Project Proposal for International 4 Star Lodge

2020

Project Proposal for 4 Star

International Lodge
Implemented in SNNPRG in Siltie Zone, Hulbarag Woreda, at
KerateTown.

Project Owner:-Aulfemo Redi

May 2020

Kerate

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Promoter:-Hamdala Jemal
 Project Proposal for International 4 Star Lodge
2020

1. EXECUTIVE SUMMARY

1 Project Name International Lodge

2 Project Owner Mr. Hamdala Jemal

3 Nationality Ethiopian

4 Project Location SNNPRS, Select Zone, Sankura Woreda , at Alem Gebeya Town
Administration

5 Product capacity Diversified type of services provided by project is Lodge, Bed room
service, Cafe, Restaurant, Swimming pool, Recreation center for kids and
Special occasion’s services.

6 Land Requirement 20,000m2

7 Construction period 2 years

8 Total initial capital The total investment capital of the project is estimated at birr 39,691,487 of
which birr 31,088,270 (78%) is for fixed investment items while the
remaining balance of birr 8,603,217 (22%) will be initial working capital.
Out of the total investment cost of the project 30% equivalent to br.
11,907,446 financed by the owners’ equity and the rest 70% equivalent to
birr 27,784,041 financed through bank loan.

9 Employment creation The total manpower required for the proposed project will be 25 permanent
employees at full capacity and 100 individuals temporary during
construction.

10 Production programme Start operation at 75% of its installed capacity, which will grow to 85% in
the 2nd year. Full capacity production will attain in 3rd year.

11 Project Action plane Land acquisition and civil construction… 1st 6 month, Mobilization…
second 6 month & 2nd year, production at full capacity…3rd year

12 Benefits of the factory for Supply of quality services, source of revenue, employment opportunity,
the region/country save/generate the country foreign exchange from tourist, benefit for the
local community, stimulate the local economy and technology transfer

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 Project Proposal for International 4 Star Lodge
2020

2. INTRODUCTION

The tourism Industry’s contribution to the world economy has grown so fast in the
recent years that it has become one of the leading foreign exchange earners of many
countries. Ethiopia with its diversified natural and manmade tourist potential can be
one of those main tourist receiving countries of the World in order to increase its
share of foreign exchange earnings; however, it should develop and improve its
tourist facilities to a level of internationally acceptable standards.

This profile envisages the establishment of an International Lodge in Southern

Nations Nationalities, and Peoples Region, Siltie Zone Hulbarag Woreda preferably
in Werabet Rural small village south of Addis Ababa, with a capacity of serving
more than 50,000 customers per annum. The village has a latitude and longitude of
801’N38020’E with an elevation of 2113 meters above sea level.

Being these potentials: i.e. economical and tourists that attract a wide range of tourist
and investors in the area, as such there is no standardize Lodge service
accommodations. The tourists are obliged to use tents to facilitate their stay on the
sites. The foreign investors are also be served by rented transport services for their
immediate return to the capital city because of lack of such facilities. In addition,
there is no standard hotel and lodge service even for the resident on the area.

The owner, Hamdala Jemal, the owner of the envisaged International lodge, sets an
objective to establish high standards of courtesy and hospitality services at level of
“International Lodge”

The lodge has planned to have services like Bed room service, Cafe, Restaurant,
Swimming pool, Recreation center for kids and Special occasion’s services etc.

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2020

3. BRIEF DESCRIPTION THE PROJECT

3.1 Beneficiaries of the project
The project is intended to achieve multiple benefits to multi-stakeholders. Primarily
the project will benefit the promoter, employees, their families and the government
from revenues that will be obtained from the proceeds. However, the project further
benefits the community at large by being a point of reference for new technology,
management information and experience.

3.2 MISSION STATEMENT

Based on, the present conductive investment policy of the country the promoter of the
project seeks to contribute to the economic development of the nation, encourage and
support hotel, lodge and Tourism sector and the individual and users to attain their
business objectives and satisfy their needs respectively by providing efficient and
states of the art lodge service.

3.3 OBJECTIVE OF THE PROJECT

This International Lodge to be one of the best logeand other service render in the
area in terms of market share and long term profitability, it should strive for one of
its objective that is maximizing its revenue by promoting the modern & efficient
lodge determined by diversifying its activates and it will be timelier to introduce a
business reform which the requires.
Therefore, the main objective of this project proposal is to assess the commercial
viability of construction building mainly for lodge services in southern Nations,
Nationalities and peoples Regional State (SNNPRS) in Siltie Zone, Hulbarag woreda
at Werabet Rural small village.
Hence, based on the above facts and experience as well as to effectively Utilize the
available finance and human resources at hand, the following fundamental
objectives were established:-

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2020

 To carry out and undertake the lodge service business.

 To construct multipurpose building and furnishing of the lodge.
 Availing modern & efficient lodge and related service.
 Provide efficient and effective services and satisfying the customer at large.
 To create employment opportunities services and contribute to the national
economy.
 To promote the transfer of the technical knowhow in the individual to improve
their capabilities to earn additional income. /establishing, maintaining and
enhancing the long term customer relationship.
3.4 PROJECT RATIONALE
3.4.1 General
The data from Ministry of culture and tourism indicates that the number of
hotels in the country is around 593 having 30,930 rooms and 24,535 beds, but the
number of international band local tourists increasing for the past five years. As
indicated in the market section of this study, the demand and supply gap for the
services were very high in which it make show the proposed project is feasibility
in regards to profit and other economic benefits. The machinery, equipment and
furniture for the Bed Rooms, bar and restaurant, conference rooms and other
services requirements will be fulfill through abroad and small quantity from local
markets. The cost of the items will be purchase abroad is very low comparing to
the local market. The inputs and raw materials are available in the local market at
low cost.
The establishments of the selected project in rational in its profit generating and
job opportunity creating to the society in addition to satisfying the existing high
demand supply gap in the country especially in the city.
The incentive policy of the government in hotel and truism investment the high
demand of the products and service easy availability of inputs for services cheap

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2020

labor availability of infrastructures and availability of machinery equipment and

furniture imported without tax (exempted from tax) are the major points to be
considered as the project is rational.
3.4.2 TOURISM SECTOR IN ETHIOPIA
Domestically the sector has created 783,638 jobs over the last four years of
the GTP period achieving more than 90% of the plan as the ministry of
culture and tourism underlined the massive expansion of standard hotels
cafeterias restaurant souvenir gift shops; recreation centers ,socioeconomic
service at tourist attraction sites had catalyzed for the creation of job
opportunities coupled with the skill upgrade training provided to 1.5 million
people working in the tourism sector and in 110 professions of truism
sector.
This is merely the beginning a transformational expansion of the sector is
expected the prospect of Ethiopian tourism is brighter and promising as
several national and international institutions attested though it’s still very
low profile to most of the world, Ethiopia is on its way toward becoming a
major travel destination though it has been hidden behind avail for decades
and is virtually unknown to the world Ethiopia Has major attractions for
travelers.
Ethiopia s, government has begun to make good strategic moves towards
bringing its attractions to the attention of the world. The whole process will
take years, but the country may get some attraction this year’
Generally there was lack of marketing and promotional strategy as well as
low awareness of tourism by local communities. In addition, the limited
share of tourism earnings reaching the local community is affecting the
sustainability of the sector and is having a negative impact on the
contribution of tourism towards poverty alleviation.
According to the Nations world Tourism Organization (UNWTO) data,
Ethiopia registered and average annual growth in international tourist
arrivals of 5.6 percent for the period 1990-2000, and 15.4 percent during
the period 2000-2005. The sector further expanded in the half of the last
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2020

decade with the implementation of the PASDEP (The plan for Accelerated
and Sustained Development to end Poverty), from 2005 to 2010, and the
consecutive double-digit growth.
In the four years from 2005 to 2008, average annual tourist arrivals were
324,664, while average annual revenue was 167 million dollars. Reports of
the sector show annual growth rate of 21 percent for tourist arrivals and
19.5 percent for revenue for those four consecutive years.
However, in 2010, while sub-Saharan Africa’s tourism market share is only
3.2 percent of global international arrivals, Ethiopia’s hare within Africa’s
shared is a minuscule 1 percent, with close competitors such as Kenya and
Tanzania claiming 4 percent and 2 percent of the same share respectively.
By contrast, South Africa has a 32 percent share. Despite this minimal
market share, nonetheless, the annual average growth rate of tourism
arrivals to Ethiopia was higher than Sub-Saharan Africa’s average.
Therefore, the government of Ethiopia (GOD) prioritized tourism
development in its growth and transformation plan ()GTP) and tourism
policy to optimize the existing tourism resources as a driving force of
economic growth for the whole country.
In light of all these, the government planned to make Ethiopia one of the top
ten tourist destinations in Africa by the year 2020 within an emphasis on
maximizing the poverty reducing impacts of tourism and change the
international image and positioning of the country.
The sector should be planned in a comprehensive way to faster the
contribution of tourism on the general economic development of the
country. The Tourism Commission was upgraded to the Ministry of /culture
and/ tourism (MoCT) in 2005. MoCT has, at the same time, the responsibility
for cultural issues, which were taken care of by the ministry of Youth and
sports previously.
Two new entities, the Tourism Transaction Council and Ethiopian Tourism
Organization, have been launched with the objective of transforming the
industry and based on the necessity to coordinate the activities of various
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2020

stakeholders in the industry. In particular, the Tourism Transformation

council established with the mandate to raise the standards of the industry
to higher level.

The Council is drawn from members of various institutions as well as

prominent personalities. In addition, tourist infrastructures in various
national parks are being upgraded and renovation work on roads linking the
parks with major

Recent data show that the sector’s progress under the GTP. In 2012 GC,
52.3 million tourists visited Africa, out of which only 596.341 reached
Ethiopia. In the first half of the last Ethiopian budget year, 2013-2014, the
ministry of culture and Tourism reported that the number of tourists showed
an increase of 36% over the same period of the previous year.

3.5 PROFILE OF PROMOTER

The promoter of the project is Hamdala Jemal. He is an Ethiopian
entrepreneur living in Addis Ababa engaged in the business world for long
years as owners of various business organizations in different business
activities. The promoter has finance and Marketing capacity and necessary
experience for the business.
The promoter has an initial vision, readiness and deep assessment of the
situation to implement the project, the purposes of this feasibility study is to
obtain required land and investment certificate for the realization of the
project objective.
3.6 Premises required
For the proposed Lodge service setup, a total of 20,000 m 2 land is required.
This land includes space for Lodge, Bed room service, Cafe, Restaurant,
Swimming pool, Recreation center for kids, and Special occasions service
faculties including parking and green area.
Table 1:- project Land requirement

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2020

SN Description Land requirement (in m2)

1 Lodge building 8,000

2 Recreation center for kids. 4,000

3 Special occasion’s service. 3,000

4 Parking and green area 5,000

Total 20,000

3.7 Total Cost of Initial Investment

The total investment capital of the project is estimated at birr 39,691,487 of
which birr 31,088,270 (78%) is for fixed investment items while the remaining
balance of birr 8,603,217 (22%) will be initial working capital. Out of the total
investment cost of the project 30% equivalent to br. 11,907,446 financed by
the owners’ equity and the rest 70% equivalent to birr 27,784,041 financed
through bank loan.

3.8 Project location and its profile

The project is planned to be established in SNNPR, SIltie Zone, Hulbarag
Woreda at Werabet Rural small village. Siltie Zone is in the SNNPRS and named
for the Siltie people, whose homeland lies in the zone. Siltie is bordered on the
south by Alaba Zone, on the southwest by Hadiya zone on the north by Gurage
Zone, and on the east by the Oromia Region. It has a total area of 2537.5
[Link] and lies between 7.43-8.10 latitude and 37.86 to 38.53 longitudes, with
an elevation managing 1501-3500 meter above sea level.

The zone has 10 woredas & 3 Town Administrator. Based on the 2008 census
conducted by the Central Statistics Agency of Ethiopia (CSA) this Zone has a
total population of 840,598 of whom 407,690(48.5%) are mal 432,908(51.5%)
women, 47,097(6.28%) are urban inhabitants. The largest ethnic group
reported in Siltie was the Siltie people (97.35%), all other ethnic group made

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2020

up 2.65% of the population. Siltie is spoken as a fires language by 96.95% of

the population and 1.48% spoken Amharic, the remaining 1.57% spoken all
other primary languages reported. It is worth mentioning that 12 km lst grade
asphalt road which is between Addis Ababa and hosaena is the basic fact for
the economic development so for reached among others 39.13 km dry season
road 17.23 km winter season road 4.06 km coble stone road 80% coverage of
clean water supply 26.5 km main waterline installation 13.5 km door water line
installation and last but not least 24 hours day in day out electric supply are
the major economic development.

Even though the infrastructure development is fast it is not accordance with

the growth of the population and land holding that in turn calls for the due
concern of the Zone Administration and regional government for the invitation
and intervention of private investors.

The town of kerate being the capital of Hulbarag woredait has got the
opportunities to provide accommodation for consecutive zonal meetings
conferences and various trainings whey near to worabe Town.

Henceforth the construction of up to standard lodge is unexploited market

opportunity for the benefit of the private potential investor and the socio
economic development of the zone.

Hence the lodge is located at essay convenience of reach to customers where

location opportunity and advantage are of very lucrative but more importantly
the location offers very large potential of ever growing demand to the Hotels
and lodge services.’

The proposal presented for this project requires the consideration not only of
technical commercial and finance factors only but also of social &
environmental following factors must be considered infrastructure service
existing industrial infrastructure economic and social infrastructure& intuitional
frame work urbanization Ecological and environmental impact of the project.

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3.9 Justification why these project is proposed

Using the favorable and conductive investment policy of the number and
capital of investment projects have grown steadily for the last three years
investments on manufacturing electricity and water supply real estate
agriculture construction and restaurants appeared to dominate in terms of
approved investment comitial.

Such a rapid expansion and growth of the investment especially manufacturing

real estate construction and hotel and restaurants show the need of the market
to enter in the business

Socio economic indicators: - Ethiopia is a country which a high population

number with a high growth rate and will result the following with respect to our
business.

 Abundance of skilled and unskilled labor supply

 Additional demand creation mainly through the urbanization process

The additional demand created though urbanization process mainly creates

high demand for lodge services.

Resultant entrances to the lodge business in turn call for the competition of
investors to deliver high Quality and well differentiated Lodge services the
company is committed to enter in to business by differentiating Hotel services
the company is committed to enter in to the business by differencing the Lodge
s standard through quality packages.

Political environment;- the political stability an improvement of the discounted

image of the country has contributed its own share for the growth of the
economy in addition the celebration of Ethiopian millennium is directly
counting its share for the growth of the country through prompting the lodge
and tourism sectored.

3.10 SERVICE DESECRIPTION

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The Lodges are a building usually providing overnight accommodations

catering and Lodge, Bed room service, cafe, Restaurant, Swimming pool,
Recreation center for kids, Special occasions services, and others. It is a type of
lodge which specifically utilizes the open environment and associated natural
and historical attractions for recreational purpose of its customers.

In this project proposal a Lodge is considered to provide local and international

tourists and guest’s services and facilities where food drinks bed rooms and
other services are provided in an efficient, cordial and pleasant manner and
style. The proposedLodge has the following devices;

BED ROOMS (6): bed rooms as well contain high standard bed room, 8 seat
sofa, office table andChair that enables the gust to conduct session with his/her
business guest. ATV set with multi-choice satellite channels and refrigerator,
with the open air having two chairs with coffee table.

All the facility contained in the first class except salon kitchen and outdoor
space in the rooms; they are baked –up with very reasonable price that
promotes their demand. From the total bed rooms 8 rooms have 1.0 m*2m two
beds and the remaining 16 has one 1.2m*2m bed. Each rooms has furnished in
standard bed room facility.

CAFÉ AND RESTAURANT: - The Cafe and restaurant will provide in-house food
and beverage services. The restaurant will basically serve breakfast, lunch and
dinner by providing daily menu and other choices of customers.

The restaurant will accommodate both national and international set-ups with
open kitchen compartment where the customers can see and participate in
cooking. This feature of the restaurants currently is highly preferred world wid.
Its total capacity it estimated to be 30 persons at a time.

Other Services: -Other services recreational service and shopping area.

4. MAEKET STUDY

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4.1 General Overview

Our country, Ethiopia has been well-known for the hospitality and the peculiar
tradition of the people that we should be cherished. By establishing a resort
hotel with quality, comfortable and decent hotel services would help for the
best use of economic value of the sector.

Tourism in Ethiopia accounted for 7.5% of the country’s gross domestic product
(GDP) in 2016. The government is proving its commitment and willingness to
develop tourism through a number of initiatives. Tourism is featured
components of Ethiopia’s Poverty Reduction Strategy Paper, which aims to
combat poverty and encourage economic development. Generally Tourism and
Hotel service sector worth the attention of the government and the people
itself to create awareness that it has great contribution to improve the position
of the foreign currency of the country and the necessary measures should be
taken.

It is witnessed that Siltie Zone is one of tourist placed in Ethiopia. Which takes
the lion share of tourist’ arrivals to the country. The economic importance of
the city is imperative factor for the improvement hotel accommodation service
in every way.

There are no standardized hotel accommodations in Kerate and also Worabe

town that can serve people coming to the area for various reasons such as for
visiting tourist sites, mission’s business activities, periodic meeting and
conferences, vacation, and visiting relatives after a long time stay from abroad
etc.

The objective of this market study is to evaluate the supply and demand
factors affecting the market for hotel accommodations in the Worabe for the
purpose of developing and income and expense projection for the proposed
facilities.

4.2 Market for Hotel and Lodge Accommodations

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The market for hotel accommodations is an all-encompassing term referring to

the many types of travelers/visitors who use hotel facilities in a given area.
These travelers represent the market’s accommodated room night demand. In
addition, the market may be characterized by latent demand, which consists of
an accommodated demand and/or induced demand.

Un-accommodated demand refers to individuals who are unable to secure

accommodations in the market because all of the local hotels are filled and
also lack of such facility. These travelers must defer their trips, settle for less
desirable accommodations, or stay in properties located outside the market
area. Induced demand represents the additional room nights that are expected
to be attracted the market following the introduction of a new demand
generator.

This section will begin with an analysis of historical tourists’ arrivals; the
historical number of competitive hotel rooms will then be estimated to evaluate
local supply trends. Citywide demand supply gap level can be calculated based
on the number of hotel rooms available in the market and the demand for
lodging accommodations.

42.1 Demand Analysis

For the purpose of demand analysis, the overall market is divided into
individual segments based on the nature of travel. Although a market may
have various segments, the three primary classifications occurring in most
areas are leisure, commercial, meeting and group. Market segmentation is a
useful procedure because individual classifications often exhibit unique
characteristics in terms of growth potential, seasonality of demand, average
length of stay, double occupancy, and facility requirements.

42.1.1 Leisure Demand

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Leisure demand consists of families, couples, and individuals seeking vacation

experiences including a weekend “get-away” or an experience that is different
and unique when compared to their normal routine. The demand also attracts
travelers from Neighboring countries, which is only few hours flying to Addis
and then drive to siltie zone. Typically associated with vacationing, leisure
demand can encompass anything from an overnight festival attendant to the
extended vacationer. According to research conducted by the ministry of
Tourism and Culture, approximately 21 percent of all tourists travel in 2016
was leisure related.

Seasonality is a major factor when attempting to attract the leisure traveler.

Peak demand periods for the leisure traveler are expected in April to
September for European tourist, who preferably chooses the area as compared
to the extreme hot weather on their areas. In addition from September to April
for tourist who wants to visit different attractive sites on the area? The
proposed resort hotel will need to promote off-season recreation activates;
packaging, and special events associated to this period will be associated with
discounting in an effort to stimulate this demand.

42.1.2 Commercial Demand

A business person traveling or through are to complete some facet of business
generates commercial demand. The commercial segment consists of individual
business people who are visiting various firms such as foreign investors on
potash mining activities and others in the subject property’s market.

Local companies generate representatives of business forms; demand in this

sub-segment may include employees of the firm or its affiliates, and often
consists of training groups. These companies typically designate hotel as
“preferred” accommodations; in return, the selected lodging facilities generally
offer a significant discount from there. Published rates typically, these rates are
negotiated on an annual basis, and the size of the discount is tied to the
number of room nights produced.

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This demand is strongest Monday through Thursday nights, and very

seasonally on Saturday, and increases somewhat on Sunday.

42.1.3 Meeting and Group Demand

The meeting and group market includes meetings, seminars, conventions,
trade association shows, and similar gatherings of ten or more people. The
availability of the only standardized conference hall on the area which will
handle meetings demands that emanates from different Government bodies,
graduation ceremony and other social engagements. Peak convention demand
will occur at very hot time due to the unique facility available on the meeting
hall.

Corporate groups are one of the most profitable components of this segment,
because they exhibit limited price sensitivity and they often sponsor banquets
and other events that generate revenue for the host lodge.

In the proposed lodge’s market, the same major employers that contribute
high-volume corporate accounts generate most corporate group activity. This
demand may take the form for training programs, sales meetings, division
conferences, and similar events with a business purpose. Corporate groups
generally meet during the works week, thus generating lodging demand on
Monday through Thursday nights. The average length of stay is two to four
days, although training groups may stay six nights or more.

Association demand is generally divided in a geographical basis; the most

common categories are national, regional and state associations. Depending on
their nature, these associations may be more rates sensitive than commercial
groups. This is particularly true when members are not reimbursed by their
employers, both must pay to attend (i.e., guestroom and conference fees). The
scheduling pattern of associations also depends on the nature of the group.

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Professional associations and/or those supported by member’s employers often

meet on weekdays, while other associations prefer to hold events on
weekends. The other market consists of groups that are social, military,
educational, religious, or fraternal in nature. Examples include family reunions,
youth groups, and fraternal.

Summary of International Tourist by purpose of Visit

Leisure Visiting
Busine Conferen Transi Not
Year & Relatives Total
ss ce t Stated
Holiday & Friends

2013 49,209 15,721 99,394 77,572 25,484 62,779 383,399

2014 71,374 47,516 138,070 81,481 35,593 53,253 427,286

2015 77,816 36,145 171,414 84,229 28,672 70,029 468,305

2016 91,064 50,531 183,008 86,020 37,116 75,699 523,438

% Change

2013/14 45.04 202.25 38.91 5.04 39.68 -15.17 11.45

2014/15 9.03 -23.93 24.15 3.37 -19.44 31.50 9.60

2015/16 17.02 39.80 6.76 2.13 29.45 8.10 11.77

2016/17 43.11 13.74 4.66 5.78 21.71 6.80 13.93

Average
28.55 57.96 18.62 4.08 17.85 7.81 11.69
% Change

Source: MoCT, Tourism Statistics Bulletin 2014-2017

42.1.4 International Tourist Visit

According to the Tourism Statistics Bulletin, the number of tourists who come
to Ethiopian year by year is growing fast. International tourist arrivals for the
last 10 years are summarized in the table below:

Year (G.C) No of Arrival

2008 179,910
2009 184,078
2010 227,398

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2011 330,026
2012 357,841
2013 383,399
2014 427286
2015 468,305
2016 523,438
2017 596,341
Source: MO CT, Tourism Statistics Bulletin 2014-2017

As recently declared by government mass Media as a consequence of different

efforts by the government and private sector to upgrade the tourism sector
and to make in a big industry the number of tourists visiting Ethiopia annually
will be expected to grow at an increasing rate in the future. Most tourists
practically are inclined to accommodate in the hotels.

Therefore, tourism sector is the biggest source of income for local hotels. The
following table shows past tourist arrivals, growth rate and receipts.

No of tourist, growth trend and receipts

Year % Receipts
No
(G.C Growt
Arrival In USD % In Birr %
) h
Growth Growth
2008 179,91 15.1 89,946,355 16.7 778,000,000 15.1
2009 0
184,07 2.3 114,627,850 27.4 994,408,062 27.8
2010 8
227,39 23.5 138,599,940 20.9 1,202,368,339 20.9
2011 8
330,02 45.1 169,975,086 22.6 1,494,811,899 24.3
2012 6
357,84 8.4 213,936,063 25.9 1,987,241,388 32.9
2013 1
383,39 7.1 204,855,489 -4.2 1,979,539,071 -0.4
2014 9
427,28 11.4 246,415,374 20.3 2,900,062,542 46.5
2015 6
468,30 9.6 333,352,000 35.3 4,800,268,804 65.5
2016 5
523,43 12.0 411,638,987 23.5 6,145,770,076 28.03
2017 8
596,34 13.9 1,190,775,61 189.27 21,204,935,19 245.03
1 3* *
Source: MO CT, Tourism Statistics Bulletin 2014-2017 1* *

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Tourist expenditure for the year 2017 was estimated using the Tourist
Expenditure Model developed based on the visitors’ Exit survey conducted in
2018.

While projecting demand for hotels’ accommodating, the following assumption

is taken in to account.

- Number of tourist arrival in year 2018 taken as a base year for

further projection
- It is assumed that a 7 % annual growth rate in tourist arrival
- One tourist will stay 8 nights in the hotel
- Out of total tourist, only 60% will stay in hotels, which are rated
three stars, and above.
- Local customers are not included in the projection for the sake
being conservative.
42.1.5 Demand Projection
Therefore, taking the above assumptions into considerations the projection
demand presented in the following table.

Projected Total Bed nights No of beds

Year Proportion
no Tourist Number per person required

2019 891,117 60% 534,670 8 4,277,360

2020 945,834 60% 567,501 8 4,540,005

2021 1,000,552 60% 600,331 8 4,802,650

2022 1,055,270 60% 633,162 8 5,065,295

2023 1,109,987 60% 665,992 8 5,327,940

2024 1,164,705 60% 698,823 8 5,590,584

2025 1,219,423 60% 731,654 8 5,853,229

2026 1,274,140 60% 764,484 8 6,115,874

2027 1,328,858 60% 797,315 8 6,378,519

2028 1,383,576 60% 830,145 8 6,641,164

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42.2 Supply Analysis

[Link] Competitive Hotel Supply
In order to assess room night demand for the proposed hotel development, we
identified a competitive set of properties in the market drawing area based on
published room rates, level of service, and availability of rooms. All hotels in
the competitive set (which are above two) stars are considered primary
competitors of the proposed development. According to the information
obtained from Ministry of Tourism and Culture, the availability of rooms and
beds classifications of list of stars-rated hotels which are presented in Ethiopia
in the following table.

Registered Star rated hotel andlodge beds by regions

Hotel rooms & beds by star Total Total

groups Beds Rooms
Region
V IV III II I

Addis Ababa 6 14 26 21 9 2246 1660

Amhara - 2 10 2 4 960 841

Region

Oromia 1 1 11 6 8 - 1147
Region

SNNP Region - 5 3 4 8 965 780

Tigrai - 1 2 4 3 831 650

Region

Total 7 23 52 37 32 5002 3931

[Link] Supply Projection

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Presently, there are almost 7,300 rooms available in Federal Level (including
pipeline projects) which are in different star level hotels in the Federal.
Assuming an annual growth rate of 5%, hotels’ room’s projections presented
below

Year No. of rooms Days/annum Rooms

2017 7,300 365 2,664,500
/annum
2018 7,665 365 2,797,725
2019 8,048 365 2,937,611
2020 8,451 365 3,384,482
2021 8,873 365 3,238,716
2022 9,317 365 3,400,652
2023 9,783 365 3,570,685
2024 10,272 365 3,749,219
2025 10,785 365 3,936,680
2026 11,325 365 4,133,514

42.3 Demand Supply Gap

The following table shows the projected demand supply gap of hotels’
accommodation.

Demand Supply Gap

Year Projected Projected Demand Gap

2019 Demand
3,334,941 Supply
2,664,500 670,441
2020 3,501,688 2,797,725 703,963
2021 3,676,772 2,937,611 739,161
2022 3,860,611 3,084,492 776,119
2023 4,053,641 3,238,716 814,925
2024 4,256,323 3,400,652 855,671
2025 4,469,140 3,570,685 898,455
2026 4,692,597 3,749,219 943,377
2027 4,927,226 3,936,680 990,546
2028 5,173,588 4,133,514 1,040,074

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According to the above demand supply gap analysis, there would be

unsatisfied demand for coming 10 years in returns justifies the need for
establishing an additional hotel in the area.

42.4 Competition
An integral component of the supply and demand relationship that has a
direct impact on the availability of Hotel services/lodging demand is the
current and anticipated supply of competitive lodging facilities. To evaluate
the city’s competitive environment, the following steps should be taken:

 Identify the area’s lodging facilities and determine which are

expected to be directly and indirectly competitive with the proposed
hotel.
 Determine whether additional hotel rooms, besides the proposed
subject, will enter the market in the foreseeable future
 Quantify the number of existing and proposed hotel rooms available
in the market.
 Review the rate structure, occupancy levels, market orientation,
facilities, and amenities of each competitor.

4.3 CAPACITY AND SERVICE PROGRAM

4.3.1 CAPACITY OF THE PROJJECT AND SERVICE PROGRAMME

From the market study it is a great demand gap between the demand and
supply of the service there for taking in to account the market study and
economic scale of service provision the envisaged project will have capacities
as shown below table 4.3.1.

Table 4.3.1:

SERVICE AND SALES CAPACITY OF THE PROJJECT

[Link] Descriptions of Total Year 1 Year 2 Year Year 4 Year

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services Occupy/year 3 5

capacity utilization 75% 85% 95% 100% 100%

1 Bed Rooms (30) 365 days 274 310 347 365 365
2 Restaurant cafe 30(persons/day) 13688 15513 17338 18250 18250

4 Other services 365 273.75 310.25 346.8 365 365

5. Material and Inputs
5.1 Raw and Auxiliary Materials

The annual cost and list of raw materials are indicated in the attached cost of
goods/service sold based on that the inputs are forecasted as follow;

 Food and beverage cost were 30% of the sales

 Other service costs were 20%of other service income
 Utilities like electricity water and cleaning agents were 5%of the total
sales

5.2 Utilities

A number of utilities would be put in place in order to ensure smooth functioning of

the factory. These utilities include Water supply, Electricity power, Telephone service,
Fuel, lubricants and [Link] details see Table 5.2

Table: 5.2:

Annual utilities required estimated cost

Unit cost Total cost in

S/N Description Unit measure Qt
in birr birr

1 Electricity power kw 25,000 6.335 158,375

2 Water Supply m3 7,500 9 67,500

Telephone
3 month 12 3500 42000
service

4 Fuel liter 6100 19 115,900

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10% of fuel
5 Oil and lubricants 11,590
cost

6 Steam kg 2,400 1.95 4680

Total 400,045

6. TECHNOLOGY AND ENGINEERING

6.1 TECHNOLOGY
6.1.1 Service Process

The envisaged International lodge will provide its services for both local and
international tourists.

The main services and the number of areas where the provision of services
could take place are as follows:

 Accommodation with/with without fast,

 Dinning and coffee ceremony,
 Special occasions services
o Conferences,
o Honeymoons,
o Art exhibition and other festivals/events,
o Family, small reunion / retreat, or a business meeting etc.
Accommodations are equipped with satellite TV, VCR/DVD, broad multimedia
connection, and some rooms are also provided with fresh cleaning facilities
with de-scholars and complimentary fresh freezing unit.

All the services in the hotel (recreational, dinning, coffee ceremony, and special
occasion services) are rendered to customers up on their request.

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Customers can make a booking to every services where payment with foreign
currency (for international tourists) and with local currency (for local tourists)
are available with both in cash and by means of credit cards.

a) Bedroom
The lodge will have bedrooms and will offer versatile services and facilities. Of
the total 30 rooms, 16 will be single bed rooms, 8 double bed rooms and 6 will
be suit rooms.
Bedrooms will be more spacious allowing ample and generous ease of
movement, comfort and relaxation for guests. Among the features of the guest
rooms the major ones are:
 Rooms of excellent quality both smoking and non- smoking, and with
luxurious standard of furniture, wall coverings quality paintings and
excellent quality floors,
 Rooms with absolutely minimal internal and external noise levels,
 Very good quality beds with superior head board or similar,
 Multi-channel color TV with remote control for watching local and
international news, movies, sports, and music and guest charge
systems. In addition to terrestrial channels video channels would be
included,
 International direct dialing telephone with easy connection for fax and
computer, two room phones in each room,
 Private bath and shower room, all bath rooms equipped with an
excellent quality of sanitary wares and fittings,
 News paper and magazine,
 Radio with several channels,
 Hot and cold water,
 Wake up call, and

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 Hair dryer.

b) Restaurant

 Restaurant
The restaurants sky, menu and traditional with a capacity of 180 at a time each
will be established. The restaurants will basically serve breakfast, lunch and
dinner by providing daily menu, weekly buffet, and other choices of customers.
 Coffee Shop
A small - cozy coffee shop will be established with a capacity of 20- 25 seats

c)Multipurpose Assembly Hall

The proposed capacity of multi-purpose assembly hall is 600 seats. The hall is
planned to accommodate and serve multiple purposes. It can be used for multi-
purpose activities by rearranging of seats and adding appropriate facilities on
time and site. The hotel has various options to use available rooms such as for
conventions, wedding services, training, workshops, and others other public
gatherings.
d) Children’s Play room

The facilities included in the children’s play room are swings, sliding stands,
and coin operated toy vehicles and different kinds of arcade video games. The
whole area of the playground shall be free from any obstruction that could
result in accident and the recreational tools are installed in such a way that
they will not cause any accident. The arcade coin operated video game room
having an area of about 200 m 2 will be secured in the main room. It should also
be free from any visible electrical connections and free from an accident or
hazard.

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The provision of such service doesn't have any adverse impact on

environment.

6.2 ENGINEERING
6.2.1 Machinery and Equipment
The hotel requires the following machinery and equipment. The total estimated
cost is Birr 10,000,000.

Required hotel machinery and equipment

Sr. Description
A Bed Rooms Machines &Equipments
B Public Area Items
C Kitchen Operation & Preparation Equipment
D Restaurant Operation Equipment
E Pastry Operation Equipment
F Sanitation and Other Equipment
G Public Area and Other Miscellaneous Item
H Staff Dining Room Equipment
I Meeting Room Equipment
J Staff Uniforms

6.2.2 Land, Plant/Physical Layout

The envisaged project requires a total land area of 20,000 m 2, of which 6,500 m2 would
be built-up area. The construction cost of building is not based on actual specifications
and engineering cost estimate (bill of quantities). Considering the prevailing
contractors average unit cost of the project area building and construction cost could
be estimated birr 9,750,000.

According to the Federal Legislation on the Lease Holding of Urban Land (Proclamation
No 721/2004) in principle, urban land permit by lease is on auction or negotiation
basis, however, the time and condition of applying the proclamation shall be

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determined by the concerned regional or city government depending on the level of

development.

The legislation has also set the maximum on lease period and the payment of lease
prices. The lease period ranges from 99 years for education, cultural research health,
sport, NGO , religious and residential area to 80 years for industry and 70 years for
trade while the lease payment period ranges from 10 years to 60 years based on the
towns grade and type of investment.

Moreover, advance payment of lease based on the type of investment ranges from 5%
to 10%.The lease price is payable after the grace period annually. For those that pay
the entire amount of the lease will receive 0.5% discount from the total lease value
and those that pay in installments will be charged interest based on the prevailing
interest rate of banks. Moreover, based on the type of investment, two to seven years
grace period shall also be provided.

However, the Federal Legislation on the Lease Holding of Urban Land apart from
setting the maximum has conferred on regional and city governments the power to
issue regulations on the exact terms based on the development level of each region.

In Kerate Town, the municipality’s Land Administration and Development Authority is

directly responsible in dealing with matters concerning land. However, regarding the
manufacturing sector, Commercialarea preparation is one of the strategic intervention
measures adopted by themunicipality for the promotion of the sector and all
commercial projects are assumed to be located in the developing commercial areas.

For the profile a land lease rate of Birr 36 per m 2 which is equivalent to the average
floor price of plots located in [Link], the total land lease cost at a rate of
Birr 36 per m2 is estimated at Birr 7,200,000 of which 10% or Birr 720,000 will be paid
in advance. The remaining Birr 6,480,000 will be paid in equal installments within 50
years i.e. Birr 129,600 annually.

Table 6.2.2

Costs of Land Lease, Building and Civil Works

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S/N Descriptions Building Unit CostTotal

Area in m2 per m2 construction
cot
1 Building of Lodge 4,000 1500 6000000
2 Recreation center for kids 2,000 1500 3000000
and Gymnasium room.
3 Laundry service and 500 1500 750000
Special occasion’s
service.
Total 6,500 9,750,000
Land Lease 720,000

7. . ORGANIZATION AND MANAGEMENT

7.1 MANPOWER REQUIREMENT
The organizational structure of the business was designed based on the
functions of the overall business towards the achievements of the setting
objectives and selecting the best way of managing the organizations resources
(human resource, capital, information and technology) effectively and
efficiently. In addition to the above mentioned bases of the organization
structure design, the intentions of the business and the external economic
situations of the area taken in to account. By considering all of the above, the
skeleton of the organizational structure is shown in Fig 7.1 below.

Fig 7.1:- Organizational Structure

General Manager

Secretory

Operation and Customer service head Finance and Administration

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7.2 THE MANAGEMENT TEAM

The management teams of the Hotel are the General Manager, Operation and
Customer Service Head and Finance & Administration Head. The General
Manager has the responsibility of managing the overall function of the Hotel
and also the head of the team.

7.3 PERSONAL PLAN

The Hotel will recruit personnel’s for the managerial positions who have an
extensive experience on the area of businesses and also have expected
educational background. The management has an advantage of sharing
experience from the top management of other hotels to utilize the well
experienced administrative system of the hotel and other sister companies.

A total of 32permanent staff workers and 80 temporary during contraction are

proposed to attain the required outputs. The availability of professional and
semiskilled workers is assessed accordingly, in which the gap in skills and
efficiency, if existed, can be filled by extensive training program to cope up
with the necessary labor norm.

By considering the expansion plan of the business and the services it will
render additional personnel will be employed to fill the vacant posts of the
organization that comes from the expanded part of the organization.

Salaries are generally in line with market pay system for the sector. The project
is planned to have fringe benefits for both skilled and unskilled workers under
the general labor legislation with regard to the entitlement in the social
security system for government employees.

Currently based on the study the detail of manpower requirements to start its
operation fully is depicted in table 7.3. The annual salaries and benefits is
estimated to be Birr 1,290,300.
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Table 7.3:- MANAPOWER REQUIREMENT

No. Monthl
S. Yearly
Job title of y
N Salary
Post Salary
1 General Manager 1 8,000 96,000
2 Operations Head 1 5,000 60,000
3 Administration & Finance Head 1 5,000 60,000
4 Purchaser 1 3,500 42,000
5 Accountant 1 3,500 42,000
6 Secretary 1 3,500 42,000
7 Driver 2 2,500 60,000
8 Cahier 1 3,000 36,000
9 Guards and Gardner 4 2000 96,000
10 Receptionist 1 2,500 30,000
11 Cooker 2 3,000 72,000
12 Supervisor 1 2,500 30,000
13 Restaurant Attendant 4 2500 120,000
14 Laundry Service Attendant 2 2000 48,000
15 Accommodation Attendant 1 2500 30,000
16 Store Keeper 1 2,500 30,000
17 Recreation center Attendant 1 3,500 42,000
18 Cafeteria Attendant 3 3000 108,000
19 Cleaner 2 2000 48,000
20 Technician 1 2,500 30,000
Sub Total 32 1,122,000
Employees benefit (15% of basic
168,300
salary
Grand total 32 1,290,300

8. FINANCIAL STUDY

The main components of the project activities consist of building and civil
works, machinery and equipment, Vehicles, office furniture and other
equipment, land lease &installation of equipment etc. all these activities
constitute fixed investment. Other components including purchase of Row

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material inputs, utilities and other costs of recurrent activities constitute

production cost of the project.

8.1 Fixed Investment cost

a) Building and civil works

The cost of building and construction is one of the major cost components of
fixed costs. The construction cost of building is not based on actual
specifications and engineering cost estimate (bill of quantities). Considering
the prevailing local contractors average unit cost of the project area building
and construction cost is estimated Birr 18,100,000. The detail is shown above
in Table 6.A.b:

b) Machinery and equipment

The under listed are the list of machinery and equipment by major category of
service centers. The details of the machinery and equipment are fully
described in annex A. As shown below, the total cost of Machinery, equipment
and Furniture is estimated at Birr 10,576,270.

c) Procurement of vehicles

The internal logistics serve as an essential component of the entire project production
process. The project plans to procure one FSR which will be used for transportation of
raw materials andone Double pickup Used for administrative purposes. The total
estimated cost of the vehicles is bout birr 2,200,000.

Table 8.1.b: List of vehicles and cost estimate (in birr)

S/n Type of vehicles Unit Qty Unit price Total price

1 FSR pieces 1 1,300,000 1,300,000

2 Double pickup pieces 1 900,000 900,000

Total 2,200,000 2,200,000

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d) Office furniture and other equipment

Office furniture and equipment to be purchased includes office tables, chairs,

shelf, filing cabinet, computers with accessories, cash safe and other
miscellaneous equipments. Description and cost estimate is birr 212,000
shown in table below.

Table 8.1.D : cost of office furniture and equipments

Type of Equipment Quantit Unit Price Cost of Equipment

y

Executive Tables 1 25,000 25,000

Executive Chairs 1 7,500 7,500

File Cupboards 2 8,000 16,000

Office Tables 2 8,500 17,000

Visitors Chairs 5 2,500 12,500

Computers 2 22,000 44,000

Printers 2 15,000 30,000

Fax Machine 1 20,000 20,000

Telephone line 1 15,000 15,000

Other office items 1 25,000 25,000

Total 212,000

e) Summary of fixed costs

Table 8.1.e Summary of fixed costs

S/n Description Cost estimate(Birr)

1 Building & constructions 18,100,000
2 Machinery and equipment 10,576,270

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3 Vehicles 2,200,000
4 Other equipment 212,000
Total 31,088,270

8.2 Service Production Costs

Production cost of the project includes direct production costs and
administrative costs. The major cost items under this include cost of goods/
service sold, salary of employee, utilities, fuel and oil and lubricants, repair and
maintenance, office supplies and others indicated as follows and summery
shows in table 8.2.g.

a) Raw materials and inputs

The annual cost and list of are indicated in the attached cost of goods/ service
sold based on that the inputs are forecasted as follow;
Food and beverage cost were 30% of the sales

 Other service costs were 20% of other service income

 Utilities like electricity, water and cleaning agents were 5 % of the total
sales

Table 8.2.a: Cost of Goods sold projection

S
Item Year-1 Year-2 Year-3 Year-4 Year-5
N
Food &
beverage
1 1,026,600 1,279,823 1,573,424 1,821,806 2,003,987
cost (30%)
its sales
Fueling
2 16,866,671 22,488,893 28,111,106 30,922,217 34,014,438
station
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supplies(85%
of its sales)
Other
services
3 328,500 409,530 503,554 582,978 641,276
inputs (20%
of its sales)
Utilities and
cleaning
4 agents 5% of 1642494.6 2133218.56 2650304.75 2972764.54 3270041
the total
sales
Total 19,864,265 26,311,464 32,838,388 36,299,765 39,929,742

b) Salary Expense:

The annual salary expense for 42 permanent employees including benefits are
calculated to be birr 1,290,300 per year.

c) Utilities:

The major utilities required and their costs are: for water, electric power, fuel
and oil and lubricants estimated as follows

Table 8.2.c: Cost of Utilities

S Unit of Unit Cost (in

Utility Qty.
N measure price Birr)

1 Electricity Kwh 92,000 0.674 61,971

256,32
2 Water It. 4.5 1,153,445
1
3 Fuel It. 14,500 22 319,000

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Oil and lubricants

4 Ls 31,900
(10%
Total 1,566,316
.

d) Repair and Maintenance Cost

Table 8.2.d: Repair and Maintenance cost

Cost
S.
Item Total estimate/year
N
% Value
Building &
1 18,100,000 2 362,000
constructions
Machinery and
2 10,576,270 5 528,814
equipment
3 Vehicles 2,200,000 3 66,000
4 Other equipment 212,000 5 10,600
Total 31,088,270 967,414

e) Insurance:

It is assumed to be 1% of fixed investment cost (31,088,270) = birr 310,882.7

f) Miscellaneous Expense:

It includes cost of land rent, legal and license fees, and other miscellaneous
expenses. It is estimated at birr 150,000

g) Summary of project SERVIES production costs

Table 8.2.g: Summary of project SERVIES production costs in birr

S/
Cost Item Annual cost in birr
N
Direct cost of 1 2 3 4 5
A production
Cost of goods and
1 19,864,265 26,311,464 32,838,388 36,299,765 39,929,742
services sold
sub-total 19,864,265 26,311,464 32,838,388 36,299,765 39,929,742
B Operating
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expenses:-
1 Salary expense 1,290,300 1,354,815 1,422,556 1,493,684 1,568,368
2 Utilities 1,566,316 1,644,632 1,726,863 1,813,207 1,903,867
Repair and 967,414 1,015,785 1,066,574 1,119,903 1,175,898
3 Maintenance
cost
4 Property insurance 310,882.70 310,882.70 310,882.70 310,882.70 310,882.70
Uniform, sanitary
5 material, stationary 195000 204,750 214,988 225,737 237,024
& related expenses
Advertisement & 500000
6 sales promotion 525,000 551,250 578,813 607,753

Miscellaneous
7 150,000 157,500 165,375 173,644 182,326
expense
Sub total 4,979,913 5,213,364 5,458,488 5,715,869 5,986,118
Grand Total 24,844,178 31,524,828 38,296,876 42,015,634 45,915,860

h) Initial Working capital

Table 8.2.h: Determination of initial working capital

S/N Cost Item Annual cost Period Initial W.C

A Direct cost of production 1 2 3
1 Cost of goods and services sold 19,864,265 4 Month 6,621,422
sub-total 19,864,265 6,621,422
B Operating expenses:-
1 Salary expense 1,290,300 4 Month 430,100
2 Utilities 1,566,316 4 Month 522,105
3 Repair and Maintenance cost 967,414 6 Month 483,707
4 Property insurance 310,882.70 1 year 310,883
5 Uniform, sanitary material, stationary & related 195000 6 Month 97,500
expenses
6 Advertisement & sales promotion 500000 3 Month 125,000
7 Miscellaneous expense 150,000 1 Month 12,500
Sub total 4,979,913 1,981,795
Grand Total 24,844,178 8,603,217

i) Project capital and financing

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The total investment capital of the project is estimated at birr 39,691,487 of

which birr 31,088,270 (78%) is for fixed investment items while the remaining
balance of birr 8,603,217 (22%) will be initial working capital. Out of the total
investment cost of the project 30% equivalent to br. 11,907,446financed by the
owners’ equity and the rest 70% equivalent to birr27,784,041 financed through
bank loan.

8.3 Loan repayment schedule

The total investment capital of the project is estimated at birr 39,691,487. Out
of the total investment cost of the project 30% equivalent to br. 11,907,446
financed by the owners’ equity and the rest 70% equivalent to birr 27,784,041
financed through bank loan.

At this stage if the project is to be supported by loan from government

agencies or local banks the recovery to the loan is assured by observing the
financial evolution criteria and the social and economic feasibility the loan will
repaid with interest rate of 10% in ten years.

Table 8.3: Repayment of Bank lone

Yea principal Total annual Remaining

r payment Interest(10%) payment in birr Balance in birr
0 0 0 0 27,784,041
1 2778404 2778404.10 5556808.20 25005636.9
2 2778404 2500563.69 5278967.79 22227232.8
3 2778404 2222723.28 5001127.38 19448828.7
4 2778404 1944882.87 4723286.97 16670424.6
5 2778404 1667042.46 4445446.56 13892020.5
6 2778404 1389202.05 4167606.15 11113616.4

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7 2778404 1111361.64 3889765.74 8335212.3

8 2778404 833521.23 3611925.33 5556808.2
9 2778404 555680.82 3334084.92 2778404.1
10 2778404 277840.41 3056244.51 0

8.4 Depreciation of fixed investment items:

The straight line method has been used to depreciate/amortize all fixed items
of the project. The deprecation cost estimated birr 2 ,445,027.

Table 23: fixed asset depreciation schedule.

[Link] [Link]
s/n Description Total cost
e e
Building &
1 18,100,000 5% 905,000
constructions
Machinery and
2 10,576,270 10% 1,057,627
equipment
3 Vehicles 2,200,000 20% 440,000
4 Other equipment 212,000 20% 42,400
31,088,270 2,445,027
Total

8.5 Revenue projection/SALES FORCAST

As indicated at previous sections the company will compare its prices with the
other competitors in the competitive market as a the bases of the revenue
estimate the prevailing average price and the revenue from sales of services is
estimated as follows the sales are forecast based on the following

Assumptions:

 The price for each services and items are increased by 10% in each year
of the forecasted period
 The capacity utilization of the will be 60% 80% and 100% for the first to
third years of the forecasted period
 The average daily sales is taken in to account for the forecast of the
total sales of beverage foods and other services based on the beginning
year daily average sales assumptions to the total forecasted years.

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 Cost of beverages and foods inputs were 30%of the revenue

 Cost of other service and inputs were 20% of the total sales
 Utilities cleaning agent and others were forecasted as 5% of the total
sales
 The bar restaurant and café has assumed that at full capacity 200
persons per day will have got the service and assumed that each will
expected 350 birr
 [Link] by Conference & Special Program 3per day will have got
the service and assumed that each will expected 25,000 birr

Table 8.5: SELES FORCAST

S.N Unit
Service Description Year-1 Year-2 Year-3 Year-4 Year-5
O measure
No. days Bed rooms
day 274 310 347 365 365
Occupied/annum
Unit price of 43 bed
1 birr 14000 15400 16940 18634 20497.4
rooms/day
Sub total Revenue from
birr 3836000 4774000 5878180 6801410 7481551
sales of bed room service
No. persons used Restaurant
person 13688 15513 17338 18250 18250
and café/Annum
Unit price of Restaurant &
2 birr 250 275 302.5 332.75 366.025
Café/person
Sub Total Revenue from 6679956.2
birr 3,422,000 4266075 5244745 6072687.5
sales of Bar, Restaurant & 5

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Café service
Fuel, oil and lubricant
liter 901961 1,093,286 1,242,370 1,242,370 1,242,370
available for sale per annum
Unit price of Fuel, oil and
3 lubricant available for sale per birr 22 24.2 26.62 29.282 32.2102
annum/liter
Sub Total Revenue from
19,843,14 26,457,52 33,071,88 36,379,07 40,016,98
sales of Fuel, oil and birr
2 1 9 8 6
lubricant
Other Services available for
No. 273.75 310.25 346.8 365 365
sale/annum
4 Average Unit price/Service birr 6000 6600 7260 7986 8784.6
Sub Total Revenue from
birr 1,642,500 2,047,650 2,517,768 2,914,890 3,206,379
sales of Other Service
Total birr 32,849,892 42,664,371 53,006,095 59,455,291 65,400,820

5 FINANCIAL EVALUATION
A. PROFITABILITY

Based on the projected profit and loss statement the project will generate a
profit throughout its operation life annual net profit will grow from Birr
4,892,481to Birr 11,927,953during the life of the project.

Table 9.A: The project projected profit/loss statement in birr

Description Project year

1 2 3 4 5
Gross sales 32,849,892 42,664,371 53,006,095 59,455,291 65,400,820

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Promoter:-Hamdala Jemal
 Project Proposal for International 4 Star Lodge
2020

Less production costs

24,844,178 31,524,828 38,296,876 42,015,634 45,915,860
Gross income 8,005,714 11,139,543 14,709,219 17,439,657 19,484,960
Less: Depreciation 2,445,027 2,445,027 2,445,027 2,445,027 2,445,027

Profit before tax 5,560,687 8,694,516 12,264,192 14,994,630 17,039,933

Less: income tax 1668206.1 2608354.8 3679257.6 4498389 5111979.9
(30%)
Net profit 3,892,481 6,086,161 8,584,934 10,496,241 11,927,953

B. Ratios

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

C. PAY BACK PERIOD

The pay –back period also called pay off period is defined as the period
required for recovering the original investment outlay through the accumulated
bet cash flows earned by the project accordingly based on the projected cash
flaw if estimated that project initial investment will be fully recovered with in
4.2 consecutive years.

D. INTERNAL RATE OF RETURN AND NET PERSENT VALUE

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Promoter:-Hamdala Jemal
 Project Proposal for International 4 Star Lodge
2020

Based on the cash flow statement the calculated IRR of the project is 14.42%
and the bet present

Valve at 10% discount rate is birring 10.25 Million.

E. Project Cash flow

Table 9.E: The project Cash flow in birr

Project year
Description
0 1 2 3 4 5
Cash inflow
39,691,48
 Equity 0 0 0 0 0
7
 Net profit 0 3,892,481 6,086,161 8,584,934 10,496,241 11,927,953

0 2,445,027 2,445,027 2,445,027 2,445,027 2,445,027
depreciation
39,691,48
Total inflow 6,337,508 8,531,188 11,029,961 12,941,268 14,372,980
7
Cash out flow
31,088,27
 fixed cost 0 0 0 0 0
0
 initial W.C. 8,603,217 0 0 0 0 0
39,691,48
Total pout flow 0 0 0 0 0
7
Net inflow 0 6,337,508 8,531,188 11,029,961 12,941,268 14,372,980
Cumulative 6,337,50 14,868,69 25,898,65 38,839,92 53,212,90
0
balance 8 6 7 5 5

6 PROJECT IMPLEMENTETION SCHEDULE

The successful implementation of any project proposal depends on the

planning of core activities to be performed during the project phase and
meeting the desired result by close follow up And due attention,

Therefore, considering that the basic assumption will be realized, the pre
operation activities to be undertaken with their corresponding time table set
for the implementation of the project are presented here under.

Table 10:- Project implementation schedule

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Promoter:-Hamdala Jemal
 Project Proposal for International 4 Star Lodge
2020

No Item Description Month (starts from September 2019)

1 2 3 4 8 10 12 14 16 20 22 24

1 Applying & getting, land, the

bank loan

2 Contacting fur & Equip

suppliers

3 Construction of civil works

4 Plant & machinery erection

5 Man power requirement

6 Purchase of fixed assets &

raw for the service materials

7 Final preparation

7 ENVIRONMENT IMPACT ASSESSMENT

Most projects have environmental impact that creates serious or irreparable

pollution and damages that results the close down of the project. The proposal
presented for this project has given due emphasis and consideration for the
environmental impact the project might encounter. This is done by
implementing comprehensive and exhaustive criterion during technology and
machinery selection that could overcome the problem. Therefore, the potential
risk related with the negative environmental impacts of this project are
seriously considered and it is risk free.

8 CONCLUSIONS AND RECOMMENDATION

A. CONCLUSION
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Promoter:-Hamdala Jemal
 Project Proposal for International 4 Star Lodge
2020

Therefore this project feasibility study is compiled and submitted based on the
facts and figures by summarizing the need and the call by the existing
potential market to create opportunity for a better supply of the envisaged
product moreover depending on the acceptability and achievement of the
product in it first phase additional marketable related product may be
introduced in the future.

B. RECOMMENDATIONS

The profitability of this business is out of question as clearly demonstrated by

the financial projection, which projections are actually very conservative with
regard to the assumptions on operating cost of sales and selling price this was
done deliberately so that the bank can see the profitability of the operation
even under the mosey conservations. The project is found to be profitable
throughout its life with sufficing capacity to repay the requested bank loan
(principal plus interest) and operational costs the financial analysis shown that
this project is financial viable bankable and worth investing and therefore
implementation of the project entails no financial risk

1. EXECUTIVE SUMMERY-------------------------------------------------------------------------------------------------1

2. INTRODUCTION -----------------------------------------------------------------------------------------------------------2

3. BRIEF DESCRIPTION THE PROJECT ------------------------------------------------------------------------------3

4. MARKET STUDY ---------------------------------------------------------------------------------------------------------14

5. CAPACITY AND SERVICE PROGRAMME -----------------------------------------------------------------------25

6. TECNOLOGY --------------------------------------------------------------------------------------------------------------25

7. ORGANIZATON AND MAN POWER ------------------------------------------------------------------------------ 27

8. FINANCIAL STUDY ----------------------------------------------------------------------------------------------------- 30

9. FINANCIAL EVALUATION ------------------------------------------------------------------------------------------- 40

10. PROJECT IMPLMENTATIO SCHEDULE ------------------------------------------------------------------------ 42

11. ENVIRONMENT IMPACT ASSESSMENT ---------------------------------------------------

43

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Promoter:-Hamdala Jemal
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2020

12. CONCLUSION AND RECOMMEDATION ------------------------------------------------------------------------ 43

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Promoter:-Hamdala Jemal