Ethiopia’s capital Addis Ababa has a significant undersupply of good quality hotels.

This according to David Harper, head of property services at consultancy Hotel Partners Africa, who says the “country is massively undersupplied with brand hotels when compared with almost all other parts of the continent. This suggests there is untouched opportunity in the industry.”

A lack of funding for new developments is a key challenge facing the industry, as well as investment risk related to the repatriation of profits.

Harper’s comments were published in the Hospitality Report Ethiopia, produced by online hotel booking company Jovago.

Addis Ababa currently only has a handful of international hotel chains, including Sheraton, Hilton and Radisson Blu. However, Best Western International, InterContinental Hotels Group and Marriott International have all announced plans for new properties. And in September, Hilton Worldwide said it will manage a new hotel on the banks of Lake Awassa in the south of the country.

Based on the number of searches on Jovago’s platform, demand for hotels in Ethiopia is the greatest in Addis Ababa (45% of searches), with other popular cities being Hawassa (9%), Bahir Dar (8%), Lalibela (6%) and Gondar (6%).

According to Jovago, the majority of searches are for three-star hotels (33%), followed by four-star (28.2%), two-star (25.3%), five-star (9.4%) and one-star (4.1%) properties.

Hotel operators could benefit from Ethiopia’s growing tourism sector, rising business travel and Addis Ababa’s position as the continent’s diplomatic capital.

The country is also already relatively well connected in terms of air linkages, with state-owned Ethiopian Airways serving 92 international and 53 African destinations with over 200 daily flights.

Attracting more visitors to Ethiopia

Despite having numerous world heritage sites, Ethiopia has not taken full advantage of its tourism potential. According to the report, the country lured 750,000 visitors in 2014.

Fitsum Gezahegn, president of the Ethiopian Tour Operators Association, says the country still suffers from perceptions of being a place of hunger and war. Other challenges include underdeveloped infrastructure and a lack of branding.

However, according to Gezahegn, the government is addressing many of these issues. “The government is now showing remarkable and effective support for the sector. It has made the sector one of its priorities and has been financing 40% of the tourism promotion costs. The new tourism institutions chaired by Prime Minister Hailemariam Desalegn are set to transform the sector.”

The area of business tourism is also potentially lucrative. “When it comes to business, Ethiopia is progressively opening up more and more to international investments which will surely translate into numerous business trips and growing revenue for the hotel industry and to the overall economy,” explains Estelle Verdier, managing director at Jovago for East and Southern Africa.

As the headquarters of the African Union, Addis Ababa is said to be home to the world’s third largest diplomatic community, after New York and Geneva. The city already hosts numerous international conferences, increasing demand for branded hotels.