To Each Their Own Value

I spent years taking apart the slogan "we don't need more tourists, we need quality tourists". This summer, however, my LinkedIn feed decided to punish me. All anyone talked about was value, and its derivatives like "enough counting heads, enough with the classic indicators, we have to measure value, etc." So here I am, writing about value in tourism.

Before I leave you to my ramblings (poor you), let me get straight to the point: I have no definite position on value tourism. Since my job is to help decision-makers understand reality, I first have to ask what we are actually talking about. I have concluded that the expression can mean many things, and that the operators of a single destination do not necessarily share the same interests, values and, therefore, the same idea of value. So I will try to do two things: first, clarify what value tourism can concretely mean in its various forms; second, and this is the point that really interests me, ask: value for whom?

Value tourism: who's he????

Behind the word value hides an uncomfortable question that more and more people are starting to ask openly: what kind of tourism do we want? I would add another, which I consider inseparable from the first: for whose benefit? These are political questions, not technical ones, and for this reason they do not admit a single correct answer. A hotelier, a resident who rents out their home to tourists, someone who had to leave the neighbourhood because they can no longer afford the rent, a mayor who has to balance a budget supported in part by earmarked taxes, a day-tripper visiting for the day: each would answer "what kind of tourism do we want?" differently, and every answer would be legitimate from its own point of view.

This is not indecision. It is the very nature of these questions, which is what sets them apart from a technical question, for which a correct answer exists, in principle. And yet, every time someone tries to tackle the first question, they end up replacing it with another, only apparently technical and neutral: which tourist is worth more? In doing so, in my view, the formula "value tourism" does not answer the political question (what tourism do we want). It dodges it, pretending there is a single possible answer, when in reality there are as many answers as there are people you ask.

This is not a new issue. Krippendorf, a well-known scholar of the social effects of tourism, tackled the subject systematically as early as the 1980s in Le vacanze e dopo? (Italian edition EGEA 2013, German original 1984, English edition The Holiday Makers 1987). The book addresses the topic broadly from the social, economic and anthropological points of view. It is full of insights and ideas, but it leaves to posterity the task of testing its intuitions (quantitatively too).

Among those who took up the task, in 1997 two Australian economists, Larry Dwyer and Peter Forsyth, tried to investigate the notion of value in tourism from an economic point of view. They came up with a concept, tourism yield, the same term used for a financial investment, with the ambition of measuring, once and for all, how much a tourist really "yields" to a territory. Thirty years and hundreds of studies later, the most solid finding of this line of research is not an answer. It is that there are different ways of measuring that yield (for example how much a tourist brings in, how much value added they really generate, how many jobs they create, how much net benefit they bring once costs are subtracted), and using different metrics to measure the same concept produces different rankings of the very same tourists. A tourist who wins on the first measure can lose on the second. This is not a detail for nitpicking economists: it is proof that "value tourism" is not one thing. It is at least five or six different things, often in conflict with one another.

Let me explain with an example. Two researchers, Susanne Becken and David Simmons, studied the holiday and spending behaviour of two types of traveller at opposite extremes: the backpacker who sleeps in hostels or tents and the tourist on an organised coach tour. They measured them on three different metrics: economic return (for the territory and for the individual business), cost to the State, and environmental impact. The results show that each segment has its lights and shadows, and that condemning or praising one or the other is only a matter of perspective.

If we put on the small shopkeeper's glasses, the backpacker looks at first sight like the least interesting customer, because they spend very little per day on lodging. But if we change measuring instrument and look at the length of the trip and the dispersion of spending, the picture flips. Staying much longer (on average over three weeks, against the six days of the coach tour), at the end of the holiday they leave behind a perfectly respectable total. But above all, their spending ends up in activities with little tied-up capital (hostels, small rental shops, bars, little stores) that do not carry enormous mortgages to repay and manage to keep as net earnings a good part of what they take in. On the other hand, according to the authors of the study, this same tourist weighs far more heavily on public finances, because they make intensive use of trails, parks and municipal infrastructure that the territory maintains at its own expense.

At the opposite end, the coach tourist spends very high amounts every day, especially in hotels. On paper and in common sense they generate an enormous added value, both from the economic perspective and from the more financial one of the individual operator. Yet if you calculate the return on that tourist spending net of the costs of building and maintaining the accommodation facility, that value becomes even negative. Big hotels have "huge mortgages" and very high investment costs to repay every month.

It would be easy to conclude that big hotels are less efficient, or that mass tourism creates less real value for whoever runs the business. But that would be an error of accounting myopia. Widening our gaze to the destination's whole ecosystem, the irreplaceable role of the large facility emerges. A small B&B or a hostel intercepts a demand that often already exists in the territory. The big hotel, thanks to substantial marketing budgets, agreements with tour operators and international sales networks, has the commercial strength to create demand from scratch, tapping flows from distant markets that would otherwise never visit that destination. Not only that: without the volumes guaranteed by big hotels and organised tours, many airlines would not even open routes to connect a territory. And without those flights, paradoxically, not even the backpacker could ever get there. Other advantages of having large businesses in tourism are the training, stability and career prospects that these big structures offer compared with small ones. I know that in the homeland of small-is-beautiful it is blasphemous even to think it, but all that glitters is not gold.

The great lesson we draw from this analysis is that we cannot judge the goodness of a type of tourism with a single yardstick. If we look for immediate retention of value in small local services, we will look kindly on those who stay long and spend in a spread-out way, forgetting however that they leave very little in taxes to finance the public goods (parks, roads, subsidised transport) that they consume in large quantities. If we look for critical mass, stable volumes and the opening of new international markets, we will have to acknowledge the irreplaceable role of those who invest in large accommodation infrastructure, while knowing that those giants must devote an enormous share of their takings to repaying the invested capital.

In short, tourism quality is not a visa stamped on the traveller's passport (a metaphor from my Claude 😊), but the result of a delicate balance between different functions, often in tension with one another. Giving up the search for the "ideal tourist" and starting to understand how the different segments support one another is the first step towards an economic analysis that truly adheres to reality, not to a simplified model of it.

And this is exactly where the need for this post, and (I hope) for a series of posts I would like to write over the coming months, comes from. If even the economists who have been studying the value of tourism for thirty years have not managed to agree on many questions, perhaps the most useful thing I can do is give you tools to find your way among the most widespread concepts for measuring tourism value, to understand what each one measures and, above all, what it leaves out. Below is a brief (non-exhaustive) preview of the topics I would like to tackle.

Seven indicators, seven reflections (maybe seven future posts)

Before getting into the substance, a premise that holds for everything that follows: the seven indicators below are not rungs on a ladder leading to an ever more "true" measure of tourism value. They are different lenses, built to answer different questions, often serving the interests of different stakeholders. There is no last rung that settles once and for all "how much tourism is worth". There is only the question that each indicator, in its own way, tries to bring into focus: value for whom, and to answer what.

1. Turnover

How much a destination takes in: it is the most obvious answer to "what does value mean", the one that ends up in end-of-season press releases. And it is also the first measure that Larry Dwyer, the economist who coined the concept of tourism yield, rejected. The reason is simple: a euro earned thanks to a better service and a euro earned only because prices went up count the same in a turnover total. And that euro may stay in the territory or vanish elsewhere; the number doesn't say. This is why turnover is the most convenient figure to quote at a press conference: it grows even when, for those who live in the destination all year round, things are getting worse.

2. Per-capita spending

If the aggregate figure deceives, the natural reflex is to narrow the focus to the single visitor: fewer people, but spending more. It is not a silly idea; it drives a good part of the destination strategies chasing "the high-spending tourist". The problem is that it remains the same family of measure as turnover: the unit of account changes, not the logic. One simple question is enough to see it: is the German tourist who spends 300 euros a day on a weekend worth more, or the American who spends 100 a day for thirteen days? The first leaves more every single day. The second leaves more in total, spread over a stay that touches the market shopping, the daily meals, everything a weekend doesn't have time to brush against. To the question "who is worth more", per-capita spending alone gives no answer: it depends on what you are measuring, and over what time horizon. The problem is not the unit of measure. It is that neither figure tells you how much of that spending really stays in the territory.

3. Value added

If counting how much tourists spend is not enough, the next step is to ask how much of that spending remains once you have paid for everything needed to produce it. That is value added: the difference between what tourists spend and what businesses in turn have to buy elsewhere in order to deliver that service (imported food, supplies, fuel, the commission of a booking platform based outside the region). It is the same principle on which the Tourism Satellite Accounts are based, the standard adopted by UNWTO, OECD and Eurostat, because gross turnover is considered too crude a proxy. But it must be used with a warning: value added measures how much is produced in the territory, not how much income remains with residents. Part of that value added, wages and profits, can still leave the territory: a salary paid to non-resident seasonal staff, a profit that returns to an investment fund based elsewhere. Value added tells you how much is created. It doesn't yet tell you who keeps it.

4. Leakage

This is a topic very dear to those who work on tourism policy, and very thorny for those who actually have to measure it, and the reason for the difficulty is already visible in the word most used to define it: "local". "Local" is not a fixed unit. A village of two thousand inhabitants, the region it sits in, the country it belongs to are three economies of radically different size, and the very same spending can "stay" or "leak out" depending on which boundary you use to measure it. A tourist who pays a supplier in the provincial capital twenty kilometres away produces a leak for the village, but not for the region. The same spending that leaves the region for another Italian region is a regional leakage, but not a national one. Anyone who writes "this destination's leakage is 40%" without saying at what scale is answering a different question from the one the reader thinks they asked.

Once the scale is fixed, leakage depends directly on how far that territory, at that scale, has a supply chain able to intercept spending instead of letting it bounce out. Not on the type of tourist who arrives. An example helps to grasp the mechanism, with a warning: it is an illustration, not a general rule, and holds only all else being equal in economic structure. Someone who travels for a long time spending little per day, in hostels and small rental shops with low fixed capital, tends to leave in the territory a higher share of that spending than someone staying in a large facility with mortgages, centralised supplies and foreign management, but only if that territory has, at the right scale, something to sell to both. A small hostel in a territory with no local production, where even the sheets and the food come from outside the region, can disperse…