of Africa's charming cities surrounded by
majestic mountains such as Mount Entoto on the north side. And up on this
mountain you find historic churches. There is a lot to see in our Addis Ababa
city tours like the Museums which have hosted the nation’s historical and
cultural heritages, archaeological collections starting with Lucy through Axumite
and Gonderine periods to the modern day, ethnographic items from a multitude
of different ethnic groups, perfect places to learn about much of Ethiopia and its
rich history. Monuments and statues commemorate Ethiopia’s patriotic sons
and daughters. You will see the very best of Addis Ababa in one of our
practical half-day Addis Ababa city tours or full-day Addis Ababa city
tours suggestions on this website filled with some of the city's most beautiful
attractions. Addis Ababa and the whole of Ethiopia with its long history of
independence represent something unusual in terms of the African experience.
Addis Ababa with a large number of foreign residents from all parts of the
world, big open markets where many goods are transported manually, amazing
collection of traditional clothes and musical instruments, day and vibrant night
life range from modern state-of-the-art discos and clubs to small and traditional
music houses, cultural restaurants to taste Ethiopian dish and see live dances
from the different people of the country for a glorious evening out, and more.
At the heart of the modern city center, the famous museums are home to the
most extensive collection of Ethiopian antiquities. Addis Mercato in Addis
Ababa is a colorful place where one can see huge array of herbs and spices
which is almost impossible to ignore it. Addis Ababa is also home to a variety of
shopping this nation. The choice is quite overwhelming.
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Technical Considerations and Implementation
The project at present is under construction foundation work for guest house
and also accommodated space for bank’s branch opening at G+0. The design
works (architectural, structural, electrical and sanitary) have been done by
professionals following the existing state of the art. The project work,
construction of the guest house building, consists of architectural and civil work
design, surveying and soil test, site preparation, excavation and earth work,
concrete and external block works, internal block works, carpentry and joinery,
aluminum works, finishing works, painting, and sanitary, electrical and
mechanical installations. Subsequent to completion of the above works room
fitting and installation of other equipment and facilities will be undertaken.
The overall construction cost of the project is estimated at about Birr 24 million.
So far the promoter has executed construction work worth of Birr 17 million
which is about 71% of the total construction cost of Birr 24 million. The
remaining construction work is planned to be completed at an estimated
amount Birr 7 million. Other investment items of the project include bedroom
items and equipment which are needed for the guest house to start giving
quality services.
The project implementation is anticipated to take about eight months. Loan

processing is considered part of the activities carried out during project
implementation. Adequate time is allocated for all activities to be executed to
realize the intended guest house.
Organization and Manpower
The organizational structure of the business operation consists of three

different position like receptionist, manager, security Gard and cleaner. When
the project becomes fully operational it requires 16 workers. The total yearly
salary and benefit bill is estimated at about Birr 924,600.
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Financial Analysis
The project requires an investment outlay of about Birr 30 million which is

envisaged to be financed by equity and loan in the proportion of 83% and 17%,
respectively. This would mean equity of Birr 22 million and a bank loan of Birr
5 million. The owner’s equity includes the amount of money already invested on
building and construction.
The financial analysis undertaken indicates that the project is profitable and
financially viable. The financial forecast also shows that project will have a
surplus cash starting from the first year of operation.
Accordingly, the projected profit and loss statement indicates that the project
will generate an average annual net profit of Birr 16.8 million. The projected
cash flow statement also shows that the project will register net cash inflow of
Birr 4.4 million at the end of the first year which is expected to increase and
reaches at cumulative cash balance of Birr 35.7 million at the end of planned
economic life of the project. The FIRR after tax and before tax has turned out to
be 19% and 18%, respectively, indicating that the project is financially viable.
The financial projects also shows that the project would register a net present
value (NPV) of about 3.82 million at 18% discount rate depicting that it is wise
to invest in the proposed venture.
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Conclusion and Recommendation
Apart from providing financial benefits to the promoter, implementation of the

project will increase government income through taxes and provide job
opportunities to an estimated 16 unemployed people. Besides, it will enhance
the foreign currency generation capacity of the country through providing
highest quality services to foreign tourists.
All in all, the market assessment justifies the establishment of the proposed
project. The financial gain from project is also attractive for undertaking the
investment. Hence, the project is recommended for implementation.
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II. BACKGROUND INFORMATION
Project promoter
The promoter Ato Getachew Tesfa is among the known engineer of
Ethiopian. He take his first degree from Italy in the field of civil engineering.
He worked with different international road constructors in Uganda and
Tanzania. Now he is going to invest at guest house business.
Project Description
Currently, the project under consideration is being constructed by known and

experienced constructor. The building designed to comprise of guest rooms
and bank’s branches only.
Getachew guest house will be located in Addis Ababa city Bole Mikeal in the
location convenient for tourist accommodations. The proposed project has
access to different tourist attraction sites both in the city and surrounding areas.
The Guest house, when implemented, shall be one of the few luxury guest
house in Addis Ababa. The design of the guest house shows that after the
completion of the overall civil works there will be spacious for banks branch at
G+0 level. The interior design at every corner of guest house building will be
very impressive with its quality and attention given to detail, comfort and
elegance. Furnishing shall be immaculate and services will be formal, well
supervised and flawless in attention to guests’ needs, without being intrusive.
Staff will be very well trained to knowledgeable, helpful, well versed in all
aspects of customer care, combining efficiency with courtesy.
With superb facilities, comfortable accommodation and unsurpassed service,

the guest house will ensure that guests will have a truly wonderful and
memorable vacation experience. Furthermore, to realize its objective, there will
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be a high enough ratio of staff to guests to provide services like 24-hour room
service, and dry-cleaning. The features of the proposed facilities and services
to be offered by the proposed guest house are discussed here under.
A) G+0 Reception room and bank branch, 2 blocks

 100 m^2 space for that will be rented for bank’s branch
 Reception room with sofa, table, shelve, TV and telephone.
B) G+1 Guest rooms, 4 blocks
 Each of the guest rooms shall be provided or furnished with:
 table, Bed and chair for the room;
 shower room (hot and cold)
 TV and telephone
C) G+2 Guest rooms, 4 blocks
 Table, Bed and chair for the room;
D) G+3 Guest rooms, 4 blocks
E) G+4 Guest rooms, 4 blocks
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2.1 Project Rationale/Justification of establishment/
Ethiopia offers a wide range of activities and experiences for vacationers and
business travelers. Visitors can trek across the desert, explore ancient ruins,
tour museums or simply relax while watching the locals interact. The unique
Rift Valley is a remarkable region of volcanic lakes, with their famous
collections of birdlife, great escarpments and stunning vistas. Tisisat, the Blue
Nile falls, must rank as one of the greatest natural spectacles in Africa today.
With 14 major wildlife reserves, Ethiopia provides a microcosm of the entire
sub-Saharan ecosystem. Birdlife abounds, and indigenous animals from the
rare Walia ibex to the shy wild ass, roam free just as nature intended. Ethiopia,
after the rains, is a land decked with flowers and with many more native plants
than most countries in Africa.
Addis Ababa is one of the major tourist destinations in Ethiopia due to the
presence of a number of cultural and natural attractions. The promoter decided
to establish an all-inclusive guest house in Addis Ababa city for tourists who are
visiting tourist destinations both in the town and surrounding areas in the city.
Being capital city, Addis Ababa is directly linked to different parts of the country.
A number of higher learning institutions including Addis Ababa University which
surround the town.
The best new tourist attractions in Addis Ababa, Ethiopia
Entoto Natural Park for the discerning customer who enjoys peace, quietness,
space and breath taking air in Addis Ababa Entoto Natural Park is for you. This
state run park is set in a tranquil on the top of Mt. Entoto. It’s ideal for relaxing,
mountain climbing, hill walking, etc. The area is a painters and photographer’s
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paradise. This stunning natural park is the most recent park to Addis Ababa. It
offers excellent standards of cleanliness. Entoto Natural Park has all essential
facilities to ensure that visitors will enjoy their stay. Some of the onsite facilities
include aquarium, horse riding, children’s playground, hotels, restaurants,
campsites and many more.
Entoto Natural Park is a unique place to discover history, nature and adventure
in Addis Ababa. Unity Park Unity Park of Ethiopia is one of the most recently
established parks in the country, and this park comprises animal enclosures,
landscaped open areas, antique and vintage cars, and generational legacy of
Ethiopia and Ethiopians. It was officially opened for public and begun operation
on Thursday, October 10, 2019. That was the first time the palace was fully
renovated. It incorporates modern restrooms, cafeterias, ticket counter, and
information technology infrastructures. The construction of the park took seven
months to complete. The park is built making children, elders and people with
disabilities into consideration. There is a guiding map that locates several
destinations in the compound of the park. Unity Park is estimated to cost
roughly 5 billion Ethiopian birr. This is done as part of the ongoing campaign to
boost tourism in Ethiopia. The park includes:
Kids’ playground. This place is reserved for children who come with their
parents. When parents take a visit, children wait them here enjoying
themselves with facilities in the playground.
Green area. This green ground has entrances and exits suitable for people with
disabilities and elders. In this park there are a number of beautiful handicrafts.
The statues of well-known Ethiopian athletes are also erected in this park. The
statues of Abebe Bikila and Derartu Tullu are carved and placed here.
Gebeta playing station. Gebeta whose generic name is Mancala is played in
Menelik II’s Palace Complex.
The Throne House. It’s 140 years old home. This is the grand home where
thrones of emperors were placed. The emperors used to receive their special
guests here in this throne house. They also used to hold discussions with their
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noblemen here. Leaders of several countries met Emperor Haile Selassie I

here in this throne house. There is a wine cellar in the palace basement. Since
the basement was constructed with stones it also served as a cooling room.
This building has invaluable historical significance because it has hosted
several national circumstances. As a result this makes it the major destination
of the Unity Park.
Banquet Hall. This hall had been using to serve as a place where people who
were invited to the state banquet during the monarchial regimes spent their
lunch and dinner times. The construction of this banquet hall took the builders a
year and half from 1899 to 1900. Although the design was made by foreigners,
the internal roofing works were done by local craftsmen using animal skin and
hide and wood and other materials. In this hall, there are also ancient
household utensils such as drinking vessels which were used to drink a local
drink called Tej, honey wine. Ethiopian Regional States Pavilion. This place is
dedicated to special parlors for regional states. All the parlors manifest
historical and cultural heritages and traditional housing styles of their respective
regions. They are not cultural centers of the regions. Rather they tell visitors
something about the area they represent. The parlors are decorated with bright
colors. This has its own reasons. It represents the bright future of Ethiopia.
Museums.
Diverse religious displays.
Black Lion Zoo. The zoo we have in this park hosts one of the country’s
treasures, black-maned lions once kept as palace pets by Emperor Haile
Selassie I. The lions have a cave. The cave has 175 meters length. People can
see the lions from outside through transparent glass fences.
Traditional Garden. The most important herbs and spices one can find in this
traditional garden include Ruta chalepensis which is locally known as Tena
Adam, Afrocarpus gracilior locally known as Zigba, Lepidium sativum locally
known as Feto, Lippia abyssinica locally known as Koseret and many more.
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There are 45 kinds of indigenous trees here used for the preparation of spices
and medicines.
Historical sites.
It took 6,000 trucks of soil to fix the landscape. The palace was first constructed
in 1887. It was partially renovated for public during the 10th year anniversary of
the Derg regime; but not opened. However, the palace lost its glory by the
heavy military presence after the 1979 attempted coup. The park can
comfortably accommodate from 1,000 – 1,500 visitors per day.
Sheger Park: This iconic space in Addis Ababa is far more than just a means to
an end. It's excellent for outdoor fun.
Over the months since its inauguration as a public space Sheger Park has
been seen by many as the beating heart of Addis Ababa; a place of public
gatherings celebratory. Piazza, Addis Ababa is filled with interesting shops,
restaurants and ancient buildings. You can easily find a map of Addis Ababa
perhaps at your hotel or certainly online. We have also excellent day trips from
Addis Ababa which are our important escapes from the city.
One can travel to Addis Ababa all year through. One can visit these attractions
while he is on his Addis Ababa airport layover tours or Addis Ababa Aiport
stopover tours as well. You can also get information on Addis Ababa tourist
attractions from our experienced drivers who provide you Addis Ababa airport
transfers. You can contact us and we will personally help you book your
Ethiopia tours like Ethiopia historical tours, Ethiopia cultural tours, Ethiopia
wildlife tours or Addis Ababa sightseeing tours. You can also book your Addis
Ababa airport stopover hotels with us.
Being the center and one of the capital city of the country, Addis Ababa city has
got huge potential for attracting both domestic and foreign tourists. In this
regard the promoter of this project has made extensive market research to
identity the existence of demand for the proposed project.
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The market assessment made reveals that there is a big gap in the demand
and supply of standard guest house services justifying the provision of
additional accommodations. The ongoing development in the city depicted the
increasing demand for such services. The market, therefore, offers a very good
opportunity to establish any types of guest house in the city.
III. MARKET STUDY
General Consideration
A guest house is an establishment offering quality guest room. A growth in

tourist flow normally paves the way for subsequent growth in tourist
accommodation facilities like guest room.
The demand for guest room is mainly determined by the international and
domestic tourists traveling for vacation or leisure, business, conference etc.
The level of economic development, political conditions and social stability also
has effect on the growth of tourism sector and on the subsequent demand for
guest house accommodations.
Tourism is a group of diverse industries integrated which are essential

components of the economy that include airlines, tour operators, car renters,
hotels, resorts, camping and recreational areas and natural attractions found in
parks and forests.
The tourism sector’s contribution to the world economy has grown so fast in
recent years that it has become one of the leading foreign exchange earner for
many countries.
Due to the fact that tourism is one of the smokeless and environmentally
friendly income generating industries, tourist receiving countries/localities have
strived to improve and extend their tourist facilities so as to attract as large
number of tourists as possible. In this regard, tourism is viewed as a best
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opportunity and most viable option for sustainable economic and social
development of Less Developed Countries (LDC).
Although there are ample opportunities that the tourism sector provides,
despite the fact that Ethiopia has diverse natural and man-made tourist
attractions had not been one of those main tourists receiving countries of the
world mainly due to infrastructural constraints like standard and related
facilities. Thus, in order to increase its share of foreign exchange earnings from
tourism, however, the country should develop and improve its tourist facilities to
a level of internationally accepted standards.
In this respect, the government has devised policy mechanism for promoting
tourism in the country. The government has committed itself to promote widely
the country’s tourist sector and its positive image through undertaking various
reform programs. As a result, the number of tourist arrivals to the country has
shown improvement in recent years. The increase in the inflow of tourists
registered has also been caused by the current peaceful situation and
investment activities observed in the country.
This situation is also expected to be further developed due to the country’s
gradual integration to the global economy and growing inflow of foreign direct
investment. The number tourists are believed to grow significantly, as the
country’s investment climate is becoming more and more attractive.
The increase in tourist inflow in Ethiopia will directly affect the major cities/town
throughout the country. Though tourists, who are planning to spend some
leisure time, are entering the country mainly through Addis Ababa Bole
International airport, they usually come to Ethiopia to visit mostly other
historical places outside the capital city.
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Overview of Trends of Tourism in Ethiopia
Ethiopia is a land of wonder and enchantment, a country with one of the richest
histories on the African continent, a land of contrasts and surprises of remote
and wild places, home to cultured and friendly people who are descended from
some of the world's oldest civilizations. There are a number of tourist attraction
sites in the country which include: The Semien Mountains National Park, the
Rock Hewn Churches of Lalibela, the Castles of Gondor and other monuments,
Awash lower valley palaeontological and prehistoric sites, Axum historical and
archaeological sites, valley of the Omo palaeontological and prehistoric sites,
Tiya prehistoric and archaeological sites (central Tigray), The Blue Nile falls
(Tisisat falls), Lake Tana, The Sof Omar Cave, the Rift Valley and other
national parks which include, Awash National Park, The Omo National Park,
The Mago National Park and Gambela National Park.
The country is endowed with unique combination of natural and cultural

heritages, impressive scenery, suitable climate, rich flora and fauna and
recognized archaeological sites. There exist many kinds of flora and wild life
and more than 800 species of birds reside in Ethiopia. Of which 23 are endemic
to the country.
There are more than 100 mammal species of which seven of the big mammals
are unique to Ethiopia. Ethiopia's many national parks enable the visitor to
enjoy the country's scenery and its wildlife, conserved in natural habitats, and
offer opportunities for travel adventure unparalleled in Africa.
All these could be enough to make Ethiopia fascinating place to visit and travel
through, but Ethiopia has so much to offer. Generally speaking, the improved
political, social and economic climate observed in recent years has created
favorable conditions for development of tourism in the country. This can be
evident from the trend that tourist arrivals for different purposes have shown an
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increasing trend over recent years. Arrival trend by purpose of visit for the
years 2005 up to 2021 is shown in Table 3.1 below.
Table 3.1: International Tourist Arrivals to Ethiopia (2014 – 2014)
visiting Not Growth

YEAR Business Vacation Transit conference relatives stated Total (%)
2014 40,125 40,768 28,670 7,689 24,589 20,321162,162 -
2015 42,256 51,083 27,216 6,361 24,913 21,288173,117 6.76
2016 43,000 20,612 59,339 25,113 27,779 35,732211,575 22.22
2017 44,125 21,705 63,315 41,414 29,895 37,010237,464 12.24
2018 44,952 21,379 66,790 44,129 28,209 38,558244,017 2.76
2019 51,000 52,462 54,576 35,947 34,394 46,146274,525 12.50
2020 52,330 90,184 86,556 45,000 32,180 31,814 338,064 23.15
2021 54,125 185,608 63,602 27,776 36,176 45,215 412,502 22.02
Source: Ministry of Culture and Tourism
From the above table it is drawn that during the period covering from 2014-
2021 the number of tourists arrived in the country increased at an average
growth rate of 14.52% per year. The number of tourists reached 412,215 in
2021 from 162,162 registered in year 2014. Observing the trends of different
purpose visits, one can understand that over the aforementioned period
international tourist arrival to the country has shown an average annual growth
rate 9%, 21%, 32%, 45%,12% and 30% for business, vacation, transit,
conference, visiting relatives and other tourist’s segments (for which purpose of
arrival is not stated) respectively.
The growth rate is expected to increase due to the development of

infrastructural facilities like roads and establishment of tourist standard hotels in
different parts of the country. Political and social stability observed in recent
times are also some of the factors that are believed to increase tourists’ inflow
to Ethiopia.
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Demand and Supply Situations
Overview of Tourism Potential of in Addis Ababa
Addis Ababa is one of the major tourist destinations in Ethiopia due to the
presence of a number of cultural and natural attractions. The promoter decided
to establish an all-inclusive guest house in Addis Ababa city for tourists who are
visiting tourist destinations both in the town and surrounding areas in the city.
Being capital city, Addis Ababa is directly linked to different parts of the country.
A number of higher learning institutions including Addis Ababa University which
surround the town.
Demand Considerations
The demand for accommodations at a particular place depends on the

international and domestic tourists traveling for vacation or leisure, business,
conference etc. The level of economic development, political and social stability
also plays a vital role in promoting and advancing tourism sector in a country.
Tourists are usually more inspired to visit historical and natural attraction areas
where infrastructural facilities like roads, hotels, telecommunication etc are
relatively developed.
It is apparent from this analysis that; the country’s overall tourism performance
will be reflected at specific tourist attraction areas found different part of the
country. In relation to this Addis Ababa town has been enjoying a lot from both
foreign and local tourists coming for different purposes. As pointed out earlier,
Addis Ababa is capital city of the country and seat of regional and federal
government and non-governmental institutions, NGOs, etc the existence of
effective demand for high standard guest house is visible. Moreover, the ever
increasing number of tourists passing through the town and who also stays for
some time undoubtedly affect the demand for guest house.
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While conducting this study an attempt was made to collect all available data
on the trend of tourist arrival/flow to Addis Ababa for different purposes. To this
end, the information obtained from the Ethiopian tourism office indicates that
the number of tourist flow to Addis Ababa in 2013 E.C was 228,533 of which
about 159,973 and 68,560 are foreign and domestic tourists, respectively.
These two customer groups are expected to utilize bedroom of the in Addis
Ababa city since they have to cross through the city to reach other tourist
destinations in the zone. If the potential demand of the local people is
considered, the total volume of demand would be much greater than this. But
we believe that the total number of tourists reported by aforementioned source
can itself signify the demand for guest house service in Addis Ababa city.
Hence, we have projected the future demand for guest house services in Addis
Ababa considering 2013 E.C (2020/21) as a base year. It is apparent that the
growth rate of tourist inflow to town is believed to be higher than the national
average. For the purpose of this project we have, however, conservatively used
the national average tourist growth rate of 14.52% due to lack of time series
data regarding the number of tourist flow to Addis Ababa city.
In addition to this, the number of days that each of the tourist expected to stay
in Addis Ababa is the other variable used in projecting the demand for guest
house. Therefore, the following assumptions are used as the major tools in
projecting the likely future demand.
 Of the total foreign tourists about 70% came to town for leisure
and the remaining 30% came to the town for conference
purpose
22 | P a g e
 Of the total local tourists about 40% came to the town for
leisure, while the remaining 60% came to the town for
conference purposes.
 Foreign tourists who arrive at Addis Ababa for leisure or
vacation are expected to stay an average of 5 days, while those
tourists who came to the city for conference is expected to stay
at least 5 days.
 Domestic tourists who arrive at Addis Ababa town for leisure or
vacation is expected to stay in the city for three days, while
domestic tourist coming to the city for conference is expected to
stay at least 5 days.
The assumptions regarding the number of domestic tourists who are expected
to stay in Addis Ababa for conference is very conservative because in actual
case conferences usually takes longer than what we have estimated.
Furthermore, the number of days’ foreign tourists stay in the city was
determined based on the actual practices observed in the city. Thus the
effective demand for the base year (i.e. 2023) is estimated to be 261,716 bed
rooms. It is important to note that the growth rate of tourist’s inflow to the city
would definitely be higher than the national average mainly due to the being the
capital city and different conference is held in Addis Ababa. For the purpose of
this projection we have, however, used the national average tourist’s growth
rate of 14.52% to show the prospective guest house demand in the city.
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Table 3.2: Demand Projection

(Bed room)
Demand Projections
Year (Bed room in Addis Ababa )
2022 261,716
2023 299,717
2024 345,274
2025 395,408
2026 455,510
2027 521,650
2028 600,941
2029 688,197
2030 792,803
2031 907,919
2032 1,045,922
2033 1,197,790
Supply Considerations
In order to make supply projections it is important to identify tourist class guest

in Addis Ababa. This will help to conduct market segmentation and
categorization of the tourist standard hotel with which the proposed project is
compared.
The available information reveals that currently there are 10,436 tourist standard
guest house and hotel having a total of 240,020 beds with average of 23 bed
each, which can be categorized tourist standard. The remaining guest house
provide very low standard services which could not match with the guest house
under consideration. Hence, only those standard guest house can only be
considered as competitors to the proposed project. As said before, the intention
is to provide highest quality service which even surpass the existing relatively
tourist standard guest room existed in the city.
Therefore, to estimate the supply of guest house and hotel accommodation
provided to both international and domestic tourists arriving for different
24 | P a g e
undertaking, these standard hotels with their respective room capacity is

considered.
Table 3.3: Existing Tourist Standard Hotels and guest house

Number of tourist standard guest Average Number of Total room available
Year house and hotel in Addis Ababa rooms per guest house
2010 2,800 23 64,400
2011 3,136 23 72,128
2012 3,512 23 80,783
2013 3,934 23 90,477
2014 4,406 23 101,335
2015 4,935 23 113,495
2016 5,527 23 127,114
2017 6,190 23 142,368
2018 6,933 23 159,452
2019 7,765 23 178,586
2020 8,696 23 200,017
2021 9,740 23 224,019
Source: Ethiopian tourism and culture office
The above presentation is aimed at protecting the future market for the planned
gust house. The study has taken into account the above hotels and guest
house as the main competitors of the guest house under consideration as far
as they are in the competitive set.
As can be seen from Table 3.3, the total number of bedrooms supplied by
these hotels and gust house is 800,055. Thus, assuming 365 working days per
year the existing supply of room accommodations in Addis Ababa city is
computed to be 800,055 bed room. According to the above table the average
growth rate of tourist standards guest house and hotel is 12% per year.
Hence, on the basis of the existing room supply and the planned supply by the
proposed hotel and guest house, the projected supply of bed room in Addis
Ababa is presented in Table 3.4 below:
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Table 3.4: Projected Supply of tourist standard guest house and hotel that accommodate
guest room.
Number of tourist standard guest house Total room available

Year
and hotel in Addis Ababa Average Number of rooms
2022 10,909 23 250,902
2023 12,218 23 281,011
2024 13,684 23 314,732
2025 15,326 23 352,500
2026 17,165 23 394,800
2027 19,225 23 442,176
2028 21,532 23 495,237
2029 24,116 23 554,665
2030 27,010 23 621,225
2031 30,251 23 695,772
2032 33,881 23 779,265
Future Market Prospect
Concretely establishing demand and supply gap for the guest house is one of
the major indicators to show whether there is adequate market for standard
bedroom services. Thus, the likely future supply shortfall for high standard
guest room accommodation services is as shown in the Table 3.5 below.
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Table 3.5: Projected demand and supply gap for standard guest house services
in Addis Ababa city
Year Demand Supply Demand &supply gap
2022 261,716 250,902 10,814
2023 299,717 281,011 18,706
2024 345,274 314,732 30,542
2025 395,408 352,500 42,908
2026 455,510 394,800 60,710
2027 521,650 442,176 79,474
2028 600,941 495,237 105,704
2029 688,197 554,665 133,532
2030 792,803 621,225 171,578
2031 907,919 695,772 212,147
2032 1,045,922 779,265 266,657
The future demand and supply gap is obtained by deducting the projected
supply from the corresponding demand for the period under consideration. As
indicated in table above, the projected demand exceeds the projected supply
by 10,814 beds room in 2022 to 266,657 beds room in 2023.
From the above presentation, it can be seen that there is excess demand over
supply for tourist standard bedroom services in Addis Ababa in the years to
come. The data further indicates that the market can accommodate more
number of investors who aim at benefiting from the sector through building
hotel and guest house in the city.
Marketing Strategy
In order to penetrate and gain considerable market share, one of the major
marketing strategies for the project is consistently rendering quality service to
customers. Due emphasis must be placed on improving quality of service and
facilities to tourists to give them comfort and prolong their stay time at the guest
house. The promoter should strengthen networks to attract the different form of
27 | P a g e
tourists. The major marketing strategies to promote the project and gain
considerable market share include:
 Advertising through different media both in Ethiopia

 Working on sustained promotional work.
 Personal selling i.e. working on public relations to reach and influence
key persons and organization within the country and abroad
 Keeping the quality of services and consistently improve with changing
situations.
 Developing web sites and other network communication systems.
Price Determination
The revenue of the guest room comes from the following sources.
 Guest room profit
 Bank rent profit
In order to determine revenue from bedrooms the prevailing charges of similar
guest room operating in surround tourist destination areas. Though bedroom
service charges of competitors are relatively higher, a conservative room
charges is considered for this project to show that the venture can still be
profitable and viable. The following table illustrates prices used in the financial
projections.
Table 3.5 Bed charge used per day
Number of
Room type Average price of room per day
room
G+1 Guest rooms 1500 4
G+2 Guest rooms 1500 4
G+3 family rooms 1500 4
G+4 family rooms 1500 4
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Table 3.8: Bank Branch rental revenues per year

Room type In Birr
G+0 bank branch 1,000,000
IV. TECHNICAL STUDY
Location
The project is planned to be located in Addis Ababa city bole Mikael. The site
covers a total area of 280 m2.
The busting capital of Ethiopia, Addis Ababa is very much the center of this
divers and delightful country. For start it is geographically sites in the middle of
this large nation and at 2355 m above sea level, occupies an elevated position
overseeing large swaths of the rest of the country. The city itself has a
population of about 5 million people Addis Ababa is also the culture hub of
Ethiopia, with several important museums stationed here, as well as major
universities and many Ethiopia orthodox sites and treasury. And Addis Ababa is
also the business hub of this otherwise very rural country. As such, it’s home to
the movers and shaker of this quick developing nation, the young and educated
as well as a small but growing middle class. This means if one wants to eat,
drink or party in Ethiopia Addis Ababa is definitely the spot to head for. But
there much more to the city. One of the interesting things about Addis Ababa is
that this city really does seem to lack a center, instead of all its attraction,
markets, churches and museums are spread out across different zones,
making a discernible tourist hub something of a misnomer here. Were there to
be one central region to this city however, it would probably be meskel square.
Home to one of the most important Ethiopian orthodox festivals of the year,
meskel square is normally filled with traffic and ratting metro overhead, but on
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the 26th of September each year, the meskel religious festival takes places right
here…. And it’s one of the most important dates in this faiths calendar. Top
things to see and do in Addis Ababa meskel squer, red terror ethnological
museum, national museum, holy trinity, st George cathederal, debre libanos
monastery, entoto mountain, addis merkato and others.
There are all the necessary infrastructural facilities like telecommunication,
water, electric power, roads, etc. that are vital for the hotel under consideration.
The location of the project under consideration is ideal for intended purpose.
The location is ideal for guest house because it is characterized by its peaceful
and calm environment thus expected to be highly preferred by both foreign and
local guests.
Building and Layout
The building design is prepared in accordance with the standard set for high
standard guest house. It will comprise very spacious and luxurious bedrooms.
The project is at present under construction, foundation work for guest rooms
and bank branch. The design works (architectural, structural, electrical and
sanitary) have been done by professionals following the existing state of the
art.
The project work, construction of the building, consists of architectural and civil
work design, surveying and soil test, site preparation, excavation and earth
work for fuel station concrete and external block works, internal block works,
carpentry and joinery, metal works, finishing glazing, painting, sanitary,
electrical and mechanical installations and others. Subsequent to completion of
the above works room fitting and installation of other equipment and facilities
will be beginning.
The building is designed to be accommodate of guest rooms and bank branch

opening.
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The overall construction cost of the project is estimated at about Birr 24 million,
the building construction cost and other investment presented in the following
sub sections.
So far the promoter has executed construction work worth of Birr 17 million
which is about 71% of the total planed cost of Birr 24 million. The remaining
construction work is planned to be completed at an estimated amount Birr 7
million. To cover this cost the promoter seeks financial assistance from local
banks. The type of construction and associated costs is shown in Table 4.1
below.
Table 4.1: Estimation of building and construction
Total Executed Remaining
Bill No. 1. Structural Work 10,732,935.00 10,732,935.00 0.00
Bill No. 2. Architectural Work 7,518,480.00 2,319,873.00 5,198,607.00
Bill No. 3. Electrical Installation

Work 3,364,405.00 2,720,755.00 643,650.00
Bill No. 4. Sanitary Installation

Work 2,812,407.00 1,305,000.00 1,507,407.00
Total 24,428,227.00 17,078,563.00 7,349,664.00

Source: Grand summary of the bill of quantity
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Bedroom Furniture, Fixture and Equipment’s
It is apparent that the establishment of the guest house project involves

fulfillment of up to standard furniture, fixtures and equipment’s at each unit.
This enables the prompter to provide quality services. Most of guest room item
are purchase including extra needed. Most of the item need at least three extra
item. The detail list and costs of these specific bedroom items are provided in
Table 4.2 hereunder.
Table 4.2: Detail Cost of Planned Bedroom Furniture, Fixture and

Equipment
Unit Price
No. Item Description Unit Qty (Birr) Total Price (Birr)
8 25,000 150,000.00
1 King Size Bed (180 x 190 cm) 200,000
8 20,000 125,000.00
2 Queen Size Bed (150 x 190 cm) 160,000
3 Pillows for King Size Bed 28,800 24 1200 17,500.00
4 Pillows for Queen Size Bed 28,800 24 1200 17,500.00
5 Blankets for King Size Bed 96,000 24 4000 162,000.00
6 Blankets for Queen Size Bed 96,000 24 4000 135,000.00
7 Blanket single 48,000 24 2000 32,670.00
8 Bed sheet 72,000 48 1500 233,694.08
9 Bed cover 72,000 48 1500 252,280.00
10 Pillow cover 26,400 48 550 20,662.50
11 Towel different colors 31,200 48 650 92,000.00
14 Mattress 38,400 64 600 79,218.00
15 TV 31” 400,000 16 25,000 75,000.00
16 TV 45” 50,000 1 50,000 105,000.00
18 Dressing table 96,000 16 6000 25,957.80
19 Hang cabinet 48,000 16 3000 15,447.51
20 Normal Chair with arm rest 72,000 16 4,500 32,200.00
21 Bed side table 67,200 16 4,200 46,000.00
22 Ventilator 68,000 17 4,000 44,560.13
23 Sofa (3 + 2 +1) 30,000 1 30,000 227,573.46
Total Value of Bed Room Items 1,728,800
VAT (15%) 259,320
Grand Total 1,988,120
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5. Utilities
The utilities needed in the course of operational process of the project are
electricity and water which are briefly described below.
5.1. Water
Water is one of the major utility for the operation of the project which is expected
to serve for carwash purpose during the project’s operation process, washing the
processing equipment, etc. The company already got water grid from the local
water authority which is sufficient for its requirement.
5.6. Electricity
The promoter will have completed the process and has secured sufficient electric
power from EEP Co. The daily power requirement of the fuel plumping machine is
at risk with the countries electric power out rich, therefore the customer is
requesting finance from bank that will use for the purchase of Generator. The
expected utility cost of the project up on operation is summarized in the following
table.
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Annual utility cost of the project.
No. Description Unit Qty. Unit price (Birr) Cost ( Birr)

1 Electricity kWh 65,000 1.6 104,000
2 Water m3 12,000 10 120,000
3 Telephone and internet (in lump sum) 45,000
Total 269,000
Capacity and Capacity Utilization

The capacity utilization for bedroom room service at initial stage of operation
is assumed to commence at feasible level and will gradually increase
depending on the experience and skills acquired to penetrate the market.
Thus, the initial capacity utilization is planned to be 85% in the first year and
with 5% increase annually it will reach at 100% in the third project operational
year and remain constant thereafter.
Environmental Impact Assessment
It is apparent that the sensitivity of a new project to the environment should

be examined irrespective of the nature of the project. In this regard, the
operation of the guest house under consideration is environmentally friendly
due to the very nature of the operation and the business itself requires
keeping the environment tidy and beautiful. Accordingly, the proposed
venture is planned to have drainage system that carries all waste water to a
central point. The mitigation of the effects of the waste begins by bringing it to
a central point and collecting it in a pit of sufficient size to handle the amount
of waste generated. Such a pit should be lined appropriately to render it
impervious so that no used water escapes to the environment. Thus, the
proposed project is not going to have any danger to resident of nearby and to
the overall environment.
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Project Implementation
The project's implementation is expected to take about 1 & half year. The
major activities include Bank loan processing, completion of the remaining
construction works, cleaning the area around the building, procurement of
equipment and furniture and recruitment of employees. The project is
expected to start full operation in September 2022.
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V. ORGANIZATION AND MANAGEMENT
Organization
Organizational set-up basically emanates from different business perspective

or visions. In the case of Getachew Guest house, the mission is to provide
quality hospitality services and the finest accommodations to guests in
comprehensive and cost effective manner and thereby generate adequate
profit to the owner.
As shown in the organization chart, the business will have three functional
departments reporting to the General Manager who is in turn responsible to
the promoter/owner. The core management team consists of the Manager
and three departmental heads. The Manager and his core team will be
responsible for the operation of the promoter under the general direction and
supervision of the shareholders.
General Manager
There will be 1 manager at the and the guest house. The Manager who is to be
appointed by the owner of the promoter is responsible for the overall
management of the building. The powers, duties and responsibilities of the
Manager shall be specified by owners at the time of appointment for the
position. The manager will control daily activity of the building.
Accountant
There will be 2 accountants who work in different shift. They responsible for
daily revenues and expense of the service. They also support the manager.
They control purchasing of the different materials.
Receptionist
There will be 4 receptionists who work in shift. Their responsibility is serving
for the guest and pick upping phone call came from different guests. They will
be hired based on different qualification. They also responsible for collection

of daily revenues and responsible for accountant position.
Cleaners
There will be 5 cleaning employees and they will clean the room and the
building part that need cleaning.
Security guard
There will be 4 security guard who work in different shift. There will be 24
hours’ security guard.
Manpower Requirement
The manpower required to effectively administer the operation of the building

is presented in 5.1 below. The table shows number of positions by job title
and monthly and yearly salary provided for each job title. When the project
becomes fully operational it requires 16 workers to undertake different
functions of the business. The total yearly salary bill is estimated at about Birr
924,600.
Table 5.1: Manpower Requirement
No. of Monthly Total
S. Salary Annual
No Position Title Persons Rate Salary
1 Manager 1 10,000 120,000
6 Receptionist 4 5,000 240,000
3 Accountant 2 6,000 144,000
9 Security Guard 4 2,500 120,000
Cleaners 5 3,000 180,000
Sub-total 804,000
Add 15% employee Benefits 120,600
Total 16 924,600
Page 37
5.2. Working capital needed for the first year

Description Amounts
Total salary and benefit 924,600
Total utility expense 269,000
Total 1,193,600
Working capital 397,900
Training
This refers to the acquisition of knowledge, skills, and competencies as a

result of the teaching of vocational or practical skills and knowledge that
relates to specific useful skills. In case of the project under consideration,
training is referred as professional development. Hence, training is
believed to bring efficiency to the guest house project.
As part of continuous training program the guest house employees should
get both on the job and off the job training to enable them understand
international concepts on tourism and standards.
Page 38
VI. FINANCIAL STUDY
Planned Investment
The investment activities encompassed in this investment phase includes

construction of G+0 for rent of bank and G+1, G+2, G+3 and G+4 guest
rooms which are needed for the guest room to start giving quality services.
The total financial requirement that is needed for the realization of the
proposed guest house is estimated at Birr 27.3 million. The promoter has
invested about Birr 17 million on building and construction and as we can see
from that total building cost about 71% is already executed. This amount is
directly invested from own equity without any bank loan.
Based on the cost estimation made in this study, a total of Birr 10 million is
required to finance the remaining investment works and for commencement
of the guest house project. Details of existing and planned investment costs
are presented in Table 6.1 below.
Page 39
Table 6.1: Detail Existing and Planned Investment Costs

Investment Costs Executed work Remain work Total Cost
24,428,227
Building & Construction 17,078,563 7,349,664
Bedroom furniture, fixture &
1,988,120 1,988,120
equipments
Generator 400,000 400,000
pre-operating costs 100,000 100,000
Working Capital 397,900 397,900
Total 17,078,563 10,235,684 27,314,247
Share (%) 0.63% 0.37% 100%
Source of finance
The investment cost of the project is planned to be financed from two sources
i.e. bank loan and owners’ equity. The owner has already made available the
fund required to finance the project. Out of the total investment the promoter
need finance from the bank birr 5,000,000 for Architectural Work Electrical
Installation Work and Sanitary Installation Work. All other investment cost is
covered and going to covered by the promoter.
Accordingly, of the total investment cost (including pre-operating costs),

promoters’ equity will be Birr 22,314,247 (82%), while bank loan is estimated
to be Birr 5 million (18%). The equity contribution includes the amount of
investment already made on the existing building. The financing scheme is
shown in table 6.2 below.
Page 40
Table 6.2: Financing Schedule

Total Financial
Owner's
Description Requirements Loan
Equity
( Birr)
24,428,227
Building and Civil Works 5,000,000 19,428,227
Bedrooms items 1,988,120 - 1,988,120
Generator 400,000 - 400,000
pre-operating costs 100,000 - 100,000
Working Capital 397,900 - 397,900
Total Cost 27,314,247 5,000,000 22,314,247
Debt/ Equity Ratio 100% 18% 82%
Anticipated Financial Developments
In order to check the viability of the project, the financial projection is made for
ten years. The financial results show that the project is financially viable and
bankable. The project's feature in different financial measurement is shown as
follows.
A. Profitability
The profit/or loss forecast indicates that the project will earn a net profit of Birr
2.2 million in the first year of operation and will be Birr 11.54million at the end
of the 10th year.
B. Liquidity
The cash flow projection also shows a net cash balance of Birr 6.95million at
the end of first year, which grows to Birr 35.7 million at the end of the 10th
year.
C. Viability
Page 41
The calculated financial internal rate of return after tax and before tax over ten
year is found to be 19% & 18% respectively.
VII. CONCLUSIONS AND RECOMMENDATION
Conclusions
The study shows that there is high demand for tourist standard guest room
house in Addis Ababa town. It is therefore, justifiable to establish competitive
guest room capable of providing highest standard service to both local and
foreign tourists.
The financial analysis revealed that the project is financially viable, socially
desirable and economically sound. In addition to its financial benefits the
project generates to the owners, it is anticipated to offer employment
opportunities for about 16 people and hence contributes to reduction of
unemployment. It will create favorable conditions for tourists coming to Addis
Ababa city whereby the town will benefit from the income generated from this
sector.
Moreover, the 12% after-tax Financial Internal Rate of Return of the project
shows the strong financial viability. The sensitivity test run to accommodate
any likely cost escalation or a decrease in selling prices shows that the
project can sustain any shocks that may come from external business
environment.
Recommendation
Both financial results and socio-economic gains that accrue to the nation
show the viability and socially desirability of the proposed venture and hence
the project is recommended for implementation.
Page 42
VIII. ASSUMPTIONS EMPLOYED IN THE

FINANCIAL PROJECTIONS
 Working days Per Year 365 days

 There will be 16 quality guest room starting from G+1 up to G+4
 G+0 level will be rented for bank
 Bed night per year will be 16*365= 5,840
 Capacity Utilization
After successfully completing the implementation work and start operation the
guest house initial bedroom occupancy rate is anticipated to be 70%.
However, bedroom occupancy is assumed to gradually increase by 10% in
the second and third year to reach at the maximum attainable capacity of
100% in 4th year. The venture is envisioned to achieve its maximum capacity
after acquiring the required experience in the sector and conducting
aggressive promotional works.
i. Room’s occupancy at capacity utilization rate
Years
Year 4
Description 1 2 3 & After
Capacity in (%) 70% 80% 90% 100%
Guest rooms 4,088 4,672 5,256 5,840
 there will be 16 guest room and 100m^2 space for bank rented at G+0
 The average guest room charge will be 1,500 per day
 The first year revenue from guest room charge will be 4,088*1500=6,132,000
 First year revenue from bank 1,000,000 constant for ten years
 business profit tax will be 30%
Page 43
Summary of Revenues
Years
Description Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 year 8
Revenue from
Room Service 6,132,000 6,745,200 7,419,720 8,161,692 8,161,692 8,161,692 8,161,692 8,161,692
Revenue from bank
1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000
(rent charge)
7,132,000 7,745,200 8,419,720 9,161,692 9,161,692 9,161,692 9,161,692 9,161,692
Total
Wages and salaries
Annual cost of wages and salaries is estimated to be Birr 924,600. The detail
manpower requirement and associated cost is shown in organization and
management part. Wage and salary will be increased by 5% year.
Other overhead costs
 Employee benefit will be 15% their salary

 utility expense will be 2,416.67 per month
 stationary and office supply will be 1000 per month
 marketing expense will be 1% yearly revenues
 training cost 50,000 per year
 Mecslanouse expense will be 50,000 per year
 Assuming all the above costs are increased by
5% per years
Depreciation and amortization

Tangible and intangible assets of the project are deprecated and amortized based
straight line method using different rate for respective items.
Value Depreciation amount per year

Description Rate
Building & Construction 5% 24,428,227 1,221,411
Bedrooms items 10% 1,988,120 198,812
Generator 10% 400,000 40,000
Total 1,460,223
Page 44
Insurance
The annual insurance rate for fire and lightening. Based on available information
for fire and lightening policy for our building will cost 150,000 per year and increase
by 5% per year.
Description Amount
Building & Machinery and equipment, furniture, and

others 150,000
Total Cost 150,000
2. Loan Repayment period……………………………………5 years

3. Interest Charges……………………………………………17% per year.
4. repair and maintenance of guest room equipment will be 1% their value
5. The implementation of the project is envisaged to take about six months as
indicated in Part V of the report.
6. The investment required is assumed to be financed by equity and bank loan
in the proportion of 82% and 18% respectively.
Page 45
Getachew Tesfa Guest House

Projected Income Statement
For the Month Ending June 30,
Project Years
Description 1 2 3 4 5 6 7 8 9 10
Revenue 7,132,000 7,745,200 8,419,720 9,161,692 9,161,692 9,161,692 9,161,692 9,161,692 9,161,692 9,161,692
Less: Operating
Costs 1,658,801 1,741,741 1,828,828 1,920,270 2,016,283 2,117,097 2,222,952 2,334,100 2,450,805 2,573,345
Gross Profit 5,473,199 6,003,459 6,590,892 7,241,422 7,145,409 7,044,595 6,938,740 6,827,592 6,710,887 6,588,347
1,460,223
Less: depreciation 1,460,223 1,460,223 1,460,223 1,460,223 1,460,223 1,460,223 1,460,223 1,460,223 1,460,223
Profit Before Int.
and tax 4,012,976 4,543,236 5,130,669 5,781,199 5,685,186 5,584,372 5,478,517 5,367,369 5,250,664 5,128,124
Interest Expense 850,000 850,000 850,000 850,000 850,000 850,000 850,000 850,000 850,000 850,000
Profit Before tax 3,162,976 3,693,236 4,280,669 4,931,199 4,835,186 4,734,372 4,628,517 4,517,369 4,400,664 4,278,124
Profit tax 948,893 1,107,971 1,284,201 1,479,360 1,450,556 1,420,312 1,388,555 1,355,211 1,320,199 1,283,437
Net Profit/Loss 2,214,083 2,585,265 2,996,468 3,451,839 3,384,630 3,314,060 3,239,962 3,162,158 3,080,465 2,994,687
Page 46

Projected Cash Flow Statement
For the Month Ending June 30…………………………..
Project Years
Description 0 1 2 3 4 5 6 7 8 9 10
Cash Inflows
Owner's
22,314,247
Equity
Loan 5,000,000
Net Profit 2,214,083 2,585,265 2,996,468 3,451,839 3,384,630 3,314,060 3,239,962 3,162,158 3,080,465 2,994,687
1,460,223 1,460,223 1,460,223 1,460,223 1,460,223 1,460,223 1,460,223 1,460,223 1,460,223 1,460,223
Depreciation
Total Cash
27,314,247
Inflows 3,674,306 4,045,488 4,456,691 4,912,062 4,844,853 4,774,283 4,700,185 4,622,381 4,540,688 4,454,910
Cash out
Flows
Fixed assets 26,816,347
Working
Capital 397,900
Pre-
operating 100,000
costs
Loan
1,850,000 1,850,000 1,850,000 1,850,000
Repayment
Total Cash
27,314,247 1,850,000 1,850,000 1,850,000 1,850,000
Outflows
Net Cash
Flow - 1,824,306 2,195,488 2,606,691 3,062,062 2,994,853 4,774,283 4,700,185 4,622,381 4,540,688 4,454,910
Cumulative
Cash
Balance 1,824,306 4,019,794 6,626,485 9,688,547 12,683,400 17,457,683 22,157,868 26,780,249 31,320,937 35,775,847
Page 47

Projected Operating Costs
For the Month Ending June 30,
Project Years
Description 1 2 3 4 5 6 7 8 9 10
Wages and Salaries 804,000 844,200 886,410 930,731 977,267 1,026,130 1,077,437 1,131,309 1,187,874 1,247,268
120,600 126,630 132,962 139,610 146,590 153,920 161,616 169,696 178,181 187,090
Employees benefit
Utility expense 269,000 282,450 296,573 311,401 326,971 343,320 360,486 378,510 397,436 417,307
Repair and maintenance 23,881 25,075 26,329 27,645 29,028 30,479 32,003 33,603 35,283 37,047
Stationary and office 120,000 126,000 132,300 138,915 145,861 153,154 160,811 168,852 177,295 186,159
supplies
Marketing Expense 71,320 74,886 78,630 82,562 86,690 91,024 95,576 100,354 105,372 110,641
Training Cost 50,000 52,500 55,125 57,881 60,775 63,814 67,005 70,355 73,873 77,566
Miscellaneous expense: 50,000 52,500 55,125 57,881 60,775 63,814 67,005 70,355 73,873 77,566
Insurance 150,000 157,500 165,375 173,644 182,326 191,442 201,014 211,065 221,618 232,699
Total Operating Costs 1,658,801 1,741,741 1,828,828 1,920,270 2,016,283 2,117,097 2,222,952 2,334,100 2,450,805 2,573,345
Page 48

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FEASIBILITY STUDY CONDUCTED FOR Ato GETACHEW

TESFA GUEST HOUSE

VIII. ASSUMPTIONS EMPLOYED IN THE FINANCIAL PROJECTIONS..........43

This investment project envisages to establish a tourist standard guest house in

Furthermore, Ethiopia is a strategically important country in the Horn of Africa

because of the growing importance of Ethiopia in hosting international

attractions, Ethiopia cultural tourist attractions, religious festivals and events in

Technical Considerations and Implementation

The project implementation is anticipated to take about eight months. Loan

Organization and Manpower

The organizational structure of the business operation consists of three

The project requires an investment outlay of about Birr 30 million which is

Conclusion and Recommendation

Apart from providing financial benefits to the promoter, implementation of the

II. BACKGROUND INFORMATION

Currently, the project under consideration is being constructed by known and

With superb facilities, comfortable accommodation and unsurpassed service,

A) G+0 Reception room and bank branch, 2 blocks

2.1 Project Rationale/Justification of establishment/

noblemen here. Leaders of several countries met Emperor Haile Selassie I

III. MARKET STUDY

A guest house is an establishment offering quality guest room. A growth in

Tourism is a group of diverse industries integrated which are essential

Overview of Trends of Tourism in Ethiopia

The country is endowed with unique combination of natural and cultural

Table 3.1: International Tourist Arrivals to Ethiopia (2014 – 2014)

visiting Not Growth

Source: Ministry of Culture and Tourism

The growth rate is expected to increase due to the development of

Demand and Supply Situations

Overview of Tourism Potential of in Addis Ababa

The demand for accommodations at a particular place depends on the

Table 3.2: Demand Projection

In order to make supply projections it is important to identify tourist class guest

undertaking, these standard hotels with their respective room capacity is

Table 3.3: Existing Tourist Standard Hotels and guest house

Number of tourist standard guest house Total room available

Future Market Prospect

 Advertising through different media both in Ethiopia

Table 3.8: Bank Branch rental revenues per year

IV. TECHNICAL STUDY

The building is designed to be accommodate of guest rooms and bank branch

Table 4.1: Estimation of building and construction

Total Executed Remaining

Bill No. 1. Structural Work 10,732,935.00 10,732,935.00 0.00

Bill No. 2. Architectural Work 7,518,480.00 2,319,873.00 5,198,607.00

Bill No. 3. Electrical Installation

Bill No. 4. Sanitary Installation

Total 24,428,227.00 17,078,563.00 7,349,664.00

Bedroom Furniture, Fixture and Equipment’s

It is apparent that the establishment of the guest house project involves

Table 4.2: Detail Cost of Planned Bedroom Furniture, Fixture and

Annual utility cost of the project.

No. Description Unit Qty. Unit price (Birr) Cost ( Birr)

Capacity and Capacity Utilization

Environmental Impact Assessment

It is apparent that the sensitivity of a new project to the environment should

Organizational set-up basically emanates from different business perspective

be hired based on different qualification. They also responsible for collection

The manpower required to effectively administer the operation of the building

5.2. Working capital needed for the first year

This refers to the acquisition of knowledge, skills, and competencies as a

VI. FINANCIAL STUDY