The Tourism Curse
Like a wealth of oil, lots of visitors can become a development trap. Here’s how to avoid it.
In a remote mountain town in Vietnam, I’m lost looking for the market. A young woman offers her help. As she walks me toward my destination, she tells me what she does for a living: She works under her mother, who runs the kitchen in one of the local hotels. I’ve run into her on her way to buy groceries.
In any of Vietnam’s major cities, a bright woman like her with a high level of English fluency would be expected to study. Here, though, I expect that she’ll stay in hospitality for most of her life. If she works hard, her reward will be moving up the hotel hierarchy, perhaps eventually attaining a post above her mother’s.
Around the world, but especially in countries with major tourism sectors, stories like hers are not uncommon. Tourism is a huge—and growing—global economic sector. According to data from the Organization for Economic Cooperation and Development (OECD), in 2016 there were 1.2 billion tourist arrivals around the world. And according to the World Travel & Tourism Council, tourism made up 10.4 percent of world GDP in 2017. In the OECD area, it accounted for an average of 4.1 percent of GDP and 5.9 percent of employment. Across the developing world, the average is even higher.
There’s reason to think that tourism is a good thing for developing economies. Costa Rica, for example, seems to have jumped up the development ladder simply by getting more people to come check out its rainforests and beaches. But there are a couple of problems with blindly promoting tourism as a development strategy. Beyond potential environmental damage and the fact that profits don’t always go to the communities most affected by the influx of visitors, there is a much deeper issue at play. For a host nation, especially one in the developing world, tourism can become an economic trap similar to other resource curses. If not handled properly, it can crowd out sectors that have more potential for future development. In turn, tourism can leave countries worse off in the long run.
One problem with tourism is single-use infrastructure (a familiar issue in countries whose infrastructure is built around extractive industries). In 1956, Belgium finished its first highway, which ran from Brussels, the capital, to Ostend, where the royal family had its summer home. The highway was constructed specifically for holiday-goers and international tourists heading to London by way of the ferry from Ostend. The new road caused a boom in travel—so much so that it was never quite wide enough in peak season, even though it remained nearly empty in low season. The high-rise apartments, shops, and restaurants constructed along the coast, which destroyed dunes and wildlife, likewise swung from overcrowded to vacant, depending on the season. Despite the investment—and despite the fact that Ostend would otherwise be a prime location for trade among Belgium, France, and the United Kingdom—the city remained a backwater. In the 1980s, facing economic distress, it requested and received special European funding to help with its development.
This story is a familiar one for many vacation destinations. Since tourism infrastructure is used at full capacity during the high season, scaling it back is impossible, and it can be hard to find alternative uses for it during other times of the year. Meanwhile, building a hotel on a prime piece of real estate makes the surrounding area less valuable for other purposes, such as office space, homes, agriculture and industry, or recreational areas for locals. Soon, a destination can become chock-full of purely tourism-related business (think: Niagara Falls) without much room for infrastructure that would benefit local communities.
Making things worse, since major tourism infrastructure is increasingly owned by global companies, profit leaves vacation sites as quickly as it comes in. Alaska, for example, is a major destination for tourism by cruise ship. The boats navigate by night, and passengers visit cities on their itineraries by day. Each day, about four ships stop at Skagway, a historic village of some 2,500 inhabitants at the end of the fjord. I visited Skagway this summer, and to my amazement the village boasts a huge number of jewelry stores. These stores, which stock items that are made in faraway places such as China or the Philippines, apparently pay tribute to global cruise ship companies to be included in their list of recommended shops. That money leaves Skagway as soon as it is spent. So, too, is cash paid elsewhere to hotels and restaurants operated by big global companies.
Another problem is that tourism can discourage individual investment in education. In the OECD area, an average of 45 percent of people aged 25-34 have a college degree. In the OECD countries with large tourism sectors, the percentage is far lower: 43 percent for Spain, 34 percent in Portugal, 27 percent in Italy. Education is a lesser priority still in developing countries with large tourism sectors.
The reason is fairly straightforward. In an economy dominated by tourism (like one dominated by oil), the economic returns on education are low because a large portion of available jobs are in hospitality or in other sectors that don’t require it. Indeed, hotels usually have only a handful of managerial posts, and they will often go to someone brought in from another location. Meanwhile, there are plenty of open spots for cleaners, waitstaff, and cooks—all of which don’t require a college degree. Local entrepreneurs without an education may be able to open a successful business or restaurant. But the odds are against them, since they generally lack the capital to match the bigger international conglomerates.
The disincentive for education leads to further problems down the road. Wages in the tourism sector are never particularly high, and although work is easy to come by during the high season, there is a lot of unemployment between peaks. Further, over a lifetime, due to the nature of hospitality work, increases in salary and productivity are minimal. And when individuals’ income trajectories are flat, the entire community’s trajectory can be flat as well.
Heavy tourism can also prevent competition. Back in Vietnam, I hiked up to a mountaintop and wanted to find something to eat and drink. The few mediocre food stalls there were overwhelmed with tourists, all hungry and with no other choices. Tourists are a captive market—this is why some of the places they visit are called tourist traps—and the drive to produce better quality products and services is low, since most tourists won’t return anyway.
And then, of course, there are the social problems created by an outsized tourist industry. In the developing world especially, sex work thrives, and there is little to protect the population from exploitation. In mining towns, shipping ports, and military bases—where the economy revolves around the constant influx of strangers with a lot of cash to spend—authorities often look the other way or even participate in and profit from exploitation. Most locals, however, are left worse off.
In their article “Urbanisation with and without Industrialisation,” the researchers Dietrich Vollrath, Remi Jedwab, and Douglas Gollin describe the basic economic problem of resource-based development this way: In an economy based on natural resources, cities are consumption-based rather than production-based.
In the West, industrialization—which drove increasing productivity and which necessitated the improvement of infrastructure, services, education, and governance—has been the key to urban economic growth. In much of the developing world, however, progress has come thanks to the exploitation of natural resources. Oil, say, or tourists. When that happens, the economy becomes consumption-driven, with more workers concentrated in services than in manufacturing. In such a system, while elites who own the resource thrive off its spoils, the general population faces stagnation. After all, the profits from oil are rarely used to pay for the infrastructure, governance, and social programs that would be needed for future growth.
Of course, unbridled industrial development has its own problems. Polluting industries, for example, can crowd out all other activity and can cause serious harm to the environment and population. That’s why modern urban development thrives on economic diversity. The better a city is at creating a range of good opportunities for workers, managers, and students, the better it becomes at attracting new industries. The more kinds of industries it has, the greater the chance that one will succeed and that the city will bring in yet more new residents and, yes, visitors, too.
The need for balance is something that people who object to all tourism should keep in mind. After protests in Barcelona, for example, the municipal government has blocked the building of new hotels in the historic city center and has put limits on the number of cruise ships that can dock in the city’s ports. Venice has likewise limited large cruise ships’ access to the city, and citizens have started a campaign against Airbnb. Amsterdam, meanwhile, has limited short-term Airbnb rentals and has imposed an additional tax of 6 percent on all hotel rooms. Such cities should realize that, especially in the developed world, tourism itself is not the problem, just an overreliance on it. It is possible for cities to maintain their own identities when they don’t build their whole economy around welcoming guests.
Japan has proved as much. In Kyoto, the former imperial capital of Japan, I usually take the bus with commuters and Japanese tourists to get around to the different zen gardens I like to visit. The crowd is diverse but mostly local, and the tourist shops are more limited to areas around prime destinations. Overall, it seems, tourists are welcome, but the city is there for its citizens—and investments are made to improve their quality of life. Tourists may enjoy these investments, too, but they are not the main beneficiaries.
Tourism should be thought of as one option in a complement of economic plans. It can be a way to strengthen local identity and to pay for the maintenance of a culture or a landscape. It should not be pursued on its own, though. As much as tourism might seem like a gateway to economic and social development, in too many ways, it can quickly become a trap.