Because Kung Lao is a secondary character that wasn't in the first game, which the first movie is based on, and was barely in the third game's story mode. He didn't even have a bio in the arcade game.
His MK2 backstory is that he was supposed to be the Shaolin warrior champion in MK1, but declined, so Liu Kang was chosen instead.
His MK3 backstory is that when Shao Khan invaded Earth, he handed Kung Lao his ass very quickly. This enraged Liu Kang into beating Shao Khan.
He wasn't even a minor character in the games being adapted and is basically a pallette swap of Liu Kang on terms of background and personality. The film did not need a carbon copy of Liu Kang. They used Johnny Cage's death as the motivation for Liu Kang instead (also being that the actor who portrayed Cage declined to reprise the role, two birds one neck).
Besides, Shaolin Monks wasn't released until 2005, years after the Mortal Kombat and Annihilation films were released. The supposed sequels never got off board due to Annihilation's poor box office performance and problems with Midway. The character wasn't prominent until after the movies existed.
A bit of trivia: the Great Kang Lao is featured in the Mortal Kombat: Conquest TV show, set 500 years before the games/movies, and semi-canon having been made by the same company that made the movies.