CTRHC: Act now — the labour gap is coming back

Economist Jim Frank

MONTREAL—The revenue potential for businesses serving tourists, including those in the food and beverage and accommodation sectors, is going to keep growing over the next 15 years.

However, the gap between labour supply and demand is also going to grow to the point where the shortage of workers will be a serious impediment, holding back billions of dollars in potential revenue.

There are things that can be done to alleviate the future labour crunch but the parties involved must start now.

This is the message that came out from the Canadian Tourism Human Resource Council’s annual Tourism HR Forum, held in November at the Delta Centre-Ville hotel in Montreal.

The conference attracted 250 registrants connected to the industry, including hotel and restaurant executives, academics, consultants and union executives.

While the recession in 2009 may have alleviated the labour shortage that had been a major headache for restaurants, hotels and other businesses, the pressure will return in the next couple of years as the economy recovers, delegates were told.

“This is still a tsunami that is building out in the ocean,” said Randy Williams, president and CEO of the Tourism Industry Association of Canada. He added that the “tidal wave” will hit in the next two or three years.

Economist Jim Frank, a former vice-president with the Conference Board of Canada, said structural changes would have to be made gradually each year.

He referred to two studies done by the CTHRC and the Conference Board in the past couple of years that look at the long-term prospects for the Canadian tourism industry and the coming labour shortages, referring to them as “path breaking” and “very detailed.”

The studies, which cover the period 2006 to 2025, show what could be lost if the necessary changes aren’t made, he said.

They give historical data and forecasts for 37 different occupations in the tourism sector, looking at labour supply and demand nationally, by province and in 16 metropolitan areas.

They are called The Future of Canada’s Tourism Sector: Long on Prospects, Short on People, and The Future of Canada’s Tourism Sector: Labour Shortages to Re-emerge as Economy Recovers. A third update is scheduled to be completed at the end of March, 2010.

The numbers

The second study’s projections show the demand for tourism goods and services rising potentially from $152 billion in 2006 to $237 billion in 2025 (adjusted for inflation, based on 2002 dollars). Spending growth is expected to be greatest from 2010 to 2015.

The numbers show that in 2006, food counter attendants, kitchen helpers and people in related occupations made up 13.6 per cent of the 1.66 million people employed in the tourism industry in Canada. Food and beverage servers accounted for 10.7 per cent, cooks 8.5 per cent, and restaurant and foodservice managers, 5.5 per cent. Bartenders made up 2.2 per cent and chefs, 1.9 per cent.

Accommodation service managers comprised 1.4 per cent and hotel front desk clerks, 1.3 per cent.

From 2006 to 2010, the potential labour supply is expected to grow at an average annual compound rate of 1.5 per cent, then slow down to 0.9 per cent in the next five years, and decelerate to 0.5 per cent from 2015 to 2025.

In the 2015–2020 period there will be no growth in the 25–34 age group, the one that accounts for the highest number of people working in the industry, Conference Board associate director Greg Hermus told conference delegates.

The study’s authors see falling fertility rates, longer life spans and the aging of the baby boom generation contributing to the aging of the Canadian population and the slow down in growth of the age sector of the population most employed in tourism. Although immigration rates are rising, Canada’s current focus on highly skilled immigrants will not help fill the gap in labour supply.

In 2010, the potential labour shortage in the tourism sector is forecast to be more than 13,000 full-year jobs, and by 2025 the figure could rise to nearly 257,000 jobs. The largest shortage by far would be in food and beverage service.

By 2025 Ontario’s tourism industry labour shortage could be nearly 98,000 full-year jobs, British Columbia’s could be more than 44,000 and Alberta’s more than 30,000. In Quebec, the shortage could be more than 55,000.
Labour problems were the most frequently cited business impediments across the tourism industry as a whole, at 65 per cent.

A large number of operators acknowledged that staffing shortages had likely resulted in lost business, and some also believed that poor customer service had hurt their reputations and possibly driven away potential customers.

What needs to be done

If tourism operators only raise wages, this could increase the potential labour supply by 50,200 jobs in 2025, according to the CTHRC and Conference Board. However, they say that the rest of the labour shortage would be eliminated by a reduction in consumer demand—increased wages would lead to higher prices which would lead to lost business.

In this scenario, there would be a 9.5 per cent reduction in potential business, or an estimated loss of $22.2 billion in potential tourism spending.

A better way to avoid the coming labour crunch is to raise productivity and increase the labour supply, say the report’s authors.

Productivity can be increased through:

• Good human resource practices that create and retain more productive employees;
• Technological innovations that reduce the demand for labour;
• More refinements to goods and services offered to tourists that reduce the need for labour without sacrificing quality (such as self-guided tours, suggested the Conference Board’s Hermus).

The labour supply can be increased by:

• Enhancing the image of tourism sector jobs;
• Streamlining temporary foreign worker programs and allowing more lower-skilled immigrants into Canada;
• Increasing incentives that attract groups not well represented in the labour pool, such as aboriginals, recent immigrants, people with disabilities and retirees.

This can be done by increasing workplace accessibility, educating employers about this untapped labour pool, providing perks such as flexible hours, and changing Employment Insurance and Canada Pension Plan regulations to allow the underemployed and retirees to go to work without losing income and health benefits.

International work exchange programs and employers sharing workers would also help, said Hermus.

At a breakout session hosted by the Toronto-based Humber School of Hospitality, Recreation and Tourism, an instructor from Holland College in Charlottetown, PEI commented that the greatest barrier to entry and retention of staff is wages. The college’s students spend $20,000 to become chefs and then are only offered $12 to $14 an hour—not a living wage. He asked if employers should offer profit sharing and bonuses, stating that even if prices go up, “tourists will continue to tour.”

Hermus replied that in travelling across the country talking to managers in the industry, he heard that non-wage incentives, such as gym memberships and other perks, worked better than offering more money. This way, people were not so ready to leave a job for small wage increases.

When asked about the effects of increased pay to staff, and thus increased prices to customers, Hermus answered, “We have found there is a fairly high sensitivity (among consumers to price hikes).”