This report presents key findings from the second Tourism and Hospitality (T/H) Enterprise Survey of Employment and Skills in Lao PDR (ESS) undertaken as part of the Skills for Tourism Project (LAO/029)1. The ESS provides a representative picture of the sector across 17 provinces and Vientiane Capital. The scope of the survey covered all registered establishments, employing three or more persons, in the hotel, resort, guesthouse, restaurant, entertainment, travel services, attractions, and handicrafts subsectors. Temporarily closed establishments were also considered in-scope for the survey. Many businesses were found to have permanently closed during the survey fieldwork, consequently the estimated total number of in-scope T/H establishments was revised down from 5,300 to 4,854. A total of 1,323 establishments responded to the survey. The high consent (96.4%) and response rates (66.5%) achieved ensure a high degree of reliance can be placed on the survey findings.
The survey was conducted in the wake of the global coronavirus pandemic (COVID-19),
which saw economic growth in Lao PDR contract in 2020 by 0.5% – marking its first negative economic growth since 1986. The services sector has been hit hardest due to lockdown measures and the decline in travel and tourism, while remittances, a vital source of income for many families, have dried up. Economic growth is forecast to rebound to 4.0% in 2021, suggesting a slow recovery, as the pandemic outbreak is expected to subside slowly.
The ESS findings confirm the devastating effects of COVID-19 on the T/H sector employment in Lao PDR. After peaking at an estimated 59,000 persons employed in January 2020 – following an all-time high number of international visitor arrivals in 2019 – employment fell to just 8,200 persons in T/H establishments who continued to operate in April 2020 following the COVID-19 lockdown and travel bans. Some 27,400 persons remained marginally attached / ‘employed’ in temporarily closed establishments.
Total employment in T/H currently stands at 28,400 persons in businesses open and trading (a further, 12,200 were reported as marginally attached / ‘employed in temporarily closed businesses’). The 95% confidence interval puts this estimate in a range from 24,400 to 32,400 persons employed. This represents a contraction of 51.9% since the high recorded in January 2020. Almost one-third of all T/H enterprises were temporarily closed at the time of the survey in May and June 2021. On average, T/H establishments employ 8.4 staff (including those fully employed and marginally attached), compared to 15 staff in 2018, reflecting the downsizing associated with the COVID-19 contraction.
T/H businesses with a stronger dependency on international tourists as a share of their customer base, have been hit hardest by the COVID-19 pandemic and are more likely to be temporarily closed. Over half (56%) of staff employed in temporarily closed businesses are in the North region which includes Luang Prabang – the preferred holiday destination for most international tourists.
Executive Summary Many T/H workers are at risk of falling into poverty. In all cases of temporary closure, firms report that they continue to employ many of their staff during these periods, often rostered on a part-time basis to undertake cleaning or maintenance. However, as these workers are not actively engaged in any productive capacity, nor being adequately remunerated, their situation is precarious, leaving many at risk of falling into poverty. More than half of all reported employment in resorts, entertainment, and attractions was in temporarily closed businesses.
Business turnover contracted even further than employment, with business revenues falling by an average 64.6% in 2020 compared to 2019, highlighting the precarious nature of employment with revenues insufficient to pay salaries and wages.
To mitigate the impacts of COVID-19 on business operations, employers have responded by cutting staff numbers (62%), wages (36%), and/or reduced trading hours (37%). In response to ongoing public safety concerns, over 94% of T/H operators have implemented a range of safety measures, including wearing of masks and personal protective equipment (PPE) by staff (86%), installing sanitisers (82%) and social distancing (76%). The main reason for not implementing safety measures was that the business was temporarily closed.
Business confidence is low and given the uncertainty surrounding the duration of the global recession and prolonged travel bans, three-in-five T/H operators are unsure about the ongoing viability of their business. Around one-in-five businesses expect to return to their pre-pandemic capacity in the next 12 months while only 6% of businesses expected to expand their operations. Just under 2% have assessed their business operation as ‘not viable’ and plan to close permanently within 3 to 6 months.
Due to the downturn in tourism activity, there is considerable excess capacity in the market with almost 80% of all T/H businesses currently operating below 50% capacity in year- average terms. Occupancy rates for accommodation establishments, have halved (from 54% in 2019) to just 28% in 2020. Across all sectors, capacity utilisation has deteriorated considerably since the 2018 ESS with the proportion of businesses assessed as either ‘at risk’ or ‘unsustainable’ increasing from 17% to 54%.
Low vacancy rates and limited planned recruitment activity further demonstrate the depressed state of the T/H sector in Lao PDR and a general lack of business confidence over the near-term. Only 8% of businesses have current vacancies on their books, and only one-in-ten has plans to recruit new staff over the next 12 months. Hard-to-fill jobs are not widespread. Of 63 firms who reported hard-to-fill vacancies only 11 adopted more formal recruitment approaches such as newspaper advertising or registering the vacancy with a recruitment agency. Most firms citing hard-to-fill vacancies continue to rely on informal methods such as word-of-mouth or walk-in job applicants to fill their vacancies. At the current levels of staff turnover and planned recruitment, it could take over five years for the total T/H employment to return to pre-COVID-19 levels.
Notwithstanding the current turmoil and disruption to T/H services caused by the global pandemic, the T/H sector in Lao PDR has undergone significant skill deepening since the first ESS in 2018.
Encouraging trends in T/H graduate supply data demonstrate significantly improved alignment between T/H training providers and the labour demands of employers in the industry. Consequently, the industry has recorded a 20%-point increase in the qualification profile, with 51% of employed workers holding formal qualifications (up from 30% in 2018). Of these, 6.7% hold T/H related qualifications (compared to just 3.1% in 2018). The illiteracy rate has fallen by 7% points from 49.3% to 42% over the same period.
Despite the severe contraction caused by the global pandemic tourism is seen as one of the sectors with significant long-term potential to create income for people from disadvantaged backgrounds in Lao PDR. New sets of skills, such as infection prevention and control, as well as health and safety practices, will be required to safely operate in the post COVID-19 workplace.
Projections of T/H employment demand to 2026 in this report have been modelled under a range of scenarios reflecting the underlying uncertainty going forward. The most likely scenario incorporates the impact of the current economic contraction and consensus forecasts of future economic growth. Under this scenario aggregate T/H employment is forecast to rebound to pre-COVID levels of 57,000 by 2023 – during which time many displaced workers could be re-employed – reaching 67,600 persons by 2026. Implicit in this forecast is a return to ‘normal’ international travel levels within the timeframe of 2021-22 with the growth trajectory moderating from 2023. To achieve this, a concerted and effective effort will be required to ensure a sustained rate of recovery in visitor arrivals and spending across the economy.
With ongoing uncertainty surrounding global travel, as precautionary behaviour and travel continue to negatively affect international tourism related services and transportation, promoting and developing domestic tourism could be a key component of the T/H sector medium term recovery strategy for Lao PDR.
Increased investment in vocational training, together with ongoing collaboration between training providers, employers and government, will ensure further improvement in the alignment of supply and demand for skilled T/H workers in Lao PDR, underpinning international competitiveness and an ability to attract a more lucrative visitor portfolio.
