Coordination and growth in tourism: When self-interest does-not suffice

Abstract

Private goods and common goods coexist in tourism. However, the nature of the latter means that self-interest alone cannot guarantee their optimal provision. Hence, coordination emerges as a necessary strategy to reconcile both. The analysis shows that, with coordination, a virtuous circle emerges between common goods (public incentive) and tourism (private incentive), becoming more intense and important with tourism-driven economic development. Coordination also allows a transition toward high-quality tourism (crowding out low-quality tourism), which is necessary to compensate for the lack of productivity in this sector. Without coordination, there is room for a tourism development trap or economic growth reversal. Finally, we identify a “Quality Paradox”: quality improvements might jeopardize economic growth by triggering a price hike, reducing overall competitiveness.