Footage of Barcelona residents dousing tourists with water guns to drive them out of the city has gone viral. Mass protests against mass tourism have taken place in the Balearic and Canary Islands. And it’s not just Spaniards who are suddenly developing an… allergic reaction to foreigners visiting their country.
The Economist notes that residents of Athens have held… “funerals” for their dead neighborhoods. Japanese authorities have erected a fence to block popular views of Mount Fuji and prevent tourists from gathering. There will soon be a curfew after 5 p.m. for visitors to a historic neighborhood in Seoul.
At the height of the Covid-19 pandemic, many predicted that tourism would never return to 2019 levels. But now tourists are back. And with the dollar hovering at two-decade highs, Americans are especially eager to travel. This should be a gift to the cities and countries they visit. Tourists bring cash and make little use of taxpayer-funded services. In fact, central bank and finance ministry officials are quietly welcoming the travel flows, even as politicians are pressured by voters to curb arrivals.
Popular destinations in Europe are seeing visitor numbers soar. Travel to Greece, the fastest-growing market in Southern Europe, grew by 20% in the first quarter of 2024. Visitor spending in Portugal is expected to be 20% higher this year than in 2019. For even more impressive growth, look to developing countries. More than half of the ten fastest-growing tourist destinations are in emerging markets. Tourist numbers in Albania and Saudi Arabia doubled in the first quarter of 2024 compared to five years ago. Arrivals in the Dominican Republic and Turkey also increased.
Tourism accounts for 3% of global GDP and employs hundreds of millions. Its growth is a boost to local economies and government budgets. The economies of Greece, Portugal and Spain grew at rates of 2% or more last year, compared with an EU-wide average of 0.4%. Tourism has played a key role in their success. Taking the broadest definition possible, around 20% of Albania’s economy now depends on tourists.
The impact of tourism on economies
Tourism generates national income. Unlike consumers of other exports, tourists travel to their home country to consume products, not the other way around.
In most places, foreign customers will pay consumption taxes while using few public services – unless the shrimp proves negligible. While there are added costs, such as the need for extra police in the summer, there are also added benefits, such as tourists paying for train tickets outside peak times, when the carriages would be empty.
The problem, the economist explains, is that higher tax revenues provide diffuse benefits, while the costs and negative effects of tourism are concentrated in the most popular destinations. In Barcelona, residents are annoyed by the crowds, dirty streets and higher prices. The situation in Mallorca is “unbearable”, locals say. The island’s population swells to 1.4 million during peak periods.
The “Dutch disease”
But it’s not just ordinary residents who are bothered. Some economists are worried, too. As tourism grows, it draws a larger share of an economy’s capital and labor. Critics compare it to a kind of “Dutch disease,” in which rapid growth in one export sector crowds out other, higher-value-added industries.
According to Giuseppe Di Giacomo of the University of Lugano and Benjamin Lerch of the Swiss Ministry of Finance, the growth of Italy’s tourism industry between 2010 and 2019 reduced demand for education, resulting in lower university enrollment, attendance and completion rates in the country. Serving pizzas to hungry tourists sounds like a great way to survive your 20s. But in your 40s, the weary waiter might wish he had gotten a degree.
The Economist points to another danger. The tourism industry in general often relies on many low-paid workers whose productivity increases only slowly – meaning it would be a poor choice to concentrate.
There is a way to make this work
Many countries are considering taxation as a way to change the tourism they receive. Fewer visitors with higher per capita spending is the goal. Venice experimented with a 5 euro entrance fee for day-trippers this summer, which it is considering doubling.
Meanwhile, Japanese authorities imposed a 2,000 yen (about 11 euros) congestion charge on a busy Mount Fuji hiking trail on July 1 in an effort to divert tourists to other routes and reduce the environmental burden. Copenhagen offers tourists who use public transport and help keep the city clean free meals and museum passes.
But governments should also do more to accommodate arrivals, especially by building infrastructure and relaxing planning rules. Rents would not rise so rapidly in Barcelona, for example, if housing supply matched external and local demand. Indeed, history shows that tourism revenues can be invested in infrastructure and higher value-added sectors, as has happened in Italy and, more recently, in Mexico.