The impact of Leakages and Linkages on Tourism-led Local Economic Development

The term leakage is used to refer to the amount spent on importing goods and services to meet the needs of tourists. Leakages occur when the local economy is unable to provide reliable, continuous, competitively priced supply of the required product or service and of a consistent quality to meet the market demand.

From a tourism and poverty relief perspective it is generally more productive to focus on the other side of the coin: linkages. It is when the local economic linkages are weak that revenue from tourism receipts in a local economic area leaks out. Engaging with local suppliers, using local capital and resources and developing the skills necessary to deliver consistently at an appropriate quality and at a competitive price can reduce leakage. This can have a demonstrable benefit for the poor.

One of the best ways to enhance economic benefits to the local community and to increase the contribution to poverty reduction is to increase the extent of linkages between the formal tourism sector (hotels, lodges, restaurants, tour operators and transport providers) and the local economy. Increased integration can develop strong linkages between tourism and other economic sectors including agriculture, fisheries, manufacturing, construction and crafts production.

The creation of local linkages needs to be part of the overall tourism development strategy in the planning, construction and operational phases. Three key sets of factors are important in enhancing the extent of local linkages —

  • The creation of employment at all skills levels and particularly where there is existing capacity
  • New attractions created through anti-poverty tourism development strategies need to be integrated into the tour programmes of the ground handlers and inbound operators. Creating mutually beneficial linkages between the formal and informal sectors is critical. Local government needs to ensure that micro-enterprises and emerging entrepreneurs are promoted in local tourism marketing initiatives where they are often neglected.
  • The requirements of new micro-enterprises for credit, marketing skills and a thorough understanding of tourist expectations need to be met. Micro enterprises may have particular difficulties in meeting health and safety, licensing and other regulatory requirements. Such regulations themselves need to be crafted to encourage inclusion through assisted education and training to ensure engagement by the poor in the industry.

The making of effective partnership-based linkages often requires a catalyst and a sustained effort. The LED process is well placed to provide both. In general, when new leases or concessions are granted, private sector companies should be asked to make the development of such linkages part of the bid. In the South African Responsible Tourism Guidelines a whole range of practical strategies for developing local economic linkages are identified.

Lorton Consulting has substantial experience in Tourism Planning for Community Participation, Tourism as a driver for LED, and Community Based Tourism. Contact us if you would like us to help your province, district, town or community achieve effective and implementable strategic tourism-led economic development planning.


  1. Josiah Miller

    “THIS was very helpful with an assignment i had to do ” thank you fo putting this up .GOD Bless

  2. Mary Lou Cobrador

    This is very helpful for my presentation about the Tourism Multiplier Effect in my Tourism Planning and Development subject. Thanks a lot!

  3. This was a very clear explanation for leakage and linkages on tourism. It really help me to answer a question.
    Thank you

  4. This explanation really help clarify my confusion about linkages and leakages. thank you for helping me out

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