Can tackling tourism income leakage unlock a more sustainable future for tourism?

‘Profit’, the much-maligned ‘P’ of sus­tain­ab­il­ity, is a strong incent­ive for indi­vidu­als, busi­nesses, and com­munit­ies to save and invest for the future; seek out and con­serve what is of value; and reinvest.

Hoteli­er and entre­pren­eur Thomas Müller argues that tak­ing a close look at tour­ism income leak­age may prove … prof­it­able … wherever our industry is most problematic. 

It’s a “Good Tour­ism” Insight. (You too can write a “GT” Insight.)

Tour­ism is a power­ful eco­nom­ic force that has the poten­tial to trans­form not only com­munit­ies, but entire nations. 

It brings people togeth­er, fosters cul­tur­al exchange, and should gen­er­ate sig­ni­fic­ant rev­en­ue for its destinations. 

How­ever, as the old adage goes: “With great power comes great responsibility.” 

When tour­ism income leaves a des­tin­a­tion without bene­fit­ing the loc­al pop­u­la­tion, the reper­cus­sions can be profound. 

The ripple effect of tour­ism income leak­age is not to be under­es­tim­ated, but there is little aware­ness of this phenomenon.

Tourism income leakage and its effects on GNI

Tour­ism income leak­age occurs when a sig­ni­fic­ant por­tion of the money gen­er­ated by tour­ism flows out of a des­tin­a­tion’s eco­nomy or doesn’t even reach it in the first place, often end­ing up in for­eign com­pan­ies’ banks or their share­hold­ers’ pockets. 

This phe­nomen­on can have a det­ri­ment­al effect on a coun­try’s Gross Nation­al Income (GNI), edu­ca­tion, employ­ment, as well as youth and women development. 

When a large por­tion of tour­ism rev­en­ue leaks out or nev­er arrives in the des­tin­a­tion, it can res­ult in a skewed rep­res­ent­a­tion of a coun­try’s eco­nom­ic health, as the loc­al pop­u­la­tion does not reap the full bene­fits of the industry.

The sustainability of economies at risk

Sus­tain­able eco­nom­ies are those that can sup­port a decent qual­ity of life for cur­rent and future generations. 

Tour­ism, when man­aged respons­ibly, can con­trib­ute sig­ni­fic­antly to a sus­tain­able eco­nomy, includ­ing the 17 United Nations Sus­tain­ab­il­ity Goals. 

Tour­ism fosters edu­ca­tion and train­ing, cre­ates jobs, boosts loc­al busi­nesses, sup­ports youth and women devel­op­ment, and invests in infrastructure. 

How­ever, when tour­ism income leaks out or doesn’t reach the des­tin­a­tion, the sus­tain­ab­il­ity of the loc­al eco­nomy is com­prom­ised and the tour­ism man­date is at stake.

Don’t miss oth­er “Good Tour­ism” posts tagged ‘Sus­tain­able & regen­er­at­ive tourism’

Without a sig­ni­fic­ant por­tion of the rev­en­ue remain­ing in the des­tin­a­tion, there may be very lim­ited resources avail­able to drive any oth­er sus­tain­ab­il­ity pro­ject — eco­lo­gic­al, social or cul­tur­al — or to invest in crit­ic­al sec­tors such as edu­ca­tion, health­care, and social services.

Eco­nom­ic sus­tain­ab­il­ity is the found­a­tion of sus­tain­ab­il­ity. WIthout it, eco­lo­gic­al, cul­tur­al, and social sus­tain­ab­il­ity ini­ti­at­ives become dif­fi­cult if not impossible.

A responsible travel supply chain is an ethical imperative

Respons­ible travel is about mak­ing con­scious choices that min­im­ise neg­at­ive impacts and max­im­ise pos­it­ive con­tri­bu­tions to the places we visit. 

We must edu­cate trav­el­lers and cre­ate aware­ness as they become more and more con­scious about sus­tain­ab­il­ity. They play a sig­ni­fic­ant role in ensur­ing that tour­ism income remains with­in a destination. 

One way to min­im­ise tour­ism income leak­age is to encour­age trav­el­lers to book dir­ectly at or with ser­vice pro­viders in the des­tin­a­tion. Those busi­nesses then won’t have to pay hefty com­mis­sions to third party plat­forms out­side the destination. 

With the help of demo­crat­ised digit­al tools, des­tin­a­tions and their busi­nesses can become more inde­pend­ent, more vis­ible, and more com­pet­it­ive online. 

Their sales and profit may increase, and with that the eco­nom­ic sus­tain­ab­il­ity of loc­al pro­viders and the entire destination. 

Overtourism needs to be addressed

Traffic, lit­ter pol­lu­tion, and the dam­age done to loc­al cul­tures and envir­on­ments are just some of the degrad­ing effects of over­tour­ism. So, when des­tin­a­tions com­plain of over­tour­ism, we need to think ser­i­ously and hol­ist­ic­ally about how to change this.

Low-cost vaca­tions have con­trib­uted to neg­at­ive envir­on­ment­al and social impacts in numer­ous pop­u­lar des­tin­a­tions around the globe. 

The qual­ity of trav­el­lers mat­ters. Much more than the quantity. 

Strik­ing a bal­ance can be dif­fi­cult, but lim­it­ing tour­ism income leak­age is once again a first step; rais­ing the value of each trav­el­ler to the des­tin­a­tion so that a big num­bers of trav­el­lers is less import­ant … and less damaging.

The qual­ity of life for loc­als will improve and with it their will­ing­ness to share an authen­t­ic exper­i­ence with their visitors. 

Tourism for good …

Tour­ism has the poten­tial to be a force for pos­it­ive change; espe­cially in low- and middle-income coun­tries where tour­ism has a man­date to cre­ate employ­ment and prosper­ity and enable invest­ments in edu­ca­tion and people development. 

But it requires a con­scious effort from all stake­hold­ers; gov­ern­ments, busi­nesses, loc­al com­munit­ies, and, per­haps primar­ily, tourists. 

Wheth­er they know it or not, tour­ists determ­ine wheth­er their travel is respons­ible and sus­tain­able simply by choos­ing where they book. 

Book­ing with glob­al mar­ket-dom­in­at­ing plat­forms is unsus­tain­able for busi­nesses and their des­tin­a­tions since 60% to 80% of the gross oper­at­ing profit of such book­ings nev­er arrives at the des­tin­a­tion, or it leaks straight out as pay­ments to those platforms. 

Also read Shane K Beary’s “GT” Insight ‘Sup­ply lines: A former soldier’s take on tourism’s fail­ure to win hearts & minds’

When book­ing dir­ectly with sup­pli­ers, trav­el­lers make sure 100% of their spend is reach­ing those sup­pli­ers, cut­ting out plat­form commissions. 

This means more resources remain in the des­tin­a­tion; resources that could poten­tially be rein­ves­ted in more sus­tain­able tour­ism development.

Hoteliers and des­tin­a­tions need to regain their inde­pend­ence from OTAs and oth­er tour­ism-related busi­nesses that treat them as money-mak­ing sources.

… by democratising digital technologies

We need to demo­crat­ise digit­al tech­no­logy to help tour­ism busi­nesses become more inde­pend­ent and more vis­ible online via a strong and secure digit­al pres­ence that keeps their dis­tri­bu­tion spread and costs under control.

Inde­pend­ent tour­ism busi­nesses also want to be more dir­ectly involved in their own repu­ta­tion man­age­ment; they want to be com­pet­it­ive on their own terms. 

Most of all, inde­pend­ent tour­ism busi­nesses want to be able to har­vest the fruits of their labour; to retain enough seeds to grow a more sus­tain­able busi­ness and des­tin­a­tion into the future.

It’s a trans­form­a­tion worth mak­ing, but it comes with a huge chal­lenge; to over­come the apathy of an industry that has become depend­ent on oth­ers for too long and res­ul­ted in too much tour­ism income leak­age from des­tin­a­tions and their stakeholders. 

The good news is that a grass­roots momentum is build­ing. Soon­er or later it will be unstop­pable as more people recog­nise the import­ance of this transformation.

After all, the choices we make today will shape the future of respons­ible and sus­tain­able travel and the world we leave behind for gen­er­a­tions to come.

Agree? Dis­agree? What do you think about tour­ism income leakage? 

Share a short anec­dote or com­ment below. Or write a “GT” Insight of your own. The “Good Tour­ism” Blog wel­comes diversity of opin­ion about travel & tour­ism because travel & tour­ism is everyone’s business.

Fea­tured image (top of post): Can tack­ling tour­ism income leak­age unlock a more sus­tain­able future for tour­ism? Image by Steve Buissinne (CC0) via Pixabay.

About the author

Thomas Müller — hoteli­er, entre­pren­eur, and the founder of rainmaker.travel — drives the demo­crat­isa­tion of digit­al tech­no­logy for emer­ging and inde­pend­ent hos­pit­al­ity and tour­ism businesses.

For its impact on des­tin­a­tions, rainmaker.travel has received eight inter­na­tion­al awards in Africa, the USA, and Europe. “With dir­ect book­ings, the rev­en­ue stays 100% with the pro­viders and in the destination.”