Underdevelopment Theory in Tourism Explained

The Underdevelopment Theory in tourism is rooted in the broader Dependency Theory which argues that developing countries remain underdeveloped due to their economic dependence on developed nations. This theory is a critique of Modernization Theory, which assumes that tourism can drive economic growth and modernization in poorer countries.

Underdevelopment Theory suggests that tourism in developing countries does not lead to true economic independence or self-sufficiency. Instead, it creates economic dependency, where local economies rely on foreign investments, multinational corporations, and Western tourists, preventing sustainable development.

Underdevelopment Theory is based on the following core ideas:

1. Economic Dependence on Foreign Investments

• Many developing countries lack capital to develop tourism infrastructure, so they rely on foreign direct investments (FDI)
• International companies own and control hotels, airlines, and tour agencies, keeping profits within multinational corporations
• Local economies receive little financial benefit as profits flow back to developed countries (economic leakage)

For example, in the Caribbean, 70% of tourism revenue leaks out because foreign-owned hotels, cruise lines, and tour operators dominate the industry. 

2. Unequal Power Relations in Global Tourism

• Developed countries control tourism trends, travel agencies, and booking platforms (e.g., Booking.com, Expedia, Airbnb)
• Tourism marketing and branding favor Western tourists, influencing what destinations must offer
• The Global South (Africa, Southeast Asia, Latin America) remains a provider of cheap labor and exotic destinations, while the Global North (Europe, North America) reaps the most benefits

For example, European and American tourists dominate luxury tourism in Africa, but African tour guides and hotel workers earn low wages. In the Philippines, tourism workers receive minimum wage despite working in profitable hotels and resorts.

3. Economic Leakage Reduces Local Benefits

• Economic leakage occurs when money spent by tourists leaves the local economy instead of benefiting local businesses.
• Leakage happens through foreign ownership of tourism businesses (hotels, airlines); imported goods (food, drinks, and souvenirs from developed countries); repatriation of profits by multinational corporations.

For example, In Jamaica, 80% of tourism revenue leaks out because foreign companies own most hotels and tour agencies.

4. Tourism Creates Low-Wage, Exploitative Jobs

• Most jobs in tourism are low-paying, seasonal, and unstable
• Local workers are paid less than their Western counterparts, despite working in the same industry
• Women and indigenous groups often face discrimination and exploitation in tourism employment

For example, Thai hotel workers in Phuket earn significantly lower wages than foreign managers working in the same hotels.

5. Tourism Leads to Environmental and Social Exploitation

• Underdevelopment Theory argues that tourism in poor countries often exploits natural and cultural resources rather than developing them sustainably
• Governments prioritize tourism profits over environmental protection, leading to deforestation for resort development; water shortages due to excessive hotel and golf course usage; pollution and waste mismanagement in tourist-heavy areas

For example, in 2018, Boracay Island was closed because of extreme pollution and environmental degradation from mass tourism.

6. Cultural Commodification and Exploitation

• Tourism commercializes traditional cultures, turning them into products for Western tourists
• Authentic local traditions become staged performances for tourist entertainment
• Locals are expected to adjust their customs to fit tourist expectations, leading to a loss of cultural identity

For example, in Kenya, the Maasai people perform traditional dances for tourists, often losing their original cultural meanings.

7. Unequal Development Between Urban and Rural Areas

• Tourism concentrates wealth in cities and tourist hubs, while rural areas remain underdeveloped
• Governments prioritize developing luxury resorts, ignoring the needs of local farmers, fishermen, and small businesses
• Rural populations migrate to cities for low-paying tourism jobs, increasing urban poverty

For example, Mexico’s Yucatán Peninsula (Cancún) thrives on tourism, while surrounding villages struggle with poverty.

The underdevelopment cycle in tourism follows this pattern:

1. Foreign investors develop hotels, resorts, and infrastructure in developing countries.
2. Tourism attracts foreign visitors, bringing revenue to the country.
3. Most profits go back to developed countries through multinational corporations.
4. Local workers earn low wages, with limited career growth.
5. Local businesses struggle to compete with large foreign brands.
6. Environmental and social problems worsen, harming long-term sustainability.
7. Developing countries remain dependent on tourism, with no diversified economy.

For example, in the Maldives, foreign investors own most luxury resorts, while locals work low-wage service jobs. The country remains dependent on international tourism.

Impacts of Underdevelopment in Tourism

1. Economic Consequences

• Dependence on tourism weakens economic resilience (example, COVID-19 collapsed tourism dependent economies)
• High economic leakage means fewer benefits for locals
• Tourism profits remain in the hands of foreign corporations

2. Social Consequences

• Increased wealth inequality between local elites and rural populations
• Exploitation of indigenous communities for tourist attractions
• Rise in crime, sex tourism, and child exploitation in poorly regulated tourism markets

3. Environmental Consequences

• Over-tourism leads to pollution, deforestation, and water scarcity (example, Boracay)
• Marine ecosystems are damaged by cruise ships and coastal development (example, Phuket)
• Tourist destinations suffer from resource depletion (example, Bali)

In conclusion, Underdevelopment Theory in tourism highlights how developing nations remain dependent on foreign investments, multinational corporations, and Western tourists, preventing them from achieving true economic independence. While tourism creates jobs and income, it often reinforces inequality, cultural exploitation, and environmental damage.