There are many hidden costs to conventional tourism and they can have unfavourable economic effects on the host community. Often rich countries are better suited to profit from tourism than poor ones. Although the least developed countries have the most urgent need for income, employment and general rise of the standard of living by means of tourism, they are often the least capable to realize these benefits. Among the reasons for this are large-scale transfer of tourism revenues out of the host country, exclusion of local businesses and products.

Leakage

The direct income for an area is the amount of tourist expenditure that remains within its borders. Very often, this is a relatively small amount due to "leakage" - the amount of money that is drained out of an area due to tax payments, profits and wages paid outside the area and expenditure for imports. When tourists demand standards of equipment, food and other products that the host country cannot supply. In most all-inclusive package tours, about 80% of travellers' expenditures are leakage. They go to the airlines, international companies (who often have their headquarters in the travellers' home countries) and not to local businesses or workers.

Local businesses often see their chances to earn income from tourists severely reduced by the creation of "all-inclusive" vacation packages. When tourists remain at the same cruise ship or resort for their entire stay, which provides everything they need and where they will make all their expenditures.This means that there is not much opportunity left for the local people to profit from tourism.’ All-inclusive import more and employ fewer people per dollar of revenue than other hotels (Source: Tourism Concern).

Is the Bagicz area development plan sustainable?

The town of Bagicez is located on the sea shore 5 km from Kolobrzeg (Poland).
In December 1992 the local community Ustronie Morskie took over 200 hectares of former military airport from the treasury. The local council decided to open this area to recreational-tourist investment.
It created in 1995 a corporation of Finnish, German and Polish shareholders. The idea was to combine the potential of partners from many domains: architecture, planning, gastronomy, consulting, marketing, law, etc.
Even though the idea was good and developing tourism would in principle be of benefit for the community. Instead of deciding on the Spatial Development Plan of 1997 was not based on sound environmental and physical planning principles nor economical feasibility.

It included instead the development of the following infrastructures:

1. International airport with an area of 85,58 hectares adopted for planes with wingspan of 24 meters.
2. Landing field for helicopters, place for private "air taxies", magazines, service stations, gas stations, administration and technical buildings.
3. Hotel and harbour complex.
4. Aqua park and swimming pool complex with sea water, therapeutic basins and hotel for 300 guests.

In 2002, the Ustronie Morskie council singed an agreement with the Danish company "Baltic Centre Poland". Within six years the plan should be carried out, with a cost of 350 million EURO.

Questions and answers:

1. What are the risks of this project? In 2004 the works still have not started and experience shows that many of these oversized development projects never come to live. With a smaller investment, small scale tourism could already be improved for the benefit of the local community. Promoting sustainable forms of tourism is more cost-effective and the positive economical results to local inhabitants are higher.

2. In the case the Centre is constructed, employment will be generated (positive) but the "direct income" for the area (tourist expenditure) will be minimum because the benefits will remain with the developing corporation and not with the local population.

3. The impact that these infrastructures will have on the coastal environment would probably be enormous and result in habitat destruction and land degradation. In this way, not only nature is destroyed, but also the values that would attract the visitors and decreasing their number.

Conclusion: Sound environmental management and planning and assessment of the financial feasibility of investments and their impact on nature (considering nature as one of the tourism products) would result in forms of tourism that benefit nature and the local population.

Good practice examples:
Link to Slovenia CAMP Case Study and Estonia Case Study.

Infrastructure cost

Tourism development can cost the local government and local taxpayers a great deal of money. Developers may want the government to improve the airport, roads and other infrastructure. Possibilities to provide tax breaks and other financial advantages which are costly activities. Public resources spent on subsidized infrastructure or tax breaks may reduce government investment in other critical areas such as education and health.

Increase in prices

Increasing demand for basic services and goods from tourists will often cause raised prices that negatively affect local residents whose income does not increase proportionately. Tourism development and the related rise in real estate demand may dramatically increase building costs and land values. Not only does this make it more difficult for local people to meet their basic daily needs; it can also result in a dominance by outsiders in land markets and in-migration that erodes economic opportunities for the locals. Long-term tourists living in second homes cause price rises in their new homes if their numbers attain a certain critical mass.

Economic dependence on tourism

Many countries have embraced tourism as the single most important way to boost their economy. This has made them very vulnerable to anything that negatively affects the local tourism industry (e.g. terrorist scares, military conflicts, impacts of natural disasters) have a devastating effect on overall economic climate. The Turkish economy for example has suffered a lot because of the war in Iraq at the beginning of the twenty-first century.

Seasonal character of jobs

The seasonal character of the tourism industry creates economic problems for destinations that are heavily dependent on it. Problems that seasonal workers face include job (and therefore income) insecurity, usually with no guarantee of employment from one season to the next, difficulties in getting training, employment-related medical benefits, recognition of their experience, unsatisfactory housing and working conditions.