Tourism Leakage

Did you know that up to 90% of every dollar you spend on holiday leaks out of the destination you visit?

TOURISM LEAKAGE IN AUSTRALIA AND BEYOND

Can you, hand on heart say you know where your spending money goes whilst you’re on holiday?

A vast majority of travellers can’t. Those cocktails by the pool. Souvenirs bought at markets.  The cultural tour that educated you about the local area. Are the profits positively impacting the local community or leaking out of it like sand through a sieve?

It’s not uncommon that 90% of the tourism dollars spent by travellers 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, traveller’s desires for luxury, comfort and familiarity exacerbate the issue in such countries.

Closer to home there is an increase in Chinese owned wineries in Australia. An article published on Reuters estimates that 20% of wineries in the Hunter Valley are overseas owned. Although they may employ local staff, a larger proportion of profits will leave Australia and therefore not benefit local communities.

This concept of profit generated by tourism leaving the host community is known as Tourism Leakage. Tourism Leakage is also often 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.

Society is becoming more aware of responsible travel which is positive. However, the right questions need to be asked for travellers to be educated and equipped to make the right conscious decisions. We need to be armed with the correct information to ensure that both our direct and indirect actions are positively impacting host communities.

Sunset at Angkor Wat, Cambodia
Angkor Wat in Siem Reap, Cambodia, is a major tourist destination on the Southeast Asia travel circuit.

There are two types of tourism leakage:

EXPORT LEAKAGE occurs when there is international ownership and therefore profits from the tourism dollars you spend leave the country. For example, staying in a Hilton Hotel in Australia means that the profits end up back in the US as it’s an American owned chain.  

Similarly, visiting a Chinese owned winery in the Hunter Valley in New South Wales, Australia, results in profits going back to China rather than staying local.

IMPORT LEAKAGE happens when tourists spend money on products and services that are imported. For example, drinking Veuve Clicquot in Australia results in import leakage. Money leaves the country to pay for the import of French champagne. Alternatively, drinking Janz keeps the dollar local as it’s Australian owned and produced in Tasmania. 

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.

So, how do we drive positive change and help minimise Tourism Leakage? 

Here are 5 top tips to keep your spending local whilst on holiday:

1. Choose local

This is the big one. It sounds simple but being aware is more than half the battle. Do you know who owns the local tour company you have chosen to book with? Sometimes what at first appears to be a local company with local guides is actually internationally owned.

Understanding who owns the company will help avoid revenue by-passing locals via global third-party organisations.

Instead of staying at large international hotel chains find locally owned accommodation. Often community-run guesthouses and smaller hotels offer a much more authentic and personal experience anyway. Staff are often passionate and want to show off their home and local neighbourhood. They tend to share their expertise on what to do that may not necessarily be in generic guidebooks.

Eating and drinking locally is key. Who do you think owns Costa Coffee? Yes, it’s Coca Cola, meaning that any profit made from a coffee bought goes back to the USA rather than staying in the country it was purchased in.

Find locally owned restaurants and cafes, which normally provide a more traditional insight into local ways of eating and are often tastier, fresher and cheaper options. Win, win!

It sometimes means being adventurous and stepping outside of your comfort zone.  Occasionally you’ll encounter a disappointing experience, but the good ones will outshine them and it will be worth it.

Drinking the local tipple is rather important too and ensures money stays within the community. Think Singha beer in Thailand, Tuska in Kenya, Bintang in Indonesia, Heineken in the Netherlands, Corona in Mexico and Coopers in Australia.  Get the drift?!

Shopping local must also be a consideration in order to keep the tourism dollar local.  Shop at markets and local stores and choose locally grown produce. Responsible tourism is about purchasing locally made souvenirs and avoiding mass-produced products. Seek out authentic locally made keepsakes rather than generic ‘made in china’ commodities.

Lastly, choose to use local modes of travel. Different countries will have different types of local travel, everything from tuk-tuks in Thailand to matatus in Kenya. Not only does using local transport impact the local community positively by creating jobs, you also get a more authentic experience of a community. 

Buying local spices in Jaipur, India
Buying local spices at the markets in Jaipur, India

2. Book direct or use a local booking site

Booking sites such as booking.com and Expedia have benefits in that they market local options internationally and to a wider audience than companies potentially can do themselves, but they do take a high % of the booking price as a commission fee.

A way of minimising Tourism Leakage is to contact the service provider direct to see if booking directly on the same deal is an option. This means all the money will go into the owner’s pocket. 

Another alternative is to seek out local booking sites. As more tech start-ups enter the travel industry there are increased options available to help us keep the tourism dollar local. Smarter is an example of a pioneering short stay marketplace featuring many of London’s beautiful homes.

Challenging the status quo of platforms such as USA owned Airbnb, Smarter is created and owned by a London local. This means that profits stay in England rather than leaking out of the country and back to the USA. 

Riparide is another example, it encourages city dwellers to unplug from the daily grind and head outdoors in search of fulfilling moments. This start-up booking platform founded by Marlon Law is Australian founded and owned, ensuring tourism dollars stay in Australia rather than leaking out of the country.

3. Do your research, be inquisitive and ask lots of questions

The only way to get to know the genuine ownership of some service providers is by being tenacious, doing research and asking lots of questions. Researching online is not always easy, it’s often not clear whether the company is locally owned.

Further research is required when searching specifically for who owns a particular company. Sometimes even this throws up blanks. It’s then about going back to basics and picking up the phone or messaging to ask the question direct. 

As responsible travellers, we need to spark up conversations with local people at any opportunity. Aim to learn more about the community, the people and their cultures, traditions, and cuisines.

If it’s possible, wait until you’re at the destination before booking anything because if you ask locals, they will often know best. Ask them about attractions, places to eat, drink, visit, stay, about the history, the people and the stories behind them. 

Atacama Desert in Northern Chile
This trip to the Atacama Desert in Northern Chile was inspired by the locals in Santiago on a recent trip.

4. Use a sustainable travel measurement tool

The above three tips take a lot of time and effort which sometimes isn’t possible. It takes a certain amount of confidence, too. For many travellers, this is where trusted and recognised international tour operators come into their own. If you do decide to book with an international brand the good news is that you can still help minimise Tourism Leakage.

Many tour companies are becoming more focused on sustainability and responsible travel and have created measurement tools as a commitment to the cause.   

G Adventures Ripple Score is a great example of such a tool. The tool was created to demonstrate the percentage of the money each G Adventure tour spends on local services like accommodation, restaurants and transport. 

The Ripple Score simply provides an indication of the Tourism Leakage effect. The higher the Ripple Score, the more money is staying within the local communities.

5. Spread the love

Often, money from tourism is spent in small defined and popular areas. Overtourism has been high on the agenda for a few years now and will continue to be a consideration post pandemic.

If we try and visit less frequented areas, we can spread the positive benefits of our tourism dollar outside of well-trodden obvious locations.  A couple of weeks in one location can be broken up by staying in different accommodation, this spreads the economic benefits.

This also provides the opportunity to meet different local people and to have a couple of different experiences in the same destination. Two holidays for the price of one, now that’s a bargain! 

Feycinet National Park in Tasmania, Australia
Honeymoon Bay is a hidden gem in Tasmania's Feycinet National Park, Australia

A better understanding of Tourism Leakage will help minimise its effects and encourage us all to be more mindful on future travels. As responsible travellers, together we can be the positive change that’s needed.

One conscious decision is all it takes to help move towards a kinder, more authentic world in which equity is more balanced.

This article was written for Wanderlust with a Purpose by Rebecca Thomas, Founder and Editor at Community Back Pocket. Based in Sydney, Bex is passionate about responsible and sustainable tourism in Australia and beyond.

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