Tourist taxes alone won’t solve overcrowding crisis: A call for smarter destination investment

The return of global tourism to pre-pandemic levels in 2024 has brought the issue of destination overcrowding back into the spotlight. While the resurgence of travel is a positive sign for the global economy, it also brings challenges, particularly for popular destinations struggling with the influx of visitors. Mass protests are being organised across Europe including Barcelona and Ibiza, Lisbon, and Venice, with a clear message that residents are fed up of overcrowding.  

Tourism taxes

Tourism already generates substantial tax revenue through mainstream channels that are often overlooked in policy debates. Hotels, restaurants, tour operators, and other tourism-related businesses pay corporate taxes on their profits. From dining out to booking tours, every little action a visitor makes contributes through sales taxes. When you add it up, tourism’s fiscal footprint is significant even before a single tourism-specific tax is applied. In 2023, Travel & Tourism generated $3.3 trillion in total taxes, accounting for 9.6% of global tax revenue.

Yet these broader contributions rarely factor into discussions about new levies like bed taxes or visitor fees. There’s a tendency to treat tourism as under-taxed, which leads to piecemeal charges that may be more symbolic than strategic. Evidence suggests that these taxes have little to no impact on visitor numbers as they simply make tourism more expensive. This can create a new problem of equity, placing an undue burden on budget travellers and small and medium-sized enterprises (SMEs).  

Before reaching for new taxes, policymakers should focus on making better use of the money tourism is already generating as the revenue from these taxes is rarely reinvested back into tourism management or sustainable solutions to overcrowding. For instance, in the US, less than 5% of the $165 billion in annual travel-related tax revenue is reinvested in tourism marketing or management, with just 1% going towards sustainable tourism challenges.

A more effective approach to managing destination overcrowding is to reinvest the significant resources already generated by tourism more strategically. The sector is a global economic powerhouse, generating $10.9 trillion in total GDP in 2024 and supporting one in ten jobs worldwide. The challenge, therefore, is not in generating revenue, but in allocating it more effectively. To this end, the "4 R's Framework" offers a model for accountability in the use of tourism-generated funds:

• Reinvest in destination health: Acknowledge the vast fiscal and GDP contribution of the tourism sector and commit to reinvesting appropriately in destination development. This can help to counter overcrowding by strategically improving infrastructure, diversifying attractions, and enhancing the overall resident and visitor experience.

• Ring-fence dedicated tourism funds: Ensure that the revenue generated from tourism is earmarked for specific projects and initiatives aimed at improving the destination's health and sustainability.

• Responsible spending based on impact: Prioritise investments that have a demonstrable positive impact on the destination and its residents. This requires a clear understanding of the root causes of overcrowding and targeted interventions to address them.

• Report clearly and regularly to the public: Transparency is essential to build trust and ensure that tourism revenue is being used effectively. Regular reporting on how funds are being spent and the impact they are having can help to build public support for tourism and its role in the local economy.

Several destinations have already adopted this approach with positive results. For example, the Balearic Islands reinvests its sustainable tourism tax in environmental projects, seasonal distribution, promotion of responsible tourism, and preservation. Similarly, Iceland is reinvesting arrival fees into preserving the nation's natural resources, ensuring a balance between tourism growth and sustainability.

While tourism-specific taxes may seem like a simple solution to the complex problem of overcrowding, they are often ineffective and can have unintended consequences. A more sustainable and equitable approach is to reinvest existing tourism revenue more strategically, using a framework like the 4 R's to ensure accountability and transparency. By working together, governments, businesses, and communities can ensure that Travel & Tourism strengthens, rather than strains, the world's destinations.

This article is based on the WTTC report “Managing Destination Overcrowding: A Call to Action from the Travel & Tourism Private Sector”, published July 2025.

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