Top Ten Ways You Can Prevent Tourism Leakage

November 10, 2021
Sofia Schmidt

Top Ten Ways You Can Prevent Tourism Leakage

We are all dreaming of our next trip. The next opportunity to board a plane and jet off to a new location. As we slowly return to the ‘new normal’, some of us have embarked on new adventures while others are impatiently waiting for lockdown requirements to be eased.

We’ve witnessed COVID-19 devastate the global market and our own local economies at home. However grim it may be, the lockdown has sparked an unprecedented interest in ‘conscious consumerism’, and with it, a renewed sense of yearning  to see the world outside of our apartment walls! Combine the two, conscious consumerism and adventure hungry travelers, and we have an opportunity to reshape the travel industry.

What Is Tourism Leakage?

Did you know that on average only 5 percent of money spent while traveling ends up back in the place you are visiting? According to the United Nations, around $5 of every $100 spent by tourists on overseas vacations ends up in the local economy. This concept is called Tourism Leakage:

Tourism Leakage : “the way in which revenue generated by tourism is lost to other countries' economies.”

Tourism Leakage occurs in two main ways. Import, and Export Leakage. In both cases, money ends up outside of the place where a product is consumed.

Import Leakage happens when certain products need to be imported into a place to meet tourist standards. So let’s say for instance that you decide to order a Coca-Cola drink while in Colombia. Since Coca-Cola is a United States based company the money spent on that drink will end up in the bank accounts of the corporation rather than the independently owned food cart owner you purchased it from.

So you’re probably thinking that any reasonable business will place an upcharge on their products in order to turn a profit? Of course they will. But as more tourists come along with specialized tastes, the demand for imported products remains steady. The result? A constant need for business owners to use a portion of their profits to continue to import expensive foreign goods. For developing economies the effects are even worse. The average import leakage in developing countries is around 50% of total revenue earned.

Export Leakage is the second way that tourism dollars leave your destination. In developing countries tourism infrastructure often comes from foreign investors. Local and family owned places just don’t have the money to compete with the larger corporations. When tourism infrastructure comes from foreign sources, this means that the revenue earned is sent back to the destination country, and taxed in that country. Barely any of the benefits from tourism are realized in the economies where it’s occurring.

You might think “well okay, aren’t these huge companies at least creating jobs in the local economy?” Unfortunately, this is rarely the case in developing countries. When local employees are hired it’s often for jobs that require a high degree of manual labor for little compensation. Not only this, but local employees hired for positions that cater to the local population (gardeners, cooks, cleaners) are usually paid out in a currency that is weaker than the currency where the corporation is founded. For example, this means that large companies can get away with paying a housekeeper working in a resort in Mexico much less than what they would pay for the equivalent position in the United States.

Furthermore, in countries where English is not the primary language, it is faster and cheaper to bring in seasonal staff from English speaking countries rather than hiring and training new staff in the local area. This business practice makes higher paying jobs inaccessible for the majority of the local population. It's a prime example of corporate exploitation.

What can we do?

So what can we do to mitigate the effects of tourism leakage? Now that we know more about how our money leaves our destinations, we are better equipped to make changes that will ensure tourism dollars end up in the hands of the local economies who should benefit from it. As a consumer, you have the ability to make the largest impact. Here are 10 of the best ways you can minimize leakage on your next trip:

  1. Shop at the Local Market

Shopping at the local market means that you’re buying food and goods from independent farmers and sellers. It’s one of THE BEST ways to sample the local cuisine and get a feel for the culture. Not only this, but purchasing at a market rather than from a Western style grocery store can save you money. Usually when I’m backpacking, I do my best to keep my expenses as low as possible so I can travel longer. Last time I was in Guatemala, I decided to go to the local market to pick up some fresh fruit for breakfast. A pound of bananas cost me $0.25 USD. In the western style grocery store (of which there is only one in the town), that price is more like $1.00. It’s a small difference to most, but it adds up. It’s a fantastic way to minimize your spending while shifting your purchasing power towards independent vendors!

  1. Eat Street Food

I have said this before and I’ll say it again. Some of the best meals you will eat while traveling will come from street food stalls! Street vendors are using local ingredients to make cuisine traditional to the area and thus limiting import leakage to a bare minimum.

I know many travelers are afraid to try street food for fear of getting sick. I can’t say I blame you. I’ve definitely had my fair share of travel related stomach bugs. But I can say with confidence that none of these instances ever came from food carts. Every time I’ve gotten sick while overseas, it’s been from higher budget restaurants. My rationale behind this is because street vendors are frequented by locals, meaning they have higher turnover of food and things won’t sit out for as long. Higher budget restaurants that cater to tourists might not see as much business in the off season and may have products sitting on their shelves longer to offset costs. You get sick as a result.

That being said, my tried and true method to picking a reliable vendor is as follows: pick a spot that’s fairly busy, make sure you can spot a sanitation station where the vendor is cleaning their equipment. By eating at street food stalls you’re not only supporting small business, but the agricultural supply chain as well. It’s the best of both worlds!

  1. Look for Locally Owned Accommodation

In the land of corporate hotel chains and swanky name-brand hostels, seeking out locally owned accommodation might not immediately come to mind. However, there are loads of locally owned hotel options right under your nose if you’re willing to look for them. Try googling phrases like “independent”, “guest house”, and “bed and breakfast” to narrow your search.

Look what happens when I google “hotels in Cancun” vs.  “Bed and Breakfasts in Cancun”:

Googling “Hotels in Cancun”

Vs. Googling “Bed and Breakfasts in Cancun”:

Based off of an initial search, you can already see just how much the results differ!

As an added tip, if it’s not clear based off of a place's website who the owner is, don’t be afraid to ask if they are locally owned and operated! If not, how is the hotel giving back to the community they’re operating in?

It’s worth mentioning that in some tourism hotspots, take Hawaii for instance, it can be extremely difficult to find locally owned accommodations. On a recent family trip to the islands it was absolutely impossible to find accommodation that was locally owned. In that case, we broadened our parameters a bit to ask “how is this hotel giving back to locals”, “is it eco-friendly”, and “how can we offset leakage in some of the other activities we choose”. In places like Hawaii that have been exploited by the tourism industry it can be very difficult to find local accommodation, that makes it all the more important to minimize leakage in other ways on your trip.

  1. Wait to Book Your Accommodation

If you’re down for a little adventure, wait to book your accommodation until you arrive! Many small hotels in developing countries don’t have the advertising budgets that the more well-known options do so from an initial internet search they may be difficult to pinpoint. While this strategy might not be the best bet for a family vacation, it’s a much more reasonable option for the “fly by the seat of your pants” backpacker types.

Usually when I first arrive at my destination I have a few nights pre-booked in my first hostel. It makes me feel secure and puts my mind at ease after what is usually a long day of travel. From here, I rely on local knowledge to book my onward accommodation. Just be sure to check ahead to make sure the place you’re visiting is not holding any large events during the time you plan to visit and that it’s not peak tourism season.

  1. Don’t Book All-Inclusive Tour Packages

I know it can be tempting to have your vacation planned and paid for all in one go, but all-inclusive packages are some of the main perpetrators of leakage in the tourism industry. On average, 80% of the money spent on things like airfare, hotels, and tours, which are all part of an all-inclusive package, goes to foreign companies outside of the host country.

I’ve rarely seen anything other than corporate tour providers, brand name hotels (I’m looking at you Hilton), and foreign-owned restaurants included in these packages. If you’re willing to put in a little more time and Google power, designing your own trip is a solid way to minimize leakage.

  1. Ask Around

As a general rule of thumb in travel, locals know best! I always suggest asking locals where to eat, stay, and what sights to see. Most locals won’t be spending their time in the areas that cater heavily to tourists, so get outside of the resort bubble (hint hint), for an opportunity to see a more authentic side of your destination and support small business. Take the advice of those who live in the places you’re visiting!

  1. Avoid Buying Brand Name Products

If you’re traveling in a developing country you will likely still see some major brand-name products on market shelves. Afterall, large corporations have managed to infiltrate nearly every corner of the globe. Anytime you’re purchasing a product that you would see back home while on your travels, the money you spend is being sent back overseas.

I completely understand that there are some things we simply cannot live without. I myself have a very specific skincare routine I’m not willing to compromise on. But I encourage you to make a list of all of the products you plan to purchase while overseas. How many of those could you compromise on? Is your brand of soap, shampoo, or deodorant negotiable? If it is, switch to the locally sourced product. If it isn’t, try to bring enough with you at the beginning of your trip. Even if you can find your trusted brand while on the road, chances are it will be more expensive than in your home country due to import taxes.

  1. Couch Surfing

I know what you’re thinking. Couchsurfing? Isn’t that free? Yes it is. And for those of us travelers living out our dreams on a shoestring budget, it allows us to travel longer while adding an element of adventure. When you couchsurf, your host is showing you your destination from a local’s point of view. It gives you the opportunity to experience local life and contribute to the economy in a way that you wouldn’t otherwise be able to if you stuck to the mainstream tourism hubs where many businesses are foreign-owned. When in Rome, do as the Romans do. Or something like that….

  1. Book with Small Tour Companies

Try to find smaller and locally owned tour companies to book with! It seems to be common sense that you would want your tour guide to be from the local area. I was surprised to find out that this isn’t always the case. It’s easy for large hospitality providers to tack on tours with vacation packages. Sometimes you may even see international brands operating tours globally. Taking the time to find a company that is locally owned and operated not only ensures your money stays in the host country, but promises a much more authentic and informative experience!

  1. Buy Souvenirs from Local Artists

Buying souvenirs from independent artists and artisans means that you will have something unique and memorable to take home. Generally if you're seeing the same item sold by multiple vendors there’s a high chance that it’s imported from overseas. So avoid the cliche dashboard hula dancer doll,  and support local business by buying a completely unique piece.

I hope that these tips inspire you to make small changes on your next trip. It’s nearly impossible to completely prevent leakage, but understanding where your money is going is the first step towards making a huge impact.

Sofia Schmidt

I'm Sofia, avid traveler, backpacking pro, and founder of No Fixed Addresses. I envision a world where travelers seek to give more to their destination than they take, and ethical tourism becomes the way we travel. I hope that my guides help you to plan your next trip, and become a more conscious traveler.




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