Come excited, leave disappointed
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The issue is “labour turnover problem” in the hotel industry. It is a common but “untold” problem in the Sri Lankan tourism industry. To my knowledge, it has hardly been a topic of interest, compared to so much talk and efforts about tourism promotion and expansion.
Many would think that the tourism industry is an attractive place for work for the rural youth. Even the rural youth find it an opportunity to escape from their harsh rural agricultural background. And they also think that it is an attractive opportunity to work in the lucrative tourism industry and in a star-grade hotel. But all such dreams begin to fade away little by little, when they are in. The result is a high labour turnover.
I thought of discussing the issue for a couple of reasons. The issue needs to be addressed so that it would directly benefit the tourism industry and improve the status of the employees of the industry. Ultimately it contributes to the development effort of the country as well.
High labour turnover
The term “labour turnover” refers to the rate at which employees leave a company or an industry. Usually, it is measured by the number of employees leaving during a year as a percentage of the total number of employees in the company of the industry.
If the labour turnover is unusually high, there is a problem that needs to be explored and rectified. It also creates secondary problems for the company or the industry incurring additional costs and the loss of competitiveness.
Most of the tourist hotels in Sri Lanka would agree that more than half of their non-executive employees, perhaps, as high as 60 per cent of the total number of employees, leave the job every year. There is no argument that this is a very high labour turnover!
As a result, recruitment and training of new employees is a constant struggle for tourist hotels. This is not only an additional cost to the industry, but also an additional effort to maintain the quality standards. Ultimately, the issue hinders on the product development within the industry, affecting the productivity as well as the country’s economy.
Highly sensitive industry
Over the past 10 years, the number of tourist arrivals to Sri Lanka has increased over four times. For many years, the industry was in depressed conditions due to internal security conditions. Then the annual number of tourist arrivals often remained around half a million a year. And the tourists from the Western countries were also replaced by the tourists from the neighbouring countries.
Now the country is hosting more than two million tourists a year. Compared to the popular tourist destinations in the world, it is still not a big number. One important characteristic is that, unlike the improvements in the business environment, tourism industry does not require complex policy reforms. When there is peace, the world’s outbound tourism is growing and tourists are coming in increasing numbers.
The problem is that the tourism industry is highly sensitive to both global and internal security conditions. Sri Lanka has already experienced the impact of both. Last year the Easter Sunday attack resulted in an immediate slump in the industry. When the country is prepared to just get away from that issue, this year China’s coronavirus issue is beginning to take its toll.
Even though we need to promote the tourism industry, it is not the scapegoat for the country’s development effort. It cannot replace the need for far-reaching and comprehensive policy reforms. Sustainable achievement of economic development depends on a more diversified industry and service sector development.
File picture of a training session for chefs at the Hotel School.
As we envisaged the potential tourism expansion in Sri Lanka, however, we began planning to accommodate it. Tourist arrivals increased from 448,000 in 2009 to 2.3 million in 2018. Earnings increased from US$ 349 million to $4.4 billion during the same period. The number of hotel rooms increased from less than 15,000 to nearly 25,000, while room occupancy rate also increased from less than 48 per cent to over 70 per cent. Together with all the expansion, direct employment too increased from 52,000 to 169,000.
Aspirations and the reality
This industry became a lucrative expansionary industry creating demand for labour, but the irony is that there is high labour turnover in the industry. Why? According to Gihan’s research findings, let’s look at some reasons for the high labour turnover in the tourism industry:
The main one is the lower reward to work, which is directly connected to the deep-rooted problems of the cost structure of the tourism industry. What you spend to stay a day in a higher star-grade hotel is, most probably higher than the monthly salary of a non-executive employee of that hotel.
I asked Gihan as to why Sri Lankan hotels are known to be expensive compared to the hotels in other tourist destinations in the region. Then where does that money go? It is because our costs are high and, difficult to cut down. Food and drinks, energy and utilities, and maintenance costs account for about half of the total costs, while all these costs are expensive in Sri Lanka. Most probably, salaries and wages which account for about 20 per cent of the total cost is, perhaps, the only variable that is flexible.
In fact, even much more important than the monthly wage, is the fact that there is hardly a progressive career path available for the non-executive employees in the hotel industry. The young boys and girls who are recruited for front office or room service or restaurant begin to realise that for many of them their career path does not lead anywhere beyond that place. And it is also linked to their stagnant monthly salary as well. This is frustrating to many of the non-executive employees who begin to realise the problem when they are working in the industry. A related issue is the lack of opportunities for education and training as well as the improvement in skills.
Another factor is the social stigma that has been attributed to the job in the hotel industry, which is again related to the lower incomes from the job as well. Another issue is the difficulty to balance personal or family life with work, due to long working hours.
Disappointment over the job
Gihan revealed his findings from the surveys he has carried out. According to his survey, only five per cent of the current non-executive employees in 15 star-grade hotels in the South have chosen to stay in the job. While the balance 95 per cent has decided to leave the job, it is 10 per cent immediately, 30 per cent within the next six months and, 40 per cent within the next year.
Among the most important reasons to quit indicate “disappointment” over the current job rather than the availability of better opportunities elsewhere. The lack of career development opportunities account for 40 per cent of the employees who choose to quit, difficulty to balance between personal life and work for 35 per cent and, the inadequate reward for 25 per cent.
Among the series of solutions, one of the most important would be the designing of career paths and establishing professional norms and standards of the employees in the tourism industry. This needs to be done at national level, while in all of the remedies, the government and the industry both will have to stand as the main stakeholders. An indirect, but significant issue is related to the high costs of the tourism industry that needs to be reviewed and solved by the government. !
(The writer is a Professor of Economics at the University of Colombo and can be reached at sirimal@econ.cmb.ac.lk).