The leakage effect[1] is a concept within the study of tourism. The term refers to the way in which revenue created through tourism in LEDCs (Less Economically Developed Countries) can 'leak' back to richer countries. Examples of the way this leakage can occur is through the money paid to tour operators especially in all-inclusive holidays.
Example
"A study of tourism 'leakage' in Thailand estimated that 70% of all money spent by tourists ended up leaving Thailand (via foreign-owned tour operators, airlines, hotels, imported drinks and food, etc.). Estimates for other Third World countries range from 80% in the Caribbean to 40% in India". [2]
Leakage effect in the Caribbean
"This theory of the 'leakage effect' is very prominent in Caribbean tourism. An example of a Caribbean island where this is evident is Jamaica. According to Missed opportunities in tourism only 50 % of the profits made from tourism stays in the local economy. The other 50 % is leaked outside of the country and benefits foreign economies."
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