How to Beat Economic Leakage in the Tourism Industry

In simple terms, economic leakage is when certain monetary transactions leave the local economy instead of staying locally and becoming a benefit to the community. When you consider that much of tourism is beneficial due to much of the profits staying locally which continues a healthy cycle within the economy of each destination. Economic leakage is exactly the opposite which can sometimes be caused by current tourism issues.

What is economic leakage in tourism specifically? It’s when visitors travel to a destination, make travel related purchases, but that money doesn’t actually provide any advantage to the local residents, and instead is received by corporations in some cases on the other side of the world. This is prevalent when you get large travel and tourism companies that try to monopolize the industry in multiple countries. Let’s take a look at some examples:

Large hotel chains

There are hotel chains found worldwide, and as a traveler, you’d expect that the money you spend to stay in one would go towards bettering the local economy. But instead of being a benefit of ecotourism, most of the money gets sent back to the US where the head office of the chain belongs, and much of the money avoids the residents in destination. 

Airlines

It’s hard to pinpoint just one or two airlines, since they all do the same thing, but one of the most noticeable current tourism issues is when an airline will keep all of the money spent within, by sending it back home to their origin country. This again, prevents the profits from staying locally in any of the airports or surrounding communities of where it was spent. 

Of course, these are only two examples of how economic leakage relates to current tourism issues in the industry. So what can travelers do?

Local-owned accommodations

Instead of staying at huge international chains, opt to stay in accommodations that are owned by local residents. This allows the money to go towards the residents’ instead of the international corporations which can help with the economy.

Go off-the-beaten-track

Instead of staying and shopping in tourist hotspots, try to go to more quiet and lesser-known locations at your destination so you can almost guarantee that your money is staying locally instead of adding to economic leakage elsewhere.

Avoid flying

Flying is one of the largest current tourism issues, so if you’re in the position to choose land travel or avoid flying altogether, then you’re contributing to keeping the money you spend on local transportation. Not only is keeping profits in the local area financially advantageous, but it’s also a common benefit of ecotourism. 

Shop and eat locally

Avoid the large chains that have head offices in another country. Instead choose small family run coffee shops or cafes run by independent owners. The money you contribute to their businesses could go towards a families’ grocery bill or sending a child to after school clubs instead of lining a millionaire’s pockets to buy their fourth holiday home.

Now you have some tips for how to better prevent economic leakage as a tourist when visiting travel destinations. If more people follow these steps during their own trips the benefit of ecotourism will increase and more local economies will continue to thrive instead of losing out on important money flow.



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