IGCSE Travel and Tourism Practice Exam

What is 'import leakage' in the context of tourism?

1. When tourists send money back home

2. When local services cannot meet tourist demand

3. When profits from tourism leave the host country

4. When local customs are ignored by tourists

The correct answer is: When profits from tourism leave the host country

Import leakage refers to the phenomenon where profits generated from tourism activities in a destination do not remain within that location but are instead transferred out to foreign entities or countries. This typically occurs when the tourism businesses are owned by foreign companies, leading to a situation where profits, earnings, and capital generated in the local economy are sent back to the company’s home country rather than being reinvested locally. For example, if a hotel or tour operator is owned by a multinational corporation, most of the profits from the tourist spending at that establishment may not benefit the local economy, as they are likely repatriated back to where the parent company is based. This can hinder economic development and growth in the area reliant on tourism. Other options describe related but distinct issues in tourism. Sending money back home relates to remittances from tourist activities, local services failing to meet demand pertains to capacity and infrastructure challenges, and ignoring local customs speaks to cultural sensitivity, rather than the financial outflow associated with leakage. Understanding import leakage is crucial for assessing the economic impact of tourism on host destinations and considering strategies to maximize local benefit.