Supporting the local economy
Tourism can bring both positive and negative impacts to a destination. Whether tourism is considered good or sustainable, depends on how well these impacts are management. An important aspect of good tourism is the realisation of creating better places for people to live in and better places for people to visit.
One of the main benefits of tourism for a destination are the economic benefits. Tourism can bring a lot of income to a destination. Travellers spend money on accommodations, food, transportation, souvenirs and activities, creating jobs and supporting local businesses. This economic boost can contribute to infrastructure development, public services, and overall economic growth.
Beware of leakage
Don’t forget that local economic growth is only possible if money spent in the destination, actually stays in the destination. The concept ‘leakage’ refers to money leaving the tourism destination and ‘flowing back’ to other countries, rather than staying within the destination to benefit the local economy.
This can happen when travellers spend money and products and services provided by businesses that are not local to the destination. Leakage can occur in various ways, including:
- Imported goods such as French champagne or Dutch Gouda cheese
- Franchise operations such as McDonalds and Hilton Hotels
- Foreign-owned businesses where the investors and owners live abroad
- International travel companies that take a significant percentage of the travel fee
Leakage reduces the overall economic impact of tourism in a destination and limits the benefits that local businesses, communities and residents gain from the industry.
Leakage in tourism can be measured, although is extremely complex due to various factors and the need for accurate data collection. The goal is to quantify the amount of money leaving a destination’s economy through various channels and doesn’t contribute to the local economy directly.
The government plays an important role in tourism revenue distribution as they are in the position to collect relevant data, distinguish between local vs. non-local spending, calculate total tourism revenue and identify leakage factors.
7 tips to directly support the local economy
Luckily, there are also ways for you to truly support the local economy and provide travellers with an amazing travel experience! It comes down to the choices you make in promoting the destination, creating your itineraries and recommendations to your travellers. How are your customers going to spend their money?
In this article
1. Hire local guides and drivers
The tourism industry is responsible for 1 in 11 jobs worldwide. One of the easiest ways to directly stimulate local employment in tourism is to hire local guides and drivers. Besides supporting the local economy, you’ll also add value to your travel experiences.
Locals are very familiar with their country, it’s history, people and culture. They are the connection between the destination and the traveller and in the position to turn the activity into an experience. Don’t forget to hire qualified and trained guides and drivers for quality, safety and reliability.
Want to learn more?
Read more about involving local guides in sustainable practices.
2. Book in locally owned accommodations
As mentioned before, booking with larger chain hotels will make your money leak back to international headquarters instead of staying in the destination. Directly support the local economy by booking locally owned accommodations.
Know that this does not only benefit the accommodation holder. It indirectly also benefits their local employees, their food providers and all other suppliers. Additionally, the traveller will have a better experience staying in an accommodation where they can learn more about the local culture.
3. Work with local communities
Community-based tourism is the perfect way to contribute to the local economy. The aim of community-based tourism is to directly benefit local communities financially, while travellers experience local way of life. The tourism experiences are hosted and managed by the communities themselves, which results in direct employment and ownership!
When done right, community-based tourism is the ultimate way of good tourism. It’s in the perfect position to create better lives for local communities, to preserve their culture and to offer travellers unique experiences.
Want to learn more?
Read more about our 7 tips to develop community-based tourism.
4. Collaborate with local partners
As a travel business, you are most likely working with a supply-chain in the destination. Partners that help you manage your travel experience, for example transport or activities. When selecting those partners, make sure to work with locals!
Thereby, make sure that you and your partner share the same values. This way you are able to guarantee your customers with a sustainable and unique experience. To offer customers the best possible service, you need to rely on partners that share your values, mindset and mission for sustainable tourism.
5. Buy local souvenirs
For most travellers, travelling is about making memories. Souvenirs are often bought to remind them of a specific travel experience. When buying souvenirs locally, you support the local handcrafters and their material providers.
Inform your travellers to buy souvenirs from local communities and instruct your guides to not take travellers to larger commercial shops. Thereby, make sure to explain about illegal souvenirs made from protected flora and fauna. For example, souvenirs made from poached ivory.
Want to learn more?
Read more about illegal souvenirs.
6. Eat in local restaurants
Eating and drinking in local restaurants and café’s directly benefits the local economy for the obvious reasons. It ensures the money stays in the destination and that the local owner and employees financially benefit. It also directly supports the local farmers and food producers in the area.
Besides supporting the local economy, eating locally is good for the environment. Local food doesn’t have to travel as far, so it reduces the CO2 emissions. Eating in a local restaurant is also a great experience for the traveller, who will be able to taste and explore the local cuisine.
7. Donate to local projects
Besides buying from and employing locals, you can also support the local economy by donating to local projects. You can choose to support a local project in every destination you offer and donate a fixed amount per traveller. Most travellers will want to contribute to a project in the destination they are visiting.
Donating doesn’t necessarily mean financially. You can also donate time or materials and the projects can be both social and environmental. Think about a local hospital, school or women empowerment center where you can contribute to. Or environmentally, you can support a wildlife sanctuary, a vegetable garden or tree planting project.
The local multiplier effect of tourism
If spent money stays in the destination, the economic benefits of tourism are boosted by the local multiplier effect. When money is spent locally you don’t only benefit the person you do business with. It recirculates in the economy:
Directly: By hiring local employees or purchasing local products
Indirectly: By spending money at any local business
Third party: When locals spend their tourism-owned money locally
How will you support the local economy?
As a travel business, you have the opportunity to decide where your money and that of your travellers ends up. By spending your money locally and with the right people, you make sure the destination directly benefits from tourism. You give locals the opportunity to do business, to be more independent and to stimulate economic growth. Support the movement of good tourism: better places to live in, and better places to visit.