ABSTRACT
Policy makers in many destinations, particularly lesser developed destinations, view Foreign Direct Investment (FDI) in tourism as a means to boost the overall pace of development. This chapter discusses the potential advantages and disadvantages of FDI in tourism. Positive effects on a host destination may include the provision of capital for tourism growth and development, increased (tourism-led) economic growth in the host destination, increased inbound tourism creating income and jobs, marketing and destination promotion effects, product and quality effects, and technology transfer. Potential disadvantages of FDI to the host destination include growing income inequality, crowding out of domestic investment, greater “leakages” from tourism imports, repatriation of profits, reduction in local employment, loss of equity and control over the host tourism industry, and inappropriate form and scale of tourism development. It is argued that the costs and benefits of FDI to a host destination will vary substantially from case to case. The paper concludes that policies involving FDI involvement in tourism should be examined carefully within the framework of overall destination development strategies, weighing up the socio-economic benefits that result against the possible associated costs and impediments to destination sustainable development.
