Before 2020, tourism in Lao PDR was one of the largest sources of foreign exchange earnings, only behind mining and electricity. International tourism arrivals reached a peak in 2019 as 4.79 million visitors came to Laos and spent $934 million dollars. This makes for a contribution of tourism spend to the Lao economy of 9.1%. It also created employment for 300,000 people in Lao PDR.

COVID-19 has paralysed the tourism industry, with a decline of international tourism arrivals around 74%. Tourism businesses experienced a huge drop in revenue of somewhere between 70 and 80%. Almost all workers in the tourism sector, both directly and indirectly, have been impacted through unpaid salaries, loss of income and increase in outstanding debts (water bills, electricity bills etc), the negative impact on households’ disposable income and a decline in domestic demand.

The biggest challenge tourism businesses in Lao PDR have reported as a result of COVID-19 is the high risk of needing to terminate their business due to cashflow issues and lack of working capital. At least 50% of tourism businesses have reported cashflow issues as a result of COVID-19, and up to 65% of formal businesses have reported a high risk of needing to terminate at least part of their operations. In interviews as well as the stakeholder consultation workshop, the private sector stressed that financial support to tourism businesses should be an immediate priority, to avoid the sector to collapse in the short to medium term.