Linkage over leakage: Rebalancing the benefits of tourism through stronger community connection
In today’s modern tourism industry, and for many destinations worldwide, only a fraction of the money spent by tourists remains within local communities. The majority of those who provide services and open their homes to visitors don't benefit much from the increase in tourism - this is even though it is the resident communities that bear many of the downsides of the growth in tourism.
Economic leakage is one of the most important issues in hospitality and tourism today, but so far has received insufficient attention in conversations around sustainability in tourism.
A big step in addressing tourism leakages is acknowledging them. We need to recognise that local residents in tourist destinations are often at a disadvantage when the area gains popularity. We need to stop and pause at every step along the way and intentionally think about the choices we make and ask ourselves who truly benefits from them, so tourist dollars stay and circulate within the local economy, instead of seeping out.
The early days of local tourism often present an opportunity for local residents to turn their homes into guesthouses or develop on family-owned land. But as destinations increase in popularity over time, foreign businesses and investors start settling in those areas, building hotels and guest houses; many with no connection to the places they settle on.
Eventually, these places may face a dominance of foreign-owned businesses. This often comes with a diversion of tourism revenue away from the local community, as money coming into these businesses often leaves the country again, something referred to as “economic leakage”. Tourism leakage refers to money spent in destinations that doesn't stay or circulate within it; instead, it leaks out. These economic leakages are significant as they divert resources from the very places that sustain tourism.
In today’s modern tourism industry, and for many destinations worldwide, only a fraction of the money spent by tourists remains within local communities. And even within those destinations, the economic benefits of tourism are allocated to a selected few, while the majority of those who provide services and open their homes to visitors often don't benefit much. This is even though it is the resident communities that bear many of the downsides of the increase in tourism: inflation, gentrification, environmental degradation and cultural erosion, to name a few.
Economic leakage is one of the most important issues in tourism today, but receive insufficient attention in conversations around sustainability in tourism.
Tourism is seen as a way for elimination of poverty and inequalities. But when tourism practices are adopted without careful consideration of how benefits are distributed, communities can lose more than they gain. Because despite offering economic advancement and job prospects, the tourism industry often provides low-paying, unstable positions, often seasonal and with limited opportunities for career progression. Starting one's own business is made increasingly challenging for local residents, given the high upfront costs associated with rising property prices and construction. And even then, local residents often struggle to compete with foreign businesses, who have a tendency to set up supply chains prioritising profitability over community wellbeing. Consequently, locals are often forced into seasonal hospitality jobs with little room for advancement. And when these are not feasible, they step out of their towns, in search of better opportunities. In many cases, a growth in tourism can even lead to a migration of locals to another place or country.
Within local supply chains, tourism leakage is generally lower, because the money circulates within the community. However, more and more tourism businesses are owned by companies not based in the countries where they operate. In addition, they aim to offer everything under one roof—rooms, meals, spas, tours, even souvenir shops, going as far as selling mass-produced "local" souvenirs made by large factories outside of the country. Guests end up spending their money on-site instead of in the local community, which means the wealth from tourism isn't spread around. Instead, the majority of benefits are flowing to people outside of the host countries. This can slow the economic development of a region, cause poverty and a loss of resources and opportunities for residents and communities.
A big step in addressing tourism leakages is acknowledging them. We need to recognise that local residents in tourist destinations are often at a disadvantage when the area gains popularity.
To minimise tourism leakage, local residents need to be consciously integrated into the tourism value chain. We need to pause at every step along the way and intentionally think about the choices we make and to ask ourselves who truly benefits from them, so tourist dollars stay and circulate within the local economy, instead of seeping out.
For hotel owners, it is not enough to simply welcome tourists; there needs to be a concerted effort to build stronger ties with the local communities and encourage tourist spending within it. It may be more convenient to surpass local talent and employ from other places, where workers may be willing to work for lower wages. It may take lesser effort to involve larger, more established players in the supply chain, instead of encouraging smaller, local ones. But these "easier" paths may undermine the community's wellbeing. Instead, hoteliers should prioritise options that benefit both the community and the hotel.
Government planning and intervention is crucial in helping local residents skill up to meet the needs of a growing tourist destination - this includes providing resources, training and financial assistance to local players to help them establish and sustain their ventures. They will also have to intervene wherever possible so the benefits of tourist revenue in a place are equitably distributed, instead of favouring a few, and contribute to the preservation of local culture, traditions and heritage, in the interest of the local community.
By making conscious choices, tourism can become more equitable, ensuring that its economic benefits are shared more fairly with those who contribute to its success. Without this conscientious approach, destinations are vulnerable to the erosion of their long-standing cultural heritage and the displacement of local residents. It's crucial for livelihoods that people have the opportunity to find employment locally, and that money is reinvested in the communities. Ultimately, reinvesting tourism revenue in local initiatives and businesses is essential for building sustainable, resilient communities. By prioritising the well-being of residents and preserving the cultural integrity of destinations, tourism can become a positive force for economic development, social cohesion, and cultural preservation.
