Inflation

Tourism development often creates inflationary effects on local economies, relating to land, property and goods. The increased demand for land increases the price. While this is beneficial to those selling land, there is a negative side-effect on the local population, particularly those who are not involved in tourism. Local people are then forced into competition for land and housing with tourism development interests.

Opportunity costs

Opportunity costs relate to the time, effort and money of developing tourism at the expense of other activities or areas of investment. If a government invests in tourism, then the money spent is unavailable for other uses. This may be detrimental to the well-being of local communities. Tourism investment can, of course, benefit local people through improved infrastructure, services and employment potential. This necessitates a cost-benefit approach to the analysis of tourism impacts, which is often expressed in terms of the leverage of additional investment or tourist spending, where a public sector investment occurs.

Dependency

Heavy reliance on a single industry in any region or country is a risky strategy in the long-term. Economic dependency on tourism is a much criticized policy, particularly for less developed countries and peripheral regions in the developed world. Some less developed countries rely on tourists from a small number of generating countries, which is the case for many small islands. Changes in their markets are not controllable and decreases in demand for tourism will have huge effects on the receiving country. The Concentration Index is used to identify the level of dependency on one or more generating countries. It is more favourable for a destination to attract a broad base of tourists so that, if there is a downturn in one particular market, then the consequences are not so damaging.