Tourism Collapse Triggers Foreclosure Threats in Sacred Town

Jul 27 , 2025. By BEZAWIT HULUAGER ( FORTUNE STAFF WRITER )

Once a crown jewel of the country's tourism circuit and a beacon for international pilgrims, Lalibela now finds its lifeline severed. Its hospitality industry, the backbone of the local economy, is buckling under a weighty mix of militarised conflicts, pandemic-induced stagnation, and mounting debt obligations.

Almost half of the 37 hotels affiliated with the town's Hotel Association have received foreclosure notices, giving them 30 days to settle their ballooning debts or forfeit their properties to creditors, chief among them the state-owned Commercial Bank of Ethiopia (CBE).

“Tourism is the area’s bloodline, and it has dried up,” lamented Yohannes Assefa, president of the Lalibela Hotels Association.

Lalibela’s financial unravelling traces back to 2016, when dozens of hotels took on loans totalling 160 million Br, an optimistic bet on a thriving tourist economy. But what followed were years of systemic shocks, including COVID-19, which shuttered the global travel industry, and militarised conflict in the Amhara Regional State turned the town into a battlefield, derailing any hopes of recovery.

Now, seven years later, that initial debt has metastasised to 250 million Br, despite repeated extensions and grace periods. Twelve properties are on the verge of foreclosure. Owners say they are ensnared in a credit trap, interest accrued during deferrals added to their burdens, even as their revenue streams vanished.

"They gave us 30 days to pay millions with zero guests in sight," said Kassahun Tadele, manager at Mountain View Hotel.

Before the pandemic, Lalibela thrived, welcoming over 50,000 international tourists annually. Between October and February, peak tourist season, the town saw up to 100 visitors daily. Tourism accounted for approximately 70pc to 80pc of the local economy, generating annual revenue of around 5.4 billion Br, according to data from the Amhara Regional State Tourism Bureau.

"They gave us 30 days to pay millions with zero guests in sight." Kassahun Tadele Manager at Mountain View Hotel, Lalibela

However, the COVID-19 pandemic, followed by prolonged regional conflicts, devastated local businesses, leaving hotels unable to repay their loans. Four hotels were destroyed because of the conflict, while widespread theft stripped other hotel owners of their valuable assets.

Abebe Demsash, owner of the 30-room Zan Siyum Hotel and a board member of the Lalibela Hotels Association, borrowed 14 million Br seven years ago, a debt now inflated to over 22 million Br. His hotel operations came to a standstill during the conflict, and he lost his car to thieves who left it ransacked some 80Km away.

"I've not been working since," Abebe recounted.

He had to lay off all his employees except security personnel.

Despite multiple loan extensions and an operational loan of 370,000 Br, many hoteliers find themselves barely holding on. Interest accumulated during loan extensions has only increased their burdens, pushing them further into debt.

"Some have left the country," said Yohannes, describing the dire conditions faced by many hotel owners. "Others are at the mercy of other people.'

Habtamu Kindu, owner of Lalibela Lodge, is among those facing imminent foreclosure. His property, valued at 200 million Br, received a foreclosure notice despite debts amounting to only 10pc of its total worth. Habtamu initially borrowed 13.5 million Br six years ago, had paid much of it off, but still owed 7.5 million Br before the pandemic halted repayments. His debt has since risen sharply to 18 million Br.

Habtamu's lodge, featuring seven buildings including a lobby, restaurant, and bar, was looted during the conflict, resulting in losses of around 20 million Br, including a vehicle and generator. To make ends meet, he shifted to running a modest tour and travel operation, managing to retain 14 employees. Of his 35 employees, he had to lay off 19.

"The money is nothing if the previous situation doesn't return to normal," he added. "We need breathing space."

Bank officials are sympathetic yet cautious. A senior executive at CBE, speaking anonymously, acknowledged the complexity of the situation.

"There are reputational stakes for the Bank, the ability to recover money in the short term, and the need for regulatory approval," he told Fortune. "What we lend is depositors' money. We must maintain the quality of our assets."

Regulators say any loan restructuring will heavily depend on banks' willingness. The National Bank of Ethiopia (NBE) is expected to support proposed interest modifications but will not expedite the process. Banking regulations, specifically the National Bank's 6th Replacement Directive on Asset Classification and Provisioning, place strict limitations on reclassifying NPLs. Loans unpaid for 90 days are classified as non-performing loans (NPLs) and cannot regain "performing" status without clear financial improvement, and restructuring options are limited.

Endalkachew Tsegaye, a senior corporate finance advisor at BDO Ethiopia, a consultancy firm, stated the importance of careful consideration in loan restructuring.

"Forbearance should never be automatic or indiscriminate," he cautioned. "Repeated restructuring without clear evidence of viability risks undermines credit discipline and masks real exposure."

He urged loan committees to base their decisions on realistic and forward-looking projections, rather than hopeful assessments, and to comply with international financial reporting standards. He also advised hotels to diversify beyond tourism, noting that Lalibela's recovery has lagged behind the broader national revival.

Federal officials assert that tourism nationwide is showing signs of recovery. According to the Ministry of Tourism, the country has welcomed around one million tourists over the past nine months, representing a nine percent increase from the previous year. However, their claim that the economy generates approximately 3.5 billion dollars is challenged by operators in the hospitality industry, who attribute empty tables in restaurants to a decline in traveller numbers.

For a town like Lalibela, the drop is real, with only a handful of visitors.

Hotel owners, through their Association, have now petitioned the federal government for support. During last week's Ethiopian Finance Forum, they submitted a formal request to Eyob Tekalign (PhD), the state minister for Finance, who received their plea with assurances of reconsideration.

PUBLISHED ON Jul 27,2025 [ VOL 26 , NO 1317]