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22 January 2007
Minister of Trade and Industry, Girma Birru, is expected to decide on the fate of Addis Abeba's Ghion Hotel; a chain of 11 hotels built by Emperor Haile Sellase 57 years ago to host African leaders at the Organization of African Union (OAU) summits.
Ethiopian Airlines has shown a strong interest in buying this hotel, camped on a 25,000sqm plot at the heart of Addis Abeba, with a desire to keep its passengers coming to Addis for conferences and the anticipated thousands to come for the Ethiopian millennium.
Ethiopian has long desired to own a hotel in Addis Abeba, due to limited accommodations and questionable standards of many of the hotels in the capital. Its efforts to jointly own a five-star hotel, with the French hotel chain Accor, had failed last year following an alleged disagreement over share distribution between the management company and the Airline.
It was after this attempt that the Airline made its formal request on April 11, 2006, to the Privatization and Public Enterprises Supervisory Agency (PPESA), a federal agency in charge of transferring state owned companies to private owners.
Authorities at the Agency argue that they are only tasked with transferring publicly held companies to private hands and do not transfer them from state owned firms to another state hand and this hinders Ethiopian's desire to acquire the hotel once decorated as the "Grand Palace Hotel of East Africa." However, should the government decide, there would not be any problem in selling Ghion off to the national carrier, according to a senior official at the Agency.
The Ministry can override the power of the Agency; thus Beyene G. Meskel, director general of the Agency, wrote a letter to the Ministry on November 12, 2006, asking the government for a policy review on the issue. According to reliable sources, the Minister had assigned experts last week to examine the case, and expected to decide whether or not there should be an exception to PPESA's policies.
If granted permission, the Agency hopes to enter into negotiations with Ethiopian's managers on the worth of the hotel.
"We are hoping to enter into negotiations based on the amount they may offer first," Girma Wake, CEO of the Ethiopian Airlines, told Fortune.
Officials at the Agency were reluctant to disclose how much they would have offered for the hotel. Nevertheless, the original offer is likely to include the hotel's total assets and all liabilities to third parties, said officials at the PPESA. A valuation conducted in 2004 shows that Ghion Hotel has a total value of 312 million Br in total asset. But, valuing the four-star Ghion Hotel, which owns 11 chains along Ethiopia's historical route of north and west, is found difficult. Ethiopian Airlines, however, is only interested in buying the hotel in Addis Abeba on Ras Desta Damtew Street, which has 191 rooms, an Olympic size swimming pool, a staff of 376, and owns the most spacious green space (often used for hosting weddings).
"The best course of action to save this Hotel is to hand it over to another operator," said a senior official at PPESA as he argued that the Hotel profits over the past years is disappointing for a hotel of its standard. According to their financial statement, Ghion recorded over 10.6 million Birr in net profits in 2004.
By Issayas Mekuria - Fortune Staff Writer