Addis Abeba's Budget Discipline Collides with Hotel Industry Survival

Aug 17 , 2025. By NAHOM AYELE ( FORTUNE STAFF WRITER )

The Administration of Mayor Adanech Abiebie has imposed a sweeping ban on the use of hotel venues for government meetings, workshops, trainings, and evaluations, in an aggressive bid to slash bureaucratic spending and reallocate funds toward capital investments.

The edict, city officials argue, is designed to tighten fiscal discipline as Addis Abeba shoulders the weight of its record-high 350 billion Br budget for the 2025/26 fiscal year, the first financed entirely from internal revenue without federal subsidies. City administrators, such as Yoseph Tale, deputy head of the City Finance Bureau, frame the directive as a matter of necessity.

“We can’t afford wasteful spending when our priority is investment,” he told Fortune. "If their meeting rooms or cafeterias are not in good condition, they are encouraged to renovate them."

The Addis Abeba City Administration plans to source 343 billion Br, over 98pc, of this year’s budget internally, a 51pc increase from the previous fiscal target. Capital spending has ballooned by 68pc to over 246 billion Br, revealing the administration’s development-heavy agenda. But, this fiscal shift is sparking tremors through the city’s hospitality industry, exposing trade-offs between expenditure control and economic vitality.

The ban ends a longstanding practice of city bureaus and districts booking hotels for official functions, something now portrayed as a manifestation of public sector excess. Under the new policy, government entities are required to make use of in-house facilities, public halls, and office cafeterias. Renovations to these spaces, officials claim, will prove cheaper than hotel fees in the long run.

The City’s Youth & Sports Bureau, one of the agencies under the city administration, has welcomed the change.

“We already have alternative halls available,” said Mehariw Temesgen, public relations director, citing venues such as Adwa Museum and Africa Convention Centre for larger gatherings.

These state-owned assets are being repurposed to offset reliance on private hotels. However, not all bureaus are equally equipped. The Women, Children, & Social Affairs Bureau, located on Queen Elisabeth II St., in the Qebena area, whose typical training sessions draw upwards of 200 participants, is struggling. According to Zenash Ketema, the deputy head of the Bureau, the facility only holds 20.

"With this restriction, we cannot train such a large group at once in our office," Zenash told Fortune. "Since hotels are no longer an option, we'll have to depend on borrowing conference rooms from other bureaus, which will make our work more challenging. We'll be requesting exemptions for key events to avoid bottlenecks in operations."

The private hospitality industry, already battered by declining demand from donors such as USAID as well as NGOs and the tourism slowdown, views the move as a direct blow.

Gadisa Girma, managing director of Haile Resorts & Hotels, called the ban overzealous.

“It’s reasonable to save public funds, but not by completely prohibiting hotels,” he said, advocating for a calibrated policy that allows large-scale trainings and conferences to continue in hotels. “The city might save in one pocket but lose even more in another through reduced tax revenue.”

Many establishments rely on public-sector events as a steady income stream, particularly during low tourism seasons. Some employ as many as 600 workers, with government bookings underpinning not only direct jobs, but also supply chains and auxiliary services.

“The government is the single largest client for hotels,” said Fitteh Woldesenbet (PhD), president of the Ethiopian Hotel & Tourism Employers Federation, representing over 2220 hotels. “If it stops booking events, what will hotels do?”

According to Fitteh, removing this source of revenue would not only hurt hotels but also undermine government tax collection.

Mustofa Abdella, CEO of Zafer Plus Consultancy, sees the policy as potentially self-defeating. He warned that with donor-funded programs shrinking, private demand tepid, and now government bookings halted, the city Administration's decision will compress profit margins, intensify competition for corporate clients, and potentially lead to job cuts and business closures.

“This is a perfect storm,” he told Fortune.

Mustofa urged the Administration to implement restrictions on the number of events city bureaus gradually hold in hotels or, at the very least, allow discounted, essential-use exceptions.

“Without such measures,” he cautioned, “the city risks eroding its own tax base and discouraging investment.”

The city’s ambition is unmistakable. Recurrent expenditures for 2025/26 are set at 103 billion Br, up 23pc year-on-year, from which 12 billion Br is reserved for emergencies. The Administration is betting that curtailing operational luxuries, such as hotel meetings, will free up funds for transformative infrastructure.

But critics, including economists, warn of unintended consequences.

“When businesses are frustrated and uncertain, they lose motivation,” said Atlaw Alemu (PhD), an economics lecturer at Addis Abeba University.

According to him, budget targets cannot be met at the expense of private sector viability, especially in employment-rich sectors like hospitality. Atlaw called for a rebalancing of priorities, urging the city officials to invest not simply in roads and parks but also in healthcare, education, and cost-of-living relief.

“People are struggling with food, not fountains,” he said. "Creating sustainable jobs will expand the city’s revenue base more reliably than austerity alone."

PUBLISHED ON Aug 17,2025 [ VOL 26 , NO 1320]