No. Well, you’re not alone. That cute restaurant that you assumed was locally owned. Souvenirs you bought at supposedly local markets. The local tour guide that educated you about the area. Unfortunately, a vast majority of travellers don’t know where profits genuinely end up and are not aware of tourism leakage.
As the tourism industry starts to re-build post-COVID-19, regenerative tourism is becoming increasingly popular. Tourists and travellers are becoming more aware than ever before of overconsumption, leaning towards sustainable tourism. Considerations other than environmental impacts are increasingly in the spotlight.
Regenerative tourism is a framework that creates abundance for all stakeholders embedding conservation, communities, culture and collaboration into recovery and crisis plans. Regenerative tourism will not only help bring valuable income to local communities in South America but also underpins pride in their culture and traditions.
Tourism has great potential for linkages with local enterprises, craft sellers, local guides, restaurants, local food producers and fishing communities but not all of a traveller’s money spent will trickle down into local people’s pockets due to what is known as ‘tourism leakage’. Social, cultural and economic effects on host communities are key to a sustainable tourism industry and minimising Tourism Leakage plays a big part in this.
Tourism Leakage is the name given to the concept of profit generated by tourism leaving the host community. Also referred to as ‘Economic Leakage’ or ‘Leakage Effect’. Simply put, the money spent whilst on holiday leaks out of the host country, often ending up in the pockets of large, multinational global conglomerates. Already wealthy brands like Coca Cola continue to benefit and local businesses lose out.
It’s not uncommon that 90% of the tourism dollars spent by travelers leak out of the actual destination. For every $100 spent by a tourist on a holiday to a developing country, only $5 remains in the host community. So that’s a tourism leakage of 95% according to the figures published by the UN Atlas of the World.
If you’re not aware of where your money is ending up, then Tourism Leakage can happen anywhere. In developing nations it’s heightened as local companies may not have enough capital to invest and international giants drive up prices. Plus, travellers’ desires for luxury, comfort and familiarity exacerbate the issue in such countries.
A report by The Charles Darwin Foundation suggests that in 2007 the estimated value of Galapagos tourism was $418M of which only $63M enters the local economy. Therefore, only 15.5% of the full value of tourism reaches local residents. A move toward higher volumes of tourists has seen an increase in multinational investment impacting a decrease away from local ownership.
EXPORT LEAKAGE:– occurs when there is international ownership and therefore profits from the tourism dollars you spend leave the country. For example, staying in the Mercure Alameda Quito, Ecuador means that the profits end up back in France as it’s a French multinational hospitality company.
IMPORT LEAKAGE:– happens when tourists spend money on products and services that are imported. For example, drinking Stella Artois beer in Colombia results in import leakage. Money leaves the country to pay for the import of Belgium beer. Alternatively, drinking Dorda Pils keeps the dollar local as it’s brewed locally in Colombia.
Some countries even import labour. Rather than offering locals jobs they buy in English speaking staff to make tourists feel more comfortable. Or it may be that importing labour is a cheaper option.
One conscious decision is all it takes to help move towards a kinder, more authentic world in which equity is more balanced and ‘tourism leakage’ is reduced.
A report from the World Bank found that extreme poverty in Latin America halved between 1995-2011 but that as welcome as the trend is some 220 million of the population are classified as vulnerable existing on just $4-10 a day.
What seems like a small amount of money to you on your South American travels can make a huge difference to the local people. Spend wisely and spend generously but most important of all be aware of where your money ends up.
A better understanding of Tourism Leakage will help minimise its effects and encourage us all to be more mindful of future travels. As responsible travellers, together we can be the positive change that’s needed.
This article was written for Fair Tourism Foundation by Bex Thomas, Founder and Editor at Spending her time between France and Australia, Bex’s responsible travel blog showcases local options in response to tourism leakage. She upholds values around equality and believes the best travel experiences come from staying with and supporting locals. Bex hopes that her blog will inspire and empower you to choose local and help minimise tourism leakage.
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