Unprecedented Unemployment in the Hotel Sector is Rising, says the Armenian Hotels Association

The impact of the coronavirus pandemic on Armenia's tourism sector, particularly on travel companies, hotels, guesthouses, and several other organizations, has led to unprecedented severe consequences. This was stated in a declaration by the Armenian Hotels Association NGO.

Today, we are confronted with the following realities: partial or complete cessation of business activities, job reductions, and salary decreases. These changes have played and will continue to play a significant role in the rising unemployment levels in the country, which reached 19.8% in the first quarter of 2020 according to the Statistical Committee of Armenia. Given the seriousness of the situation, it is possible to predict further increases in this indicator unless appropriate actions are taken to restore both the general economy and its individual sectors, especially tourism.

In this regard, the Armenian Hotels Association conducted a survey regarding changes in the hotel sector labor market, with direct participation from member hotels of the association. The resulting findings allowed for a deep assessment of all the damages inflicted upon the hotel sector and their subsequent consequences.

The survey showed that during the pandemic, 37.5% of companies had to resort to cuts. Unfortunately, this process is expected to continue, as approximately 53.3% of employers who have not yet made cuts plan to do so in the future. Of those employers who have already reduced staff, 22.2% are preparing for further reductions. These changes were recorded during the months of April to July of this year.

The sectors most affected by these job cuts in hotels have been the restaurant and bar, room service, and guest reception and registration, with reductions of 48.4%, 42.8%, and 41.4% respectively. Full data can be found in the table presented below. The studies indicate that future cuts will primarily concern the following sectors: restaurant and bar (42%), room service (34.1%), and guest reception and registration (32.7%). The overall picture is illustrated in the table below.

Comparative data reveals that the four most affected sectors will continue to suffer: restaurant and bar, kitchen, room service, and guest reception and registration. In such a situation, experienced and highly qualified employees have found themselves in a dire predicament, partly due to the fact that their narrow specializations are linked to the most affected sectors.

Job cuts are not the only negative news in this situation. Unfortunately, numerous companies, trying to retain some of their staff in the face of financial constraints, have had to reduce their payroll fund. Only 25% of companies that did not implement staff reductions have maintained pre-crisis salary levels. In companies that implemented cuts, levels of salaries prior to the crisis have not been preserved; in such companies, 25% are paying only two-thirds of the basic salary, while others pay 50% or less.

The studies also indicate that during the pandemic, only 33.3% of hotels continued to pay their employees' salaries. Given the financial difficulties, the remaining operators have preferred the following measures: providing paid leave (29.1%), sending staff on unpaid leave (25%), providing unpaid leave (45.8%).

The conducted survey and analysis of responses provided an opportunity to assess all changes occurring recently in the tourism sector and their impact on Armenia's labor market, as well as to predict the worsening of the situation due to future job and salary cuts, many establishments closing, and the irreversible loss of potential in the tourism sector.

Considering all these issues, the Armenian Hotels Association has developed an action plan for exiting this complicated situation, which has been presented to relevant authorities in the form of an open letter, including the State Tourism Committee, the Ministry of Economy of the Republic of Armenia, and the Government of Armenia.

As the state of emergency has once again been extended in the country, inbound tourism figures for this year continue to approach zero, while those companies trying to survive on the basis of domestic tourism are still recording negative numbers. The Association has proposed the following solution: immediate support from the Government of Armenia is necessary to prevent further deterioration of the situation in the labor market.

This support should take place along the following two avenues: reduction of the tax burden, including cancellation of income tax arising from salary payments, and subsidies amounting to 50% of registered employees' salaries until companies return to self-sustainability. Without such comprehensive and immediate support from the Government, this crucial sector for the further development of the Armenian economy will remain alone in the face of an unprecedented economic crisis, and the rapid reduction of jobs along with the decline of sector capacity will certainly continue.