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Where does the money go from tourism?

Figure 1: Structure of the International Tourism Industry (Bennett, Roe et al. 1999)

Structure of the tourism industry

The structure of the tourism industry is summarised in Figure 1. According to the World Tourism Organisation, 698 million people travelled to a foreign country in 2000, spending US$478 billion. International tourism receipts combined with passenger transport currently total more than US$575billion- making tourism the world's number one export earner, ahead of automotive products, chemicals, petroleum and food (UNEP). Poor countries have roughly a 30% share of the international tourism market which has been growing at 9.5% per year since 1990, compared to 4.6% average worldwide (Roe, Goodwin et al. 2002).

There are a number of intermediaries between the customer in the originating market and the supplier of the various products and services in the destination. Unlike some other industries, tourism is marketed internationally, but is consumed at the point of production. Perhaps the greatest foreign influence is customer requirements in terms of what they are prepared to buy in terms of product and assurance of its delivery. Therefore whilst a travel agency may seem mainly responsible for marketing, it actually has a host of other responsibilities to ensure customer satisfaction, such as choosing reliable and trust worthy suppliers who will share the liability of delivering a holiday.

 

Poverty

Millions of poor people live in and by tourist destinations. Poverty is usually judged as the percentage of people living on under US$1 per day. Examples of popular tourist destinations and their poverty rates are shown Figure 2, which shows the severity of poverty in these regions. If we look at one of the most popular tourism destinations in Latin America, Peru, then we find that 49% of the population still live under the National Poverty Rate (World Resources Institute 2004). We believe that Leap Local can help shift the balance of benefits of tourism towards the poor. International tourism market in developing countries is about 30% of the total market, and has been growing at an average of 9.5% per year since 1990(Roe, Goodwin et al. 2002).


Figure 2: Some well-known destinations in poor countries (Roe, Goodwin et al. 2002)

Leakage

Yet out of each US$100 spent on a vacation tour by a tourist from a developed country, it has been estimated that only around US$5 actually stays in a developing-country destination's economy (same source as figure 1). Other more modest estimates of leakage include a study of Thailand where 70% of all money spent by tourists ended up leaving the country, 80% of tourists’ money left the Caribbean, and 40% left India (UNEP). Another study estimates the average leakage to be 55%, rising to 75% in worse cases(Ashley, Boyd et al. 2000). The figure below shows how the leakage happens.


Figure 3: Source -- United Nations Environment Programme http://www.uneptie.org/pc/tourism/sust-tourism/economic.htm

There is another kind of leakage which is also occurring between government and local communities. For the four-day Inka Trail, South America’s most popular hike through the UNESCO-listed Historical Sanctuary of Machu Picchu, a park fee is charged by the government to enter the Sanctuary. These are $50 per tourist and $10 per porter (staff carrying tourist’s luggage and camping equipment). Despite this government income the evidence of government investment in Sanctuary facilities is not apparent and local communities continue to suffer very poor wages. Whilst porters are legally supposed to be paid $40 for a four day trip, many (not just some) are paid less than $20 per trip. A similar situation has occurred in Kenya where it was found that only $7 million of the $300 million generated by park fees was returned to preserving the park.

 

REFERENCES

Ashley, C., C. Boyd, et al. (2000). Pro-poor tourism: putting poverty at the heart of the tourism agenda. No 51. O. D. I. (ODI), ODI.

Bennett, O., D. Roe, et al. (1999). Sustainable Tourism and Poverty Elimination Study, Deloitte and Touche

International Institute for Environment and Development

Overseas Development Institute.

Roe, D., H. Goodwin, et al. (2002). The Tourism Industry and Poverty Reduction: A business primer. P.-p. tourism.