In a bid to rein in spending and free up cash for infrastructure, the Addis Ababa City Administration has barred its offices—including the 11 sub-city administrations—from holding meetings, trainings, evaluations, and workshops in hotels.
The directive, issued in July in a letter signed by Abdulkadir Redwan, head of the city’s Finance Bureau and deputy mayor, instructs municipal offices to “be frugal” and stop purchasing hotel services for routine government business. The aim, officials say, is to redirect public money from routine expenses to capital projects such as schools, health centers, housing and infrastructure.
The policy comes as the city prepares for a record 350 billion birr budget for the 2025/26 fiscal year. Of that, 246 billion birr—or 71 percent—is earmarked for capital projects such as schools, health centers, housing, and infrastructure. Recurrent spending will account for 91 billion birr. City officials say more than 98 percent of projected revenue, about 343 billion birr, will be raised locally—51 percent more than last year’s target.
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The shift reflects a new financial reality. With federal subsidies cut, Abdulkadir says Addis Ababa must prioritize “vital projects” over administrative comforts.
The austerity push goes beyond hotel bans. The cost-saving push also calls for refurbishing used computers and furniture, repairing broken equipment rather than discarding it, and adopting “smart office” practices to reduce paper use through digitization.
“We believe public funds should be used wisely,” said Yoseph Tale, deputy head of the Finance Bureau. “And renting hotel venues for routine government meetings does not align with our financial priorities.”
The Bureau has not yet quantified how much will be saved under the new rules. “We don’t currently have an estimate or a confirmed figure,” Yoseph said, adding that a comprehensive study is planned. “To determine the precise costs incurred from hotel spending, we need to collect data from over 70 central institutions, 11 sub-cities, and 119 woredas.”
City budgets have been climbing sharply. For 2024/25, Addis Ababa approved 230.4 billion birr—a 42 percent increase from the previous year—with nearly two-thirds allocated to capital expenditure.
City officials also argue the ban is practical: many government agencies already own large halls built with taxpayer money. Yet, many offices still rent hotel conference rooms. “Any government entity in Addis Ababa can use the meeting spaces of other city institutions instead of booking hotels,” he said.
The decision, however, is not universally welcomed. Hotel owners warn of a sudden loss of business at a time when the sector is still recovering from the pandemic.
“Ministerial and government meetings have long been held across hotels. If that stops, the impact will be immediate—especially for hotels with large meeting halls,” said Aster Solomon, president of the Addis Ababa Hotel Owners Association and owner of Mosaic Hotel. She argued the loss of government clients would ripple through the industry and reduce the city’s tax revenues from hospitality.
For now, City Hall is standing firm. With federal subsidies gone and major infrastructure projects underway, they insist frugality is not optional but essential. “We are reducing recurrent expenses by redirecting funds to long-term and impactful projects,” Yoseph said. “That’s our priority.”
Hotel owners say the policy threatens not just their bottom line but also their employees’ pay. “The decision will also negatively affect hotel staff income since they get the service charge,” said Aster.
She noted that conferences and trainings organized by NGOs, government agencies and the private sector have long kept hotels afloat during periods of low tourist arrivals. The recent suspension of the US Agency for International Development (USAID), which had funded many NGO events, has already dented bookings. “The city’s decision will worsen the strain,” she warned.
“The ban could lead to job cuts unless room occupancy rises sharply,” Aster added. “Some hotels could lose up to 40 percent of their income, and the government itself would collect less revenue from VAT, profit tax and employment taxes.”
At the same time, she pointed out, international conference tourism—known as MICE (Meetings, Incentives, Conferences and Exhibitions)—has been expanding in Addis Ababa thanks to its role as a diplomatic hub. “MICE is the most profitable platform for hotels, and expanding in that direction could cushion the blow,” she said.
City officials are unconvinced. “Yes, hotels are among the city’s largest taxpayers,” acknowledged Yoseph Tale, the Finance Bureau’s deputy head. “But that doesn’t justify government overspending. Besides, hotels do not rely solely on domestic government conferences to stay afloat.”
Hotel managers expect a harsher reality. “Even a cancellation of a single conference from the Mayor’s Office affects our revenue,” said the deputy manager of a private hotel in Addis Ababa. His property, which boasts more than 10 meeting halls with capacity for 10,000 participants, had enjoyed 98 percent occupancy thanks to international conferences—but he conceded the ban could wipe out much of the income from local events.
A room-division director at another private hotel, who asked not to be named, forecast significant losses from meetings and related services. “Our biggest business is hosting conferences along with banquets—food and refreshment packages. Without these, the impact will be huge and direct,” he said.
He described the sudden quiet in what had been a bustling conference hall. “Just weeks ago, civil servants filled this space for back-to-back workshops. Now the chairs are stacked, the projector screen rolled up, and the room feels unsettlingly empty.”
Getahun Alemu, president of the Ethiopian Tourism and Hotel Market Association, urged hotels to diversify their services to attract private enterprises and foreign nationals. “The decision will not restrict conference tourism in the country,” he argued.
Addis Ababa’s move is not without precedent. Similar measures have been tried elsewhere, with mixed results.
In Indonesia, a nationwide ban on local governments holding meetings in hotels—introduced as part of an austerity drive—was scrapped in June 2025 after mounting pressure from the hospitality industry. The restriction had deepened a financial crisis for hotels and related businesses.
Kenya, by contrast, imposed a similar ban in 2022. Despite widespread criticism, it has remained in place as part of broader cost-cutting measures.
Some in Ethiopia’s hotel sector see a contradiction. “The city administration aims to cut costs while simultaneously reducing tax revenue,” said a senior manager of a private hotel.
Banquets, he pointed out, are among the industry’s most lucrative services. Minimum prices start at about 4,000 birr per guest, average around 5,000 birr and can reach as high as 7,000 birr. Hotels with large meeting halls—which rely heavily on such events—are expected to lose millions of birr in income.
Fitih Woldesenbet, president of the Ethiopian Hotel and Tourism Employers Federation, argued that the decision undermines a sector the government itself has long promoted as a pillar of the economy. “Government and international organizations are the sector’s main customers,” he said. “If they retreat, hotels will suffer, jobs will be cut and tax revenues will decline.”
Most small hotels employ between 20 and 50 workers, jobs now at risk, he added. The exodus of NGOs has already hurt the industry. “With NGOs leaving, the government remains the primary customer. This decision will make the situation worse,” Fitih said.
While international conference tourism is expanding, he cautioned, it cannot yet sustain the industry. “We support cost-saving measures, but not at the expense of crippling the hotel sector before alternatives are fully developed,” he said.
Before the Covid-19 pandemic, Ethiopia’s hospitality sector was booming. According to the UN Economic Commission for Africa, the industry contributed nearly USD 4.8 billion to the GDP, with international tourist arrivals topping 1.4 million—a decade-long peak. The pandemic, however, delivered a crushing blow: arrivals in 2020 fell by more than 84 percent, to just 228,200 visitors.
Even so, growth projections remain strong. According to Marketing Insights data from Statista, Ethiopia’s hotel market is expected to reach USD 1.06 billion in revenue by 2025 and grow at an annual rate of 7.5 percent over the next five years, reaching a projected USD 1.53 billion by 2030. User numbers are forecast to exceed 18 million by 2030, with penetration rising from 9.6 percent in 2025 to 12.3 percent by the end of the decade.
