The Economist: The war on tourism is often self-harming

Cooling off is easy in Barcelona. Swim in the sea, sip sangria — or just hang about looking like a holidaymaker. Recently residents have taken part in anti-tourist protests, some firing at guests with water pistols. Other rallies calling for an end to mass tourism have taken place across the Balearic and Canary Islands. And it is not just Spaniards. Locals in Athens have held funerals for their dead neighbourhoods. Authorities in Japan have put up a fence to spoil a popular view of Mount Fuji and prevent tourists gathering. Soon there will be a 5pm curfew for visitors to a historic neighbourhood in Seoul.

During the depths of the COVID-19 pandemic many predicted that tourism would never return. Now, however, holidaymakers are back. According to UN Tourism, a multilateral agency, this year trips are set to nudge 1.5 billion, up a tad from 2019. The US dollar, measured against a basket of currencies, is worth more than at any point over the past two decades, barring a four-month spell in 2022 — meaning that Americans are particularly keen to travel.

This ought to be a gift to the cities and countries being visited. Tourists bring cash and make little use of taxpayer-funded services. Indeed, officials in central banks and finance ministries quietly welcome the inflows, even as politicians are being pushed by voters to soak tourists (with taxes) and limit arrival numbers.

Familiar spots in Europe are seeing visitor numbers soar. Trips to Greece, the fastest-growing market in southern Europe, jumped by a fifth in the first quarter of 2024, compared with the year before. Visitor spending in Portugal is forecast to be 20 per cent higher this year than in 2019.

To find even more impressive growth one must venture to developing countries, and plenty do. More than half of the ten fastest-growing destinations are in emerging markets, where guests can get better bang for their buck and tourist industries are being created from scratch. The number of holidaymakers in Albania and in Saudi Arabia doubled in the first quarter of 2024, compared with five years ago. Arrivals to the Dominican Republic and Turkey have also shot up.

Tourism accounts for 3 per cent of global GDP, a chunky 6 per cent of cross-border trade and employs as many people as live in America — meaning its expansion will reshape economic activity and ease government budgets. The economies of Greece, Portugal and Spain all grew at a rate of 2 per cent or higher last year, against an average of 0.4 per cent across the EU. Taking the broadest possible definition, some 20 per cent of Albania’s economy now relies on tourists, up two percentage points from five years ago. In Saudi Arabia tourism’s contribution to GDP has grown by a third in the past year. Holidays are a serious business.

Tourism, like any export, generates national income. Unlike consumers of other exports, tourists travel to the source country to consume products, rather than the other way round. Goods and services that are not normally tradeable, such as a paella by the beach, become so. In most places, foreign diners will pay consumption taxes while using few public services — unless, that is, the prawns turn out to have been dodgy. Although there are surge costs, such as requiring additional police in the summer, there are also surge benefits, such as tourists paying for train tickets during off-peak times, when carriages might otherwise be empty.

The problem is that higher tax receipts offer diffuse benefits, whereas the costs of tourism are concentrated. In Barcelona residents are annoyed by crowds, dirty streets and higher prices, as well as stores selling cannabis and tacky souvenirs. Majorca’s situation is “unbearable”, says Joana Maria, who organises local anti-tourist protests. The population of the island can swell from 1 million to 1.4 million in peak periods.

Some economists also worry. As tourism booms, it draws in a larger share of an economy’s capital and labour. Critics liken this to a kind of “Dutch disease”, where rapid growth in one export sector prevents other, higher-value added industries from growing. According to Giuseppe Di Giacomo at the University of Lugano and Benjamin Lerch of the Swiss finance ministry, growth in Italy’s tourism business from 2010 to 2019 reduced demand for education, resulting in lower university enrolment and completion rates. Serving pizzas to hungry tourists seems a great way to get by at the age of 20; by the age of 40 a tiring waiter may wish he had studied for that degree. The holiday sector relies on lots of poorly paid workers whose productivity grows only slowly — meaning it would be a particularly bad business for developing countries to get stuck in.

Policymakers want to turn the boom to their benefit and keep locals happy. From Portimão, a lovely beachside spot in Portugal, to Poole, which also has a beach and is in Britain, towns across Europe are making guests pay more in taxes, so as to ration access and improve infrastructure. Some want to attract richer guests; others want to reduce visitor numbers altogether. Cruise-ship passengers are often unwelcome as they crowd streets without having the decency to pay for hotels or restaurants. Greece plans to cap the number of berths in 2025, after passenger arrivals increased by 50 per cent last year. Where rents are high, as in Barcelona and Lisbon, governments are cracking down on short-term lets.

In some places, tourist taxes are too effective. Gangbusters growth in emerging markets is in part a result of travellers looking for a bargain. These destinations tend not to have museums stocked with the world’s loot or unique Broadway shows; instead, they often attract visitors with offerings that are more easily substituted, namely beaches and booze. Festus Fatai Adedoyin of Bournemouth University and co-authors find that in one such spot, the Maldives, each 10 per cent increase in taxes reduces arrivals by 5.4 per cent, whacking an industry that contributes almost a third of GDP.

By contrast, in places with unique attractions, taxes are less likely to put off tourists. Amid a throng of visitors outside a home designed by Antoni Gaudí, a famous Catalan architect, Nina Tavolder, a Canadian, says she was undeterred by the €4-7 ($6.60-$13.30) nightly charge. She chose Barcelona for its culture, food and nightlife: “We would not consider not coming because of the tax.”

A study in 2019 by Song Haiyan of Hong Kong Polytechnic University and co-authors found that higher airfare levies, a type of tourist tax, did not affect overall spending, merely shifting budgets. Those paying more for flights then splashed less on hotels and meals. As Jordi Valls, one of Barcelona’s deputy mayors, puts it, the flow of tourists is “unstoppable”.

Although tourists are unlikely to stop visiting because of a price rise, they may change how they visit. Venice has experimented with a €5 ($8.30) entry charge for day-trippers this summer, which it is considering doubling, in the hope of encouraging visitors to stay the night. Japanese officials, meanwhile, levied a ¥2,000 ($20) congestion charge on a crowded hiking trail at Mount Fuji on July 1 in an attempt to shift tourists to other routes and ease the environmental burden. Copenhagen is offering tourists who use public transport and help keep the city clean free meals and museum passes.

It is worth trying to make tourism work, rather than to become as unwelcoming as possible. If guests raise local prices, they will also raise wages, notes Chloe Parkins of Oxford Economics, a consultancy. Governments can do more to accommodate arrivals, both by building infrastructure and loosening planning rules. Rents would not rise as fast in Barcelona, for instance, if housing supply responded to foreign and local demand. Indeed, history shows that tourism receipts can be invested in infrastructure and higher value-added sectors, as has happened in Italy and, more recently, Mexico. In most cases, summer holidays can be enjoyed by everyone.