Social Issues / Tourism Economics

Tourism Economics

This essay Tourism Economics is available for you on! Search Term Papers, College Essay Examples and Free Essays on - full papers database.

Autor:  anton  30 April 2011
Tags:  Tourism,  Economics
Words: 5714   |   Pages: 23
Views: 539

Tourism Leakages through Imports and Expatriate Welfare



Tourism is undoubtedly one of the largest and growing industries in Fiji. It creates employment, brings about economic growth and development and earns a significant amount of foreign dollar for the economy. However, a significant amount of the income earned is leaked out of the economy through imports and hiring of expatriates. The extent to which this leakage occurs is from Fiji’s economy is not known. As such, this research seeks to fill this vacuum and quantify the extent of leakage from the tourism industry.

Key words: Leakage, expatriates, imports


Tourism is one of the significant industries in Fiji’s economy. It generates a substantial amount of foreign exchange inflows, creates employment, contributes towards government revenue and brings about a lot of economic growth and development. Like other Pacific Island Countries, Fiji’s tourism sector has comparative advantage enabling it to compete internationally.

However, despite the lucrative benefits from the tourism industry, full extent of the income generated can not be retained in the local economy. Fiji has an open economy. This means that it imports, exports and indulges in transactions internationally. As such, there are bound to be leakages from the economy. Leakage means income from tourism that leaves the destination country. The World Bank estimates that 55 per cent of international tourism income leaves the destination country via foreign-owned airlines, hotels and tour operators, or payments for imported food, drink and supplies.

The supply of tourism products requires three types of imports, final goods and services or directly consumable items such as foreign liquor, cigarettes, film rolls, intermediate inputs or raw materials such as flour, meat, fuel and capital goods and services such as machinery and equipment, busses and coaches. Apart from importing goods and services, the industry hires expatriates from overseas countries. Expatriates are those employees hired from overseas for their expertise. They are contracted for a specific time frame and return to their home countries upon completion of their contracts. Both imports and hiring of expatriates result in financial leakage. This means that revenue arising from tourism related economic activities in destination countries are not available for investment or consumption of goods and services in the same countries. The income lost through leakages is a concern to developing countries like Fiji since investments are vital if growth is to be secured.


The direct income for an area is the amount of tourist expenditure that remains locally after taxes, profits, and wages are paid outside the area and after imports are purchased; these subtracted amounts are called leakage.

The bathtub theorem is often used to explain leakages from an economy. The theorem states that an economy grows when injections are greater than leakages and an economy shrinks if leakages exceed injections. One of the most acclaimed downfalls about tourism is that much of the tourism income leaks out of host countries in the form of international airfares, royalties and fees paid to foreign managers and foreign trade names, to tour operators, airlines, hotels, and for imported food and drinks. Additionally, international promotion and advertising results in a lot of tourism income spent in foreign markets.

The expansion of the travel and tourism industry in Fiji has increased the demand for trained and skilled people to cater for the growing needs of the expanding industry. Since the demand of the needed expertise is not met by the local labour market, the industry resorts to international markets to fill this vacuum.

A larger number of expatriate’s hold senior management level jobs in the tourist industry. The locals are employed mainly in the unskilled or semi-skilled jobs. The problem of labor unavailability stems from the massive brain drain that took place as a consequence of the series of coups. As such, Fiji loses most of the income from tourism is lost through foreign exchange leakage. In 1998, Fiji’s tourism receipts were valued at F$568 million of which, 60 percent leaked out of the country. Import of food decreases foreign exchange earnings, thus reducing opportunities for development of local production. Regional impact depends on varying availability of resources in different regions. Among the barriers towards stronger linkages into the local economies are strong linkages between foreign-owned hotels and overseas suppliers, particularly in the form hierarchical monopolies in the tourism sector. Other barriers are tourists’ preference for similar food as at home; imported food being cheaper; imported food being of better and more consistent quality; and more reliable supplies by imports. Barriers of communication and understanding between foreign tourism companies and local producers are also named as causing large amount of imports. In addition, tourism development has caused decreases of agriculture and greater dependencies on imports of agricultural products in many cases. Tourism developments compete with agriculture in terms of land and labor and can increase the local consumption of imported food as well as inflate the food prices, which create particular burdens for women (Hemmati 1999).

Importing luxury goods for tourist consumption is another significant cause of financial leakage because the amount of imported goods is high and it is necessary to maintain a sophisticated infrastructure.

Many employees in the tourism sector need specific qualifications, such as foreign language abilities. However, local people in destination areas often don't have such qualifications and education and training facilities are not present in many areas. Managers from developed nations, particularly with international hotel chains, usually occupy highly qualified and well-paid positions whereas unqualified and low paid jobs are offered to local people. Gender segregation of the labor market prevails, with women in unqualified and low-paid jobs. Under these circumstances, income of employed foreigners will largely leak away (indirect economic impact), and tourism development will over time not increase the living standards of local people and development levels of their communities.

Tourism has many hidden costs, which can have unfavorable economic effects on the host community. Often, developed countries are better able to profit from tourism than poor ones. Whereas the least developed countries have the most urgent need for income, employment and general rise of standard of living by means of tourism, they are, unfortunately, least able to realize these benefits. Among the reasons for this are large scale transfer of tourism revenues out of the host country and exclusion of local businesses and products.

The direct income for an area is the amount of tourist expenditure that remains locally after taxes, profits, and wages are paid outside the area and after imports are purchased; these subtracted amounts are called leakage. A study looking at tourism 'leakage' in Thailand estimated that 70% of all money spent by tourists ended up leaving Thailand (via foreign owned tour operators, airlines, hotels, etc.). Estimates made for other Third World countries range from 80% in the Caribbean to 40% in India. On average, of each US$ 100 spent on a vacation tour by a tourist from a developed country, only around US$5 actually stays in a developing-country destination's economy.

Narayan (2000) highlights that money leakage is common in Pacific island tourism. Resorts and hotels are often self-contained microcosms. Governments provide attractive investment inducements, such as a waver of duty on construction and other hotel development materials and a waver of corporate taxes on profits for several years. Developers can therefore construct and run a resort from a Pacific island and export the profits. Some resorts include rooms, food, local transportation, and duty-free shopping as part of a holiday package that is paid for before the tourist ever arrives on the island. Very few of those dollars ever arrive on the island, making it difficult for the governments to provide quality infrastructure (roads, water, electricity, sewage treatment, education and training of tourism personnel, attractive parks and recreational areas).

There are three types of leakage related to inbound tourism. Firstly, the pre-leakage which includes home countries’ margin and airfare. Secondly, the internal leakage or the import content of inbound tourism. This indicator measures the proportion of leakage in tourism expenditure after the tourists have reached the destination. Thirdly, invisible leakage is the foreign exchange cost of resource depletion and deterioration. Financial leakage is likely to be high in countries where there is little manufacturing and service capacity. Financial leakage in the developing world could range between 40 percent in India and 80 percent in the Caribbean. This figure probably includes pre-leakage and internal leakage. The same study claimed that tourism leakage in Thailand is as high as 70 percent.

The internal leakage is best estimated by a tourism satellite account and the average for developing countries is between 40 to 50 percent (Hemmati 2001) and 10 to 20 percent in the most advanced and diversified developing countries. A tourism satellite account prepared by the National Economic and Social Development Board of Thailand in collaboration with the TAT completed in 2004 reported that the import content of Thailand’s tourism sector in 2003 was about 22 percent of tourism income. Thus, the figure of 70 percent cited above seems to be too high even when international airfares are taken into account.

The author’s study of the hotel industry in Thailand provided additional information on internal leakage through interviews with entrepreneurs. It was true those 50 years ago when the hotel industry began, almost everything in the hotel needed to be imported including chairs in the restaurants. Today, imports of hotels are limited to exotic food, beverages and limousines (Eccles 1995). It was estimated for the author that the proportion of foreign food and beverage in four and five star hotels would not exceed 15 percent of total sales or about 1,500 million.

A major factor that determined the scale of local benefits from tourism projects is “leakage”, which can be defined as the proportion of money invested or earned in the tourism sector that end up overseas. The level of “leakage” of tourism investment and earnings is an issue that has been given some attention in Bank work and in the wider literature on the linkage between tourism and sustainable development. Altinay and Hussain (2005) identify a number of causes of leakage in their review of tourism in Africa, including types of tourism facilities developed and costs of marketing and promotion, demand patterns and volumes of tourists, extent of local ownership, management and employment in the accommodation and services sector, availability of free transfer of profits, import restrictions and duties on imports, prior existence of infrastructure, particularly capital intensive (e.g. airports) or technology intensive (telecom) and the level of development of industries and sectors linked to tourism that can supply materials needed at construction stage and for operation of facilities.

A number of studies have calculated the leakage rates of tourist expenditure, and a recent study found that leakage is quite significant for some countries. For underdeveloped countries, particularly islands, the leakage rate is 55% (i.e. only 45% of foreign exchange earnings from tourism remain in the country); while for other countries, including Mexico, Thailand, Turkey and the Dominican Republic, the leakage rate is less that 15%.

Tourism has many hidden costs, which can have unfavorable economic effects on the host community. Often, developed countries are better able to profit from tourism than poor ones. Whereas the least developed countries have the most urgent need for income, employment and general rise of standard of living by means of tourism, they are, unfortunately, least able to realize these benefits. Among the reasons for this are large scale transfer of tourism revenues out of the host country and exclusion of local businesses and products.

There are two main types of leakages, namely, import and export leakage. Import leakage occurs when tourists command standards of equipment, food, and other products that the host country cannot supply. It is typical of less- developed countries where food and drinks must often be imported, since local products are not up to the tourist's standards or the country simply doesn't have a supplying industry. Thus, in such a scenario, much of the income from tourism expenditures leaves the country again to pay for these imports. However, import leakage is not only typical of developing countries. Even in developed regions, local producers are often unable to supply the tourism industry.

Often, especially in poor developing nations, multinational corporations and large foreign businesses are the only ones that possess the necessary capital to invest in the construction of tourism infrastructure and facilities. As a consequence of this, an export leakage arises when these overseas investors take their profits back to their country of origin. A 1996 UN study, carried out in the Caribbean evaluated the contribution of tourism to national income, gross levels of incomes and/or gross foreign exchange. The results showed that net earnings of tourism, after deductions for all necessary foreign exchange expenditures, were much more significant for the industry than for the region itself. Significant leakage was mainly attributed to imports of materials and equipment for construction, imports of consumer goods, particularly food and drinks, repatriation of profits earned by foreign investors, overseas promotional expenditures and amortization of external debt incurred in the development of hotels and resorts. The impact of the leakage varied greatly across the studied countries, mainly depending on the structure of the economy and the tourism industry.

Financial leakages in tourism occur when revenue arising from tourism-related economic activities in destination countries are not available for investment or consumption of goods and services in the same countries: Financial resources "leak away" from the destination country to another country, particularly when the tourism company is based abroad and when tourism-related goods and services are being imported to the destination country. Financial leakages occur in many economic sectors, not only in tourism. However, the issue should be addressed as tourism development is being portrayed as one of the few profitable economic sectors for developing countries.

The tourism industry is one of the fastest growing industries and creates more than 10% of global economic output and one in nine jobs with estimated annual revenues of US$1,550 billion by the year 2010. The economic benefits of tourism development to developing countries are limited. A significant percentage of the revenues arising from tourism leaks away from developing countries because of foreign ownership of the industry, imported resources, foreign tour operators and airlines and other reasons.

Wood and Jayawardena (2003) note that the more a developing country relies on luxury tourism, the greater is the danger of high expenditures for imported luxury goods. Hall (2000) states that the more established a country becomes as a tourism destination, the greater the proportion of revenue, which leak away. According to Mathieson and Wall (1982)., 35% of tourism earnings are lost due to investment in imported goods in countries, which are big and economically developed, whereas especially in Small Island developing states the leakage is about 40% to 60%. The leakage can even be up to 90% in remote and scarcely developed counties.

Financial leakages in tourism have various causes, depending the country and the kind of tourism involved. Foreign direct investment is crucial for developing countries, also in the tourism sector. Yet investment from local sources is a very important prerequisite to avoid revenue leaking away; lack of local resources is a significant reason for financial leakage. Package tours, which are offered and sold by one wholesaler, tend to imply little revenue remaining in destination countries. Package holidays are increasingly all-inclusive deals, making it unnecessary for tourists to spend money outside the resort. Many local tour operators cannot compete with the financial back up, marketing, and logistics of internationally operating tourism companies based in developed countries. Local operators lack access to and information about the developed countries markets, marketing expertise and infrastructure such as Internet access and foreign language capacities. Dealing with remittances from overseas can also cause problems for local tour operators. However, due to package travel arrangements dominated by developed country based businesses, developing countries do not benefit as much as they could. Local suppliers can suffer enormously as international operators tend to work with established international businesses for car rentals, food supply etc. and/or buy local businesses whereas through direct sale local operators are able to negotiate prices.

To decrease financial leakages in tourism, it would be important to increase local ownership of tourism-related businesses, build up tourism infrastructure using local investors and avoid purely foreign investment. It would also be important to decrease imports for tourism development and tourist’s consumption, using local materials for buildings and infrastructure, and increasing usage of local food production, where appropriate. There is also a need to support community based tourism business initiatives and to increase their access to the market, an issue where tourism boards have a key role to play. Consumer awareness is another important aspect - encouraging consumers to book and buy locally, and raising awareness of the impact of their choices. Package tourism poses a particular problem for many developing countries that are, in some cases, starting to regulate against it.

Another important component is to invest in education and training to enable local people to pursue careers in tourism if they so choose. Partnerships between industry, NGOs and government departments can play an important role. Education and training should focus on marketing, financial management, literacy and foreign languages. Training should also provided to promote activities that are indirectly linked to tourism, such as printing, dying and folk-arts. Training and education programs should particularly aim at encouraging women to move into non-traditional occupations which require more skills and are better paid and at encouraging women to aim at rising into key managerial positions.

The most important overall strategy to achieve these goals is to engage in transparent, democratic and gender-balanced consultation and decision-making processes at the local level in destination areas. Among organizations and groups to be involved in tourism development - stakeholder groups - are national, provincial and local governments, tourism boards, the tourism industry, local communities and the diversity of their member groups, trade unions, non-government organizations (NGOs), community based organizations (CBOs), women, Indigenous Peoples, faith communities, and others. An appropriate planning and management approach needs to involve all stakeholders. To allow for meaningful participation, there is a great need to improve information availability and capacity building for participation. Different member groups of local communities, for example, women, may need specific measures of capacity building for participation.

Systematic processes to promote community participation in tourism should become an important part of all externally aided tourism projects, national tourist policies and strategies and, where relevant, in conservation, forestry and coastal zone management projects.

Foreign investors need to seek the engagement with all stakeholders from the beginning, and seek the linkages into local economies wherever possible. The tourism industry should collaborate with community based initiatives on the basis of their shared concern about conserving natural resources on which both their market shares depend upon.

National and local governments, the industry and trade unions have a key role to play in disseminating information to local communities about tourism-related development plans to enable community members to create successful income generating activities. Government policies to encourage a mix foreign and local investment and joint ventures, to improve access to credit for tourism-related local businesses, to increase government assistance of the agricultural sector, to allocate preferential landing and take-off slots to national carriers, and to engage in appropriate promotion activities should also be considered.

Research Question

Linkages between the tourism industry and other sectors of local economies are an under-researched area. Issues like package tourism, imported food or linkages to agriculture are more frequently being addressed than foreign direct investment or education and training of local and indigenous communities. Comparable statistics are rare as there are various units based on which tourisms contribution to the economy can be measured. Different countries have different ways of estimating GDP, export expenditures, and so on.

Measuring leakages is another problem; for many countries, there are no such data. Travel receipts are commonly used as a proxy for tourism earnings (Pearce, 1991) but it is sometimes unclear if only direct earnings from the tourism sector are taken into account or if earnings from indirectly related sectors are being included.

As such, based on research conducted in various other countries, this research seeks to answer the following question: What proportion of tourism income earned is leaked out of Fiji’s economy through imports and expatriate welfare?

This research is motivated by the fact that no such research has been conducted in Fiji’s setting and the findings of this research would help quantify the extent of leakage from Fiji’s economy.

Research Methods

To answer the research question, two forms of data collection techniques were employed. Firstly, a questionnaire was sent to thirty two hotels which had a response rate of 32%. Secondly, personnel interviews were conducted at the following organizations; Ministry of Tourism, Fiji Islands Trade and Investments Bureau, Bureau of Statistics, Reserve Bank of Fiji and an academic.

Unfortunately, most of the hotels were either reluctant to disclose any information or disclosed only part of the information.

Results and Discussion

Analysis of Interviews

Interview One

The first of the interviews were conducted at the Reserve Bank of Fiji. Mr. Atif Khan, an economist was interviewed. He acknowledged that the topic on tourism leakages was difficult and the Bank did not have any relevant information on it since it had not undertaken any research on this issue for the past years. He further added that it was natural for leakages to occur. However, it should not be deemed as a discouraging factor since approximately fifty cents from every dollar earned by the tourism sector is retained in the economy. This could stimulate economic growth and development via employment creation, increase in government revenue and many other avenues. He further added that the portion retained also creates a multiplier effect.

Interview Two

The second interview was conducted at the Fiji Bureau of Statistics. Mr. Pranesh Sharma, a senior statistician, provided various forms of data to aid in quantifying the issues highlighted in the research question.

The following chart shows Fiji’s performance in terms of the total amount of imports and exports for the period of January 2007 to February 2008.

Graph 1

Source: Fiji Bureau of Statistics

The provisional data state that Fiji’s total imports for the month of February 2008 was $271.2 million, domestic exports was $55.2 million and total exports was $82.9 million. As compared to the previous corresponding month, imports increased by $87.6 million (47.7%) whilst total exports decreased by $8.8 million (9.6%). Of the total exports, domestic exports decreased by $15.4 million (21.8%) but re-exports increased by $6.6 million (31.3%). This indicates that the general level of imports has been either steadily increasing with only a few sudden falls.

The statistician further added that for the month of February 2008, vegetable products, mineral products, base metals and articles thereof and machinery, mechanical and electrical appliances and parts thereof comprised 62.3 per cent of imports. He further noted that Fiji’s major sources of imports are from Singapore, Australia, New Zealand, United States of America and India.

Interview Three

The third interview was of an employee at Fiji Trades and Investment Bureau. Mr Zarak Khan, an investment promotion officer at the bureau provided information pertaining to tourism investment in Fiji. He notes that there are proposed investments in the western, northern and central resort projects amounting to F$2,868,597, F$4,398,000 and F$440,996,311 respectively. These resorts aim to initially employ a total of 561 locals. However, due to confidentiality reasons, the Bureau can not release the total value of foreign investment in the tourism sector.

Some additional information provided regarding tourism investment included the allowances given to encourage investment in the tourism industry. Two of such allowances include an investment allowance of 55% of the total capital expenditure to be deducted when calculating tax, a 5% turnover tax of hotels.

He also highlighted that there are some conditions set to discourage massive foreign investment and encourage local partnership in investments. For instance, a foreign investor engaging in a restaurant business rather than those operated by foreign owned hotels must have at least $200,000 in fixed assets and at least 50% equity held Fiji citizen(s) for investment up to $500,000 in fixed assets. Also, a foreign investor engaging in rental and hire cars or a chartered land and transport tour operator business must have at least $500,000. Additionally, any activity involving investment in the cultural heritage of the Fiji Islands must have at least 51% equity held by Fiji citizens.

Finally, Mr. Khan notes that most of the hotels in Fiji are neither fully locally owned nor fully foreign owned but are usually in a partnership agreement or joint venture.

Interview Four

The fourth interviewee was Miss Shalin Singh of the Ministry of Tourism. She mainly referred to Fiji Visitors Bureau (FVB) as her reference point. She highlighted that according to the Fiji Visitors Bureau (FVB) tourism in Fiji is dominated by the private sector, which is controlled mostly by the international hotel chains like the Sheraton, Warwick, Macombo, Fijian, Holiday Inn and other prominent hotels. The same goes for the ground tour operations, which underlines the success of any tourism industry in the world. Also, ATS, Coral Sun and Rosie Tours have established themselves as major players in wholesaling and retailing businesses. She also reiterates that Government has put in place policies that would attract foreign investors into Fiji and also expand the tourism sector. The allowances identified were similar to those identified by Mr. Khan of FTIB.

An interesting piece of information revealed was that F$1000 of tourist expenditure requires F$560 in imports (56%). The foreign exchange surplus retained in the country is $440 (44%). Tourism leakage at 56% is only marginally higher than agriculture and manufacturing (both at 54%) and mining 52%.

Interview Five

Lastly, Dr. Dorasammy Rao, a lecturer at the University of the South Pacific was interviewed. According to Dr. Rao $0.60 of every $1 earned through tourism earnings is lost through leakages and recalls that $3 million was spent on purchasing food stuffs for the tourism industry from other countries 3 year back.

He added that Fiji has lost approximately 56% of the tourist dollar to through import leakage and direct, indirect and induced levels. He also stated that there are no current or recent researches on the leakage factor of the tourism industry although there were some interest shown by government bodies in the past few years. Dr. Rao also said that leakages in Fiji occur in the form of, expatriate salaries, marketing by the Fiji Visitors Bureau, payments made overseas for trips by Fiji locals, imports of food stuffs, building materials, furniture, white goods and so on. He said that leakages are similar everywhere, and the people of Fiji need to update their data systems in terms of tourism imports and leakages as there is any evident data around of them. Dr. Rao highlighted the need for expatriates and noted that expatriates are definitely needed in the tourism industry of Fiji or any other developing nation. Even if the employees are locals, they need to be trained by experts to meet international standards.

Moreover, Dr. Rao said the expatriates are needed because they are needed for international tourists as they are highly experienced and have rotated around a lot and their knowledge can be put in a lot of useful new ventures. In addition to that, everyone has to respond to market changes and know about the market and local people may not get the job because of cultural reasons and if a job interview is carried out by an expatriate there is a certain level of fairness. Moreover, hotel operators trust expatriates more than local people because confidential information critical to the organization is kept to a certain level and not everyone has access to it and employers may say that they are investing they have a right to employ who they want and since countries like Fiji needs investment they cannot be dictators and investors want to operate freely and hiring of expatriates is not the question of is not the question of people being trained and remaining unemployed but the quality of training they receive.

Analysis of Questionnaire

Table 1

Holiday Inn Sonaisali Outrigger Beachcomber Tradewinds Plantation Island Resort Fijian Resort Mocambo Sheraton Lautoka Hotel Mean


% Permanent 72% 80% 68% 90% 87% 78% 86% 77% 81% 92% 81.1%

% Casual 28% 20% 32% 10% 13% 22% 14% 23% 19% 8% 18.9%

% Local 98% 94% 95% 90% 97% 89% 92% 93% 88% 99% 93.5

% Expatriates 2% 6% 5% 10% 3% 11% 8% 7% 12% 1% 6.5%

% of hotel income spent on wages and salaries 30% 40% 30% 30% 40% 30% 30% 30% 30% 20% 31%

% of hotel income spent on expatriates 2% 4% 3% 6% 2% 7% 6% 6% 8% 1% 4.5

Any other form of foreign consultants No Yes Yes Yes No Yes Yes No Yes No -

% of hotel income spent on other foreign consultants N/A 2% 1% 3% N/A 4% 3% N/A 2% N/A 1.5%


Food and beverages пѓј пѓј пѓј пѓј пѓј пѓј пѓј пѓј пѓј пѓј 100%

Furniture пѓј пѓј пѓј пѓј пѓј пѓј пѓј пѓј пѓј пѓј 100%

Lighting пѓј пѓј пѓј пѓј пѓј пѓј пѓј пѓј пѓј пѓј 100%

Beddings пѓј пѓј пѓј пѓј пѓј пѓј пѓј пѓј пѓј пѓј 100%

Cutlery пѓј пѓј пѓј пѓј пѓј пѓј пѓј пѓј пѓј пѓј 100%

Fruits and vegetables пѓј пѓј пѓј пѓј пѓј пѓј пѓј пѓј пѓј пѓј 100%

Are substitutes of imports available? Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes 100%

% of hotel income spent on imports 40% 50% 40% 60% 30% 60% 60% 50% 50% 20% 46%

Summary of Leakages

Table 2


% of hotel income spent on expatriates 4.5

% of hotel income spent on other foreign consultants 1.5%

% of hotel income spent on imports 46%

Total 52%

The results from the questionnaire analysis (Table 1) states that the extent of expatriates hired depend on the scale of operations of the hotel. This means that larger hotels tend to hire more expatriates then smaller hotels. On average, 6.5% of the staff employed by hotels is expatriates. This accounts for on average 4.5% of total hotel income. In addition to this, evidence suggests that the hotels hire consultants who take on average 1.5% of the total hotel income. Additionally, despite the existence of substitutes, hotels import a wide range of products. On average, hotels pay 46% of their total income on imports.

As such, as depicted by table 2, on average 52% of the total income earned by the hotels are leaked out of the economy.

Furthermore, graph 2 shows a breakdown of the countries from which the hotels imports most of its products. Majority of the imports are from Australia and New Zealand which account for 64% of total imports. This is justified by the low level of transport costs. The remaining 36% is spread over countries further away from the Pacific region.

Graph 2

A similar analysis for expatriates (Graph 3) shows that majority of the experts are also hired from Australia and New Zealand.

Graph 3

An interesting result from the questionnaire analysis revealed that although there are local substitutes available for the items imported, hotels continue to import. Most of the responding hotels state that this is due to the demands from tourists and the need for the hotels to be on par with international standards. However, the hotels do acknowledge the need to reduce imports and state that they try and minimize imports in all avenues possible. For instance, although a large chunk of imports include food and beverages, the hotels ensure that these imports include on those items not available on local shelves.

Additionally, the government provides some form of assistance to hotels to encourage reduction of imports. The nature of the assistance, however, was not revealed.

Research Question – Result

The research question stated was: What proportion of tourism income earned is leaked out of Fiji’s economy through imports and expatriate welfare? The results from the interviews and questionnaire analysis clearly indicate that a large portion of income earned by the tourism industry is leaked out of the economy through imports and hiring of expatriates.

Although the exact magnitude of this leakage is difficult to determine, evidence suggest that approximately 50 to 60 percent of the total income leaks out of Fiji’s economy. This is supported by empirical results from this research which concludes that approximates the figure to be 52%.

Limitations of Research

There were a few limitations faced while conducting this research. Firstly, hotels were reluctant to complete the questionnaire given since they feared leakage of confidential information. As a result, only 10 out of 32 questionnaire were returned, some of which were partially completed. Secondly, the organizations interviewed did not have much relevant information and perceived that research topic to be difficult. Thirdly, since there hasn’t been recent research of leakages in Fiji’s setting, it became difficult to relate current situations with previous times. The lack of research indicates the lack of data which was also encountered by this project.

Lastly, since this research was bounded by time limitations, ample time may not have been given to hotels to respond or enough information may not have been collected. However, given this limitation, all possible avenues were unturned to make a reasonable conclusion on stated the research question.

Suggested Further Research

It is acknowledged that the results of this research are based on the extent of information and data made available. However, a research on the magnitude of tourism leakage in Fiji should be conducted to ensure information on leakages are current. In order to do this, the research needs to devote a lot more time and allow respondents more time to complete the questionnaire. Additionally, to overcome the issue of confidentiality, such a research should be triggered by the Ministry of Tourism which be make it a necessity for the hotels to release their data.


Tourism is undoubtedly one of the largest and growing industries in Fiji. It creates employment, brings about economic growth and development and earns a significant amount of foreign dollar for the economy. However, evidence suggests that a large portion of this income is lost through leakage.

This however, should not be seen as a discouraging factor. If the players of the tourism industry such as hotels, the tourism ministry and others are able to manage with the resources available locally, the extent of imports would decrease, not drastically but gradually.

Additionally, it should be appreciated that despite leakages, the tourism industry in Fiji rakes in a lot of enhancements in the welfare and standard of living of the local people. As such, if all stakeholders work collectively, the extent of leakage could decline and the industry could prosper further.


Altinay, M., Hussain, K. (2005). Sustainable tourism development: a case study of North Cyprus. International Journal of Contemporary Hospitality Management. Volume 17 Number 3 pp 272-280

Eccles, G. (1995). Marketing, sustainable development and international tourism. International Journal of Contemporary Hospitality Management. Volume 7 Number 7 pp 20-26

Hall, C. M. (2000). Tourism Planning: Policies, Processes and Relationships. Prentice Hall

Hemmati, M. (ed.). 1999. Gender & Tourism. Women's Employment and Participation. Report to the UN Commission on Sustainable Development 7th Session, April 1999. London: UNED-UK.

Mathieson, A., Wall, G. (1982). Tourism: economic, physical and social impacts. Longman: London

Narayan P, (2000) Fiji's tourism industry: a SWOT analysis, The Journal of Tourism Studies. - Vol. 11, no. 2; pp. 15-24.

Pearce, D. (1991). Tourist Development. 2nd ed. Longman Scientific & Technical

Wood, P., Jayawardena, C. (2003). Cuba: hero of the Caribbean? A profile of its tourism education strategy International Journal of Contemporary Hospitality Management. Volume 15 Number 3 pp. 151-155

Get Better Grades Today

Join and get instant access to over 60,000+ Papers and Essays

Please enter your username and password
Forgot your password?