Circular Economy Adoption in Addis Ababa’s Hospitality Sector: Hierarchical Regression Analysis of Supply Chain Transparency and Tourist Willingness-to-Pay Price Premiums
This study demonstrates that in Addis Ababa's hospitality sector, both circular economy adoption and supply chain transparency significantly increase tourists' willingness to pay price premiums, with transparency acting as a crucial amplifier that strengthens the financial value of sustainable practices.
Original paper licensed under CC BY 4.0 (https://creativecommons.org/licenses/by/4.0/). This is an AI-generated explanation of the paper below. It is not written or endorsed by the authors. For technical accuracy, refer to the original paper. Read full disclaimer
Imagine a world where the hotels we stay in do not just consume resources but actively work to restore them. This is the promise of the circular economy, a system designed to break the old habit of taking materials, making products, and then throwing them away. Instead, it seeks to keep resources in use for as long as possible, turning waste into new value and regenerating natural systems. For the hospitality industry, which uses vast amounts of water, energy, and food, this shift is not just an environmental ideal but a practical necessity. Yet, a critical question remains for hotel owners in developing nations: if a hotel makes these difficult changes to become more sustainable, will guests actually notice, and will they be willing to pay extra for it? The answer often depends on trust. In a market where claims of "green" practices can be hard to verify, the way a hotel communicates its efforts becomes just as important as the efforts themselves. This is where the concept of supply chain transparency comes in—the honest, open sharing of information about where materials come from, how they are made, and what happens to them after use.
A recent study conducted in Addis Ababa, the capital of Ethiopia, set out to understand exactly how these factors work together. Researchers wanted to know if tourists would pay more to stay at hotels that adopt circular economy practices, and whether being open about their supply chains would make those guests more likely to pay. The team surveyed 381 international travelers staying at a wide variety of hotels, from large international chains to smaller local guesthouses. They asked these guests about their willingness to pay a higher price for a room if the hotel was known for reducing waste, reusing water, and sourcing materials sustainably. Crucially, they also asked how much the guests valued seeing clear, verifiable information about these practices. The study found that the relationship between sustainable practices and what guests are willing to pay is not a simple straight line; it is a partnership between doing the work and showing the proof.
The results were clear and encouraging for hotel managers in emerging markets. The study showed that when a hotel adopts circular economy practices, guests are indeed willing to pay a higher price. This effect was strong on its own, but it became even more powerful when the hotel was transparent about its supply chain. The researchers found that transparency acts like a multiplier. When a hotel not only implements sustainable systems but also clearly explains where its food comes from, how its energy is generated, and how it handles waste, the guests' willingness to pay a premium increases significantly. In fact, the data suggested that a hotel with high levels of sustainable practices but low transparency would generate a much smaller financial return than a hotel with the same practices that also shared detailed information with its guests. The difference was substantial: a hotel that was both highly sustainable and highly transparent could see a threefold increase in the price premium guests were willing to pay compared to one that was sustainable but kept its methods hidden.
This finding challenges the idea that simply "being green" is enough to win over customers. The study suggests that in places where formal environmental certifications are rare or unknown to the public, the hotel itself must become the source of truth. By openly sharing information about their suppliers, labor standards, and environmental impact, hotels can build the trust necessary for guests to feel confident in paying extra. The research also highlighted that this willingness to pay was not limited to a specific type of traveler; it was influenced by factors like income and previous experience with green hotels, but the core driver remained the combination of action and openness. The study concludes that for hotels in Addis Ababa and similar markets, the path to financial success through sustainability lies in a dual strategy: invest in the circular systems that protect resources, and then have the courage to show the world exactly how those systems work. This approach turns sustainability from a hidden cost into a visible value that guests are eager to support.
Drowning in papers in your field?
Get daily digests of the most novel papers matching your research keywords — with technical summaries, in your language.