Tourism revenue loss abroad impacts environment, local communities

A 2024 report by Travel Foundation Turns out, on average, 50% to 80% of what tourists spend on vacation goes outside the local area, causing myriad adverse effects on the local economy. This phenomenon is known as economic leakage.

When responsibly planned and executed, tourism around the world is known to create employment opportunities, improve infrastructure, and support environmental conservation efforts. However, when not managed equitably, tourism can destroy ecosystems, create social friction and benefit only a select few.

“Tourism can be a means of conservation if planned and managed properly,” said Christina Cavaliere, associate professor of human dimensions of natural resources at Colorado State University. “However, most tourism is not planned or managed properly, so it poses an environmental and social threat.”

Experts point to high economic leakages as a symptom of weak tourism management, which hinders the sector's ability to have a positive impact on communities. Economic leakage is the proportion of total tourist expenditure that does not remain in or reach the economy of a destination.

“Economic leakage occurs when money leaves the destination where the resources were used and moves back to where the multinational corporation is headquartered,” Cavaliere said.

The two major drivers of this leakage are foreign ownership of hotels and resorts and import of goods and services by foreign companies.

Many multinational resort chains and all-inclusive resorts import a large number of goods to meet the demands of international guests. This also includes Food and beverage, manufacturing materials and global marketing expenses.

“All-inclusives often have a tendency to import food because of the tastes of their customer base,” said Andrew Seidl, professor of agricultural and resource economics.

Other than this, Local farmers and supply chains They may not meet companies' standards or may not have the ability to produce high volumes consistently. These supply issues have resulted in increased imports by hotels and resorts.

A key tool in addressing economic leakages is governance, which is achieved through a combination of multiple stakeholders.

“Government will be a stakeholder, but there will also be community groups, there will also be local nonprofits, there will also be local businesses, there will also be universities and education systems,” Cavaliere said.

in colorado, Colorado Tourism Office's Destination Management Strategic Plan This is the first time that Colorado has a statewide plan to promote sustainable and restorative tourism through 2024. It is also an all-inclusive guide for industry leadership, the tourism industry and tourism partners to look at shared priorities.

“Achieving this destination management plan is a milestone for the state of Colorado,” Cavaliere said. “To ensure that tourism across the state is being developed in a way that is actively contributing to the conservation of biodiversity and communities.”

These schemes addressing tourism are important to tackle economic leakages. Cavaliere highlighted that the plans and practices are implemented all over the world and help affected areas save time and money.

“So instead of trying something new, (communities) can replicate what was successful, with minor adjustments appropriate culturally and specifically for the site,” Cavaliere said.

Cavaliere is an interdisciplinary social scientist and tenured professor at CSU who develops frameworks for stakeholders involved in tourism to better serve local communities and their respective environments. A key strategy featured in the Travel Foundation report to address economic leakage was direct revenue streams from tourism. Examples include tourist taxation, foreign visitor fees, and entrance fees to parks.

“For example, many countries have airport entry fees, Rs 50-100 for any international tourist entering the country,” Seidl said. “There are a number of ways we can try and generate revenue that can then be plowed back into local communities or nature.”

Lina Xiong, associate professor of human dimensions of natural resources at CSU, emphasized the role of local government in preventing outside companies from taking all the profits from tourism and creating economic leakages.

“A lot of destinations have a tourism tax, where a certain percentage goes to support local communities, to support schools, to support infrastructure,” Xiong said. “So it's really important for the legislation to consider that – that part of the tourism benefit has to stay here.”

The 2024 Travel Foundation report highlights a case study on a sustainable tourism tax Balearic Islands Agency for Tourism. The tax was implemented depending on where the tourist stays, such as at a hotel or cruise port stop. It was also based on the time of year the tourist was traveling, with a larger tax during the busy tourist season and a smaller tax during slower periods. By 2024, the tax raised 262 million euros and developed 167 projects which were allocated to sustainable and regenerative projects.

Some projects relate to environmental rehabilitation, training and employment in the tourism sector, conservation of cultural heritage, social housing and other beneficial actions.

Economic leakage is particularly a problem for small island developing states, including a select few countries that face “unique social, economic and environmental vulnerabilities”. united nations. Some of these countries include Bahamas, Jamaica and Barbados.

“Unfortunately, these countries often do not have sufficient financial and economic resources, governance and institutions, and environmental regulations to manage local tourism efficiently and sustainably,” said Edward Barbier, University Distinguished Professor of Economics at CSU.

However, better utilizing the tools of tourism through governance and strategy has the potential to significantly improve a country's environmental and community conditions, Seidl said.

Seidl said, “Tourism is one of the largest and most important industries or engines of economic growth in the less developed world.” “It is a means of transferring money from the rich to the poor, and we need to do it in a way that benefits local communities more than international providers.”