By Christine Cheung & Tim Liu
I am sure when you read this title you thought to yourself ‘Great! Tell me something that I don’t already know.’ It does not take a genius to know that low/peak season and public holidays plays a huge role in affecting business in sectors such as F&B, hospitality and tourism worldwide. What you don’t know is that in Cambodia, this effect can be crippling for business owners and it does not just affect sales, but also could be a detriment to your service or product quality.
Some Background Information:
When you do your due diligence on Google or whatever new-age medium of information, you will discover Cambodia has a population of around 16 million people in 2019. Search more and you will find that 2 million of those are living in the capital of Phnom Penh. Go a bit deeper and realise that the number of expats living in Phnom Penh is between 200,000 or 300,000; give or take depending on whether there is a new prakas (means official regulation in Khmer) trying to make industry changes or correcting unsavoury business behaviour.
Officially according to the Ministry of Tourism (MoT) the low season is between May-September. according to Ministry of Commerce there is a total of 28 public holidays throughout 2019, with a reduction of days to occur in 2020 to boost productivity.
Working in Cambodia one must take into consideration the cultural differences that may occur. Cambodians are traditionally known to be family orientated and Buddhism plays a key part in daily living. Realise that a good number of the labour force that are in the major cities such as Siem Reap, Phnom Penh or Sihanoukville are from the province.
So, what did the last three paragraphs have anything to do with a would-be business owner with a positive mindset of investing in Cambodia that is bringing over foreign work ethics and business model?
Quite a lot…
The Issue of Working on Public Holidays.
It’s a week before the public holiday and because it is let’s say Pchum Ben (Three-day Buddhist holiday celebrating ancestors or relatives that have passed) your entire team says that they need to go back to the province. More established businesses, with larger teams would be able to negotiate with their staff and arrange to maybe leave a bit later, alternate work days or accept higher holiday wages, but because family orientation coupled with filial values is at the core of Cambodian culture, they go back. Your methods of persuading everyone to stay does not entirely work because family is more important than wages. You are left with a decision: business needs to cope with whoever is left, or just close for three days.
After living in Cambodia, you will soon realise, it’s not only you that is experiencing this issue. Even public service providers such as ’CINTRI,’ Phnom Penh’s waste management company in charge of rubbish collection and trash disposal is also on holidays as their workforce is on leave.
The Issue of Peak & Low Season.
Business is great during peak season. Increased tourist volumes, and greater traffic. Unless you are serving horrible products, or your store is in a less than optimal location there is no way that you would miss out on the slice of the profit pie. Since, all your competitors are doing the same thing by hiring and preparing for this moment, finding staff during this time can be rather difficult to meet the demand or maintain your quality standards.
You’re at the best cycle of each year and then BAM! In comes low season May.
Business falls sharply, you start laying off staff that you hired for the peak period. There is close to no foot traffic and what you heard was increased tourism statistics from official channels is siphoned by zero-dollar tourism.
For businesses in tourist cities such as Siem Reap, this can be especially crippling as everyone begins to go into a price war spiral as hotels slash prices, restaurants come out with low cost meal deals and some establishments even go as far as shutting down for this period. How is this even sustainable?
The Issue of Specific Consumer Targets
For the last 5 years, all you hear from businessmen and the media talk about is Chinese investment. Makes sense considering China has been at the top of the FDI ranking by surpassing all other FDI sources combined according to 2019 World Investment Report by UNCTAD. The China National Heavy Machinery Corporation has also invested USD 1.4 billion in the 246-megawatt Stung Tata hydropower plant in the Koh Kong province; which is expected to supply 30% of Cambodia's national power grid.
You would think that with all the Chinese investors coming into Cambodia they must be big spenders. So, let’s setup a business that is centred on Chinese consumers.
Everything seems to be going well until you hit Chinese New Year, Chinese National Day, Mid-Autumn Festival, and whole list of other holidays and then add on top all official public holidays in Cambodia. You’re no longer dealing with just Chinese consumers, you’re dealing with Chinese expats, Chinese tourists, ethnic Chinese from South East Asia, local Khmer with Chinese backgrounds and more…
Each of the listed are not necessarily stable sources of income. It is then you realise, this is Cambodia and simply relying on a foreign source of income, is not sustainable either.
So what can be done?
After reading this article, you’re probably thinking you are in way over your head doing business in Cambodia. Rest assured the purpose of this article is not to put you off doing business here. We’re here to highlight the potential issues that you will be facing doing business and it is something worth thinking deeply about, especially when it comes to planning.
In our next article we will be talking about how to tackle these issues, the need to diversify and localise, combined with ample planning to ensure that public holidays and seasonal cycles would not catch your business off guard.