Preserving Paradise: Why tourism organisation management generates more profit and higher life quality for locals—sustainably

How can we rebuild tourism to respect nature and the lives of locals? Banner image: Shutterstock/spatuletail
Preserving Paradise: Why tourism organisation management generates more profit and higher life quality for locals—sustainably

This article is part of a series in which OECD experts and thought leaders — from around the world and all parts of society — address the COVID-19 crisis, discussing and developing solutions now and for the future. Aiming to foster the fruitful exchange of expertise and perspectives across fields to help us rise to this critical challenge, opinions expressed do not necessarily represent the views of the OECD.

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When Samantha Gross, the Director of energy and climate at The Brookings Institute, commented on the concept of a “resource curse” in a Netflix mini-documentary on the future of oil, it was hard to miss the parallel with tourism. “Just because countries have an abundance of natural resources”, she explained, “doesn’t mean they do better”.

In fact, many countries with an abundance of natural resources fare worse: lower GDP, lower incomes, lower quality of life.

In the case of Iran, when oil was flowing in the 1950s, 83% of the profit was going directly overseas to the oil company headquarters in England. Sound familiar? The remaining 17% is not so far from what’s left in destinations with all-inclusive hotels, where most of the visitors’ payments are sent to corporate headquarters elsewhere.

Having a wealth of attractions or a climate that appeals to tourists (or even having millions of actual visitors) doesn’t always translate to local profit or the long-term well-being of the destination.

The problem is two-fold. First, there’s no clear vision of what “success” is for the tourism industry, other than attracting “more visitors than last year”. Second, there’s no destination management, and those few destinations that are starting down this path are generally going about it wrong.

Let’s start with what successful tourism looks like. For decades, governments have been pumping tens or hundreds of millions of euros annually into tourism marketing via destination marketing organisations. The straightforward thinking went like this: if visitors are showing up and spending money, then a marketing campaign should attract more visitors and make the destination more money.

It makes sense—but only up to a point. It doesn’t factor in the tourism version of diminishing returns. Consider the current capacity limits in tourism. There’s a maximum number of visitors allowed in each hotel, on each airline, in each restaurant and even on each golf course. But when one of those things fills up or reaches a consistently high occupancy, corporate headquarters or various investors add more. More hotels are built, more flights are added, more restaurants are opened, more golf courses are created. But what happens when all those new visitors overrun a local beach, or hiking trail, or city center, or the most popular attractions? These are typically the things that drive tourists’ decisions to visit, yet the destination cannot simply add more of them to accommodate the influx of people. So, they just suffocate from too many visitors.

Anyone who has seen photos of overcrowded places knows they look horrible. Overcrowding squeezes out the locals, strains the local resources (from water and electricity to waste management) and is unpleasant for the visitors themselves. Yet this should come as no surprise because that’s exactly the model the industry has created.

Read more on the Forum Network: Profit or Poverty? The democratic imperative for water, sanitation and hygiene for all, by Pedro Arrojo-Agudo, Special Rapporteur on the human rights to safe drinking water and sanitation, Office of the United Nations High Commissioner for Human Rights                   

To this day, when the destination leaders stand up and tell a room full of eager tourism stakeholders that the region is expecting 4% more visitors next year, they get a round of enthusiastic applause. Maybe even a standing ovation. For years, many of the stakeholders clapping in those ballrooms had been fully booked in peak season and so weren’t really sure why they were clapping. They likely thought they were supporting the industry—but were they? 

Since its inception, the goal of tourism around the world could be neatly summed up with one word: “more”. More visitors, more buses, more flights, more cruise ships. Now, destinations are waking up to the fact that tourism can also fall victim to “too much of a good thing”.                    

The rise of the global middle class and proliferation of discount airfares created a tidal wave of tourists. Between 1950 and 2019, the global population grew by 208%; international tourism grew by 5,740% over this same period. With big crowds and mass tourism comes lower quality, congested experiences, high demand on resources and often lower spending per visitor.  

It’s easy to forget that the tourism industry is, after all, an industry. It seems smart for destinations to be factoring in the inherent costs of tourism (water, electricity and waste management), pricing and spending habits into the equation. Disney World showed, in 2016, that it was possible to increase profit even with declining visitors. Many of those same strategies Disney used to achieve this can be easily adopted by other destinations.

If a destination can increase spending by 10%, isn’t that just as good (or perhaps even better) than bringing in 10% more visitors?  

There are even more profound costs to consider, like reef and nature degradation or the local quality of life. If a destination’s weak policies allow visitors to ruin the natural assets, this short-sighted strategy doesn’t leave much hope for the future. Consider a seaside resort that becomes popular while turning a blind eye to visitors breaking off pieces of coral souvenirs. How long can that practice last before the resort is ruined? Ok, so nowhere is openly promoting that divers and snorkelers take coral, but very few are effectively stopping them from stepping on it, or getting too close and accidentally breaking it and killing the reefs. The result in 10 years will be the same: a dead reef.

It’s hard to argue that tourism is successful if it’s not improving the quality of life for the locals.

For any destination that wants to pave the way towards smarter tourism, step one is figuring out what the destination’s vision of success should be. Step two is creating policies and enforcement mechanisms to manage them.  

Tourism management has been a buzzword in the industry for several years, but destinations need to take a smarter approach. Typically, governments have been turning to their tourism organisations and asking them to try to take on more of a management role. One problem with this is that they’re professional marketers, not destination managers, which requires a completely different skill set. The second problem is that their primary job is attracting visitors, so it’s not easy for them to both attract visitors and limit them. If they want to keep their jobs or perhaps get a promotion, chances are that this isn’t going to happen by bringing in fewer visitors.

That’s why every destination needs a tourism management organisation that is separated by firewall from the marketing side. Just like church and state or advertising and editorial.  

The natural state is that these two organisations push against each other. Marketing helps define the brand and attract the most desirable visitors, while  management focuses on defining key limitations, relieving congestion, maintaining a high level of service, striving toward sustainability and improving the local quality of life. Barcelona is one example, with a marketing department and management department that aren’t just located on separate floors, but in entirely different buildings with their own staff and budget. It’s not just possible; it’s the future of smart tourism.

Ironically, if tourist destinations want to feel more authentic and less like Disney, they need to adopt Disney-style management behind the scenes to limit crowds and maintain smart spending, service and sustainability. 

* In terms of how much hotel money stays in the destination, it varies widely. If a visitor books directly with a hotel that orders locally-sourced supplies (and it is locally-owned rather than an international franchise), then nearly all the money stays in the destination. Unfortunately, this category isn't as common as one might hope, especially among the larger, high-end hotels. On the other end of that spectrum, if a visitor books a package holiday that includes a stay a hotel franchise, very little money ever arrives at the destination. In between those two extremes are several scenarios. If fees are paid to online travel agencies instead of direct booking, that accounts for leakage; franchise fees paid by locals to international brand-name hotel chains is also leakage. And, of course, if the management group that owns the hotel is not based in the destination that means a large piece of that financial pie never sees the light of day in-destination, not even to mention profit. Local governments would be wise to consider tax benefits to reward those hotels that have the most local economic impact, and higher rates to discourage those that have the lowest impact. After all, the prime product those hotels are offering—the destination itself—does not belong to them.

Read more in the OECD's report Tourism Trends and Policies 2020

Visit OECD's Tourism Statistics page for more data

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