Canadian Tourism Human Resource Council (CTHRC) The Impact of Canada’s Changing Demographics: Sector Comments Scott Meis Special Advisor Canadian Tourism Human Resource Council (CTHRC) CTHRC Educators Symposium October 4, 2012 Good morning. Thank you for the opportunity to Comment on Alex’s presentation and talk to you today about the Impact of Changing Population Demographics on Canada’s tourism sector In his presentation Alex has focused primarily on the impacts and implications of changing demographics on the education sector, and I agree with almost all of what he has said. My supplementary comments focus mainly on the impacts and implications of the same changing demographic conditions for business operators and employers in the tourism sector Indirectly this will also have implications for students working part-time in the sector during their studies and younger workers entering the tourism labour force after their studies are completed.

Focus: Demographic impacts on the tourism sector & labour force Topics: Demographic pressures Tourism employment and labour trends Demographics of the tourism labour force Tourism labour supply and demand Compensation, attraction and retention issues in tourism Focus & Topics of Today’s Comments I will touch briefly on 5 topics: Demographic pressures Tourism employment and labour trends Demographics of the tourism labour force Tourism labour supply and demand Compensation, attraction and retention issues in tourism

Percentage of Population by Age Group 2031 As noted earlier in Alex’s presentation, Canada is entering into a period characterized by slower labour force growth and a major shift in its composition which will change Canada’s job market significantly: Low birth rate results in downward pressure on population growth The influence of the natural rate of population increase on population growth is declining -- immigration was responsible for 80% of population growth in 2007, and will account for 100% of net increase by 2030 Population is aging: 30% are baby boomers, between born between 1946 and 1964 This situation in not completely new, tight labour markets were beginning to affect the tourism sector in the mid-2000 before the 2008 recession The recession created a temporary reprieve from labour shortages, but all sectors of economy are now facing tightening labour market conditions However, despite the some slowing of market growth and product substitution due to the recent global recession; tourism is resilient and tourism travel market demand is continuing to grow, albeit more slowly, and it will continue to grow both in Canada and globally . Percentage of Population by Age Group

Tourism and Canadian Jobs 1.66 million jobs in tourism sector Represents 9.4% of all Canadian jobs 1.9% job growth in tourism jobs compared to 1.6% in total economy Jobs attributable to visitor spending account for 36% of total sector employment 37 distinct occupations Sector workforce of 1.65 million people The supply side of tourism is a diverse multi-industry sector comprised of 29 various industries within five tourism industry groups: accommodation, F&B, recreation & entertainment, transportation, travel service all providing direct services to tourism travelers; The provision of these services to domestic and international visitors as well as local consumers creates: 1.66 million jobs within the 5 industry groups of the sector 9.4 % off all jobs in Canada A faster rate of job growth in tourism than the total economy -- 1.9% annual job growth for tourism compared to a 1.6% job growth overall in Canada Within the sector, 37 distinct occupations (plus some general groupings) are identified – some straddling two or more industry groups, such as cooks and chefs. A total sector workforce of 1.65 million people Source: Statistics Canada, Human Resource Module of the Tourism Satellite Account 2011

Regional Share of the Labour Market Jobs   Tourism Sector Accomm F&B Rec & Ent Transport Travel Services St. John’s 0.5% 0.6% Halifax 1.4% 1.3% 1.5% Québec 2.2% 2.9% 2.4% 1.9% 1.8% Montréal 11.6% 6.9% 11.0% 13.2% 14.1% 14.6% Ottawa 3.3% 2.7% 3.5% 3.6% Toronto 15.6% 10.1% 17.9% 17.7% 23.7% Winnipeg 2.5% 2.3% 3.4% Saskatoon 0.8% 1.0% 0.9% 0.7% 0.4% Calgary 4.2% 3.0% 4.1% 3.9% 5.9% Edmonton 3.7% 3.1% Vancouver 8.9% 7.1% 8.6% 9.6% 9.2% 13.8% Jobs in tourism industries created through the provision of commercial services and commodities to visitors are unevenly distributed in Canada. A major share, 37.6% are in Ontario, and 59% are in central Canada (Ontario & Quebec combined). This uneven geographic distribution of jobs also cascades down to the local city level, with the highest job shares occurring in Toronto and Montreal. Similarly, the Food and Beverages and Accommodations industry groups are the most labour intense sectors, followed by the Recreation and Entertainment industries group – creating the major share of jobs within the overall tourism sector 11.2% 1.1% 16.4% 3.6% 22.0% 0.4% 2.8% 37.6% 2.6% 1.9%

AGE Demographic Characteristics 2006 MALE FEMALE 52.6 52.3 47.7 47.4 40.5 32.8 30.2 24.6 The tourism labour force differs from the Canadian population in general in several important ways: The tourism sector employs a higher proportion , of female workers, 52%, and a lower proportion of male workers, 48%, than are found respectively in the Canadian population in general. It also employs a higher proportion, younger workers aged 15-24, 33%, than is found in the overall Canadian population; as well as lower proportions of older workers aged 35 to 44 (19%) and also those aged 45+ (30%) than is found respectively in the overall Canadian population 19.9 18.5 18.6 15.0 CANADA TOURISM 2006 15 – 24 25 – 34 35 – 44 45+

Age Groups of the Tourism Sector’s Employed Labour Force Younger Workers in Tourism & Canada 2006 Age Groups of the Tourism Sector’s Employed Labour Force Canadian Labour Force 59.5% 40.5% Tourism Sector 69.8% 30.2% Accommodations 62.9% 37.1% Food & Beverage Services 80.8% 19.2% Rec & Entertainment 67.9% 32.1% Younger workers are also not distributed evenly throughout the sector. Whereas younger workers, aged 15 to 44 make up 60 percent of the overall labour force, they represent 70 percent of tourism sector workers. And they are over represented in four of the five industry groups, namely: the labour force of he Food and beverages industry group, at 81% of industry employment; the recreation and entertainment industry, group at 68%; the Accommodations industry group at 63%; and and similarly, the Travel Services industry at 62% And lastly, they make up 46.5% of the transportation industry, which is much older, with the majority, 53.5 % consisting of older workers in the 45 years and older age group. As a result, the first four of these industry groups will be particularly impacted by the changing demographic conditions in Canada. Transportation 46.5% 53.5% Travel Services 61.5% 38.5% 15 – 44 years 45 years and older

Occupations Heavily Staffed by Young Workers Percent Under 25 Years of Age Percent Over 25 Years of Age 67.2 32.8 50.8 62.5 54.5 49.1 37.5 45.5 42.4 57.6 Food Counter Attendants/Kitchen Helpers Food and Beverage Servers Bartenders Program Leaders and Instructors Cooks 2006 Similarly, particularly young workers, aged under 25 years of age, are concentrated in relatively high proportions in several noteworthy occupations within the tourism sector, namely: Food counter attendants and kitchen helpers at 67%; Food and beverage servers at 49%; Cooks at 42%; Bartenders at 37%; All of which are mainly found in the F& B and Accommodations sectors, but high concentrations of young workers are also found in another occupational group --Recreation program leaders and instructors at 54% in the recreation and entertainment industry group Other tourism sector occupations that also rely heavily on young workers include: Cashiers, Landscaping Labourers, Operators & Attendants, Sales Clerks, Customer Service Clerks. All these occupations will be particularly impacted by the changing demographic conditions in Canada.

Return to Shortages in 2013-2014 After Temporary Surpluses Emerging During the Recession 2008-2012 The 2008 recession caused a dramatic temporary change in labour market conditions, and many segments of the tourism sector experienced a short-term surplus of labour in recent years as a result. While economic conditions, for the most part, improved during 2010 and 2011, the number of new hires in the sector has been curtailed by continuing economic uncertainty and rising operational costs. And, even though economic conditions are expected to continue to improve during 2012 and into 2013, labour surpluses are likely to persist for some regions and provinces during this time. The exceptions are those regions such as Manitoba, Saskatchewan and Alberta where demand is being driven by a booming natural resources sector

Spending on tourism goods and services Gap = 228,500 full-year jobs left unfilled (10.7% of labour demand) 56% Spending on tourism goods and services Looking forward for the longer term, the next 20 years out to 2030, overall combined real spending on tourism activities in Canada by all market segments – domestic and foreign visitors as well as local consumers -- could potentially increase by 56% to $293 Billion by 2030 Projections of the labour demand associated with the market demand growth for Canada’s tourism sector indicate labour demand could grow from just under 1.61 million jobs in 2010 to 2.14 million jobs in 2030, a potential increase of over 33 per cent Meanwhile the projections for the potential growth of labour supply in the tourism sector indicate that overall tourism employment could rise 18% from nearly 1.62 million full-year jobs in 2010 to 1.91 million full-year jobs in 2030. The difference in these two growth trends creates an expanding gap between labour demand with the sector and available labour supply, and represents 228,500 full-year jobs left unfilled (10.7% of labour demand) Results in a pressure to raise wages, which in turn drives up price and stifles spending Market equilibrium results in billions in lost tourism revenues Emerging and growing labour shortages result in consolidation, delayed investments , reduced levels of customer service $293 Billion (2030) Supply and Demand 228,500 Unfilled Jobs

Tourism Labour Shortages by Occupation   2010 2015 2020 2025 2030 Food-counter attendants and kitchen helpers -2,365 11,956 25,911 35,646 42,690 Food and beverage servers -1,845 10,209 20,710 30,847 38,782 Cooks 92 5,465 12,540 16,496 20,536 Bartenders -277 2,321 5,003 7,394 8,738 Program leaders / instructors in recreation and sport -415 813 2,574 4,737 6,267 Labour Shortages by occupation (full-year jobs) Labour Shortages as a Percentage of Labour Demand 2030 Air Pilots, Flight Engineers and Flying Instructors 23.2% Landscaping and Grounds Maintenance Labourers 21.1% Bartenders* 20.7% Security Guards and Related Occupations 18.0% Aircraft Mechanics & Aircraft inspectors 15.7% Industry groups with the most market growth and the most shortages of skilled labour are projected to be Transportation, Food and beverage services and Recreation & Entertainment. Four of the five tourism occupations expected to have the most significant shortages of workers over the next 15-20 years are found predominantly in the food and beverage services industry and to a lesser degree in the accommodations industry. The largest labour shortages by far are projected for food-counter attendants and kitchen helpers, as well as food and beverage servers. By 2030, these two occupational groups could experience shortages equivalent to nearly 43,000 and 39,000 full-year jobs. Over the long term, the occupational group projected to suffer the most acute labour shortage vis-à-vis that occupation’s estimated labour demand is air pilots, flight engineers and flying instructors – and this trend is found not just in Canada but also globally as seen in recent statements by both Boeing and IATA.

Tourism Labour Shortages by Geography 2030 St. John’s 17.7% Charlottetown 11.9% Halifax 15.8% Saint John 16.2% Quebec City 11.7% Montreal 9.5% Toronto 10.1% Ottawa 12.0% Niagara Falls 6.9% Winnipeg 8.0% Regina 13.6% Saskatoon 14.6% Edmonton 11.2% Calgary Victoria 11.4% Vancouver 8.9% These emerging labour shortages are also distributed unevenly across regional geographies and jurisdictions within Canada. In relative terms, Atlantic Canada is expected to endure some of the most acute shortages in tourism labour as a percentage of overall potential labour demand. Cities most affected by potential labour shortages in 2030 projected to include St. John’s, Saint John, Halifax, Saskatoon, Regina and Ottawa. Newfoundland 17.0% British Columbia 9.6% Quebec 11.2% Manitoba 7.5% Alberta 10.3% PEI 12.1% Ontario 10.6% Saskatchewan 12.0% Nova Scotia 14.5% New Brunswick 15.6% YOU ARE HERE

CANADA (median hourly base) Wages and Working Conditions Food & Beverage Server CANADA (median hourly base) All Organizations $9.65 Accommodations $10.18 Recreation & Entertainment $9.50 Food & Beverage Services $9.00 Unionized $10.93 Non-unionized Full-time Positions Part-Time Positions $9.57 Seasonal Positions One of the issues for tourism in competing for workers is the image of low paying jobs with poor working conditions – for example the average compensation for tourism jobs remains approximately two thirds of the national job average. Even though, the average compensation per job in tourism been rising in recent years, the share of the national total is unchanged and relatively stable over the longer term. However, compensation also varies significantly by occupation, industry, region, unionization, part-time vs full time work and seasonal work. The average hours worked in a week is also less than the national average reflecting the high proportion of seasonal and part-time work in the sector. Our simulations show that increasing wages , reactively to the changing demographic conditions, is marginally effective at increasing labour supply, but it will also increase costs, reduce demand and ultimately hamper profitability and competitiveness. SOURCE: Tourism Sector Compensation Study, CTHRC (2010)

Non-cash elements can be integral to any HR management strategy Competition for Labour and Compensation - More Than $$ Simulations suggest that increasing the rate of employment of entry-level occupations can alleviate a significant portion of projected shortages A competitive compensation packages is a key driver of workforce attraction and engagement, but its more than customized wages and salaries Non-cash elements can be integral to any HR management strategy Employers who compete in these areas experience higher attraction & retention Modeling suggests that competing on both non-wage benefits and investing in on-the- job training can also significantly boost the attraction, retention and supply of labour Instead, our models suggest that a pro-active strategy to increase labour supply would be more effective. One simulation result suggests that increasing the rate of employment of entry-level occupations by just 1% per year over 10 years can alleviate a significant portion of projected shortages Our simulations suggest, too, that competing on non-wage benefits can also significantly boost the supply of labour: Half of the entry-level labour shortages could be eliminated through moderate gains in the coverage of key non-wage related benefits Health/dental plan, vacation time, and flexible hours most important to employed 18-24 year old workers Our research also suggests that investing in job training can also significantly boost the supply and retention of labour as well as increasing the satisfaction of travel consumers.

Tourism Industry Issue: Skills and Labour Shortage An adequate supply of skills and labour are necessary to deliver quality service and exemplary hospitality – crucial for competitiveness Tourism relies heavily on younger workers – but the size of this labour segment is decreasing, and competition is intensifying. The sector needs part-time, seasonal and casual workers, therefore attraction and retention are key challenges, particularly with younger workers. Tourism industries could face a shortage of more than 64,000 workers by 2015, and 208,000 by 2030, limiting its ability to realize its full potential. To survive, tourism businesses will have to compete aggressively for workers and to invest more in them as assets. To summarize: An adequate supply of skills and labour are necessary to deliver quality service and exemplary hospitality – crucial to sector competitiveness Tourism relies heavily on younger workers – but the size of this labour segment is decreasing, and competition for them is intensifying. The sector needs part-time, seasonal and casual workers, therefore attraction and retention are key challenges, particularly with younger workers. Tourism industries could face a shortage of more than 64,000 workers by 2015, and 208,000 by 2030, limiting its ability to realize its full potential. To survive, tourism businesses will have compete aggressively for workers and invest more in them as assets.

Customizing competitive compensation packages Recommended Industry Tactics Encouraging business/education partnerships (co-op/internship programs, work exchange opportunities) Promoting tourism as a viable career and improving the attractiveness of tourism jobs: Customizing competitive compensation packages Adding non-cash benefits to attraction and retention strategies Embracing the benefits of well designed professional on-the-job training Giving more attention to, effort and investment in training and certification of workers Promoting CTHRC tourism-specific labour market information to aid better decision making by employers and workers Recruiting employees from new labour pools (Mature Workers, Disabled Persons) Information to assist in hiring temporary foreign workers So what can we, that is CTHRC do about this? Tactics we recommend include: Encouraging business/education partnerships (co-op/internship programs, work exchange opportunities) Promoting tourism as a viable career and improving the attractiveness of tourism jobs: Customizing competitive compensation packages Adding non-cash benefits to attraction and retention strategies Embracing the benefits of well designed professional on-the-job training Giving more attention to, effort and investment in training and certification of workers Promoting CTHRC tourism-specific labour market information to aid better decision making by employers and workers Recruiting employees from new labour pools (Mature Workers, Disabled Persons) Information to assist in hiring temporary foreign workers

Canadian Tourism Human Resource Council Questions? Scott Meis Canadian Tourism Human Resource Council smeis@cthrc.ca http://cthrc.ca/en/research_publications

Source 1: Demographics of the Tourism Labour Force Utilizes the 2006 Census & LFS Reports on the number of “people” working in the sector rather than the number of jobs Includes all workers, not solely those attributable to tourism expenditures Data includes: demographics, job type, language, immigrant status, equity group, and education by industry group and tourism occupation Help stakeholders understand the demographic & employment characteristics of workers in the sector

Source 2: The Future of Canada’s Tourism Sector Labour Supply/Demand Projections Expands on the HRM to project labour demand and supply at the national, provincial, and sub-provincial levels Integrates Statistics Canada data for tourism demand and demographic forecasts Clarifies the dynamics of the tourism labour market by providing data on the supply/demand of workers over 5-25 years by industry and occupation Explains how issues like retirement, productivity, immigration, and wage rates impact the sector’s labour market. Provides optimistic and worst-case scenarios Offers insights on the impact of HR strategies for attraction & retention

Source 3: Tourism Sector Compensation Study Understanding compensation data is key to dealing with changing demographics and labour shortages Helps inform attraction and retention strategies. Reports on total compensation (incl. tips & benefits), as well as HR policies and challenges, and administration practices. Collects information from 2,000+ tourism businesses, which allows reporting by industry, region and occupation among other characteristics