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If you want to be in Luang Prabang to witness Lai Heua Fai then ttry to calculate when the full moon will be around the end of October and start of November (the end of the 11th lunar month). The festival falls one day after full moon which comes at the end of the three month long Buddhist Lent that is celebrated as Awk Pansaa. This is a very significant day in its own right and the number of people who give alms to the monks first thing in the morning increases significantly for one day only (the local equivalent of a semi-observant Christian going to church at Easter). In 2012 the festival falling on the same day a Halloween was a pure coincidence.
The festival is always one day after its equivalent in Vientiane, this may be because of the moon or to ensure that dedicated festival goers can attend two festivals in two days (or, perhaps, a little bit of both).
According to the Traditional Arts and Ethnography Centre (TAEC) in Luang Prabang (separate TA reviews refer) the festival probably originated as a ceremony to pay homage to the rivers and water divinities. At its core is the construction of small 'boats of light' made by individuals and families from banana tree trunks, leaves, flowers, candles and incense. These can be purchased from a number of budding entrepreneurs who set up stalls on and around the main procession route. But it's more fun to make your own and you can spend a couple of hours at TAEC being taught how to on the afternoon of the procession. If you're there in future years, it's worth checking out whether this very hands-on workshop is being repeated.
In the days running up to the festival many much bigger homemade boats start to pop up around Luang Prabang. All of them look very impressive but some of them are particularly elaborate creations of bamboo, tissue paper and candles. Boats in the form of a naga are popular and in 2012 one temple had somehow constructed a three-headed dragon. You may also see a couple of immaculately constructed lotus flowers or a giant fish. The boats are normally displayed proudly outside of locals temples (vat / wat) so you can try to spot your favourite some time before the big night.
On the day of Lai Heua Fai the procession commences sometime after sunset. There doesn't seem to be a fixed time attached to this but by about 6.45pm the first boats pass the National Museum and head down the peninsula. If you want to watch the entire procession and then join it a little later on your best bet is to reserve a table with a view at one of the many restaurants on Sisavangvong which becomes Sakkarine as the peninsula progresses to the North East. Arrive by 6pm and then just sit back and enjoy the spectacle.
The procession is accompanied by lots of chanting, singing, drum bashing and music. There are firecrackers everywhere and, out course, millions of candles both on the boats and carried in homemade lanterns by the people (often kids) attached to each entrant in the parade. It's a lot like a carnival that many westerners will be familiar with, only with boats instead of floats. The other enjoyable difference was the atmosphere: universally lighthearted and with hardly any stewards (let alone police) present because they simply weren't required. There's no problem if you decide to pick a boat that you like and walk along with it.
The closer the procession gets to the end of the peninsula the more congested it becomes. The route is very straightforward: a straight line down Sisavangvong and Sakkarine until a point around Wat Sop then a zig zag one block to the north to enter Wat Xieng Thong by its western gate. The boats then line up and wait to be judged. Some people had bypassed the procession and gone early to Wat Xieng Thong to get a good view of all the boats lined up from the temple steps. That's probably a good idea if you want to take some photos as you'll find this very tricky during the parade itself. But if you are more interested in soaking up the atmosphere then it's best to watch some of the parade from Sisavangvong and Sakkarine and then to join the profession towards the temple.
It was pretty crowded within Wat Xieng Thong and, unless you've managed to find a good spot somewhere, you're probably better off extracting yourself from the melee as soon as you've had a look at the boats.
Exit down the steps towards the Mekong on the northern side of the temple to launch your own mini 'boats of light' - constructed earlier in the day - onto the river. If you have kids, you may not want to do tis. Holding their hands and navigating through the crowd down the steps to the river whilst also clutching your fire boats is no mean feat. As you launch your 'boat of light' the idea is to make a wish. The boat will carry away your sins and bad luck down the river. They honour the spirits of the river.
Of course, you will have to hang around the Xieng Thong steps if you want to see the big fire boats being launched later in the evening (some time from about 8pm onwards). But it's a bit of a scrum and you might be better off walking back down the peninsula alongside the river to find a spot to watch the boats floating back down the Mekong. There are a number of less crowded sets of steps down to the water near Le Calao and La Belle Rive where people launch their 'boats of light' with a little bit more dignity!
From a spot just by La Belle Rive you can relax watching the bigger boats (and hundreds of the smaller ones too) go sailing past. Fireworks fly off in all directions from both sides of the river as well as barges traveling up and down it. And hundreds of fire lanterns launch into the sky add to the dazzling array of images wherever you look. It is a beautiful sight and the ideal way to end the evening.