Where does your money spent on traveling go?
First time I opened my Tourism Management course book back in my university days, one chart especially stood out to me. This was the “Tourism Leakage” chart, which showed the average distribution of the money spent on a holiday. When you analyse the individual elements of the chart, there are no big surprises. But the visual overview communicates a clear message: The tourism destination itself receives a surprisingly small portion of the economic benefits from your total holiday expenditure.
The chart looks something like this:
Let’s walk through the elements of this tourism leakage chart.
Blue section: A lot of the travel expenses you have before the actual trip such as airfare, insurances, and travel agency profits will benefit international and outbound companies not directly related to the country of your travel destination.
Rose-colored section: Within the country you are visiting, there are expenses such as visa fees, inbound travel agencies, and transportation providers. These might benefit the national economy, but not have any direct positive effect on your holiday destination. They might also be international companies partly with international staff, in which case more leakage occurs on a national level.
Green section: Among your expenses at the destination is the proportion of the accommodation cost that stays with the hotel, the money you spend inside hotel, and at the destination such as shopping, eating, activities, rental, transportation, and guided tours. If you book these products and services directly from the supplier, and if the suppliers are local, chances are that more economic value will stay locally. Especially in low resource communities or destinations with large gaps between rich and poor, your money are more likely to benefit a small local elite or foreign companies because these are usually the only ones who can provide tourism products that live up to international standards. A hotel belonging to an international hotel chain will send profits back to company headquarters and they will be more likely to employ internationally trained and non-local staff. If you buy and consume imported products and brands the import cost obviously leaks out of the local economy also.
Dark section: Needless to say, the size of the tourism leakage depends on the individual case and there are a lot of variables and exceptions. But there has been done research on the area. According to the UNEP (United Nations Environment Programme), for every 100 $ spent by a tourist on a holiday to a developing country, only 5$ remain in the host community. That’s a tourism leakage of 95%. Another report quoted on the same web page says that…
“70% of all money spent by tourists ended up leaving Thailand (via foreign-owned tour operators, airlines, hotels, imported drinks and food, etc.)”
One can only wonder then, how much of the remaining 30% will then stay in the host community?
Why is tourism leakage a problem?
If you made it this far, you might have quietly wondered in the back of your mind, “But is leakage so bad”? “Isn’t it just the same as other consumer products that involve a large number of stakeholders, agents, producers, buyers, whole-sellers, workers, and a mixture of raw materials from near and far?”
Good questions. I was myself wondering just the same when I analyzed the chart. Tourism has the beautiful potential to create local jobs, create cultural pride, share local knowledge and customs, give unique experiences to visitors, and to contribute economically to small local businesses and host families. How many of these benefits will materialize if you stay at an international hotel with foreign staff and management, drink Coke and Heineken, eat McDonalds, and stay at private beaches not welcoming local residents? Not much.
And why is this important? Because it is usually the host community that has to deal with all the nuisances and potential problems related to tourism. These could be…
- Price inflation – everyday goods and services become more expensive caused by tourism development, but local salaries might not increase proportionally.
- Water shortage – tourists use a significantly more water than local residents. This can be a big problem in areas of freshwater shortage. For example swimming pools, bath tubs, air-conditioning, frequent washing of bed sheets and towels, irrigation of gardens, and activities such as golf require great amounts of water.
- Waste management – tourists use and require a lot of single-use products such as shampoos and lotions, slippers, chemicals from daily cleaning of rooms and common hotel areas, batteries etc. At the same time high seasons can attract a great number of tourists to a relative small area creating more waste along with increased pressure on the infrastructure.
- Space issues – your favourite beach could be full of tourists or even worse, it could be privatized, so only the paying tourists get the best beach spots.
- Cultural issues – in a tourism destination where local customs, tastes, and socio-cultural and political sensitivities take a backseat to a hedonistic and bulldozing “tourist culture”, tourists are likely to cause annoyance, worry, and even contempt among local residents. Interestingly, but perhaps not surprisingly, tourists sometimes behave worse on holiday, as they also take a vacation from their normal responsibilities and restrictions from back home.
- Noise issues – tourists don’t have to work the next day, so every night is a new opportunity for a party.
What can you do to make your money benefit the society in which you are traveling?
To make sure your holiday expenses benefit the destination and the communities you are visiting, we want to make a list of things you can do. Remember to follow Beachmeter.com, so you don’t miss this list. If you have any suggestions to add to the list, please feel free to contact us.
Interested in reading more about tourism leakage?
Here are some links for further reading to those interested:
Problems in Paradise – article by Chris Brazier co-editor of New Internationalist. This article touches not only upon tourism leakage, but also a number of the challenges and problems with tourism development in general.
23 CommentsLeave a comment
[…] On top of that, there is the problem of what tourism researchers call “leakage”. For an in-depth exploration of tourism leakage, see our post “Tourism Leakage – This is how little your money contributes locally!” […]
Very informative and interesting article about tourism leakage. I’ll have a look at the related links.
[…] We investigate tourism leakage and see how little of your holiday expenses actually remain to benefit the local communities of your travel destinations. […]
[…] are much more environmentally and socially sustainable than their bigger counterparts. For example, “leakage” is not a big issue in small family-owned hotels. Compared to big hotels and hotel groups, small accommodation providers are more likely […]
[…] will minimize tourism leakage by supporting the local community directly. You will interact with your local host or seller, and […]
One of the topics, which I try to explain to my students. They only see the total numbers, which get published everywhere. Tourism is a billion dollar industry and who actually benefits. In Thailand only 15% of the total income stays in the country… simply not enough, when we go down the list from above… waste, water shortage, accessibility to beaches for locals, wages, etc. The list could go on forever. Truly an eye-opener…
Yes, I agree. I also had “wow!”-moment when the tourism leakage issue was first introduced to me. What it tells me is that the majority of tourists basically don’t travel to get challenged and inspired by new ways of doing things. It’s rather a question of convenience and comfort where food, service, culture etc. should not be too different from what they are used to, which results in the import of foreign staff, products, food, and services.
[…] Most of the money spent for travel doesn’t stay in the local economy–it goes to airlines and hotel and restaurant chains owned by people outside of the community. […]
[…] from having me there? These questions really struck me after our Hawaii visit. I found this great graphic about tourism leakage, showing only about 10% of your holiday money actually gets in to […]
May i know when was this published? and who’s the author of this article?
Hi Bettina. Please check your personal inbox. Have a joyful day.
could you message me the date, and author, and qualifications of this article?
please share with me also as i would love to acknowledge you on my research about tourism leakages.
Medoh from Botswana,southren African
Hi Medoh. You’ll receive an email shortly 😉
same here please share with me too. This is one of the best article i read out.
This is a very powerful and informative stuff about tourism leakage.
Hi! I would love to know the author of this article aswell and the date is was published. This is very informative article, thank you!
Hi Sini and thanks for your interest. You will receive an email with the details of the article.
thank youStudy in malaysia
[…] read this article on tourism leakage (not to be confused with Montezuma’s revenge) if you don’t believe […]
[…] We get it, travel is part of a lifestyle now. It is no longer a luxury, but rather a necessity to live your best life, and of course, to be able to geotag your photos on Instagram (Admit it. Our team here is guilty of it too). However, with travel there can be a large margin of tourism leakage where less than 10% of your hard earned money actually goes back to the local community. […]
[…] evenly-spread economic boost without the devastating cultural and environmental impacts and leakage of Big […]
[…] hotel chains. Most of the profits made by these get siphoned out of the country, which is called economic leakage in […]
[…] you know that for every $100 spent by tourists in developing countries, the local economy only sees about $5? It’s time to change […]
[…] your tourist dollar to causes you support- whatever choice that might be. You can also read up on tourism leakage and why it is important to keep your tourist dollar within the local […]
[…] Leakage rates range from around 40% in India to 80% in Mauritius according to 2011 research published by the German development agency GIZ. In Thailand, the world’s ninth largest tourist destination, an estimated 70% of money leaves the country through foreign-owned tour operators, airlines, hotels, imported drinks and food. […]
As you clearly indicate in your article, there is a large issue to resolve which provides the basis for any social and ecological sustainability in any destination.
Unfortunately, this is not a given and especially in developing countries causes issues as you correctly described in your article.
Today, Hospitality and Tourism providers are giving away 60% to 80% of their profits & the customer ownership and data to no longer sustainable traditional value chains (i.e. collapse of Thomas Cook) or to market-dominating digital value chains (i.e. booking.com). This is not sustainable and needs to be fixed to really start going about ecological and social sustainability tourism development.
As a social enterprise, we focus on this with our public-private partnership & freemium business model.
We democratize technology and make it inclusively available for all the emerging, small, medium and independent hospitality and tourism businesses in a destination.
We keep more tourism spend in the destination and gain back control of their visibility, digital presence, reputation, communication, and distribution.
Hello I cannot find the report from the UN that you cite. Do you have the link and could you please share it with me? Thank you!!
Hi Elena. The cited article appears to have been removed by the UN. So far, we haven’t been able to locate it. This page from Oceansatlas seems to use the same study though.
hi! I am doing a research on tourism impacts of Thailand’s economy. Would you be able to send me the author’s name and the date is was published? Thank you so much!!
No problem. Will send you an email with the information ☀️
[…] Tourism leakage is when revenue is lost from tourism to other countries’ economies. It means the attempt to calculate the percentage of expenses contribute to the local economy of the destination you are visit and what percentage leak to other outside economies. For example, your transportation, accommodation, food and tour costs all go toward your vacation budget. Tourism leakage breaks down those numbers and shows just exactly who is really benefiting from your spending. […]
[…] Uzbekistan.The dominance in tourism of large chains, resorts, and theme parks is a major source of tourism leakage, which is the phenomenon in which traveler spending ends up “leaking” out of the country they […]
[…] The phenomenon of tourism dollars ending up outside the destination country due to foreign ownership is called “tourism leakage.” […]
I would also love to know the author of this article and the date it was published. I hope I am not late to subscribe you thanks a lot.. This is really great.
[…] chart by beachmeter.com shows a breakdown of how tourism dollars are often […]
[…] quando falamos de troca, falamos de conversão, mudança, transformação. Segundo este artigo*, também apresentado pelo Janelas Abertas, estudos mostram que a cada 100 USD gastos por um […]
[…] On my next trans-Africa trip, I want to take up the dozens of offers from locals that we are all too quick to decline for our pre-booked ‘safari’. In doing so I hope to form a deeper collaboration with the local guides rather than being a one-off customer to a large multinational tour company. I want to choose where my money goes rather than leave only 10% left for the local communities. […]
I would also love to know the author of this article
Author: Peter Berg Schmidt
Publishing date: April 14, 2015
[…] locals miss out on the chance to enjoy benefits-they leak out of the local economy a term known as leakage. The environmental impacts of tourism on local communities include noise and air pollution, […]
I’d like to cite this article for an essay on global tourism. What’s the name of the author and publication date?
Author: Peter Berg Schmidt
Publishing date: April 14, 2015
[…] 2014: Bali’s Water Crisis. University of Notre Dame, science.nd.edu.pl [dostęp 16.12.2021].  Beach Meter: Tourism Leakage – this is how little your money contributes locally! [dostęp […]
[…] Ile pieniędzy z turystyki trafia tak naprawdę do lokalnej społeczności? Pomocny artykuł i grafika do zobaczenia tutaj. […]
[…] with fewer resources are the hardest hit. The travel industry on exacerbates this as up to 90% cash spent on traveling to these countries ends up in the pockets of big business that is outside of the very […]
[…] While it may be tempting to book your stay at an All Inclusive resort, I guarantee you that most of the larger resorts and accommodations are owned by massive Western hospitality corporations and your dollars aren’t circulating into the local economy like you think it is and instead goes back to mostly American, sometimes European conglomerates; a phenomenon known as Tourism Leakage. […]