CHAPTER 9

Funding Effective Destination Management and Infrastructure

Introduction

This chapter considers how DMOs need to move away from being purely promotional bodies toward managing and coordinating destinations effectively. The challenge for many regional and local destinations remains how to fund the required investment in tourism-related infrastructure and services to help better manage visitor flows and mitigate overtourism.

The use of public space is free for all including visitors, but the maintenance and repair costs are funded by local taxpayers highlighting some of the invisible costs caused by increased tourist flows. The implication for DMOs is a shift away from marketing and promotion toward managing wider destination issues as highlighted previously.

Although, many destinations are keen to become more sustainable and avoid overtourism this requires a commitment to implementing sustainable development principles to deliver the desired goals and outcomes. The idea of imposing taxes and/or levies on international visitors is not new, but it remains highly controversial in many destinations and is often met with skepticism especially from private sector stakeholders and industry players.

Making Destination Management Sustainable Long Term

Many destinations impose a relatively small city or environmental tax on tourists staying in registered accommodation establishments, which means those staying in privately rented accommodation such as Airbnb and day visitors do not have to pay the tax. This is the case in Amsterdam where overnight guests are charged a flat rate of €3 per night and a further 7 percent is added to your room bill when staying in registered accommodation (Tourist tax (toeristenbelasting) 2021). This approach is somewhat counterproductive as it targets those visitors who tend to spend the most in the destination while at the same time being less likely to cause negative impacts. On the other hand, daytrippers who frequently arrive in large groups causing congestion and typically spending very little in the destination are not taxed. This is likely due to the fact that it can be difficult to capture day visitors, especially if they are not part of a group. Thus, from an administrative point of view it is easier to just charge those staying in registered overnight accommodation.

Tourist Taxes and Fees

Venice, which until March 2020 was one of the most overcrowded destinations in the world, was due to introduce a tax on daytrippers in July 2020 in an attempt to control visitor numbers (Dunford 2020). However, the tax was postponed until 2021 due to the coronavirus pandemic. The proposed tax is part of Venice’s drive to rethink its tourism system and transition toward a model based on quality and sustainability at its core. According to Paola Mar, the city’s councillor for tourism: “the goal is to trigger a renaissance of the city…. We want to attract visitors for longer stays and encourage a ‘slower’ type of tourism. Things cannot go back to how they were” (Dunford 2020).

Bhutan is perhaps the most well-known niche destination to have imposed a high tax (or more accurately an entry fee that requires a minimum expenditure per day) for visitors as well as limiting the number of foreign tourists visiting the country at any given time. This high-value, low-impact tourism model was introduced in line with the country’s gross national happiness development model, which argues that an economy is not an economy if it does not promote sustainability, community wellbeing, and social harmony. The Bhutanese tourism policy aims to protect and share the country’s natural beauty while preserving the local cultural traditions and way of life while benefiting from the jobs and foreign income generated by tourists. The daily charge of USD250 per day includes a USD65 sustainable development fee and a USD40 visa charge. Until recently regional visitors from India, Bangladesh, and the Maldives were excluded from paying the daily charge. (Minimum Daily Package | Tourism Council of Bhutan 2021). However, these regional visitors now also have to spend a minimum per day. USD65 out of the USD250 fee goes toward funding free healthcare and education for all citizens, nonetheless, about a third of the population still lives in poverty. The Bhutanese population are thought to be proud of their tourism policy and the benefits that it brings to their country. Thus, this would appear to be a positive model to adopt for developing countries and emerging economies seeking to alleviate poverty through tourism development.

According to the OECD, in the case of Iceland, the National Infrastructure Plan and the Tourist Site Protection Fund were established to support and invest in natural and cultural sites that face pressure from tourism. Investment in both public and private tourism-related infrastructure funded by the scheme equated to ISK1.2 billion in 2019 (OECD Tourism Trends and Policies 2020 | en | OECD 2020). The plan and fund were launched in response to the key challenge facing the Icelandic tourism sector, which is how to maximize the economic contribution from the sector while protecting the assets that it depends on. The rapid growth in tourism has increased pressure on nature, infrastructure, and society. This means that tourism planning, infrastructure investment, data collection, tourist safety, and visitor flow management remain key priorities in Iceland. Furthermore, a new long-term Tourism Policy Framework for 2020 to 2030 with a strong emphasis on sustainability was published in 2019. It is supported by a new Tourism Impact Assessment Model, which takes the carrying capacity of the environment, infrastructure, society, and economy into account and is considered fundamental to the future development of Icelandic tourism (OECD Tourism Trends and Policies 2020 | en | OECD 2020).

Recent growth in the number of visitors to New Zealand has not only increased the benefits of tourism, but it has also highlighted that the benefits versus costs need to be considered carefully as they do not always fall in the same place. Growth in tourism has led to overcrowding in places causing increasing pressure on infrastructure as well as some of New Zealand’s main natural attractions (OECD Tourism Trends and Policies 2020 | en | OECD 2020). The current funding model for visitor-related infrastructure was no longer considered to be fit for purpose and this was compounded by the absence of a direct relationship between visitor numbers and revenues. It is often difficult to derive an adequate revenue stream from natural attractions and related facilities such as visitor centers and toilets with the cost of upkeep falling on central or local government. In the case of local government, this can put particular pressure on budgets and be unaffordable, especially in less densely populated areas. In such cases, central government intervention is necessary to ensure that funding for conservation, tourism infrastructure, and services is on a financially stable footing, with those who benefit from the infrastructure and services provided contributing meaningfully toward the costs. With this in mind, New Zealand recently introduced a NZD35 International Visitor Conservation and Tourism Levy to secure the necessary resources to mitigate the impact of tourism at the local destination level. The levy is forecast to provide NZD450 million over five years and is earmarked for investment in tourism infrastructure and conservation in equal measures in accordance with an investment plan. At the same time, the private sector in New Zealand has launched an industry-led Tourism Sustainability Commitment Initiative.

In 2016, the Rwandan government doubled the fee to USD1,500 for tourists to visit the Gorillas, which resulted in an increase in revenues from USD15 million to USD19 million and a drop in visitors to the Volcanoes National Park from 22,000 to 15,000 per annum (Bellaigue 2020). However, the coronavirus pandemic has exposed the downside to this particular low-volume high-yield model as there are currently no wealthy foreigners visiting the National park and they are unlikely to return for some time. Thus, the Rwandan government is having to rethink its conservation strategy owing to the lack of revenues coming from the high visitor fees. In an attempt to encourage domestic and regional tourism during the coronavirus pandemic the entry fee to the Volcanoes National Park has been reduced in the hope that it will help preserve more local livelihoods.

In Japan, the introduction of the International Passenger Tax is to become a permanent source of funding for tourism promotion as well as being put toward innovative and cost-effective measures to develop the tourism offer and support tourism businesses. Measures include enhancing immigration procedures, developing world-class tourist facilities, and creating new tourism content using regional resources (OECD Tourism Trends and Policies 2020 | en | OECD 2020).

Key Takeaways