Supporting Local Economies Through Tourism
Tourism is one of the world's largest industries and can be a powerful tool for economic development. When managed well, it can bring significant benefits to local communities, creating jobs, generating income and supporting businesses. However, if not managed sustainably, much of the economic benefit can leak away from the destination.
Key Definitions:
- Economic leakage: When money spent by tourists leaves the local economy rather than benefiting local people.
- Multiplier effect: How money spent by tourists circulates through the local economy, creating additional rounds of spending and income.
- Local sourcing: Using products and services from local suppliers rather than importing them.
- Pro-poor tourism: Tourism that generates net benefits for poor people in destinations.
£ Economic Benefits of Tourism
Tourism can support local economies in several ways:
- Direct employment in hotels, restaurants and attractions
- Indirect employment in supply chains (food producers, craftspeople)
- Tax revenue for local governments
- Investment in infrastructure that benefits locals too
- Preservation of cultural heritage and natural environments
💰 Economic Challenges
Tourism can also create economic challenges:
- Economic leakage through foreign ownership
- Seasonal employment patterns
- Dependence on a single industry
- Rising costs for local residents (housing, food)
- Unequal distribution of benefits
Understanding Economic Leakage
Economic leakage is one of the biggest challenges in tourism. It happens when money spent by tourists doesn't stay in the local economy. In some developing countries, up to 80% of tourist spending can leak out of the destination.
Common Causes of Economic Leakage
🏨 Foreign Ownership
When hotels, restaurants and tour companies are owned by international corporations, profits often flow back to their home countries rather than staying in the destination.
🛫 Package Holidays
All-inclusive resorts and package holidays often mean tourists pay most of their money to companies in their home countries, with little spent locally.
🍱 Imported Goods
When hotels and restaurants import food, drinks and other supplies rather than buying locally, money flows out of the destination economy.
Strategies for Maximising Local Economic Benefits
There are many ways destinations can ensure more tourism spending stays in the local economy and benefits local people.
🏠 Local Ownership and Employment
- Support local entrepreneurs to start tourism businesses
- Train local people for jobs at all levels, including management
- Develop cooperatives where communities jointly own tourism ventures
- Create policies that encourage local hiring and fair wages
🍲 Local Supply Chains
- Encourage hotels and restaurants to source food locally
- Develop craft markets selling authentic local products
- Create links between farmers and tourism businesses
- Promote local products as part of the visitor experience
Developing Tourism That Spreads Benefits Widely
Sustainable tourism should aim to spread economic benefits across the community, not just to a few businesses or individuals.
🌏 Community-Based Tourism
Community-based tourism (CBT) involves local communities in planning and managing tourism activities. Benefits include:
- Direct income to community members
- Preservation of local culture and traditions
- Community control over tourism development
- More authentic experiences for visitors
👥 Pro-Poor Tourism Strategies
Pro-poor tourism focuses specifically on generating benefits for poorer members of communities through:
- Creating employment opportunities for disadvantaged groups
- Supporting micro-enterprises and informal sector businesses
- Developing tourism in rural and less developed areas
- Using tourism revenue for community development projects
Case Study Focus: Fair Trade Tourism in South Africa
Fair Trade Tourism (FTT) in South Africa certifies tourism businesses that meet specific criteria for fair wages, good working conditions, ethical business practices and respect for human rights and culture. Certified businesses include lodges, activity operators and volunteer programmes.
Benefits include:
- Workers receive fair wages and proper training
- Local communities share in tourism benefits
- Local products and services are prioritised
- Tourists can easily identify responsible businesses
By 2019, over 70 businesses were certified, creating significant economic benefits for local communities while offering tourists authentic, ethical experiences.
Measuring Economic Impact
To ensure tourism is truly benefiting local economies, it's important to measure its impacts carefully.
📊 Economic Indicators
Key indicators to measure include:
- Number of local jobs created
- Percentage of tourism businesses that are locally owned
- Amount of local products used in tourism businesses
- Distribution of tourism income across different groups
- Ratio of tourism wages compared to living costs
📝 Monitoring Methods
Effective monitoring can include:
- Regular surveys of local businesses and residents
- Tracking where tourist money is spent
- Comparing economic data before and after tourism development
- Gathering feedback from different community groups
- Using sustainability certification schemes
Case Study Focus: Feynan Ecolodge, Jordan
Feynan Ecolodge in Jordan's Dana Biosphere Reserve shows how tourism can support local economies in remote areas. The lodge employs only local staff and is managed by the Royal Society for the Conservation of Nature in partnership with EcoHotels.
Economic benefits include:
- Direct employment for 26 people from local Bedouin communities
- Income for 80 additional families through activities like guided hikes, making handicrafts and providing transport
- Use of local products including olive oil soap, candles and food
- Preservation of traditional Bedouin culture and knowledge
The lodge has won multiple awards for sustainable tourism and demonstrates how tourism can create meaningful economic opportunities while protecting natural and cultural heritage.
Balancing Economic Benefits with Other Aspects of Sustainability
While economic benefits are important, truly sustainable tourism must balance economic goals with environmental protection and social well-being.
Finding the Right Balance
🌲 Environmental Considerations
Economic activities shouldn't damage the natural resources that attract tourists. Sustainable businesses invest in environmental protection and use resources efficiently.
🏢 Cultural Preservation
Tourism that commodifies culture can harm communities. The best approaches respect and celebrate local culture while creating economic opportunities.
📅 Long-term Planning
Short-term economic gains shouldn't compromise long-term sustainability. Planning should consider future generations and build resilience to changes.
Summary: Key Principles for Supporting Local Economies
- Maximise local ownership and employment in tourism businesses
- Develop strong local supply chains to reduce economic leakage
- Ensure benefits are distributed widely throughout communities
- Involve local people in tourism planning and decision-making
- Measure and monitor economic impacts regularly
- Balance economic benefits with environmental and social considerations
- Invest tourism revenue in community development and infrastructure
- Develop diverse tourism products to reduce economic vulnerability
When managed well, tourism can be a powerful force for economic development in destinations, creating jobs, supporting local businesses and improving quality of life for residents. The key is ensuring that economic benefits stay within local communities and are distributed fairly.
