Hilton Addis, Ethiopia’s first, and for a long time only, international hotel franchise, will be up for privatisation in no less than three years when the existing management contract comes to an end, sources disclosed to Fortune.
A decision made by the Prime Minister’s Office last week has been communicated to the board of directors of the hotel, chaired by Yinager Dessie [PhD] to prepare the property for auction, the sources disclosed.
Yinager, chief of the National Planning Commission, under the rank of a minister, declined to comment. The decision to sell the property followed a meeting between the board and an executive of Hilton Worldwide, based in South Africa, held on Tuesday, March 2, 2017 sources disclosed.
Hilton Worldwide has a 50-year management contract with the Ethiopian government to run the Hilton Addis property, first opened in 1969 by Emperor Haile Selassie. The contract, to be renewed every decade, gives Hilton Worldwide a 20pc share of revenues, while also restricting it from operating another property in the country under the Hilton brand.
Hilton is a global hospitality company with close to 17 brands, including Hilton Hotels & Resorts, which operates in Ethiopia. Designed to resemble the ancient Lalibela Church, Hilton Addis has remained an iconic property to the nation and a landmark to Addis Abeba, until the entrance to the scene of Sheraton Addis, in February 1998.
Lying on a vast tract of land estimated to cover over 60,000sqm plot, the hotel has a 12-storey main building – alongside a Garden Wing extension added to it in 1987 -making it the property with the largest number of rooms, over 400, in the capital.
However, the property has been in need of major renovations, including to the electromechanical workings of the hotel, and the interior of the rooms. About 10 years ago, experts from Hilton Worldwide estimated the renovation costs and proposed close to 280 million dollars, although it has not received government approval yet.
Despite its prime location on Menelik II Avenue, lush parking lots, swimming pool with a natural spring water, and gym frequented by many in the city, authorities regulating the hospitality industry have downgraded the property to three stars.
“The renovations were the major reason for the hotel being downgraded, among other factors,” said Fisseha Asres, who has worked in different management positions at Hilton. “Some service problems caused by management and the rush made by the assessors in grading the hotel were some of the other reasons. I still believe that Hilton Addis is better than some hotels that are graded as four stars” he added.
“I am surprised Hilton Worldwide did not downgrade it,” said a hotel expert with a vast experience in the hotel industry.
Other developers in the country have been eyeing management contracts with Hilton Worldwide, such as Samuel Tafesse’s Sunshine Group for its property in Hawassa, and Tsemex Hotels & Business Plc of Rezene Ayalew, for a property in Addis Abeba.
Currently, Sunshine is working on the design work of Hilton Hawassa after it signed a management deal with Hilton Worldwide two years ago. Sunshine and Hilton Worldwide signed an agreement to open Hilton Hawassa, subsequent to Hilton Worldwide getting government permission to use the brand outside of Addis in Hawassa and Bahir Dar.
Tsemex received a loan amounting close to 10 million dollars from the World Bank’s International Finance Corporation[IFC] to jointly develop a property in Addis with Intercontinental Hotels Group [IHG]. However, a dispute with a local hotel bearing the name Crown has led the company into bitter legal battle, which is now under review by a constitutional inquiry board at the House of Federation, people familiar with the case told Fortune.
There have been possible talks between Hilton Worldwide and Tsemex. The company appealed to the Prime Minister Office for Hilton to be released of its contractual commitments not to operate other properties, sources disclosed. However, Rezene strongly denied, when approached by Fortune, both the existence of talks with Hilton Worldwide and appealing to the PM Office.
The Prime Minister’s Office, which had declined a request from the board of directors a few years ago to consider the property for privatisation, opted to put the property on the auction bloc this time around, these sources disclosed. The executive who visited Addis last week has expressed to Ethiopian authorities Hilton Worldwide’s interest to be the main bidder when the property is put up for sale in few years, sources disclosed.
[By Fasika Tadesse, Addis Ababa, Ethiopia]