economic impacts of tourism in maldives

Maldives’ Economy Records Strong Recovery Amid Existing Weaknesses and Global Challenges

MALE’, April 13, 2022 — Maldives’ economy, buoyed by a strong rebound in tourism, is projected to grow at 7.6 percent in 2022 and fully recover to pre-pandemic levels by 2023, but the country’s high debt levels are a major concern, says the World Bank in its twice-a-year regional update.

Released today, the latest South Asia Economic Focus Reshaping Norms: A New Way Forward  projects the region to grow by 6.6 percent in 2022 and by 6.3 percent in 2023. The 2022 regional forecast has been revised downward by 1.0 percentage point compared to the January projection due in part to the impacts of the war in Ukraine.

Countries in South Asia are already grappling with rising commodity prices, supply bottlenecks, and vulnerabilities in financial sectors. The war in Ukraine will amplify these challenges, further contributing to inflation and deteriorating current account balances.

Also released today as a companion piece, the latest Maldives Development Update underscores the growing momentum of the economy supported by a sustained recovery in tourism, while identifying potential downside risks to growth. Maldives is expected to see strong economic growth in the medium-term, with real GDP expected to grow by 10.2 percent in 2023.

But the country faces vulnerabilities due to its large imports of fossil fuels as share of GDP, a reduction in tourists from Russia and Ukraine, and a high debt burden. Further increases in global energy prices may cause an additional fiscal burden. Tourism could be adversely impacted by a persistent reduction in Russian and Ukrainian tourists and new waves of COVID-19 infections. However, there is some upside potential from increasing tourist arrivals from traditional source countries and new markets.

“While the strong rebound in tourism is expected to boost Maldives’ economic recovery, with real GDP growth projected to return to pre-pandemic levels by 2023, prudent debt management remains critical to improving fiscal sustainability,” said Faris H. Hadad-Zervos, World Bank Country Director for Maldives, Nepal and Sri Lanka. “A high dependence on tourism and limited sectoral diversification also remains a key structural challenge. We continue to support Maldives in leveraging digital technologies and investing in renewables to achieve a green, resilient, and inclusive development path.”

Another challenge the region faces is the disproportionate economic impact the pandemic has had on women. The South Asia report includes an in-depth analysis of gender disparities in the region and their link with deeply rooted social norms, and recommends policies that will support women’s access to economic opportunities, tackle discriminatory norms, and improve gender outcomes for inclusive growth.

Sources: World Bank Macro Poverty Outlook and staff calculations.      

Note: (e)=estimate, (f)=forecast, * = excludes Sri Lanka. To estimate regional aggregates in the calendar year, fiscal year data is converted to calendar year data by taking the average of two consecutive fiscal years for Bangladesh, Bhutan, Nepal, and Pakistan at 2015 constant US$, for which quarterly GDP data are not available. GDP measured in 2015 prices and market exchange rates. Pakistan is reported at factor cost. Afghanistan is not included in the regional aggregates as Afghanistan is not producing statistics so there are no estimates or forecasts beyond 2020.

Last Updated: Apr 13, 2022

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Opportunity for sustainable tourism to accelerate Maldives’ sustainable development

June 30, 2019.

--- Image caption ---

Speech by Ms. Akiko Fujii, Resident Representative of UNDP Maldives at the IMTM Sustainable Tourism Forum, held in Male', on 26 June 2019.

·      Managing director of International Maldives Tourism Market (IMTM) Ms. Hawwa Shiuna,

·      members of the tourism fraternity,

·      state and local actors and other esteemed guests, 

First of all, I would like to congratulate IMTM and its partners on successfully organising today’s forum on Sustainable Tourism Development, an issue of increasing significance to the Maldives! 

I want to thank the organisers for giving me the opportunity to speak at this function, and share my thoughts on how sustainable tourism can accelerate Maldives’ sustainable development.

As a new comer to the Maldives, just like other foreigners, I was instantly attracted by the country’s natural beauty. I am also fully aware of Maldives’ outstanding economic achievement. Maldives has doubled GDP per capita from USD 4,460 to USD 9,760 between 2007 and 2017 and has transformed from a low to middle income status in a matter of decades. Needless to say, the tourism has been the central driver of this amazing economic achievement. 

However, we have also witnessed the volatility of the sector, which negatively affected Maldivians in recent years; the global financial crisis of 2007, and the global mass coral bleaching event of 2016 to name a few. Each of these instances created ripple effects in the lives and livelihoods of every-day Maldivians involved not just in the tourism sector, but also the many subsidiary industries that support it. 

It’s time for us to think earnestly about the development of the tourism industry that is more sustainable and resilient, but also act as a catalyst to unlock local socio-economic development in an integrated and transformative manner.   

So what exactly is Sustainable Tourism?  

At the UN we refer to it as the kind of tourism that takes full account of its current and future impacts on the economy, society and the environment.  It is a tourism that does not just address the needs of its visitors, but also considers the rights and needs of its host communities.  

The UN’s Sustainable Development Goals (SDGs) recognizes the potential of sustainable tourism industry in achieving especially SDGs 1 (Poverty), 8 (Decent work) and 12 (Responsible consumption). In Maldives’ case, I would like to add 13 (Climate Action) and 14 (Life below water) as relevant goals.

Accordingly, the tourism sector that is developed towards achieving SDGs should promote 3 main dimensions; environmental integrity, social justice and inclusive economic development.

As we are aware, the Maldives’ Tourism, which heavily depends on the country’s natural beauty, is under serious danger from global and local events.  

Changing climate and warming seas have bleached the spectacular coral gardens. Strong currents and unpredictable weather patterns are eroding our beaches. These events threaten not just the tourism sector, but the survival and well-being of ordinary Maldivians across the country.  

In addition to consequences of global-warming, localized human-made activities have caused an adverse effect on the environment. The damage created by ocean plastic wastes is just one example.  

In the Partnership Forum held two weeks ago, I was pleased to learn of the current governments’ commitments to advance principles of Blue Economy, ensuring the sustainable use of ocean resources for economic growth, improved livelihoods and overall ocean ecosystem health. I hope that this high-level political commitment will transform the local tourism development to practise sustainable tourism principles across the Maldives.  

The second dimension of Sustainable Tourism is social and cultural development. A few weeks ago, the country was visited by the UN Special Rapporteur in the field Cultural Rights.

She observed that “parts of the tourist industry in Maldives had been operating in a somewhat separate, parallel universe, where tourists were not given adequate opportunities to see or hear Maldivian performing arts and culture, share Maldivian cuisine or learn about Maldivian ways of life and crafts.” 

She stressed that “cultural knowledge and practices be revived, professionalized or used to find new developments in the interaction with visitors.” Efforts in this regard can be employed by the Tourism Sector to drive local economies, as well as to enrich local cultures. 

The third dimension of Sustainable Tourism is that of enhancing equality and economic justice among local population.  

40 years since the advent of Tourism, major gaps can still remain in development gains, between the capital city Male’ and other outer islands. According to the 2014 Maldives Human Development Report commissioned by UNDP, for instance, a person living in Male’ is likely to receive twice more income, and complete 3 more years of schooling, than a person living in an outer island. More recently, the Household Income and Expenditure Survey of 2016 states that “91.1 percent of countries’ poor population live in the Atolls (other than Male)’. “ 

Tourism sector can contribute immensely to drive local economies in their surrounding island communities. Instead of working as independent entities that either import, or create subsidiary industries within our own premises, the Tourism Sector could invest in neighboring communities to drive local business for example: agriculture and fisheries, ultimately diversifying and strengthening local economies. This would not only drive local economies, but strengthen the economy and through diversification, reduce the adversity of impacts to the Tourism sector. 

As of 2014, one-fifth of all employed Maldivians work in the tourism industry. And of this sizeable tourism workforce, 14% work in resorts. However, less than 4% of this resort workforce are women. Greater attention needs to be given to drive more women and youth into employment in the Tourism Sector, by reducing obstacles to work in resort islands and enhancing their professional skill sets. This involves enabling decent work and living conditions for staff, and providing opportunities for job advancement within the hierarchy of tourism establishments. 

Sustainable practices in tourism development also require business operators to assess the future tourism in the Maldives. Globally, we are seeing rapid changes in how tourism is practiced. These changes are coming about to complement changes in the mindset of travelers, who are increasingly aware of how decisions they make have lasting impacts on local communities. There is also a greater interest from travelers to interact and experience local communities and their ways of life. To be sustainable, the tourism sector needs to assess and adapt to these global changes.  

Locally UNDP has partnered with the Maldivian government on key initiatives such as the Baa Biosphere reserve, and the Tourism Adaptation Project. The Baa Biosphere Reserve in particular, is a significant example of how carefully planned sustainable tourism practices can generate local development, while also protecting the environment.  

Again, 2030 Agenda for Sustainable Development provides an integrated framework for the sustainable tourism. In this vein, the wide representation at today’s forum gives UNDP a new hope to engage in Sustainable Tourism Initiatives across Maldives. I hope that the discussions today will lead to lasting, positive impacts for the country, and take us one step closer to achieving the Sustainable Development Goals in Maldives.  Thank you.

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The changing face of tourism and work: How Maldives is successfully adapting to the pandemic

Valerie mercer-blackman.

It’s December 2023. Rita, a young businesswoman, has just finished meeting with clients in Chennai, India and anticipates meeting friends in Singapore for the holidays two weeks later. An employer-sponsored hybrid work model allows her to work from anywhere. She chooses to work at a guesthouse in Male, Maldives thanks to great Internet connectivity while spending time absorbing the local culture and South Asian cuisine, even trying her hand at snorkeling. Pre-COVID-19, she would have had to fly back from Chennai, India to snowy Chicago where she resides; go to the office for 10 days; work fighting an arduous jetlag; and then fly back East almost 10 thousand miles to Singapore. Now not only is she significantly reducing her carbon footprint, but she also feels revitalized after her stay in the Maldives, and is happier and more productive. Not to mention, she has contributed to Maldives’ tourism industry.

Is Rita’s practical yet creative twist on work-life balance indicative of the future of tourism—and work? 

According to various measures in the World Bank’s latest South Asia Economic Focus (SAEF), the region’s tourism heavy nations—Maldives, and to a lesser extent Nepal, Sri Lanka, and Bhutan—are well poised to take advantage of new services and digital technologies along with a new-found need for wellness post-pandemic, to boost their economies  . See a prior blog on services as the driver of development in South Asia.

Tourism: Savior for a Post COVID Economy?

Before COVID-19, tourism was among the fastest-growing sectors in Maldives and Bhutan, with a growth rate that outpaced GDP growth rates. The pandemic and related stringent measures hit all South Asian countries dependent on tourism hard, leading to a deep contraction in GDP in 2020.  According to the World Travel and Tourism Council , the entire global tourism industry, particularly business travel, was devastated by the pandemic.   Business spending decreased by 61 percent from 2019 to 2020 compared to 49 percent for leisure travel. Business travelers on average spend much more than leisure and domestic travelers, making the recovery of business spending essential for the entire travel sector. As the industry struggles to recover, there is also great uncertainty about how the future of work could transform the demand for travel, and many expect international business travel to be the last segment to recover as it is most sensitive to travel restrictions.

However, despite these uncertainties, our analysis in the South Asia Economic Focus shows that tourism has the potential to be a fast-growing sector post-COVID amidst new remote work possibilities and changing travel behaviors:

• The desire for travel is strong, spurred by the pent-up demand in leisure travel, which has been driven by new hybrid work environments and household savings during the pandemic. 
• As remote work becomes a long-term reality, more than half of the global tourists have expressed interest in extending business trips or working remotely in tourism destinations while enjoying leisure time.
• There is also evidence of an increase in the average duration of stay by 2.4 days since 2020, according to Tourism Status Updates by the Ministry of Tourism Maldives.
• The ravaging effects of COVID-19 on mental health may also increase the demand.
• COVID-19 is changing tourists’ attitudes and behaviors. According to recent online surveys by booking.com , more than half of global travelers, particularly younger travelers, started looking for travel plans that were more sensitive to the environment and local communities, including staying away from crowded tourist attractions and exploring lesser-known destinations.

South Asian countries already have a comparative advantage in developing niche tourism and ecotourism, as they are endowed with diverse natural and cultural resources. Therefore, small and tourism-dependent countries can view the pandemic as an opportunity to unleash the potential of tourism and pave the way for sustained growth going forward. 

Maldives: Setting the Bar High in Tourism

Maldives has been exemplary in its resilience and ability to recover. In 2021, visitor arrivals reached more than 80 percent of pre-COVID levels, far outpacing other similar tourist destinations. 

These are some lessons we can draw from Maldives’ spectacular recovery in the tourism sector:

• First, the government’s policies and interventions around the border restrictions and health regulations play an important role in the recovery of the tourism sector.  For example, Maldives took a concerted effort to reopen its border to tourists as early as July 2020 but implemented strict hygiene protocols for tourists, including one of the fastest COVID-19 vaccination campaigns in the world. This has improved the confidence of travelers and has created high-value consumers.
• Second, Maldives quickly made an effort to capture new source markets and expand to new countries of origin. For example, the emerging source of the international tourist market from Russia and India—in part arbitraging quarantine rules—has compensated for the tourism revenue loss from China, its top source market before the pandemic.
• Third, Maldives is seizing changing preferences to promote a better image. In 2020, Maldives launched a marketing campaign with the tagline “ Isolation never looked this good ” to emphasize its unique reputation of being a niche destination, while emphasizing environmentally sustainable tourism.
• Fourth, it is investing in digital technology as the demand for high-speed internet and contactless services rise due to the pandemic. In Maldives, more than 60 percent of the population has access to broadband Internet—with relatively high bandwidth speed—while other tourism-dependent South Asian countries are still lagging  , limiting the possibilities to meet travelers’ need for working remotely. Moreover, digital platforms will be important in minimizing physical interaction when traveling, while still fulfilling travelers’ needs. For example, one of the luxury resort in Maldives, has developed an app to facilitate contactless services including ordering food, virtual check-in and check-out, and other amenities to adapt to changing customer behaviors.

Adapt or perish? Maldives is choosing the former. It behooves other South Asian nations to pay attention as they build back resiliently post COVID-19.

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Maldives Fifth Tourism Master Plan 2023-2027.

10 Economic impacts of tourism + explanations + examples

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There are many economic impacts of tourism, and it is important that we understand what they are and how we can maximise the positive economic impacts of tourism and minimise the negative economic impacts of tourism.

Many argue that the tourism industry is the largest industry in the world. While its actual value is difficult to accurately determine, the economic potential of the tourism industry is indisputable. In fact, it is because of the positive economic impacts that most destinations embark on their tourism journey.

There is, however, more than meets the eye in most cases. The positive economic impacts of tourism are often not as significant as anticipated. Furthermore, tourism activity tends to bring with it unwanted and often unexpected negative economic impacts of tourism.

In this article I will discuss the importance of understanding the economic impacts of tourism and what the economic impacts of tourism might be. A range of positive and negative impacts are discussed and case studies are provided.

At the end of the post I have provided some additional reading on the economic impacts of tourism for tourism stakeholders , students and those who are interested in learning more.

 Foreign exchange earnings

Contribution to government revenues, employment generation, contribution to local economies, development of the private sector, infrastructure cost, increase in prices, economic dependence of the local community on tourism, foreign ownership and management, economic impacts of tourism: conclusion, further reading on the economic impacts of tourism, the economic impacts of tourism: why governments invest.

Tourism brings with it huge economic potential for a destination that wishes to develop their tourism industry. Employment, currency exchange, imports and taxes are just a few of the ways that tourism can bring money into a destination.

In recent years, tourism numbers have increased globally at exponential rates, as shown in the World Tourism Organisation data below.

There are a number of reasons for this growth including improvements in technology, increases in disposable income, the growth of budget airlines and consumer desires to travel further, to new destinations and more often.

Here are a few facts about the economic importance of the tourism industry globally:

• The tourism economy represents 5 percent of world GDP
• Tourism contributes to 6-7 percent of total employment
• International tourism ranks fourth (after fuels, chemicals and automotive products) in global exports
• The tourism industry is valued at US$1trillion a year
• Tourism accounts for 30 percent of the world’s exports of commercial services
• Tourism accounts for 6 percent of total exports
• 1.4billion international tourists were recorded in 2018 (UNWTO)
• In over 150 countries, tourism is one of five top export earners
• Tourism is the main source of foreign exchange for one-third of developing countries and one-half of less economically developed countries (LEDCs)

There is a wealth of data about the economic value of tourism worldwide, with lots of handy graphs and charts in the United Nations Economic Impact Report .

In short, tourism is an example of an economic policy pursued by governments because:

•      it brings in foreign exchange
•      it generates employment
•      it creates economic activity

Building and developing a tourism industry, however, involves a lot of initial and ongoing expenditure. The airport may need expanding. The beaches need to be regularly cleaned. New roads may need to be built. All of this takes money, which is usually a financial outlay required by the Government.

For governments, decisions have to be made regarding their expenditure. They must ask questions such as:

How much money should be spent on the provision of social services such as health, education, housing?

How much should be spent on building new tourism facilities or maintaining existing ones?

If financial investment and resources are provided for tourism, the issue of opportunity costs arises.

By opportunity costs, I mean that by spending money on tourism, money will not be spent somewhere else. Think of it like this- we all have a specified amount of money and when it runs out, it runs out. If we decide to buy the new shoes instead of going out for dinner than we might look great, but have nowhere to go…!

In tourism, this means that the money and resources that are used for one purpose may not then be available to be used for other purposes. Some destinations have been known to spend more money on tourism than on providing education or healthcare for the people who live there, for example.

This can be said for other stakeholders of the tourism industry too.

There are a number of independent, franchised or multinational investors who play an important role in the industry. They may own hotels, roads or land amongst other aspects that are important players in the overall success of the tourism industry. Many businesses and individuals will take out loans to help fund their initial ventures.

So investing in tourism is big business, that much is clear. What what are the positive and negative impacts of this?

Positive economic impacts of tourism

So what are the positive economic impacts of tourism? As I explained, most destinations choose to invest their time and money into tourism because of the positive economic impacts that they hope to achieve. There are a range of possible positive economic impacts. I will explain the most common economic benefits of tourism below.

One of the biggest benefits of tourism is the ability to make money through foreign exchange earnings.

Tourism expenditures generate income to the host economy. The money that the country makes from tourism can then be reinvested in the economy. How a destination manages their finances differs around the world; some destinations may spend this money on growing their tourism industry further, some may spend this money on public services such as education or healthcare and some destinations suffer extreme corruption so nobody really knows where the money ends up!

Some currencies are worth more than others and so some countries will target tourists from particular areas. I remember when I visited Goa and somebody helped to carry my luggage at the airport. I wanted to give them a small tip and handed them some Rupees only to be told that the young man would prefer a British Pound!

Currencies that are strong are generally the most desirable currencies. This typically includes the British Pound, American, Australian and Singapore Dollar and the Euro .

Tourism is one of the top five export categories for as many as 83% of countries and is a main source of foreign exchange earnings for at least 38% of countries.

Tourism can help to raise money that it then invested elsewhere by the Government. There are two main ways that this money is accumulated.

Direct contributions are generated by taxes on incomes from tourism employment and tourism businesses and things such as departure taxes.

Taxes differ considerably between destinations. I will never forget the first time that I was asked to pay a departure tax (I had never heard of it before then), because I was on my way home from a six month backpacking trip and I was almost out of money!

Japan is known for its high departure taxes. Here is a video by a travel blogger explaining how it works.

According to the World Tourism Organisation, the direct contribution of Travel & Tourism to GDP in 2018 was $2,750.7billion (3.2% of GDP). This is forecast to rise by 3.6% to $2,849.2billion in 2019.

Indirect contributions come from goods and services supplied to tourists which are not directly related to the tourism industry.

Take food, for example. A tourist may buy food at a local supermarket. The supermarket is not directly associated with tourism, but if it wasn’t for tourism its revenues wouldn’t be as high because the tourists would not shop there.

There is also the income that is generated through induced contributions . This accounts for money spent by the people who are employed in the tourism industry. This might include costs for housing, food, clothing and leisure Activities amongst others. This will all contribute to an increase in economic activity in the area where tourism is being developed.

The rapid expansion of international tourism has led to significant employment creation. From hotel managers to theme park operatives to cleaners, tourism creates many employment opportunities. Tourism supports some 7% of the world’s workers.

There are two types of employment in the tourism industry: direct and indirect.

Direct employment includes jobs that are immediately associated with the tourism industry. This might include hotel staff, restaurant staff or taxi drivers, to name a few.

Indirect employment includes jobs which are not technically based in the tourism industry, but are related to the tourism industry. Take a fisherman, for example. He does not have any contact of dealings with tourists. BUT he does sell his fish to the hotel which serves tourists. So he is indirectly employed by the tourism industry, because without the tourists he would not be supplying the fish to the hotel.

It is because of these indirect relationships, that it is very difficult to accurately measure the economic value of tourism.

It is also difficult to say how many people are employed, directly and indirectly, within the tourism industry.

Furthermore, many informal employments may not be officially accounted for. Think tut tut driver in Cambodia or street seller in The Gambia – these people are not likely to be registered by the state and therefore their earnings are not declared.

It is for this reason that some suggest that the actual economic benefits of tourism may be as high as double that of the recorded figures!

All of the money raised, whether through formal or informal means, has the potential to contribute to the local economy.

If sustainable tourism is demonstrated, money will be directed to areas that will benefit the local community most.

There may be pro-poor tourism initiatives (tourism which is intended to help the poor) or volunteer tourism projects.

The government may reinvest money towards public services and money earned by tourism employees will be spent in the local community. This is known as the multiplier effect.

The multiplier effect relates to spending in one place creating economic benefits elsewhere. Tourism can do wonders for a destination in areas that may seem to be completely unrelated to tourism, but which are actually connected somewhere in the economic system.

Let me give you an example.

A tourist buys an omelet and a glass of orange juice for their breakfast in the restaurant of their hotel. This simple transaction actually has a significant multiplier effect. Below I have listed just a few of the effects of the tourist buying this breakfast.

The waiter is paid a salary- he spends his salary on schooling for his kids- the school has more money to spend on equipment- the standard of education at the school increases- the kids graduate with better qualifications- as adults, they secure better paying jobs- they can then spend more money in the local community…

The restaurant purchases eggs from a local farmer- the farmer uses that money to buy some more chickens- the chicken breeder uses that money to improve the standards of their cages, meaning that the chickens are healthier, live longer and lay more eggs- they can now sell the chickens for a higher price- the increased money made means that they can hire an extra employee- the employee spends his income in the local community…

The restaurant purchase the oranges from a local supplier- the supplier uses this money to pay the lorry driver who transports the oranges- the lorry driver pays road tax- the Government uses said road tax income to fix pot holes in the road- the improved roads make journeys quicker for the local community…

So as you can see, that breakfast that the tourist probably gave not another thought to after taking his last mouthful of egg, actually had the potential to have a significant economic impact on the local community!

The private sector has continuously developed within the tourism industry and owning a business within the private sector can be extremely profitable; making this a positive economic impact of tourism.

Whilst many businesses that you will come across are multinational, internationally-owned organisations (which contribute towards economic leakage ).

Many are also owned by the local community. This is the case even more so in recent years due to the rise in the popularity of the sharing economy and the likes of Airbnb and Uber, which encourage the growth of businesses within the local community.

Every destination is different with regards to how they manage the development of the private sector in tourism.

Some destinations do not allow multinational organisations for fear that they will steal business and thus profits away from local people. I have seen this myself in Italy when I was in search of a Starbucks mug for my collection , only to find that Italy has not allowed the company to open up any shops in their country because they are very proud of their individually-owned coffee shops.

Negative economic impacts of tourism

Unfortunately, the tourism industry doesn’t always smell of roses and there are also several negative economic impacts of tourism.

There are many hidden costs to tourism, which can have unfavourable economic effects on the host community.

Whilst such negative impacts are well documented in the tourism literature, many tourists are unaware of the negative effects that their actions may cause. Likewise, many destinations who are inexperienced or uneducated in tourism and economics may not be aware of the problems that can occur if tourism is not management properly.

Below, I will outline the most prominent negative economic impacts of tourism.

Economic leakage in tourism is one of the major negative economic impacts of tourism. This is when money spent does not remain in the country but ends up elsewhere; therefore limiting the economic benefits of tourism to the host destination.

The biggest culprits of economic leakage are multinational and internationally-owned corporations, all-inclusive holidays and enclave tourism.

I have written a detailed post on the concept of economic leakage in tourism, you can take a look here- Economic leakage in tourism explained .

Another one of the negative economic impacts of tourism is the cost of infrastructure. Tourism development can cost the local government and local taxpayers a great deal of money.

Tourism may require the government to improve the airport, roads and other infrastructure, which are costly. The development of the third runway at London Heathrow, for example, is estimated to cost £18.6billion!

Money spent in these areas may reduce government money needed in other critical areas such as education and health, as I outlined previously in my discussion on opportunity costs.

One of the most obvious economic impacts of tourism is that the very presence of tourism increases prices in the local area.

Have you ever tried to buy a can of Coke in the supermarket in your hotel? Or the bar on the beachfront? Walk five minutes down the road and try buying that same can in a local shop- I promise you, in the majority of cases you will see a BIG difference In cost! (For more travel hacks like this subscribe to my newsletter – I send out lots of tips, tricks and coupons!)

Increasing demand for basic services and goods from tourists will often cause price hikes that negatively impact 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. This often means that local people will be forced to move away from the area that tourism is located, known as gentrification.

Taking measures to ensure that tourism is managed sustainably can help to mitigate this negative economic impact of tourism. Techniques such as employing only local people, limiting the number of all-inclusive hotels and encouraging the purchasing of local products and services can all help.

Another one of the major economic impacts of tourism is dependency. Many countries run the risk of becoming too dependant on tourism. The country sees $ signs and places all of its efforts in tourism. Whilst this can work out well, it is also risky business!

If for some reason tourism begins to lack in a destination, then it is important that the destination has alternative methods of making money. If they don’t, then they run the risk of being in severe financial difficulty if there is a decline in their tourism industry.

In The Gambia, for instance, 30% of the workforce depends directly or indirectly on tourism. In small island developing states, percentages can range from 83% in the Maldives to 21% in the Seychelles and 34% in Jamaica.

There are a number of reasons that tourism could decline in a destination.

The Gambia has experienced this just recently when they had a double hit on their tourism industry. The first hit was due to political instability in the country, which has put many tourists off visiting, and the second was when airline Monarch went bust, as they had a large market share in flights to The Gambia.

Other issues that could result in a decline in tourism includes economic recession, natural disasters and changing tourism patterns. Over-reliance on tourism carries risks to tourism-dependent economies, which can have devastating consequences.

The last of the negative economic impacts of tourism that I will discuss is that of foreign ownership and management.

As enterprise in the developed world becomes increasingly expensive, many businesses choose to go abroad. Whilst this may save the business money, it is usually not so beneficial for the economy of the host destination.

Foreign companies often bring with them their own staff, thus limiting the economic impact of increased employment. They will usually also export a large proportion of their income to the country where they are based. You can read more on this in my post on economic leakage in tourism .

As I have demonstrated in this post, tourism is a significant economic driver the world over. However, not all economic impacts of tourism are positive. In order to ensure that the economic impacts of tourism are maximised, careful management of the tourism industry is required.

If you enjoyed this article on the economic impacts of tourism I am sure that you will love these too-

• Environmental impacts of tourism
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The Economic Impact of Cultural Tourism in the Maldives

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Maldives Tries to Win Back Indian Tourists As Arrivals Fall 40%

Peden Doma Bhutia , Skift

April 16th, 2024 at 9:11 AM EDT

While Maldives enjoys record-breaking arrivals, its tourism companies aren't about to let the Indian market keep falling. They're on a mission to reverse the trend.

Peden Doma Bhutia

The Maldives Association of Travel Agents and Tour Operators is determined to increase Indian arrivals to the island destination and is taking steps to achieve this.

“Indian arrivals to the Maldives have gone down by almost 40%,” said Abdulla Ghiyas, the association’s president, in an exclusive interview with Skift.

In early January, #BoycottMaldives started trending in Indian social media following a diplomatic dispute between the two countries. Indians accused Maldivian politicians of making disparaging remarks against Prime Minister Narendra Modi.

As a result, India, which was the number 2 source market for Maldives, has now fallen to number 6 . India’s share of visitors had been almost 11% – it has shrunk to 5.6%.

Promotions in Indian Cities

Ghiyas said the association will be hosting roadshows in 3 Indian cities in July and confirmed to Skift that one of the cities would be Bengaluru.

The association also plans to engage with Indian social media influencers. “We also want to see how we can work with the tourism board in Maldives as we have partnered with them in the past as well. There are talks that the tourism board is also planning of doing something in India,” Ghiyas said.

At the July roadshows, he said he’s keen to look at cities that have direct connectivity with Maldives.

Ghiyas expressed a desire to have conducted the roadshow earlier, noting that May is when Indian outbound travel peaks. However, he mentioned plans for another round of roadshows towards the end of the year, aiming to include Tier 2 cities. “Even if they lack direct flights to the Maldives, these cities would represent an important market for us,” he said.

Maldives has so far received (from January 1-April 15) 693,867 tourists, up from 606,395 arrivals for the same period last year, as per the latest data from the Maldives tourism ministry.

China is the top source market for the island destination, followed by UK and Russia.

Between January 1-April 15, almost 39,000 Indians visited Maldives, a decline of almost 40%, compared to the 64,250 arrivals for the same period last year.

“We might not talk immediately about the growth scenario, but I would definitely like to see the 40% decline narrow down,” Ghiyas said.

Can’t Ignore India

While Maldives has experienced record-breaking tourism arrivals so far, Ghiyas said it still needs India. “There are properties and resorts that rely heavily on the Indian market, which have been severely affected. This will hurt us in the long term and that is why we have decided to engage with the India market.”

Aminath Suzan, CEO of Maldives Association of Travel Agents and Tour Operators, pointed to cultural ties, such as similarities in food, language, and pop culture. “We must ensure that unrelated matters do not negatively impact the bond, for which we have dedicated years and built this alliance.”

MATATO Meets with Indian High Commissioner to Foster Tourism Cooperation The Maldives Association of Travel Agents and Tour Operators (MATATO) engaged in a productive meeting with His Excellency Munu Mahawar, the Indian High Commissioner to the Maldives, to explore collaborative… pic.twitter.com/PNXiy3QdVz — MATATO – PATA Maldives Chapter (@matatoMV) April 9, 2024

The association members also recently met with Munu Mahawar, the Indian high commissioner in Maldives, to collaborate closely with his office to boost tourism initiatives.

Dubbing the meeting with Mahawar “positive,” Ghiyas said the high commission has offered assistance to the association. “Once we have a concrete plan, we will definitely follow up with the High Commission and share our plans.”

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Tags: asia monthly , china , india outbound , islands , maldives , social media , tourism marketing

Photo credit: Ritz Carlton Maldives Fari Islands. Fari Islands