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The Economic Impacts of Tourism

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SUCHITOTO, El Salvador- A major attribute of a rising tourist town is that the overhead for running a business often rises to the point where the only people able to afford it are those raking in money from the tourists. In this way, tourism is a self-feeding industry: the more money that comes into a town through tourism, the higher utilities cost, the higher rent goes, and soon enough, the only businesses in downtown are those who cater to the people from far away with the money.

The local businesses whose clientele are the people who actually live in the town — businesses such as pupusarias — often cannot sustain rising costs (as their customers cannot afford higher prices) and are kicked out to the periphery of their own city or they close up shop altogether. And another vacancy is created for the expensive tourist restaurants, language schools, volunteer operations, and hotels to move right in — as the heart of the city is rigged for visitors.

Simply put, a busy restaurant charging $10 for a plate of food can afford a $112 water bill and rising rent, a pupusaria charging 30 cents a pupusa and 5 cents a tortilla, not as much.

Pupusaria closes due to rising costs

And Suchitoto is fast becoming ever more of a tourist enclave. Most of it now seems to be domestic, but foreigners are quickly finding out about this tranquilo city in Central America, a good stop between Granada and Antigua, in a country which has become the dispensary which collects the tourist overspill from Guatemala. I can see the flood that is about to come, the levy which holds the crowds back in Guatemala is about to break.

“El Salvador is open for business.”

In Suchitoto, I see a city in rapid flux; in El Salvador, I see a country moving towards the fruits of an industry that can easily redouble and eat out the core of its own organism, leaving only an exoskeleton in its wake. Suchitoto has become a tourist town — as it should: this is a good place.

I cannot say what affected the rising cost which drove the pupusaria out of business. I cannot say for sure that it was the rise of tourism with absolute conviction. For the most part, my job is to observe and speculate. I ask questions, evaluate my surroundings, and then draw up inferences. But I do know that the next business to rent the space now left vacant by the pupusaria is going to have to sell something for a high enough price to turn a profit. Perhaps this would be easier to do by targeting the people overtly willing to spend the most money: the tourists.

Tourism is a rigged system, a stacked deck of cards: the intake of money that tourist services suck in is very much independent from the local economy. Tourist facilities do business with people making vastly higher amounts of money in other parts of the country and the world, so their prices do not have to be set in coordination with local wages. A pupusaria on the other hand cannot charge more for their wares than what the people living and working in El Salvador can pay. In this instance, that price is between 25 and 35 cents a pupusa.

A business that has local clientele is tied into the income parameters of the location where they are located, while a tourist business is tied into the income parameters of other parts of the country and the world — places where people make and are able to pay vastly more money. In this dichotomy, locally supported businesses often cannot afford to pay the rising costs triggered by the tourist based businesses, and they are often closed down and shipped out on the back of a pickup truck — as I observed happening to the equipment from the pupusaria that I often ate at in Suchitoto.

And eventually, this will mean that the local people, living and working in El Salvador, making an El Salvador wage, will one day also be sucked into this whirlwind of rising costs. They will soon need to pay higher prices as the businesses in their town either struggle with rising rents and utility payments. In this economic environ, businesses must raise prices or close down — leaving only the businesses that can afford to function in such a stacked deck economy, the businesses that cater to tourists.

This pupusaria closed in no way due to a lack of business. The place was always packed. In fact, my wife described her first visit as follows:

“I chose to go to that pupusaria because it had the most people at it so I figured that it was the best.”

The rising costs to keep this business going grew so high that even while running at full capacity its owner could not afford to keep up. It is my impression that there are only two choices in this scenario: raise prices or close down. A pupusaria cannot sell their wares for more than 25 to 35 cents. They would be simply out competed by the legion of other pupusarias that dot the streets of Suchitoto. Customers could not afford to pay more.

So the 30 cent a piece pupusa restaurants close down, are shoved out to the periphery of town, or they raise their prices.

——————-

“Why would someone pay three times as much money to eat at that restaurant?” Chaya once asked while pointing to a tourist restaurant in Suchitoto.

I could not answer her, I have no idea why someone would pay four or five dollars for a meal when they can eat the same things at a nearby restaurant for a dollar fifty.

Where there are options, none but the class conscious will wantonly pay more for a meal. There are now options in Suchitoto, you can get a meal cheap — most restaurants still price their meals to meet the income of their clientele — this is a good place to live. Though I can see a day when these options fade away to the periphery of the city, and then out for good. The restaurants that can sustain $112 a month water bills will move in and charge $10 for a plate of food. The definition of a tourist trap is perhaps a place where cost options no longer exist.

———————

“It has begun.”

El Salvador tourism.

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Filed under: Central America, Economics, El Salvador, Tourism, Travel Economics

About the Author:

Wade Shepard is the founder and editor of Vagabond Journey. He has been traveling the world since 1999, through 76 countries. He is the author of the book, Ghost Cities of China, and contributes to Forbes, The Diplomat, the South China Morning Post, and other publications. has written 3048 posts on Vagabond Journey. Contact the author.

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