Chapter 1 Introduction

1.1. Background of the study Luangprabang used to be the ancient capital city of the Lane Xang Kingdom (the Kingdom of a Million Elephants), and established since 1,200 years ago. Sirisack (2014), In the 14th century, the King Chao Fa Ngum founded the first Lao Kingdom of Lane Xang, remained the capital of Lane Xang until 1565 when the capital was moved to Vientiane by King Setthathirath (although Luangprabang remained the country's main religious centre). And it used to be the center of cultural, architectural, historical and political activities.

According to Tourism Department in Luangprabang (2014), stated that Luangprabang as the tourism sightseeing and located in the northern central part of Lao People’s Democratic Republic, surrounded by numerous mountains and green forests. Luangprabang situated in the centre of northern , the province shares border with Oudomxay, Phongsaly and Houaphanh to the north, Vientiane and Sayabouly to the south and southwest and Xiengkhouang to the east. It consists of 12 districts such as Luang Prabang, Xieng Ngeun, Nan, Pak Ou, Nambak, Ngoi, Pakxeng, Phonxay, Chomphet, Viengkham, Phounkhone and Phonthong with Luangprabang occupies of 16, 8755 square kilometers, the estimated population 447,541 people.

By UNESCO Websites (2015), Luangprabang is an outstanding example of the fusion of traditional architecture and Lao urban structures with those built by the European colonial authorities in the 19th and 20th centuries. Its unique, remarkably well-preserved townscape illustrates a key stage in the blending of these two distinct culture traditions.

TDD, (2012).Visitors to Luang Prabang is charmed by the friendly atmosphere of this small town. They interests because of the town itself offers several unique insights into the history of the region, through excellently preserved Buddhist temples, museum, night market and a variety of Lao, Tai-Lue, Burmese,and Chinese.

The political and religious centre of Luang Prabang is the peninsula, with its royal and noble residences and religious foundations. Souphaxay (2553), the traditional urban fabric of the old villages, each with its temple, was preserved by later constructions. The colonial urban morphology, including the network of streets, overlapped harmoniously with the previous model.

The richness of Luang Prabang architecture reflects the mix of styles and materials. The majority of the buildings are, following tradition, wooden structures. Only the temples are in stone, the monasteries generally consist of: the cult buildings (shrine, chapel, library, stupa,

1 stone post), ancillary buildings and buildings for inhabitants or visitors (monastic communal buildings, cells, refectory, etc).

Sontikul, (2010).The many pagodas or "Vat" in Luang Prabang, which are among the most sophisticated Buddhist temples in Southeast Asia, are richly decorated (sculptures, engravings, paintings, gilding and furniture pieces). Xieng Thong, which dates from the 16th century, comprises an ensemble of the most complex structures of all the pagodas of the town. It is remarkable both from the archaeological point of view, and from the Laos iconographic and aesthetic viewpoint.

The sacred Mount Phousi stands at the heart of the historic town built on a peninsula delimited by the and the Nam Khan, domain of the mythical naga. Ceremonies to appease the nagas and other evil spirits, and Buddhist religious practices (Prabang procession, the monks’ morning quest) perpetuate the sanctity of the place. Natural spaces located in the heart of the city and along the riverbanks, and wetlands (UNESCO Websites, 2015).

Luangprabang town is a very famous country for its cultural diversity and well known because of its attractions. Different places of the country are full of cultural and historical heritage places, which are the major attractions and the assets of the nation.

In 1995 UNESCO was declared Luang Prabang as World Heritage Site. This distinction confirms, through the concerted action of local, national and international authorities, a real motivation to preserve this wonderfully serene city. The title is justified not only by the many beautiful temples in Luang Prabang, but also by its traditional wooden dwelling, the old colonial style houses and the natural environment that encases it in a perfect harmony of plant and stone (website of www.tourismlaos.org, 2015).

As a result, Luang Prabang was officially proclaimed and indexed as a UNESCO World Heritage Property in the year of 1995 (United Nations Educational, Scientific and Cultural Organizations [UNESCO], 2004). With such international recognition, it brings more and more tourists and promotes the tourism industry of the country.

Luang Prabang has been promoted as a tourist destination for two decades by the government of Laos. UNESCO also classified this town as a World Heritage site in 1995. The city’s popularity further increased when it was named by Wanderlust Magazine as the Top City for tourism in 2006, 2007, 2008, 2010, 2011, 2012 and 2014 respectively, And in the year of 2014 Luangprabang was voted by Wanderlust again in the place of popular destination to visit, Ranking voted; 97.14 per cent of readers nominated Luang Prabang as their favorite destination while 95 per cent also voted for Bagan and 94.74 per cent voted for Stockholm

(Website Wanderlust Magazine, 2015).

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With the fact that Luang Prabang is very reputable in terms of historical and unique cultural preservation and nature’s beauty, tourism industry in Luang Prabang is forecasted to drawn more and more sightseers and trippers worldwide arrival for the forthcoming year, Consequently, it needs more concentrations and intents on developing and producing the extent of qualified tourism sectors, especially in the terms of opening the investors to invest the tourism businesses in Luangprabang district.

World Tourism: Realizing tourism industry as important, in 1975, the World Tourism Organization (UN-WTO) has been established to replace the international tourism federation established earlier in 1925. At that time, there were only 109 member’s countries. Until 2015, there have list of the 156 Member States of the UNWTO countries, and 6 Associate Member, and 2 Observers (website of unwto.org/members, 2015).

International tourist arrivals reported by destinations around the world reached 1,138 million in 2014, a 4.7% increase over the previous year, according to the data in this issue of the UNWTO World Tourism Barometer. Overall demand was robust with 51 million more tourists travelling the world (UNWTO, 2015).

According to the World Travel and Tourism Council, tourism directly contributed to ASEAN’s GDP (4.4%) and employment (3.2%) in 2011. In addition, the sector accounted for an estimated 8% of total capital investment in the region (http://asean.asean.org/tourism,

2015).

ASEAN Tourism: First established in 1981, ATF has been a key driving force in developing tourism in the ASEAN region. For over three decades, government and private sector associations have come together annually at ATF to discuss, review and strategies ways to continuously promote ASEAN as the world's top travel destination, (website of atf.com, 2015 ).Tourism has been one of the key growth sectors in ASEAN and has proven resilient amid economic challenges globally. The wide array of tourist attractions across the region has drawn 81 million tourists to ASEAN in 2011, up by 30% compared to 62 million tourists in 2007. Data from the Pacific Asia Travel Association (PATA) shows that on the first few months of 2012, ASEAN was the fastest growing destination-region in the world, followed by

South Asia.

Lao Tourism: Lao PDR has become the member of World Tourism Organization (WTO) by accession in 1975 (unwto.org, 2015).The Lao People’s Democratic Republic (Lao PDR) opened its doors of tourism to the international tourists in October 1989 and, since then, the tourism industry has developed rapidly to become one of the country’s largest earners of foreign currency and economic into the nation ( Phosikham, 2010).

Tourism is one of the industrial sectors that rapidly grow widely in many countries around the world. At present, many countries have paid special attention to the development and

3 promotion of tourism, as it is a key sector for socio-economic development and Tourism supports related tourism investment such as travel, hotel, restaurant, transport, and souvenir businesses (Lao PDR Tourism Strategy, 2006-2020).

The strategy in promotion of Laos’s tourism sectors in 2012 1), Laos will develop a high quality tourism industry and become a preferred destination in ASEAN and on global travel markets, 2) Investment about 14.5 million US$ per year from 2011-2015 in priority programmes,3) 95% of the investment in Tourist Site Development, Human Resources and Marketing. And expectation increasing of tourist in the year of 2015, indictor Increasing arrivals and reach 2.87 million visitors - Increase total /revenue by visitor: 438 million $/153 $

(LNTA, 2014).

The Government of Lao PDR has placed tourism as 1 of 11 priority sectors to contribute to country’s socio -economic development; - Tourism is now a major contributor to national income (7% - 9% of GDP) and employment; - Focus on the development of sustainable tourism based on culture, natural and historical resources. To implement an open - door policy concerning cooperation with foreign nations in economic and cultural maters.(LNTA, 2014).

Sirisack, (2014).Laos may still be in a state of development, but the friendly Lao people and their growing interest in the outside world has made it into one of the most enjoyable travel destinations in Asia. Conscientious eco-resorts dot the northern mountain tops, fulfill of cultural heritage and hotspots like Luang Prabang offer quaint rooms and fine dining in restored French colonial houses and mansions. The tourism Industry is one of the most important and significant economic sectors in Lao PDR because of it provide gage sources of income to Lao economy.

Luangprabang Tourism: Tourism and Heritage Site Management in the World Heritage Town of Luang Prabang, is a very famous country for its cultural diversity and well known because of its attractions. Different places of the country are full of cultural, natural and historical heritage places, which are the major attractions and the assets of the nation as in country.

The director-general of the Tourism Development Department, Soun Manivong told the Vientiane Times (2013), that there has been growing investment from both the state and private sectors in an effort to develop more tourist attractions in recent years such investment has seen the necessary infrastructure and visitor facilities installed at some 700 tourism sites, which are now up and running throughout the country, the director said. Another 800 potential tourist attractions that boast world heritage sites, natural, historical and cultural attractions have yet to be developed, and this represents untapped investment potential.

The tourism industry is one of the most important and significant economic sectors in Laos as well as in , Tourism is player a roles and rapidly growing tourism

4 industry to Luangprabang in every year, Main while tourist attractive destinations and numbers of arrivals in constantly. Reported by Lao National Tourism Administration (2013), makes the number of the tourists increase rapidly, totally 367,725 in 2010 and increase to 467,911 in 2013. The international tourist’s arrival 210,783 in 2010 and 342,557 in 2013, Asia and Pacific 74,146 in 2010 and to 130,879 in 2013, and international visitors in 2013 as well as a drastic increase number of local tourists from 125,354 in 2013 and Grew to 568,844 in 2014 or about 3% of increase (TDD, 2014).

1.2. The problem of statement

Motivation of researcher to take this case to be the research studies because of the growing tourism industry including tourism investment sectors in Luangprabang are very significant and pull the priority of the economics of the country growth. with the increasingly numerous of the tourists in the year by year, since the UNESCO was declared Luangprabang 1995 as the world heritage sites town and with promotion of the Lao government to open the doors for welcoming tourists around the world.

Reported by Lao Tourism Strategy, (2006-2020). Base on the recent growing number of tourist and regular flow rate, it is estimated that there will be 1,6 million tourists in 2020; there are going to increase about 2,2 million in 2015; and 3 million in 2020 with expected revenues of 250-350 million US Dollar per year.

Many business executives have poured capital into various kinds of tourism-related businesses in recent times, such as building hotels, guesthouses and restaurants, along with tour company services. Lao Hotel and Restaurant Association President Oudet Souvannavong told on Vientiane Times (2013), forecasts that investment in hotels and restaurants where tourism is the core focus will have much higher investment potential, such as those working closely with tour companies to offer more complete holiday packages.

Rushmore, (2002). When evaluating a market area, the hotel investor first looks for situations that exhibit a need for a specific hotel product. At the same time, consideration is also given to protective characteristics known as barriers to entry, which might include restrictive zoning or license approval processes, limited suitable land or acquisition opportunities, rapidly escalating construction costs, and the unavailability of an appropriate chain affiliation or management company. A unique market position may quickly change to an overbuilt position if no barriers to entry exist and other competitive products can enter the market without much difficulty.

1. World heritage town of Luangprabang is a very famous city for its cultural diversity and well known because of its attractions while they have faced with environment changing. And

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Different places of the country are full of cultural and historical heritage places, which are the major attractions and the assets of the nation (Keomanivong, 2009). UNESCO, (2014). World Heritage sites receive major publicity and as a result, become notable attractions for large numbers of tourists from all over the world. However, in spite of crate the economic benefits to the nation and to be the main economic growth of country.

2. Tourism entrepreneurs in Laos: Reported by Tourism Development Department (2013- 2014) Hotels, there have 491 in 2013 and 551 in 2014. Guesthouse and resort, there have 1,868 in 2013 and 1,911 in 2014. Restaurant, there have 1,744 in 2013 and 1,269 in 2014. Hotel entrepreneurs in Luangprabang district (2013-2014), local and foreign entrepreneurs have been increasingly investing in hotel businesses. There were three types of owners: privately owned, joint ventures (JVs) and State-Owned Enterprises (SOEs). The most significant percentage (56%) of the hotel business is privately-owned, 11% is owned by the foreign investors, 6% is owned by the GoL, and 27% are JVs shared by the GoL, local residents and foreign investors, who are mostly British, French or Hong Kong Chinese. It makes the increasing of tourists with altogether to increase tourism industries such as numerous of investment Hotels, there have 60 in 2013 and 58 in 2014 (hotel investment decreased while tourists increasingly). Guesthouses, and there have 320 in 2013 and 254 in 2014. Restaurants, there have 283 in 2013 and 72 in 2014. Entertainments, there have 6 in 2013 and 3 in 2914. Tour agencies, there have 42 in 2013 and 49 in 2014, brands agencies are 25 in 2013 (Southiseng and Walsh).

3. by the Market situation, the year 2014 is another remarkable year for tourism in Laos even though the percentage of increase was lowers than that of the same period, overall number of tourist arrival increased 10% over 2013 (compared to 13% from 2012 to 2013). In general, while the total number of tourist arrivals of the main markets increased, the market share of tourists from long haul generating countries slightly increased except those from America, Africa and Middle East: Europe 5,03% (5,6% 2013), The America 2,07% (2,27% in 2013) and Africa and Middle East 0,21% (0,21% in 2013).Visitors from neighboring countries (ASEAN) represented the largest number of tourists in 2014 (3,224,080) or about 75% of the total tourist arrivals, an increase of 6% over 2013. In the same way, international tourists, considered the most important market for Lao tourism, grew from 550,732 in 2013 to 568,844 in 2014 or about 3% of increase but accommodations demand can’t respond to every tourist’s needed, in according to tourism investment un-tasteful for some investors in last year. (LTNA, 2014).

4. According to Lao Tourism Strategy (2006-2012), Lao government plans to rebuild, expanding and setting up land -lock to land links. Open tourism laws to welcome ASEAN,

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European entrepreneurs and maintaining the political stability but some regulations are still restrict and constrain for foreign entrepreneurs.

When one travels to another city or country, one usually has different needs and demands for the destination one is travelling to. Trying to meet these needs and demands is what comprises the tourism industry. The tourism industry can be divided into main sectors; hospitality, attractions and event, transport, travel organizers and intermediaries and destination organization sectors. All of these sectors can be thought of as range of businesses and organizations involved in delivering the tourism product and the travel experience. Hotels of course are a part of the hospitality sector and as such are major essential supply components of tourism.

Tourism Development Department, (2010-2013). Luang Prabang has since then become as the potential industry of attracting both internal and international traveler’s attention to Laos. Tourism has achieved the growth for national better economic and emerges to development country all the sides. And tourism industry plays the biggest roles to Luangprabang’s economic with created jobs prospect to people in community, transfer income, profits to all. Moreover, tourism industry allows different community based on enhance citizen’s living standard, improve physical infrastructure, and alleviated poverty in conformity with the strategy of Laos’s government.

More interestingly, this kind of tourism industry has contributed to the national economic growth and creates more job opportunities for the Lao people, in particular the residents of Luang Prabang residents itself. Several tourism agencies, hotels, guest houses, restaurants have been dramatically established in order to take advantages and benefits from such tourism boom.

A lot of internal and external residents of Lauang Prabang find a job in the tourism related enterprises and Hotels and guesthouses are among the prime beneficiaries of tourism growth, as every visitor needs somewhere to stay (Vientiane Times, 2013).

On above referring to such high volumes tourists arrivals to Luang Prabang yearly, tourism market has automatically become the main market which mainly creating more opportunities for the local people to generate their own income. The tourism industry is the critical potential and has direct effect on the development of small and medium enterprises (SMEs) in Luang Prabang. Most significantly, several of local people tend to run their own businesses and alternatively cooperate with other, especially, in terms of hotels, guesthouses restaurants and tourism agencies; as presenting by the actual growth of the accommodations, restaurants and tour operators.

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This is the greatest opportunity for investors to invest the hotel business in Luangprabang district, Laos PDR and by opening of Lao government policy in order to provide each facility for their supportability in terms of tourism investment, hotel industry (Public and private sectors), and building the jobs to the local community and constantly development tourism sectors.

1.3. The problem of questions

1. Does its the World heritage status of Luangprabang influence and suitable for investment the hotel business?

2. Whereas the number of the tourists both internally and externally visiting to Luang Prabang has incredibly increased year by year, is it difficult to securely support the wise services and satisfy the respective travelers?

3. What’s government strategy plans to improve the laws, transportation and political situation which can be influenced and positive factor for hotel investment in Luangprabang?

4. In terms of tourism investment, what does the opportunity of investors in seeking to run hotel business in Luangprabang district?

1.4. The objectives of the study

1. To study the characteristic of the World heritage town, tourism market, transportation and tourism law which influence for hotel investment in Luangprabang district, Lao People’s Democratic Republic.

2. To study the positive factors in relating for hotel investment in Luangprabang district, Lao People’s Democratic Republic.

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1.5. The scope of the study

To keep the significance in this study within a limited scope, this study focuses on the major feasibility and crucial business on the positive factor of the hotel investment in Luangprabang district, Laos People’s Democratic Republic. And Of course, this study is definitely conducted within specific area as defined in the research objectives. As this topic study obviously covers all investors who are impressed the hotel investment in Luangprabang district.

The population of this study thereby are scoped down and studied in the area of where most of relevant investors involved of the hotel investment within area of Luangprabang district. All the research study relates to hotel investment of the governmental sector, public, private and individuals those direct and indirect influences from tourism investment.

to make this study more meaningful, the information supporting from this study are collected through documents, journals, textbook, internet, tour company, graduated students, hoteliers and entrepreneurs which both primary and secondary tools by interview, experiences and observation in the area of Luangprabang district, Lao PDR.

1.6. The period time of study

The duration time of study will be taken since 20 July, 2015 and expected to finish 25 November, 2015.

1.7. Research Significances

This study is expected to get the several main benefits as following;

1. To know the increasing the numbers of long-haul foreign visitors to Luangprabang in every year.

1. The positive factors of study can make easily decision of investor for investment the hotel business in Luangprabang district, Lao People’s Democratic Republic.

2. To know world heritage town, Tourism market, transportation and tourism law that it influence or create opportunity to hotel investment.

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3. To make the investors understanding the current situation, opportunity and feasibility of the hotel investment in Luangprabang district.

4. To present all the positive findings that researcher has found to the investors who will come to invest the hotel business in Luangprabang district.

5. To build the inspiration, interesting and persuading to investors in ASEAN and Europe to invest the hotel business in Luangprabang more and more in the future.

6. To get the conclusion and recommendations for using hotel investment and constantly developing the business in Luangprabang in the future.

1.8. Concepts of the Study

This study is selected on the instrument of the conceptual analysis strength, and opportunity to forecast the further feasibility of hotel investment and the positive findings resource which researcher has through studied in terms of primary and secondary data by interviewed, experienced, collected and observation from documents, journals, tourist operators, entrepreneurs, hoteliers, guest house, restaurant, graduated students and head tourism office it will bring these findings to be the studied analysis, summarized and concluding the final matters into the abbreviated document and presenting to investors know, understand recent situation and forecast in the further of the situation, opportunity and feasibility in investment the hotel business in Luangprabang district.

1.9. The conceptual framework

This is the conceptual framework that researcher has used in terms of studies which has provided into three types as following;

1. Independent of variable study

The significant factors of decision-making of investors in investment the tourism business are related;

 World heritage town.  Tourists market: drastic the national and international tourists market.  Transportation system: Improvement, expansion and linkages.

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 Tourism Laws: Drafting and improvement regulations for supportive tourism investment. 2. Dependent variable of study The characteristic of hotel investment which researcher will take for combining of study functions as following: The opportunity of Hotels Investment business in Luangprabang district.

Chart: 1 conceptual framework

Independent Variables Dependent Variables

Factors

- World heritage town Opportunity of Hotels - Tourist market - Transportation investment business

- Tourism Laws

Sources: (Keomanivong 2009; UNESCO (TDD, 2014) 2014; Southiseng& Walsh, 2006 and LTL 2013)

1.10. Hypotheses of Study

This study investigated the assumption to forecast hotel business units’ into three main positive factors as following; 2. The factor of the world heritage town and increasing tourists market are resulted to invest the hotel business in Luangprabang district, Lao People’s Democratic Republic.

3. Strength, Opportunity and feasibility of tourism investment are resulted to entrepreneur’s intent to hotel investment in Luangprabang district, Lao People’s Democratic Republic.

4. Factor of transportation, sustainable tourism management, political and laws can help investor’s decision-making to invest hotel business.

5. Tourism industry such as hotel, guest house, restaurant and Travel Company are needed for visitors while it is a great for opportunity and feasibility for tourism investment business in Luangprabang district.

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1.11. Definitions of Terms

1. Hotels: is an establishment that provides lodging paid on a short-term basis,and commercial establishment offering lodging to travelers andsometimes to permanent r esidents, and often having restaurants,meeting rooms, stores, etc., that are available to the gene ral public.

2. World heritage town: Luangprabang town is a very famous country for its cultural diversity, architecture, natural and historical sites by UNESCO.

3. Tourist market: The tourist market is where converge the offer of products and tourism services and demand that is interested and motivated to consume those products and tourist service. And indicator visiting of tourist in year by year.

4. Transportation: to provided basic infrastructure in tourists’ destination or tourists’ access to destinations such as road, waterways and air port.

5. Laws: Tourism law is determined the criteria, regulation and standard of management, movement and controlling the tourists. This is for promotion and development in term of the cultural, historical and natural traveling for maintaining the environment, sustainable and development tourism industry become a global sector. It is consist of preservation and development the nation into the harmony, unity, friendship, peaceful and collaboration with development international tourism.

This Law applies to tourism activities, public sector activities directed at promoting tourism, suppliers of tourism products and services, tourists and consumers of tourism products and services.

The tourism sector is organized and functions through a system that incorporates the public and private sectors as well as other parties involved in tourism activities (Tourism laws in Laos 2013).

And Political: The potential factor for Laos is peace, and political stability. Economy is in continuous growth rate; tranquility and safety society. Infrastructure has been developed and improved, (LTS, 2006-2020).

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