Impact of Tourism Leakage and How to Prevent It

EKU Online > Impact of Tourism Leakage and How to Prevent It

When you spend money at a tourist destination for your vacation, where does all that money go? Ideally, the tourism dollars you’ve spent at a destination should go into supporting the local economy no matter how or where you spent the money. If tourism is good for the economy, it therefore must be a source of sizable income in the host destinations. However, this is not always the case. Frequently, a significant amount of the money tourists spends while traveling ‘leaks’ out of the destinations. For various reasons, the money ends up elsewhere. The money is directed to large, international tourism companies that are foreign-owned or based in another country. Especially when associated with mass tourism and high-end, all-inclusive luxury tourism, leakage often occurs in developing nations where they need the revenue the most.

Tourism leakage causes inequality

First of all, tourism leakage is unethical because it causes inequality. According to the UN’s Ocean Atlas, of each $100 spent by a tourist from a developed nation, only around $5 actually stays in the local economy of a developing country destination. There are two main sources of tourism leakage which are import leakage and export leakage.

What is import leakage?

Import leakage happens when the tourist demand for certain products/services cannot be met by the local economy. In those cases local suppliers look somewhere else to import the goods/services the tourists want. For example, instead of buying locally produced orange juice, a tourist buys an imported Minute Maid orange juice. Up to 50% of tourism income for developing countries is said to be lost through import leakage.

What is export leakage?

Export leakage, on the other hand, is when foreign investors take the tourism profits out of their operating destinations and back to their home country. For example, a multinational corporation (MNC) buys a private beach on an island in the Caribbean and develops a luxurious, all-inclusive resort. Despite making a profit off this island and employing local workers, the tourism income made from this resort is getting sent back to the company’s headquarters overseas. This keeps lining the pockets of large MNCs while local communities continue to suffer, worsening global inequality. 

Tourism leakage and cultural erosion

Another problem is that leakage can cause cultural erosion. If tourists keep demanding products from back home, only stay in large resorts created by global companies, or only buy from expensive foreign brands, there is little room for local cultures to grow and many locals get driven out of their own communities due to heightened housing costs in favor of more profitable tourism establishments. Eventually, global cultures can end up becoming diluted and less diverse. Therefore, it is important for tourists to actively seek local cultures and experience them. By learning about the local cultures and respecting them, those cultures can flourish.

How do we prevent tourism leakage?

One of the easiest ways is to buy local and stay local. Import leakage can be prevented by spending money on local products, staying in local accommodations, and eating at local restaurants. Another way is to avoid foreign-owned, all-inclusive package tours. Sometimes it can be hard to avoid them as some destinations may not offer any other option or some people may not be able to travel in any other way. But you can do small things to help prevent excess leakage by seeking out locally-owned accommodations or even homestays for authentic experiences. If you do opt for an all-inclusive, you may be able to find a local company or a company that hires and trains locals in management positions or sources food and products locally. You can also look for those companies that give back to their operating destinations to help minimize the negative impacts of tourism leakage.

There are many more ways you can help prevent tourism leakage. If you would like to learn more about tourism leakage or about sustainable and responsible tourism, you can start by studying Global Hospitality and Tourism at Eastern Kentucky University.

By: Jeongyeon (Jennie) Ahn, PhD, assistant professor, EKU Global Hospitality and Tourism

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