A recent article by a sustainability specialist provoked this post: The author argued that foreign tourism investments, foreign ownership and management of resorts in the Maldives constitute 'tourism leakage'.
This term describes money spent by visitors that end up 'leaking' to external companies and economies.
According to the author, tourism leakage is “unethical, extractive, and ultimately contributes to the perpetuation of colonial ideologies and inequality.”
In my view, this article provides such a naive, utopian views on how a destination should run its tourism economy!
Tourism leakage in the Maldives and other leisure destinations is nothing more than return on capital for direct investments, as well as investments in human capital and knowledge capital.
A foreign-owned and managed resort provides not only good employment to the locals, it serves as a knowledge transfer institution that trains thousands of locals and turns them into world-class hospitality employees that can now sell their skills locally or anywhere around the world.
It invigorates the local economy and provides employment and good living to thousands and millions of locals, irreplaceable income to local small business owners, such as farmers, construction and maintenance companies, transportation companies, manufacturing, etc.
The foreign resort owners/investors carry all the risks from calamities like typhoons/hurricanes, pandemic, local or regional labor or political disturbances, etc. In return, the owners/investors generate profits in good years AND losses in bad years, such as during the three long years of the pandemic.
The author calls this “tourism leakage” to be “perpetuation of colonial ideologies and inequality.” Really? If there are no foreign investors who, naturally, are interested in return on their investments, where would the billions of dollars to build the local resorts and tourism infrastructure come from?
The only thing I agree with the author is the fact that many leisure destinations allow the OTAs and tour operators to take advantage of their destinations by doing very little to educate hoteliers, invest in digital marketing and encourage direct bookings.
Ex. The government tourism authority of Mexico for years had an OTA providing the booking engine on its official website, so was the case here in New York with the local visitors bureau. There are many examples like this one from around the world.
OTAs and tour operators are making billions of dollars in commissions, money that can be spent to improve local staff payroll, professional development, infrastructure, maintenance of properties, local activities, etc.
Leisure destinations should invest in education of local tourism businesses, and invest adequately in technology and digital marketing to encourage direct bookings and achieve a well balanced direct vs indirect distribution.
Max Starkov
Hospitality & Online Travel Tech Consultant & Strategist
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