#tradeXpresso Lungo: the sweet spot of sustainable tourism should be your next summer destination!

It’s July and, if you live in Europe, it’s mid-summer and you’re either already on holidays, or about to go. If I were to guess what your travel destination is, I would probably need a lot more than one guess. One reason for it is that, after the global pandemic, global tourism is going through some fundamental shifts. The covid crisis hit tourism hard. Take France, for instance, the top tourist destination worldwide. In 2019, there were over 90 million international tourists. In 2021, that number dropped to almost half at around 48 million. The same happened almost everywhere, in other major tourist destinations like Spain, United States, or Italy. Some major tourist destinations were in a de facto lockdown. Thailand went from 40 million international tourists to almost none in 2021, followed by a slow recovery, with 11 million international tourists last year.

We have also changed our lifestyle. The pandemic created a new social class of digital nomads, longer-terms business traveller that blurred the lines between tourists and residents. Some destinations now provide co-living spaces that transformed hotels in “place to live and work”. According to Statista , the United States, Thailand and Spain were the top three destinations for digital nomads. Several countries want to brand themselves as digital nomad destinations. In Europe, Portugal, Estonia and Greece introduced new legislative measures to encourage teleworking and long-term stay. Costa Rica and Iceland also tried to lure digital nomads to their shores. This trend came on top of the other disruptive changes to traditional tourism, such as ecotourism, solo travel, wellness tourism, “bleisure” travel (combining business trips and leisure travel), virtual tourism, or staycations.

These new trends in tourism can be disruptive even for experts, trade in services experts to be more precise. Trade in services was already a complex topic, with the rules for international trade in services being defined by the so-called “modes of supply”. The WTO rulebook for services (the General Agreement on Trade in Services – GATS) envisaged four distinct modes of supply . ?In a nutshell, international trade in services typically occurs in any of these four modes of supply:

Mode 1 - Cross border supply of services: it is the supply of a service from the territory of one country into the territory of another country. The best example is provision of a cross-border service online.

Mode 2 - Consumption abroad: it is the supply of a service in the territory of one country to the consumer of another country. Tourism is the typical mode 2 example.

Mode 3 - Commercial presence: it is the supply of a service by a service supplier of one country, through commercial presence, in the territory of another country. Opening a bank office abroad would fall under mode 3 services.

Mode 4 - Movement of professionals: it is the supply of a service by a service supplier of one country, through the presence of natural persons of a country in the territory of another country. A typical example would be the relocation of an IT engineer for a limited period in a foreign country to help a client.

Tourism activities, by definition, involve the movement of the consumer (tourist) to the country destination (supplier). This is defined as mode 2 services in the GATS taxonomy . But now with digital nomads, we see the rather complicated situation where the neat separation between GATS modes of supply being blurred, creating additional headaches for trade statisticians. What mode of supply would best characterise the online services provided by a digital nomad that is temporarily located in a different country? Typically, cross-border online services are counted under mode 1. As a business tourist, tourism services are counted under mode 2. And the temporary movement of workers is counted under mode 4. Digital nomads combine three modes of supply for services: mode 1, 2 and 4. As I experienced it first hand, producing services trade statistics by modes of supply was already difficult. These new tourism trends may be bad news for trade statisticians, if teleworking from abroad becomes a widespread practice.

Yet, tourism also attracts a lot of other, more serious bad news. With the renewed tourism activity, the side-effects of over-tourism in places like Amsterdam, Barcelona, or Venice resurfaced. Amsterdam, a victim of its own success, now even has a “Stay Away” campaign. Tourism was even charged with exacerbating inflationary pressures. The “Beyonce effect” was presented as responsible for an extra 0.2 percentage points to monthly inflation. How? Well, simply by inducing a sudden surge in international tourism (both from across Europe and the United States), with fans taking advantage of the significantly cheaper ticket prices than back home. Tourism also accounts for a non-negligible share of greenhouse emissions , growing plastic pollution, and water consumption. Spain, for instance, goes this summer through a difficult draught period . Typically, tourists consume more water than locals: according to one estimate , while a local resident consumes on average 127 litres per day, the consumption of a tourist ranges between 450 and 800 litres, for hotel and restaurant activities (kitchen, laundry, toilets, swimming pools, landscaping and golf courses irrigation, etc.).

At the same time, tourism plays a crucial role for the economic performance of many developing countries. For many small islands (e.g. Maldives, most Caribbean countries like Aruba, Antigua & Barbuda, Bahamas, St. Lucia), tourism represents more than 50% of total exports, according to the UN World Tourism Organisation. Even for more diversified countries, like Türkiye, international tourism represents around 60% of the total value of their exports. For France, even if tourism receipts represent only around 5% of total French exports, this is comparable in size with top French exports like aircraft, pharmaceuticals or automotive.

These impressive figures are only based on direct revenues from international tourism. Add indirect economic activities that are needed to support the tourism sector, plus the importance of domestic tourism and you may be looking the world’s “largest industry”. Given the massive economic impact of tourism, countries are hence faced with a complex equation to solve: how to use tourism as a driver for sustainable development, while avoiding the pitfalls of certain overcrowded destinations that put severe strains on the local communities and their environment? How to reach this sweet spot in sustainable tourism was recently the theme for the G20-backed UN High-Level Political Forum on Sustainable Development .

One solution, at least in terms of having the right KPIs in sight, may come from a data-driven approach. The good news is that tourism-related indicators are quite well developed. More than a decade ago, Julien Gourdon (currently a Senior Economist at the Agence Francaise de Development) and myself proposed a new and comprehensive Sustainable Tourism Benchmarking Tool (STBT) to guide public authorities and businesses towards the sweet spot of sustainability in tourism activities worldwide.

The objective of the STBT is two-fold. Firstly, this methodology is able to detect the sustainability problems in a tourism destination. Secondly, using benchmarks and policy-relevant indicators, the STBT allows policymakers to make informed decisions and improve the prospects for sustainable tourism development in their countries. Seven key dimensions were included in the Cernat-Gourdon Sustainable Tourism Benchmarking Tool: tourism assets, overall infrastructure, tourism attractiveness and activity, tourism-related linkages and losses, environmental and social sustainability).

Each of these dimensions was broken into groups of variables, which were further broken into key performance indicators (KPIs). For instance, tourism-related linkages capture the extent to which tourism activities generate additional economic activities in the local economy. When linkages with the other sectors of the domestic economy cannot be built, a significant part of the development potential stemming from tourism activities is lost. This leads to missed economic opportunities for destination countries. Yet, one has to be realistic: not all tourism expenditures can be reinjected in the local economy. Tourist destinations require imports, just like any other economic sectors. Hence, a certain degree of external inputs not available in the local economy are crucial to ensure the tourism sector remains competitive. Apart from the typical tourism indicators, one important aspect included in our methodology is the extent to which tourism activities benefit the community and the environment. A tourist destination is sustainable only if both the human condition and the condition of the ecosystem are satisfactory or improving. If the condition of either is unsatisfactory or worsening, the destination is unsustainable.

We tested our STBT methodology on three developing countries from Asia: Indonesia, Malaysia and Thailand. Based on the data available at the time when we developed the STBT methodology, Indonesia has the highest score for tourist assets, whereas Malaysia and Thailand ranked far below. However, despite lower scores for tourist assets, the most attractive destination among the three countries examined was Thailand. The STBT suggests that both Malaysia and Thailand appeared at the time to be more efficient in the exploitation of their tourist assets than Indonesia.

The STBT framework also revealed that tourism in Indonesia and Thailand created fewer linkages in the local economy relatively to the amount of expenditure by tourists. This stands in contrast to the Malaysian case, where despite the lowest score for tourism activity, there was a higher economic multiplier for the local economy from tourism. With regard to tourism sustainability, Thailand and Malaysia had the most problematic situations, the former on the human component, and the latter in the environmental component. A better score for Indonesia in the sustainability segment confirmed that the country could increase its tourist activities without reaching critical, detrimental effects for tourism sustainability.

?Figure 1. The Cernat-Gourdon Sustainability Benchmarking Tool: the case of Indonesia, Thailand and Malaysia

?The Cernat-Gourdon Sustainable Benchmarking Tool didn't make it as a travel app for your smartphone. So it would be hard for you to use it when choosing your next summer destination. But maybe we do not need an app to make informed choices. If you asked me where to go next, I would simply suggest that we all head for the sweet spot of sustainable tourism.

No matter where you’re going, enjoy your summer holidays!