Development Crossing

Corporate Social Responsibility (CSR) and Sustainability

Much of the money that tourists spend when they go on a holiday does not go to the destination country or community. I just found out that this phenomenon is called leakage. The tourist's money goes to the travel agent who sold the trip, the airline which carried him/her to the destination, the investors who built the facility where he/she stays (usually not a resident of the destination country), food that is imported into the destination, operating costs and, finally the employees. Except for the payments to employees most of this money leaks away out of the destination's country and community. I've seen estimates of leakage from 30% to 95%. Even when money goes to the destination's country a lot of it does not go to the local community leaving the community just as poor as it was before the tourist destination was built and sometimes poorer.

Most of the estimates of leakage seem to be sheer guesses which will be high when a social activist does the guessing and low when it is by an industry supporter. Has anybody seen calculations of leakage based on solid economic data rather than estimates?

Two forms of leakage that could be remedied by practicing sustainable tourism management are food importation and management by foreigners (there are others). Tourist facilities import food when the nearby communities cannot provide a reliable supply of safe food of types that tourists prefer. In many cases trained farmers and agronomists can remedy this situation by using modern sustainable farming methods. Are any members of this group aware of training programs for local farmers possibly supported by the destination country, grants from donor countries and/or private foundations or the travel companies?

The other form of leakage is the use of management personnel from the facility owner's home country rather than the destination country. Local residents are frequently hired by tourist facilities only for the most menial, lowest paying jobs. The frequently can't qualify for management level positions with higher pay because of their lack of a higher level of education and also a lack of skills in the languages of the tourists. Here again, do members of the group know of tourism management and language training programs that would help local residents rise above the poverty of their communities?

There are a lot of so-called sustainable tourism companies that try to return more of the tourists' money to local communities but the ones I've read about are small, providing holidays for maybe a few thousand people a year. They may have good intentions but they are probably too small to make more than a dent in the poverty of the destinations they deal with. What is needed is programs that go beyond the capabilities of the cadre of small sustainable tour companies. Are there any good ones out there that are successfully helping communities prosper from the rich tourists in their midsts?

Ron Ratney

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Replies to This Discussion


Capturing the most money from tourism and keeping it in a community is an important issue and of great concern wherever one lives, and your questions bring up lots of good points. One thing I will say is that before one can estimate what sort of leakage there is, I think the definition itself needs adjusting as it is impractical if you try to paint it as every bit of money someone spends the minute they determine to travel outside their home community. However, it might also be impractical as an entire concept...

I prefer to envision leakage as a relationship between actual money that enters a community/economy via tourism to how much leaves--and is related to economies of scale. Why do I think that's a better view? Well, the main reason is that you can't have leakage of money that was never there in the first place. Secondly, it's the only way you can benchmark the effectiveness of local economic development efforts in regards to tourism accurately. Let me elaborate...

You can't have leakage when there was no money due a local economy. In other words, a tourist might book a flight from one country to another and visit several cities or villages...or just one. Leakage--if we subscribe to it as a relationship to particular economies/communities of scale--might occur by loss of revenue at the national level of economy/community if the destination country does not have an airline that can fly the tourist into the country that is owned and operated by people living in the destination country. Even this is a reach when thinking of leakage, because until a tourist arrives in country, no money entered that economy/community of national scale. Acquiring money before it enters a local economy of whatever scale is more about finding new markets, marketing and sales than about retaining money within an economy by my way of thinking. It is certainly about acquiring every possible bit of money from tourism, but to me it isn't leakage if it is within the largest economy of scale--global--because it has nowhere to leak. The money stays somewhere within that economy.

However, since at some point an airline (or ship, auto, train, moped, etc.) enters a nation providing transportation as a service, then the cost of providing that service can considered revenue belonging to communities of scale that it passes through. Thus, you could have leakage from an international flight as the service of flight could be provided by the destination country if it has that capability. Booking a travel package would not to me entail leakage unless the would-be tourist contacted a travel agent in the destination country, or some region or town therein...and then decided to book through someone outside of those economies. Booking is a potential revenue source, and I can see how some might consider it leaked revenue--but since I might belong to the global community and still book a flight for someone in a country I do not live in to a destination I also do not live in, you can't say that selling the idea or framework/structure for a trip or adventure is the sole province of someone from the destination community/economy.

In other words if I sitting at a dinner table tell someone they should go whitewater rafting in New Zealand and they agree that they should...and I subsequently say, "Well, I know a good airline and I'll get you booked" there is no room for leakage because that function wasn't something exclusive to the destination economy/community of New Zealand. That tourist's money was spent somewhere--with the one who booked the trip to New Zealand, me. I provided a tourism service in my own country...that of selling adventure/travel--which means a traveler will buy luggage and clothes and sunscreen from retailers in my community/economy. The money is right where it belongs. I also provided New Zealand a service, again, for which I should be paid and so the money is doubly deserved...confirming that it is, indeed, right where it needs to be.

I say that last part because, again, if the money was never in an economy (New Zealand's in this example), it isn't leaking (except perhaps from the pocket of the future tourist). That tourist might have found a better deal booking through a New Zealand airline or travel agent, but they would have had no revenue coming even with an airline of their own and travel agents galore...if I had not sold that person on the idea or if they never came into contact with that person in order to attempt doing the same.

Simply put, by my way of thinking, you only have leakage if money enters a particular economy/community of scale and it leaves.

Taking this to the tourism marketing extreme, if a billionaire visits my tiny village in some remote region and the impact is so profound on this visitor that they stay, we as a community have accomplished the pinnacle of tourism by convincing someone to relocate and settle in our community, making it their new home. Tourism was effective in bringing considerable wealth to the community and creating an additional community member who will be (hopefully) productive, generate additional wealth in the tax base and spend money in the community over the remainder of that person's life.

If the billionaire goes back to his/her mansion in some other country...that's actually leakage. In that context, you might suddenly find the concept of leakage shocking, since every tourist who leaves an economy/community takes potential revenue with them out of that economy/community. I only say this because many business/economic models aren't as sustainable as they could be, in that they are short-sighted and focus only on or take into account one visit rather than the entire potential of what that visitor/tourist represents. That tourist doesn't just represent the money they might spend on vacation--they are potential new members of that community who bring other potential members, knowledge, personal networks that might in turn benefit the community and so on.

Which is of greater benefit to a community: (1) the tourist who visits once, may or may not return and might tell others of this great place they enjoyed, or (2) the tourist who relocated to a community because it created such an impact on their life that EVERY SINGLE CONVERSATION WITH ANYONE, ANYWHERE THAT INVOLVES WHERE THEY LIVE AND WHY will henceforth be word of mouth marketing for that community/economy?

As to benchmarking, determining leakage, the only real way you could conceivably do it and get an accurate assessment is that you would need to know the worth of every person entering an economy (you get numbers from tourism bureaus and government statistics at the base end of things) over the course of their lifetime. For example, if 1,000 people pass through my economy of some scale (we will say a village in this instance), and each is worth $1 million over the course of their lifetime in terms of what money they will earn (and thus have to spend), then $1 billion dollars minus the amount they spent in the particular economy of scale (village) is the amount of leakage. Thus if each spent $5,000 while visiting, the amount spent is $5 million while the leakage is $4,995,000,000.

Since we aren't probably able to determine what everyone traveling through some economy is worth, I suppose you can, could and probably should use the median income of the visitor's home locale...but even that might take enormous and meticulous research resources/efforts to ascertain. Or not. My point is that leakage is not just the money spent on a booking agent and airline flight, it entails greater potential.

Now, semantics and examples aside, let me get at the heart of your questions. How do you overcome leakage, whatever its definition? You find ways to stop it, obviously. But, again, unless everyone who visits your community/economy of scale stays, you're going to have focus your efforts on the biggest leaks.

You mentioned food, and that is a big one! One of the ways to maximize tourism revenues is to embrace local living economy principles, where agriculture and livestock are produced locally and people buy them locally. There IS a great resource for information and training in this regards. Check out the website for BALLE (Business Alliance for Local Living Economies) at:

Their principles can be applied in scale to any community/situation really. Now, it is important we don't put the horse before the cart, so we should back up and think about whether or not there is a NEED to have or if it is in the best interest of a community/economy to provide food that is not locally/natively available? This leads to backtracking along the marketing strategy path to the point where you ask who you are targeting and why? Is the community even interested in growth that comes from obtaining new community members? If you serve the same foods a tourist eats in their home country/community, you provide something familiar...but the trade off is that you lessen the uniqueness of your own community. The trade off is often necessary, however, all basic things...but I want to reiterate the point that EVERYTHING the community is about, says, does or marketing, and thus has an impact on the amount of leakage and where that leakage occurs.

Ultimately, if you want to serve cheeseburgers in your exotic locale to cater to tourists who like cheesburgers, the way to stop leakage is obviously raise your own cattle so you can produce beef and cheese, grow your lettuce, onions, tomatoes, and make your own condiments. It isn't rocket science, it's just economics--where is the tipping point in cost vs. payoff? A perhaps smarter approach is to consider revamping existing local cuisine to suit touristy palettes. It's the concept of buying an existing, well known local company (brand, website, campground, hotel...whatever) and then remodeling it. Serving cheeseburgers is the equivalent of building a new company from the ground up if the ingredients don't exist locally.

Mull this over. A good, creative chef could be hired by some community to create unique dishes that would appeal to touristy tastes...and turn an economic leak into a unique income stream. If a chef were to take local exisiting unique foods and create something that outsiders want and can't get elsewhere and that is pleasing to their palettes even if unfamiliar, that would have a greater impact on leakage than growing non-native plants and raising non-native livestock. Consider that the efforts of some chefs might impact the economy so greatly that you not only stop a good deal of leakage, but put a spin on local cuisine that generates tourism--and you can see that stopping leakage is a lot like guerrilla warfare. Make your weakenesses into strenghts.

Local cuisine unappealing to tourists? Find creative ways to make it appealing. Hold a contest seeking chefs to help recreate local cuisine in a way that it would appeal to tourists, make a big production out of it, milk the marketing and stop the leak. The contest would draw attention, serve as a marketing tool, and eventually generate recipes that would offset or potentially eliminate leakage. Might different spices and cooking methods applied to local foods create a different result altogether that creates a benefit economically (and for the taste buds)? You never know until you try and have nothing to lose...except potential revenue.

Guerrilla forces are small and lightly armed, which is a weakness. This makes them fast-moving and highly mobile, which are strengths. They are don't have satellites and huge infrastructures which are weaknesses. They have the local populace on their side often and know the territory more intimately, which are strengths. If your enemy has dropped equipment or weapons, take it up and use it or find a way to make use of it so that you turn the enemy's weapons and production against them.

If there are dropped opportunities seize them. If there is a mechanism for stopping leakage, but it doesn't fit just exactly, find a way to make it fit...or create a new mechanism altogether out of pieces/ideas you find.

If you don't have the means to stop leakage as a community of one scale, consider whether a neighboring community has the solution. Your community might have the solution to stop some of their leakage. Expand your leakage prevention measures to the next larger economy of scale (individual, familial, organizational, neighborhood, community/municipality, county, region, state, nation, global...) and you then keep more revenue in the economy--it's just spread about over a larger area. If one family or village or city can't accomplish something on its own, but four or five can, then they should work together and take advantage of that...begin thinking in terms of partnered/regional tourism and not just individual/localized tourism.

Sometimes stopping leakage is simply a matter of changing attitudes and thinking. Instead of viewing other businesses or communities as enemy competition, start thinking of them in terms of supporting competition. If my business doesn't offer a good or service that my competition does, in sending a potential customer to them I am not shooting myself in the foot. I am making myself useful, which builds trust between my business and that person so that they know if they need something I DO OFFER, that they can and probably should consider doing business with me because I have demonstrated that I care about them and the problem they are trying to solve--even if I can't be of direct help in doing so. I have also helped keep revenue in my community of whatever scale if I direct them to a competing business rather than let them exit the economy and enter another while seeking a solution.

Businesses in developing nations are often misguided here and you hear a lot of talk about crushing the competition. Smart people see that for the nonsense it is. Profit is not what business is about, relationships are. Profitability is merely one aspect of business, and not even necessary to the conduct of business. One can operate business and merely break even and there's not a thing in the world wrong with that. Unless you're motivation is greed, of course, or you are desirous of and care about money to the exclusion of all else. Otherwise, anyone, anywhere can operate a business ethically and sustainably--which entails sustainment in terms of not just resources, but relationships--be they shipping methods, hiring costs, suppliers, with customers or with the tax collector.

Lastly, you bring up an important consideration about people resources. DIY. Do it yourself. It ought to be the primary concept for stopping leakage. If there is something an economy of any scale can do to obtain/retain revenues that enter it, it should be done locally. Hire local, grow local, spend local.

Or, create a local company/organization to train, create those managers and staff and thinkers and service providers that are needed. I have put considerable thought into the lack of highly trained or educated business talent in developing economies/communities, and my concept is that a new sort of company is needed. A for-profit company whose purpose is creating businesses and entrepreneurs in developing nations by bringing future entrepreneurs/business owners into developing nations, paying for their higher education and employing them in business/economic development consultancies is what I envision. If you check out my profile here on Development Crossing, I outline the concept a bit.

Basically, if you have company in a developed country offering scholarships/internships to those in developing countries, put them to work part time as they go to school over the course of a few years where they not only learn how business is conducted in different countries but can offer unique insight into how they conduct business and the unique problems facing communities in their area. The consultancy would take advantage of the stronger economy of the developed nation, focusing on helping strengthen smaller communities via offerings of marketing, ecommerce/IT skills, providing services, human resources consulting, process streamlining, offering expertise in various fields, creating a for-profit business. Those profits would go towards paying for the education of foreign students who would not only get an education, but practical business experience. Then, they would go back to their home country and open a small business, thanks in part to a business grant from the consultancy firm. Thus, they would hire and train people locally, and the consultancy would take on more interns/exchange students.

Corporations are great at turning profits--that is a strength. They aren't always very ethical as a result and profits go to shareholders, and that is a sort of weakness where sustainability is concerned. However, consider that a business whose goal is to generate profit and use that profit to build/develop communities and create educated/experienced entrepreneurs (thereby not having profit to pass to shareholders unless you consider the shareholders to be communities) turns that weakness into a strength. A consultancy that focuses on economic development for rural, island communities in developed nations will generate wealth, create expertise...which then can be channeled directly into places it will do the most good.

Communities wishing to stop leakage should be looking for ways to do just this, by finding their brightest and most driven and getting them into higher education with the specific goal/intention of them coming back into the community. Those in developed nations seeking to aid others should consider creating a business whose function is the practice of business and generating knowledgeable practitioners of economic development/business for developing regions through the very practice of economic development.

Anyway, that's just my two cents on the concept of leakage. I wish I knew of actual programs such as you are seeking out, but I'm not sure there are any of large scale out there. It's likely there is, I just haven't come across any yet. Most programs seem aimed at helping via aid to developing regions rather than actually approaching the development of resources, people and a region as a functional business goal that can generate profit. As such, I think while good intentioned, they're getting it all wrong from the get-go.

Great questions and it's given me a lot to think about. Sorry for the long-winded and rambling post, but I had a pot of coffee and some free time...

Good luck, and please drop me a line or let me know what you learn about stopping leakage. I'm very interested in economic development and sustainability. I've been doing considerable thinking in that direction and have ben working on my own sustainable ebusiness framework as a result that makes use of the concepts and principles that have popped into my mind. If you are interested, you can find it (and it is a work in progress) at:

Enjoy your day!

Sean Wilson
I’m uncomfortable with your definition of “leakage” since it can result in defining the concept out of existence, particularly in situations where the economic losses of local communities is greatest. Hemmati and Koehler (Sustainable Travel and Tourism pp25-29, 2000) state that “Financial leakages in tourism occur when revenues arising from tourism-related economic activities in destination countries are not available for (re-)investment or consumption of goods and services in the same countries.” I’ve underlined where the income under consideration differs from your definition. The authors seem to consider all revenues, not just those that actually show up in the distinations.
The phenomenon of leakage is most cogent in situations where the tourist buys an all-inclusive holiday package. TUI Thomson is a large integrated travel company in the UK. It owns street level travel agencies, airplanes and hotels, mainly around the Mediterranean Sea. On their web site, I looked for all-inclusive holidays in Kenya and found one at the Serena Beach Hotel near Mombasa for 1054 pounds. This includes round trip airfare on Thomson Airways, seven days at the hotel with breakfast, but not other meals, included and transfers to and from the airport. Many people who take such a trip are primarily interested in going to a warm place in the winter with a white sandy beach, good food and accommodations and attentive service. They can spend their entire week without leaving the hotel which is fenced off from the rest of the country. The hotel will probably arrange bus tours outside the fence but in many cases the passengers don’t have to leave the bus and enter the strange and exotic surrounding country.
A prospective traveler would walk into a Thomson travel office, look at the array of brochures and tell the agent which holiday he/she wants. The agent would say “fine” and ask for a deposit of a few hundred pounds with the rest due a few weeks before departure. The agent may also prebook bus tours and possibly meals not covered by the inclusive price. The only money the traveler would have to spend at the resort would be for liquor and tips (and sometimes not even for liquor). Hypothetically, Thomson may have found that the locals at the destination don’t maintain their vehicles and drive like maniacs so that the company will own the busses they use and employ expatriate drivers from somewhere else in the world. The hotel will hire locals as groundskeepers, housekeepers and kitchen staff but employees who have to communicate with guests will be from out of the country as well as those with management responsibilities. The farmers in the vicinity of the hotel are illiterate stone-age subsistence farmers and cannot supply the amount of food needed by the hotel. In addition, enteric diseases are common from bad sanitation on the farms. Accordingly, the hotel is forced to buy food and supplies like paper goods from outside the country.
Overall, the tourist pays almost the whole cost of the holiday before leaving his/her home community and the hotel uses only a small amount of the money to pay the local help. Since the tourist spent almost the entire cost of the trip before ever leaving home, your definition of leakage would estimate it to be barely above zero. According to Hemmati and Koehler’s definition, the leakage would be almost 100%. Which definition more accurately estimates the financial benefit that people in the destination community received from the tourist’s expenditure?
The issue of a resort buying food from outside the country rather than locally is tied up with the larger problem of malnutrition and starvation in third world countries. Some very smart and dedicated people have been working on the problem for several generations so I don’t think we’re going to remedy the situation by tossing around a few off-the-cuff remarks. I’m aware of several efforts to promote the use of locally grown produce but one has to consider that if a country is unable to produce enough food for its citizens because of problems with agricultural technology and economics, any successes in increasing food productivity and safety should benefit the citizens first rather than tourists who are probably well fed anyway.
I’m by no means an expert in agricultural technology and economics but I would like to bring up some agricultural history from the United States. Certainly third world countries bear little or no resemblance to the US as it is now or as it was in the past but the country’s experience with agricultural colleges, research stations and extension service may have some useful lessons for improving agriculture in third world countries. In the 1860s congress established colleges in every state to teach agriculture, mechanical arts, military science and liberal arts. They were funded by endowments of public lands (state and federal) which could be sold or used for development and thus provide money for construction and operation. As the railroads were built across the country, the federal government, which owned the land, allocated alternate one-square-mile tracts on both sides of the railroad rights-of-way to the land grant colleges. The program was a great success and over the years millions of young farmers were trained in the latest agricultural technology and economics. The colleges still exist and have become very large universities. One of the functions of the land grant colleges was to establish agricultural research stations in each state. The task of the stations was to study and develop agricultural methods appropriate to the conditions in each state. Lastly the colleges established agricultural extension services which sent teachers all over the states to train farmers in their home communities. One of the functions of the extension services was the creation of 4-H organizations for children where they were taught things like animal husbandry. The children would raise animals and display them at fairs where they could win awards. Our family was not engaged in agricultural and we didn’t live in an agricultural area but, nevertheless one of my sons belonged to a 4-H group specializing in pigeons, my daughter belonged to a group specializing in rabbits and my granddaughter belonged to groups specializing in goats, rabbits and chickens. The walls of her room are covered with blue ribbons and trophies that she’s won and there are boxes under her bed filled with more.
The outcome of all the education efforts is that the United States is now the largest producer and exporter of agricultural products in the world. This is in spite of the fact that large areas of productive agricultural land are arid or semi-arid and are subject to searing heat in the summer and temperatures well below freezing in the winter. Also the productivity is very high both in terms of yield per acre and per man-hour. In the interest of full disclosure, I should point out that procedures recommended by the state and federal departments of agriculture probably contributed to the dust bowl phenomenon during the 1920s and 1930s which led to the abandonment of many farms in the middle of the country and the migration of the farmers to California (see “The Grapes of Wrath” by John Steinbeck). Also as settlers moved into the areas west of the Mississippi River they forced the indigenous Indians onto reservations.
The issue of employing managers from outside the destination countries could be remedied by establishing training programs in hospitality management and language skills both at public and private institutions. An example of where this is being done is at the University of the West Indies with campuses in Jamaica and Trinidad. However I have to admit that I don’t know how successful they are in placing their graduates in management positions at the internationally owned hotels and resorts in the Caribbean, particularly positions with the opportunity for advancement to senior management.
This post is already too long but I hope at least a few people read it and feel called upon to comment on it.

You must forgive me if I did not explain my concept of leakage clearly or as well as needed, but in the example you mention, the amount of leakage by my definition would not be close to zero, but near the other end of the scale. Let me attempt to elaborate using it.

The booking of the trip occurs outside of the destination country, and the agency both earns and deserves revenue for booking it. That is due the agency, and cannot be attributed to leakage. Though. perhaps it could? The booking could be done by a travel agency owned by someone in the destination country, operating in the tourist home country I suppose.

Even though the entire fee is paid in the booking agency's country, we can see that the travel (flight) and accommodations (hotel) COULD be provided by the destination country, as could any other activity or expense incurring activity of tourism once the tourist has arrived in country--thus, all of that by my definition is leakage. The worth/value of those persons is also leakage upon leaving the destination economy by my definition.

Even though the money was never exchanged in the destination country (and here, where I mention monies entering/leaving an economy of scale may be where the confusion lies). there is a direct relationship with goods & services that COULD BE PROVIDED by the destination economy of scale (destination country) to the definition. I may not have made that connection clear enough, but in my description, I mentioned that international flights, since they could be provided by the destination country, constitute leakage if not provided by the destination country.

I understand when I mentioned monies entering/leaving an economy of scale it appears one way, but when taking into account the potential, it covers the other aspect of your example. Thus, while TUI Thompson owns the agency, airline, hotels and so on, the flight and accommodations COULD be provided by those in local economies, and thus under my perception of the concept, are leakage. Actually, it's almost the exact same definition as Hemmati and Koehler offer, but that I use the additional consideration of potential wealth/contribution of the tourists themselves over the course of their lifetime.

There is that potentiality that plays a factor in the concept as I see it, and there's a flip side to it. If there is a potential opportunity for revenue that is beyond the capabilities of an economy of scale to incorporate it, can you really call it leakage?

The concept of leakage is basically an explanation for economic/business potential and failures that lie almost entirely in the realm of marketing functions. Everything from the hiring of locals or expats, importing food versus using local food sources is a marketing function for someone, be it the TUI Thompson company or the host nation's tourism department or the destination community or its farmers and workers. Just as employees are internal customers (making their hiring/firing a marketing function called human resources management), companies building resorts in a developing country are customers as well. They are buying into the destination country, the destination country is selling a product. How well or poorly the destination country's government presents and sells their product (and how efficient their business process for doing so are) is all tied into it. Leakage appears as an attempt to explain inefficient or poor marketing in a process with a focus on tourism as an industry. You could apply the same concept to any area of business or to virtually any industry and the principles for finding suitable strategies or solutions, applying fixes for failing or inefficient processes are pretty much the same--only the details differ. It's not a particularly ground-breaking or new concept, just a new semantic spin/term like crowd-sourcing and social business.

It seems to me that leakage is a consideration (not sure measurement is the right thing here) of streamlining processes involved in and maximizing profitability of some marketed economy of scale. Leakage speaks of lost revenue and potential revenue. I just take into account not only the money spent by a tourist in one episode of tourism, but the amount they could spend/contribute over the course of their lifetime.

Tourism could be said to be the sum of functions and processes around providing goods or services to non-stakeholders in some economy of scale. This means that I view a visiting tourist like a one-time purchaser, which the destination economy has the opportunity to turn into a recurring subscriber (repeat visitor) or potential shareholder (resident). So at the far end of the leakage scale, there is the elimination of leakage by conversion of a tourist to non-tourist.

I'm sure there are a myriad ways one could look at the same functions and describe the same results. As to defining the concept out of existence, I can see how it would appear that way, and that is exactly as I personally think it should, since you can at one point stop all leakage. It's not hypothetical, you can stop all leakage from a tourist at some point by converting them to a resident, and it happens constantly around the globe, every day. Can you stop all leakage from every tourist? Probably not, which is why tourism continues. But just because it creates a huge number for potential revenue lost, does not mean my concept is less valid than Hemmati and Koehler's offering. I would rather demonstrate to someone a truer scale of potential versus actual revenue, as I think doing otherwise is doing someone a disservice by providing them with fluff and feel-good notions of success rather than simply putting things in proper context. My version simply takes into account the point of conversion from external customer/non-stakeholder to internal customer/stakeholder in a community/economy.

I'm no economist though...and I am biased towards economic development that focuses on growth as well as finances. I understand not every community views tourism as something with an end goal of garnering more members of/to/for the community. If a community seeks growth (not just financially), however, I cannot personally see how they could in good conscience ignore the potential of every tourist in completeness and believe their strategies, plans and actions were based upon any meaningful metric.

Oh, I'm a native Oklahoman and always appreciate it when someone is aware of the state's history and the complicity of the government through its policies in the creation of the Dust Bowl. Like many Oklahomans, my family history bears the marks of that era and so reading about it is far less interesting than the family stories passed down. I can still hear them first hand from my great uncle who lived through it and is still hanging in there. Seeing him walk through my father's garden and hearing him remark on how so many families would not have survived had it not been for the simple turnip and collard greens, hearing his stories and those of other relatives (who have since passed on) are things that have given me an entirely different perspective of agriculture, life and historical context. Subsistence farming is not something long-gone and forgotten in family life even in America.

I agree with you about the issues surrounding agriculture, starvation, and the relationships between developed and developing nations for the most part. Even concerned as I am about sustainability and environmental issues, and recognizing the impact global trade has had on many populations...I still think a lot of developing countries create a lot of their own problems and don't take enough responsibility for them. Someone allowing an outside company to create a hotel/resort which generates considerable wealth for a non-resident company but does little for the local economy is doing their countrymen a disservice, probably for personal/selfish and self-serving gain. I'm not absolving the company doing such a thing for being morally and ethically decrepit either, but I'm saying that developing nations often foster, tolerate or even create their own problems.

I agree it's unlikely tossing around ideas, definitions and concepts will necessarily change something but it is a good start.

I was glad to read of your mention of the University of the West Indies. I had previously discovered their website while researching island economic development some time ago...always nice to hear when others have discovered a gem of a resource. I enjoyed reading a couple studies they produced and intend to dig about in on their site more from time to time to see what new and interesting things they might produce.

Anyway, I have rambled on again when I merely meant to point out that as I see it, leakage in your example would be in agreement with what Hemmati and Koehler would seem to suggest--plus the additional leakage that would occur after the tourist left home due to loss of the long-term potential that tourist could contribute to the visited economy if he/she became a permanent stakeholder or non-tourist.

Great information and discussion, though. I'll try to keep quiet now and watch the discussion...


Have a great week!
At the risk of driving a good discussion right into the ground, I would like to add a few thoughts. You are basically viewing the economy of tourism from the viewpoint of the service provider. I find the issues easier to understand from the viewpoint of the tourist who consumes the services. When a tourist steps off the plane at his/her destination he/she starts accruing benefits (mostly intangible) of his/her presence at the new location. He breathes the air of the destination with its exotic smells, he absorbs the warmth of the sun and hears the sounds of the life of a distant culture. He then accrues the benefits of the pleasures of experiencing the luxury of his accommodations, the gastronomic delicacies, the powdery white sand between his toes, the bracing massage of the ocean's waves. Although the best things in life may be free, our traveler pays real money for the benefits he's accrued. The amount of money is set by the marketplace and is what the tourist agreed to pay for his trip. Considering only the benefits accrued within the tourist destination, the next question is: whose pockets do the payments go to? The leakage is that part of the payments that do not go into the pockets of the people living in the destination.By looking at potential values you muddy the waters. Potential effects are not actual effects and may never become actual effects. When you walk into a casino there is a potential that you will walk out with a million dollars more than you had when you walked in. But that is unlikely to happen. I prefer to look at things that are actually in the real world, not there potentially.

However, enuf said. Let's see if any other members of this forum have anything to say.

It has been interesting reading the dialogue between you both, Ron & Sean. Maybe I can add a little to the dialogue from the suppler perspective.

In 2002 I was asked by the IFC (part of the World Bank Group) to look at ways the Internet could be leveraged to help small local owners of accommodations in the Mekong region to sell to the global market. Tourism was growing rapidly but distribution was uneven. Most travellers ended up accommodated in the larger foreign owned facilities, and local people were missing out. The reasons varied e.g. size (too small for the bigger groups), pricing (too cheap to support the types of commissions needed by the global marketers, lack of business skills, lack of infrastructure, etc. but the consequences were quite dramatic and it was clear that the locals would need some help if they were going to realise the benefits.

Our efforts focussed around a few things. First was to target the independent traveller market as the market of choice for the local small players (they mostly try to book direct and are more likley to enjoy the smaller local type accommodations). Second was to use the Internet as our distrinution channle of choice. Thirs was to overcome the "last mile" issues in dealing with small local suppliers (the skills, resources, infrastructure issues etc.) by having a local representative domiciled in the destination to do all those things the locals struggled with. The work of this local representaive often starts with taking digital photos etc.....but can be a range of things. In the Solomon Islands for example the local representative has a HF radio base station and radios accommodation providers in the outer islands to pass on bookings. For travellers the booking experience is a seamless one ....... but the ongound work needed to make this a seamless experience is mostly quite challenging.

The results have been quite impressive. In the 3 1/2 years since spinning this business off from the IFC we have grown to a point where we now have local representives (franchisees actually who own and operate the local booking business) signed in 300 destinations in over 100 mostly emerging economies. We process thousands of bookings every month and the traffic grows consistently by around 10% per month.

Two things we are very proud of. First, many of the smaller accommodations on our network had no online sales presence before we came along, and for many of them today we represent their major source of bookings. Second, as we work as a type of ASP with respect to the franchisees in our network (see between 95 and 98% of all income generated from bookings made via us stays in the destination and is shared between the local accommodation provider and the local franchisee.
It sounds as if you had a great idea that worked out well in the real world. You've created a series of niche hotels in a number of communities and within those niches the foreign exchange leakage is minimal. The hotel owners, their employees and suppliers benefit far more from the tourist trade than they would if they worked for a large foreign-owned hotel. However, I would guess that in each community where the niche hotels operate they probably provide only a small fraction of the total accommodations. The niche hotels certainly decrease the overall exchange leakage to some extent in their communities but for the community as a whole, dominated by the foreign-owned chain hotels, the overall leakage is still high.

I sometimes compare the economics of operating a large hotel in a tropical paradise with the costs of operating a similar size hotel in a northern city like Boston (where I live) or New York. The tropical hotel doesn't have to provide heat in the winter and has large spaces where they don't provide air conditioning. They pay their help the low prevailing local wage, don't have to provide much guest parking, and their local taxes are low. The Boston and New York hotels pay higher local prevailing wages; they provide heat in the winter and air conditioning throughout the building during the summer, and pay high taxes. The operating margins in the tropics must be much higher than they are in Boston or New York. Instead of sharing their profits with the local people who, after all, help in making the hotel a success, they take the money home and put it in the bank or pay dividends to stockholders. What does this say about the social responsibility of the tropical hotel owners?
Thanks Ron for bringing this to the group. I have lived in South Africa for 6 years and every year end I would take a holiday to Mozambique Maputo. You won't like what I am going to tell you guys. Towards Christmas and year end the Mozambican and South African border post have queues which last for ever clearing people entering Mozambique.96% of these travellers will be having cars and trailers carrying food, beverages and beers and even sleeping equipment into Mozambique. Mozambique has wonderful sea food, hotels and even South African shops selling South African food and beverages. What this means, is that the Holiday makers will not buy anything from Mozambican shops apart from entrance fees at night clubs for the smallest number of those who like night entertainment in Maputo. They pollute the environment which will then be cleaned by Mozambican cheap labour paid by the Government. Can someone explain to me how the Mozambican Government and the poor community benefit from tourism .To make matters worse the packages are bought from international travel companies and encouraged to go through South Africa.

CGICE TRUST Southern Africa Rural Tourism Development is going to address all these issues mentioned in these articles. We need to create programs which benefit the poor communities.CGICE Rural Business School is looking for expert donations in designing training modules and rural tourism development projects which benefit everyone,including our poor communities.This is a sensitive area of discussion we can write books on it lets all campan for anti-corruption and anti- poverty and work together for a sustainable development.
There are a few things that confuse me about the annual year-end parties that South Africans have in Mozambique. What is the attraction that brings South Africans to Mozambique rather than partying at home? Why does it only happen around year-end? Why do South Africans buy their party supplies at home rather than in Mozambique? The whole phenomenon reminds me of "Spring Break" in the United States. Colleges all over the country have a one-week holiday in the spring when students head for the city of Fort Lauderdale, Florida to party 24/7. The city doesn't mind the money that the kids bring in but they definitely don't like the disorder during the week and the mess that has to be cleaned up later.


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