Tourist Flows and Its Determinants in Ethiopia Part 1

Ethiopia has immense tourism potential owing to its natural, historical and cultural
endowments. The reasons behind the sector’s poor performance have not been studied in a
comprehensive way, however. This paper, using an array of methodologies including simple
historical explanation of tourist flow time series data, panel data analysis of tourist flow
determinants and destination competitiveness analysis, attempts to fill this gap.
The review
of history illuminates the detrimental effects of civil wars, famine and nationalization of
private companies on the performance of the Ethiopian tourism sector. The panel data
analysis takes into account the positive and significant impact of previous year’s tourist
arrivals, the Ethiopia’s infrastructural development as well as the per capita GDP and the
total population of the sending countries. The analysis shows that the price differential
between Ethiopia and Kenya and distance negatively affect tourist flows in Ethiopia. In
addition, the dummy for Africa is significant and positive. Finally, the destination
competitiveness analysis shows that Ethiopia is better rated in inherited endowments than in
created and supporting resources (like tourism infrastructure). Yet almost every rating
exhibits considerable improvement after tourists visited the country, suggesting that the
famine-related bad image of the country still hinders Ethiopia’s tourism sector.

Tourism is one of the largest and rapidly growing industries in the world. According to the
World Tourism Organization (UNWTO, 2007), there were 846 million international tourist
arrivals in 2006 only, which showed an increase of 5.4% over the previous year. However,
the developed world is taking the lion's share of the market with Europe, North America and
East Asia claiming 76.3% the international tourists in the same year.
Though noted for its tourism potential, Africa's underdeveloped tourism sector is attracting
only 4.81% (40.7 million) of the total tourist arrivals in the world. What makes the problem
severe is the fact that a considerable proportion of this number is taken by South Africa and
Northern African countries (ibid).
The situation in Ethiopia is even worse. On the one hand, its tourism potential is diversified:
natural attractions that include some of the highest and lowest places in Africa along with
immense wild life including some endemic ones; a very old and well preserved historical
traditions with fascinating stelae, churches and castles to witness that, an attractive cultural
diversity of about 80 nations and nationalities; and various ceremonies and rituals of the
Ethiopian Orthodox Church which open a window on the authentic world of the Old
Testament (www.tourismethiopia.org). On the other hand, it is one of the poorly performing
countries in terms of tourist arrivals. For example, the total number of tourist arrivals in
Ethiopia in 2006 is 290,000 which is more than five times smaller than the number in
neighboring Kenya, 1,644,000 (WDI,2010). Even then, it is a major source of foreign
exchange earnings in the country claiming an average of 23.34% of the total export earnings
from 1995 to 2007 (WDI, 2010).
To develop the tourism potential and let it contribute in the effort to reduce poverty and
underdevelopment in Ethiopia, finding the main determinants of tourist flows in the country is
of great necessity. Yet, except as part of a panel of Sub-Saharan African countries (Naudé
and Saayman ,2004), as to my knowledge, organized and methodologically sound studies
to identify major determinants of tourist flows in Ethiopia are inexistent. It is now evident that
it is difficult to generalize global or regional findings to a single country as the country may
have a completely different institutional set up from the rest of the world. Hence, this work
fills this gap by using a triangulation of methodologies to sort out the major determinants of
tourist flow in Ethiopia.
This paper attempts to identify the major determinants of tourist flows in Ethiopia first by a
simple historical explanation of the time series of tourist flows and tourism receipt in Ethiopia
for the period 1963-2005. Then, systems Generalized Method of Moments (GMM) estimator
of Blundell and Bond (1998) is employed on a panel data of tourist arrivals in Ethiopia
originating from 40 counties from 1998 to 2004 to identify main macro economic
determinants of tourist flows in Ethiopia. Lastly, the so called destination competitiveness
analysis of Omerzel (2006) based on the views of tourists and tour operators is applied to
assess the degree of attractiveness of Ethiopia as a tourist destination relative to other
African countries.