What Is Tourism Leakage And How Can We Prevent It?

Tourism leakage…? After seven years of full-time travel I had never even heard of the word tourism leakage, but I was shocked to find out what it really means. In short, tourism leakage is the money that ‘leaks’ out of the country that you are visiting as a tourist. But did you know that this is on average 95%, according to the UN Atlas of the Oceans? Yep, you are reading this right… from every $100 USD spent during your holiday, only $5 USD actually stays in the country that is providing you all those amazing experiences. Crazy, right?!

What is tourism leakage?

There are two types of tourism leakage: import and export economic leakage. Leakage is the highest in developing nations, which are exactly the countries that need your money the most.

Sustaying Tourism Leakage Chart

Import leakage

Import leakage happens when a destination needs to import goods and services from abroad to cater to their tourists. Many people are so used to the food and comfort they have at home, that they demand the same products to be available during their vacation. This means that local producers miss out on the opportunity to sell their products to guests. This can range from construction materials to food to English speaking staff. If those things are imported from other countries, the money spent on it will not end up in the foreign destination. Between 40% to 50% of tourism income gets lost due to import leakage.

Export leakage

Export leakage occurs when the money earned from a tourist gets sent back to the headquarters in a wealthy country. Many big tourism development projects and resorts are established by big corporations and foreign businesses. They have the investments and capital to develop something up to the standards that many tourists demand. But the money earned in those establishments doesn’t stay in the foreign country, even if they hire some local staff. All of their profits end up in the hands of the corporations that built it, causing up to 56% of tourism dollars lost in export leakage.

Why should we prevent tourism leakage?

You might think that visiting a foreign country at least gives jobs to local staff in the hotels, restaurants and shops. But since this is only 5% of the total money spent by a traveller, tourism can actually cause more problems than benefits for a developing country. 5% is not enough to cover the costs and negative impact that come with tourism.

1. Tourism demands more maintenance

If a place is flooded by tourists, the infrastructure around that area needs to change too. Think about city councils needing to spend extra money to clean up trash, to build bigger water facilities and to make better roads. There will also be more air and water pollution that needs to be tackled. If you have ever been to a popular beach, you’ll see all the trash that people leave behind for example. Tourists generally use a lot more water than locals, and so do resorts and hotels to water their plants and clean their rooms etc. This can result in water shortage. Most of the money spent on this is paid with local taxes, while foreign-owned hotels only get the benefits.

2. It has a negative impact on local people

In popular tourist destinations prices inflate, which causes everything to be more expensive. Local salaries don’t increase accordingly, causing a big inequality between the locals and the tourists. Locals often lose access to beautiful beaches due to privatization and have to deal with noise from partying tourists. Housing becomes more expensive, pushing the locals out of their homes. As a result, local people often work in the touristy destinations, but can’t afford to live there. You can imagine what kind of effect that has on the local community, and increases the gap between rich and poor. All while the big dollars still leak out of the country.

3. It causes cultural erosion

If you support big resorts and foreign-owned businesses, it leaves little room for the local culture to flourish. Resorts don’t represent the local building style and local way of life. They try to pursue the luxury from home that tourists are used to, but most likely that does not represent the local community and their traditions. Besides that, many travellers don’t respect the local culture and wear improper clothing, often drink a lot and can be loud and obnoxious. This causes the local people to get annoyed with tourists, and not willing to share their rich traditions that make travelling so rewarding. On top of that, they don’t even benefit from the money that tourists bring in, because most of it ends up in the hands of big corporations and franchises.

Tips for travellers to stop tourism leakage

Now that you are more aware of what damage tourism leakage can cause, how can you prevent it? It’s all about being a responsible traveller.

Local market in Cambodia

1. Support local

Eat local, stay local and buy local. The more you choose local, the less leakage occurs. Choose a local restaurant and try the local flavours. Stay in a hotel that is run by a local and represents the local culture. It’s okay to stay in places not as luxurious as you are used to, and will most likely offer you a much better memory and story to tell. Buy local souvenirs and support small businesses. Book tours and activities with locals and learn about their culture through them. Avoid English-speaking tour guides that are sent there by foreign corporations who take jobs away from the local community.

2. Avoid all-inclusive packages

80% of the money spent during all-inclusive packages doesn’t stay in the designated country. On the other hand, booking a local stay only results in 8.8% tourism leakage. Avoid big resorts where everything is organized and consumed within the resort. Don’t book cruise ships or pre-organized tours run by big foreign agencies. These types of holidays attract big groups of tourists, often so big that small local places can’t even accommodate them. Which means they automatically miss out on any revenue that might come from these packages. If you really can’t or don’t want to stay in local guesthouses, at least choose stays that contribute to helping the local community.

3. Book with small, responsible travel agencies

If you don’t want to travel alone or like a backpacker, there are many smaller, responsible travel agencies that try their best to give you an authentic experience. They choose local stays and use local guides to give you an insight into a foreign country. Pick these types of vacations, rather than big tour groups that just show you all the highlights, and put their guests in resorts or franchised hotels.

4. Embrace the local culture

Get out of your comfort zone and embrace the local culture. What makes travelling so special is the authentic experiences you have in another country. Don’t expect a Coca Cola on every street corner, try the local street food stands and learn about the local traditions with a local guide. Enrich your mind by getting out of your comfort zone as much as possible! Pick a local dish that you have never eaten before. Don’t choose fish from the menu in a mountain village, or buffalo steak in a fish community. Local produce supports the local community, so be aware of the local food traditions in a place. Don’t expect everybody to speak English and learn a bit of the local language. You will see the wonders it does to the local people over there if you are open to their way of life!

5. Travel off-season

Places that are open year-round often hire local residents as their staff. If you travel in high-season there are sometimes not even enough locals to cater to the high amount of tourists, resulting in getting people in from overseas to work in popular tourist destinations. Try to travel off-season to distribute the tourism money evenly throughout the year, and to give jobs to locals year-round. Locals will spend their salary in their own country, so your dollars will most likely end up in the right hands when you avoid the overcrowded high-season destinations.

6. Do your research

Before you book your holiday, do some research about the local customs and adjust accordingly. If you want to party and get drunk, you probably don’t want to do that in highly religious areas. Respect the local traditions and ask questions about where your money goes to when you book with agencies or tour groups. Choose trips that use local hosts and tell your travel agent that you want to have authentic experiences. Ask people at your destination which brands and local activities you should support. Travelling is magical because of the unique experiences you can have!

Local woman in rice field in Indonesia

You’ve got the power to change where your money ends up

Being a long-term traveller myself, I see tourism leakage as a big problem in developing countries. My best experiences came from the most local ones. Sleeping in creaky wooden huts with only cold water doesn’t sound so bad if you see the smiles on the faces of the locals that you are supporting with booking their stay. Your money goes directly to their families, and you as a tourist contribute to a better life for them. Besides that, they are proud to host travellers and want to learn everything about you too. What better way to embrace a foreign culture by really getting to know the people and their customs, while you’re telling yours! In my opinion that is what real travel is about; respect and support the local community as much as you can. Learn from their way of life, isn’t that why we seek exotic destinations in the first place?

How Can Sustaying Help To Prevent Tourism Leakage?

Travelling can be a great way to support a country if you make informed choices. It was hard for me to find out what I could do as a backpacker to contribute to the local community before booking a stay. I wanted my money to end up in the right places, but I couldn’t figure out the answers to most of the questions I had to prevent tourism leakage. So I decided to make my own platform: Sustaying. I developed Sustaying to make it easier for travellers to make responsible choices. Our system reviews places based on sustainable and responsible travel, so you will know in advance where your money will end up.

The power is in the tourist’s hands, and you can contribute! Please help us grow by asking your local stay if they want to be added to our database, and we will promote it for free on our channels. And don’t forget to review it after you’ve left 🙂