Labour Challenges Threaten Growth Prospects of the Accommodation Industry
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1 TOURISM SECTOR Labour Challenges Threaten Growth Prospects of the Accommodation Industry In a difficult year for the Canadian economy, tourism was one of the few sectors that provided a positive contribution to economic growth in Looking forward, it is expected that the tourism sector will be counted on to boost economic prospects for many regions of the country, particularly those struggling with economic uncertainty due to market fluctuations in resource prices. Tourism HR Canada s Labour Supply and Demand Study The 2015 update of Tourism HR Canada s Tourism Labour Supply and Demand report, Bottom Line: Labour Challenges Threaten Tourism s Growth, suggests that demand for tourism-related goods and services in Canada has the potential to expand more than 50 per cent in the next 20 years from $187 billion in 2015 to $287 billion in However, the report implies that this growth may not be realized if labour challenges are not addressed. The accommodation industry is a key part of Canada s tourism sector. It has been estimated that hotels, motels, and resorts alone contribute over $16.2 billion in GDP to the Canadian economy on an annual basis. The industry also supports more than $7.6 billion in taxes for all levels of government. The accommodation industry provides employment and career opportunities in a wide variety of settings that range from hotels, motels, and resorts, to campgrounds and cabins. The information contained in this brochure provides some of the key takeaways from Tourism HR Canada s study particularly as it relates to the accommodation industry. While most businesses have been able to manage labour challenges with relatively modest implications, the difficulty of attracting and retaining employees over the long term is projected to result in missed opportunities for investment throughout the tourism sector, and a growing inability to meet potential demand. What Employers Say Overall, 66 per cent of accommodation businesses surveyed identified labour issues as a significant impediment currently impacting business operations. As a business impediment, labour issues ranked higher than increasing operational costs and weakness in the local or provincial economy. Outlook for Accommodation Services Similar to overall tourism-related goods and services, the outlook for accommodation services is quite strong, with revenues projected to grow steadily over the next 20 years. In particular, real spending on accommodation services in Canada by domestic and foreign visitors has the potential to grow from $11.6 billion in 2015 to $16.5 billion in 2035 an increase of 1 Inflation adjusted 2010 dollars. 1
2 43 per cent. As well, real spending on accommodation services from non-tourism sources, such as local residents, is projected to increase from $1.2 billion in 2015 to $2.4 billion in 2035 an increase of 104 per cent. (See Chart 1.) Chart 1 Demand for Accommodation Services (2010 $ billions) Chart 2 Labour Demand and Supply for Accommodation Jobs 300, ,000 Demand for labour Supply of labour Non tourism demand Foreign tourism demand Domestic tourism demand 200, , $ Billions The strong growth in demand for accommodation services is projected to stimulate solid growth in the demand for labour by businesses operating in the industry as well as potential new entrants. It is projected that the number of jobs required to meet those needs would grow from 199,000 jobs in 2015 to more than 265,000 jobs in 2035 an increase of 33 per cent. (See Chart 2.) What the Long-Term Projections Suggest Potential growth in accommodation services demand may not be met if labour challenges in the accommodation industry are not addressed. In fact, without significant changes to the number of available workers, wages, or the appeal of working in the most difficult to fill and retain occupations, the accommodation industry could experience a shortfall in the supply of labour equivalent to 30,000 jobs by It is projected that the discrepancy between labour demand and supply will progressively worsen over time, reflecting the cumulative effect of missed opportunities and unfulfilled demand, and significantly constrain the industry s growth potential. The challenges associated with labour shortfalls such as the inability to attract, retain, and promote an adequate level of qualified employees are factors that could cost accommodation businesses millions of dollars. (See Chart 3.) Chart 3 Potential Labour Shortfall in the Accommodation Industry 35,000 30,000 25,000 20,000 15,000 10,000 5, ,658 15, ,777 25,002 29,906 On a province-by-province basis, the accommodation industry is projected to face the biggest shortfall in Ontario, where supply will fall short of demand by almost 9,600 jobs by The dramatic shortfall in labour projected for Ontario is followed by shortfalls in British Columbia (more than 6,500 jobs) and Quebec (approximately 4,900 jobs). (See Chart 4.) 2
3 Chart 4 Potential Labour Shortfall in the Accommodation Industry in 2035, by Province BC 6,531 AB 2,988 SK MN ON QC NB PE NS NL 1,647 1,514 9,577 4, ,000 4,000 6,000 8,000 10,000 12,000 Perceptions of Tourism Businesses To provide some further context into how tourism businesses perceive labour challenges, an online survey was an integral part of Tourism HR Canada s long-term labour supply and demand study. This online survey established where labour challenges currently rank among a wide range of potential business impediments and pinpointed the most pressing causes and outcomes associated with labour challenges. Within the accommodation industry, the occupation projected to experience the largest labour shortfall over the longer term is hotel front desk clerks. That occupation is followed by light duty cleaners; janitors; caretakers and building superintendents; program leaders and instructors in recreation, sport, and fitness; and food counter attendants and kitchen helpers. (See Chart 5.) Chart 5 Potential Labour Shortfall in the Accommodation Industry in 2035, by Occupation Food counter attendants and kitchen helpers Program leaders and instructors in recreation, sport, and fitness Janitors, caretakers and building superintendents Light duty cleaners 2,930 3,210 4,275 5,070 The results of the online survey confirm that labour issues are the most widely recognized impediment faced by accommodation businesses today. In fact, 66 per cent of the respondents indicated that labour issues currently represent a significant obstacle for business. This was followed by nearly 60 per cent of respondents identifying increasing operational costs as a significant barrier facing accommodation businesses today. Pressed for more details regarding the source of labour issues, many businesses said they faced a shortage of both skilled and unskilled labour in their local area and difficulties finding qualified and reliable employees. Respondents also pinned many recruitment difficulties on the seasonal nature of business. The online survey also found that, among accommodation businesses currently facing labour challenges, over 20 per cent were impacted by changes in the Temporary Foreign Worker (TFW) program. In fact, 88 per cent of accommodation businesses that employed temporary foreign workers reported losing employees because of new restrictions in the TFW program. While changes to the program appeared to have the most impact among properties operating in Western Canada, accommodation businesses in Central and Eastern Canada were also affected. Hotel front desk clerks 6, ,000 4,000 6,000 8,000 3
4 The Challenge of Raising Wages To help attract and retain qualified candidates, a simple solution might seem to be that businesses struggling with labour challenges should increase real wages. To various degrees, businesses felt this option would only provide some relief in addressing labour challenges. In fact, many businesses believed that to have a material impact on reducing labour challenges, wages would have to significantly increase. Aside from greatly constraining profit margins, businesses thought that the higher wages would increase prices, which would ultimately reduce demand and limit the industry s potential for growth. Considering the chain of events, fewer than half of respondents from the accommodation industry felt that increasing wages would be somewhat or very effective in reducing labour challenges. Most respondents thought that labour challenges would continue or increase in the years ahead. This is largely due to the solid performance many businesses experienced in 2015 and a strong growth outlook going forward. Indeed, 62 per cent of accommodation properties felt that business revenues increased during 2015, compared with In fact, many respondents experienced growth across all source markets including locals and visitors from other parts of Canada, the U.S., and overseas markets. Overall, two out of three respondents in the accommodation industry expect labour issues to continue to represent a significant business impediment over the next three to five years. Contributing Factors to Growing Labour Shortfalls There are many factors that are expected to contribute to the growing labour shortfall in the accommodation industry. One of the most significant contributors to the escalated difficulty in recruiting and retaining workers will be tied to demographic changes. For example, the baby boomer cohort represents a significant potential source for tourism demand over the medium term. However, boomers departure from the labour force will also exacerbate the shortfall of labour, particularly in managerial positions and among housekeepers. Meanwhile, declining birth rates will further constrain the growth of young entrants into the labour force a vital age cohort for staffing many tourism-related occupations. It is also expected that the strong growth in demand for seasonal operations will increase the challenges associated with hiring and retaining workers for accommodation businesses. The accommodation industry has seasonal variability in its employment needs that align with the number of international visitors entering Canada. In 2015, the accommodation industries unemployment rate shifted from 10.9 per cent in January to 4.4 per cent in July and August, 2 well below Canada s average unemployment rate. In rural and resort areas, limited transportation and employee housing options also constrain the number and quality of candidates available to work. As a result, labour shortfalls will continue to induce additional overtime, stress, and pressure among the existing workforce. To mitigate some of these drawbacks, significant progress is needed in finding new sources of labour and enhancing the appeal of tourism occupations. Perceptions of Tourism as a Place of Employment To provide some perspective on potential root causes of labour challenges in the tourism sector, an online survey was conducted to establish the perceptions (and potential misconceptions) that Canadians have toward working in the sector. The results of the survey provided some interesting insights, particularly the responses by age and previous work experience. Overall, the majority of respondents had a positive perception of working in tourism, and most would recommend working in the sector to friends and relatives. However, the survey did highlight that a high share of respondents perceived that the sector offered low wages and benefits, as well as work hours during evenings, weekends, and holidays. It was also thought that many occupations would not provide a career in the sector or elsewhere. On a positive note, among respondents who had previously worked in the sector, many believed the skills and experiences acquired were beneficial to their career. In fact, respondents frequently mentioned that the soft skills gained through customer service, communication, and dealing with people were particularly helpful in succeeding in many different work environments. The results of the survey also confirmed that while younger respondents tended to view many tourism occupations as temporary jobs, those with previous experience were more likely to see occupations as stepping stones to other opportunities. 2 Adapted from Statistics Canada, Labour Force Survey, This does not constitute an endorsement by Statistics Canada of this product. 4
5 What Can Be Done? Shortfalls in labour are presently making their effects felt in several parts of Canada. Many hotels are currently unable to operate at full capacity and entrepreneurs have already chosen to forgo building new capacity due to worker shortages. The supply of labour must increase if the industry is to meet its full growth potential. Several strategies were identified by participants in the Tourism Labour Supply and Demand study that could address labour challenges for tourism businesses. Many of these strategies have also been voiced by various tourism industry associations, including the Hotel Association of Canada (HAC). Industry-Led Initiatives While the following proposed strategies should be initiated by stakeholders working in or representing the accommodation industry, they are likely to be more effective if industry representatives, tourism businesses, and government can collaborate. These strategies are: Enhance the Image and Appeal of Tourism Jobs Showcasing the professional benefits of a tourism career could be achieved through presentation in schools, the development of co-op programs, or by strengthening the industry s presence at job fairs. Providing (or making employees aware of) advancement opportunities would make a career in tourism much more attractive. Create Partnerships to Share Workers Developing partnerships among tourism businesses both within the accommodation industry and with other industries could extend the employment period or even increase the likelihood to provide year-round employment for potential job seekers. The relatively short period of employment currently provided is a challenge for many employers, particularly those in resorts or remote parts of the province. Increase the Productivity of the Labour Force For certain occupations, productivity enhancements could be achieved by increasing the level of formal or informal training required or provided. If businesses are successful in adjusting the roles and responsibilities of occupations to accommodate the enhanced productivity of their workforce, it is likely that businesses will be able to offer higher wages. This should help reduce the difficulties associated with recruiting and retention of hard to fill positions. Tap Into New/Underutilized Sources of Labour Supply While younger workers tend to be one of the most relied-upon demographic segments to fill tourism occupations, businesses should also consider new and potentially underrepresented sources of labour to fill those positions where recruitment or retention are difficult. Some of the most promising sources include older workers, people with disabilities, new immigrants to Canada, Aboriginals, and workers laid off from other sectors. Government-Led Initiatives Aside from strategies that can be led by tourism businesses or organizations representing tourism businesses, government also has a key role in implementing or redesigning policies to mitigate future labour shortages for the tourism sector. The following are priorities identified over the short term: Develop a New or Redesigned Foreign Worker Program Geared Toward the Accommodation Sector While current immigration programs tend to favour highly educated immigrants, the tourism sector would benefit from programs open to workers who could fill occupations that have lower entry to practice requirements. This program helps resorts and remote parts of the country meet their labour needs. To enhance the applicability of this program for accommodation businesses and employees, it is suggested that flexibility be increased to allow seasonal placements and allow employees to work with multiple businesses. Develop More International Work Exchange Programs The labour pool available to the accommodation industry can be increased through international work exchange programs. A recent agreement between the Government of the Solomon Islands and the Saskatchewan Hotel and Hospitality Association (SHHA) is one example that allows recent graduates of the Hospitality Program to gain valuable work experience in a temporary capacity. A larger number of spots for International Experience Canada applicants would also significantly increase the labour pool. 5
6 Reduce the Clawbacks of Employment Insurance and Old Age Security to Boost Labour Force Participation Businesses frequently mention that the clawbacks associated with EI or OAS act as a disincentive to potential candidates who would like part-time or seasonal work. These workers would like to supplement their weekly incomes. However, program clawbacks on incomes and/or benefits make labour force participation unfeasible. Communicate Existing Programs More Effectively Small and medium-sized businesses frequently find it difficult to access and apply for government programs. Businesses feel there is a role for government to play in centralizing access to these programs, and offering help in the application process. In fact, many businesses feel that government resources should move away from marketing toward resources that will reduce the challenge associated with operating a tourism business. QUICK TAKEAWAYS Accommodation Industry The demand for accommodation services is projected to increase dramatically over time, and support over 265,000 full-year jobs by The hotel industry currently pays out $8.5 million in salaries and wages, and supports $7.6 billion in tax revenues across all three levels of government (2015). Ontario currently supports the largest number of full-year equivalent jobs in the accommodation industry at 84,084 (2015), but the province is also expected to face the greatest shortfall in labour over the longer term with nearly 9,600 unfilled jobs by QUICK TAKEAWAYS Tourism Sector Canada s tourism sector currently supports employment for 1.7 million Canadians and has the potential to significantly increase its economic footprint in the coming years. Labour challenges are projected to worsen and result in a potential labour shortage for businesses equivalent to nearly 240,000 full-year jobs in While labour shortfalls are projected to be most numerous for businesses operating in Ontario, Quebec, British Columbia, and Alberta they may be potentially most acute in parts of Atlantic Canada. Among Canada s major metropolitan centres, Toronto is expected to experience the strongest overall growth in labour demand over the long term as well as the largest potential labour shortfall. While raising wages in the most difficult to fill and retain occupations would eliminate labour shortfalls (by reducing demand), it would also result in constraining revenues for the sector equivalent to $19.9 billion by Consequently, governments and industry have an incentive to find more effective solutions that not only limit the shortfalls in labour but also the impact on overall revenues, profits, and tax contributions. Funded by the Government of Canada s Sectoral Initiatives Program. The opinions and interpretations in this publication are those of the author and do not necessarily reflect those of the Government of Canada.
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