Value chain analysis Ethiopia tourism

Ethiopia has a wealth of natural and cultural resources, with some unique cultural and natural features that set it apart from other African destinations. In the last decade, international arrivals to Ethiopia have shown a positive trend, reaching nearly one million in 2017. However, growth has been fuelled mainly by the increase of international tourism worldwide, improved air connectivity and a dynamic economy that generates many business trips. Tourism data are skewed by weaknesses in the visa system, a large diaspora travelling on foreign passports, and an increasing number of transit passengers from Ethiopian Airlines flights (that cross the border to spend a night or a few hours in Addis). These have to be considered to draw meaningful conclusions.

Holiday trips represented 37.4% of total arrivals in 2016 while Europe generated over a third of those trips (34.4%). The UK, Germany, Italy and France consistently appear in the ranking of the top-10 tourism generating markets for leisure tourism. Sweden and the Netherlands also appear high in the ranking.

However, it seems that Ethiopia receives fewer holiday tourists than the number that can be concluded from official data. The sentiment of many incoming operators, and the low number of foreign visitors in key tourism attractions such as the National Museum in Addis Ababa (47,208 in 2016[1]), the Simien Mountains National Park (10,685 visitors in 2016)[2] and Lalibela (25,069 visitors in 2016), confirm this point. Both the Simien and Lalibela are UNESCO sites. Thus, the number of true holiday trips from Europe to Ethiopia is well below the official 112,000 annual visitors (2016) (which includes a difficult to explain 25% growth over 2015).

Moreover, most tourists follow the same two routes (North and South) and the leisure demand is quite seasonal due to the prevalent image among European outbound operators that the rainy season (European summer) is not a good moment to visit Ethiopia. However, Italy and Spain do generate visits at that time, when the number of holiday trips tends to go down.

There are opportunities for growth, but more proactive commercialisation is needed. Current international trends in European markets present opportunities to diversify the product portfolio and attract more visitors, and European markets were prioritised by the Marketing and Branding Strategy as being among the ‘core’ markets with high revenue potential and high affinity for leisure travel to Ethiopia, as well as among the ‘steady markets’ that are easier to penetrate.

In spite of all the opportunities, important obstacles and challenges hinder competitive and sustainable tourism development in Ethiopia, the most important being:

• Limited understanding of tourism as a development and export sector among high-level government officers
• Institutional framework in place but weak implementation capacity, skilled human resources and financing as well as improved coordination at all levels is needed
• Poor quality of service mainly due to lack of trained manpower
• Very limited accommodating capacity of international standards for leisure tourism, with investment concentrated in main cities and business-type hotels
• Lack of basic and IT infrastructure present challenges for tourism businesses
• Narrow product range offered to the market by incoming operators
• Weak private sector associations
• Official destination marketing focuses on mainstream trade shows (traditional activities) and lacks human and financial resources. Poor digital marketing
• Unplanned destination development
• Poor visitor management in natural and heritage sites puts them at risk, untapped potential for revenue generation
• Poor tourism statistics, needs improvement to provide grounds for sound decision-making by public and private organisations
• Little attention for sustainable practices among public and private players
• No suitable funding available for tourism SMEs
• Need for a recurrent funding mechanism to support tourism development

As a result, Ethiopia is lagging behind other East African destinations that have developed a more competitive tourism industry and attract higher numbers of international tourists.

In this scenario, the key opportunities for the CBI to add value to the tourism value chain in Ethiopia are:

1. To foster a proactive and more professionalised commercialisation and sales effort by incoming operators, targeting strategic segments of the leisure market and higher-spending tourists in the main European markets. This should contribute to: i) more professional incoming operators with improved capacity to approach and develop lasting business relationships with the European travel trade, ii) higher visitor numbers with more diversified travel motivations (segments), and iii) better distribution of tourism flows throughout the year and across Ethiopia.
2. To support existing small tourism service providers (accommodations and restaurants) to upgrade the quality of their services and management practices. They are the main suppliers of incoming operators, are in contact with visitors and have an impact on the quality of the travel experience, as well as the destination image. The added value of a CBI project could be multiplied by designing training and coaching in a way that could be replicated in the future with local resources. This approach would be an excellent complement to the CBI method to support incoming operators.
3. To foster improved conditions to direct private investment and tourism flows to lesser developed regions. CBI could foster coordination to capture and strategically direct investment in accommodation of higher standards that would attract more and higher-spending tourists, increasing jobs and exports. The CBI could also contribute to a more competitive and sustainable tourism product by providing very focused support to improve destination/product development in unique areas with high potential for European tourism.
4. Promote sustainable practices among incoming operators and the tourism industry at large to respond to the increasing interest in sustainability by European outbound operators and their customers, and because sustainable practices will allow further growth of tourism safeguarding natural and cultural assets. Providing technical assistance to improve visitor management and sustainable tourism operations in key natural and heritage sites would also support sustainable tourism development (including new opportunities for SMEs to provide services).

In general terms, to differentiate the project and achieve higher impact, the following approach is recommended:

• Focus on few activities with more in-depth work leading to some practical impact.
• Design project activities (at least some of them) in such a way that they can add value to the tourism value chain beyond the project scope.
• Regarding institutional development, involve relevant federal and regional public organisations in the different project activities but avoid providing training in classroom settings.

The specific CBI interventions proposed are summarised below and, as explained in chapter 11, PUM could become a great partner to amplify capacity building.