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The South East Asia Travel Show
Tackling Economic Leakage & Sustainability Grandstanding in Tourism, with Ewan Cluckie, Tripseed
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- [00:00]
A
Hello, it's Monday, 23rd of September. I'm Hannah Pearson. On today's show, Gary Bauman and I will be discussing ethical governance and eliminating economic leakages from the tourism operations with our special guest, Yuen Kluckey, director of growth at Thailand based Tripseed. So let's get started. This is the Southeast Asia Travel Show.
- [00:27]
B
Hello wherever you are in the world and thanks for listening in. So today's show, we're delighted to welcome back Ewan Clucky from Tripseed. It was last on the show way back on the 25th of January, 2023. Time really flies. A great deal has happened in regional travel and tourism since then and for Tripseed as well, which has just launched its economic distribution disclosure initiative, which we're going to be diving into in this episode. So, Ewan, welcome back to the show. Thanks for coming on. How are you doing right now and where are you?
- [01:00]
C
Hi. Thank you very much for having me on the show. Currently I'm up in Chiang Mai in the north of Thailand and we've got plenty of rain up here, so good to be keeping inside and on the show.
- [01:13]
B
How is it up there? I mean, how bad are the floods? We hear and read quite a lot.
- [01:17]
C
About them at the moment. City of Chiang Mai hasn't been hit too hard and Chiang Rai has been. Has been pretty badly impacted. There's been some hotel closures that have just gone completely underwater. Water levels are still rising. We still get a lot of rain. So we're kind of in a wait and see, wait and see what happens mode at the moment. But I know there's a lot of government support coming out to help the communities that have been affected.
- [01:41]
B
As we mentioned at the head of the show there, you. And we want to delve in detail into your recently announced economic distribution disclosure initiative. But before we begin, can you kind of set the background and tell us the context for this initiative? You know, what made you do this?
- [01:59]
C
So to give it a little context, as you guys know and anyone who's followed Tripseed for any sort of length of time, we've always strived to bring a little more honesty into sustainability discussions. We've always believed that it's just as important to acknowledge and discuss tourism's negative impacts as as it is to celebrate the positive ones. I think without this critical acknowledgment, we tend to view things through a bit through rose tinted glasses and we kind of relieve ourselves of the pressure to actually fix any of the problems. And one thing that became clear to us was this topic of socioeconomic sustainability, which seems to have largely been overlooked in terms of requiring marketing claims to be backed up by any form of evidence or substantiation. And in today's world, you know, so many travel companies are actively marketing themselves as support, supporting local communities or saying things like 95% of the money from this tour goes to local communities. And you don't have to look very far to see this kind of sustainability grandstanding. But you also don't have to dig very deep or ask very challenging questions before you can quickly determine that these sweeping claims have really no grounding in reality. And so our economic distribution disclosure initiative aims to address this, shining a light on where money really is going. Just as environmental greenwashing is being called out, we want, want to expose similar issues in socio economic claims and bring more transparency and accountability to how tourism actually impacts local communities.
- [03:31]
A
Yeah, I mean, and I love that ethos behind it because I think you're right, there is now, you know, more awareness, I would say a little bit more cynicism perhaps with travelers around those greenwashing claims when it comes to the environment. But how would you actually measure whether it's, you know, the similar kind of greenwashing when it comes to the community is quite hard to measure.
- [03:56]
C
Exactly.
- [03:56]
A
So, yeah, so to tell us, you know, what are these core principles of economic distribution disclosure initiative? How does it work and how do you really intend to drive that towards, you know, transparency and having this positive impact within the local economy?
- [04:13]
C
I think the core principle is quite straightforward. I mean, you can't improve what you don't measure. What we're creating with the economic distribution disclosure is a tool to enable these measurements to be made without this. All these claims about how this much money stays local are often baseless. But by actually tracking the flow of funds, we can bring honesty to these claims and push for genuine positive impact, not just marketing slogans. And it's easy to say, you know, like we're raising $10,000 to build a new school library or whatever, but if a company is actually using those donations to get a 200% tax deduction and provide a higher return to their overseas shareholders, they're actually leaving a net negative contribution to the overall national economic system. Now, that's not defined as leakage, but it does demonstrate how tax ethics and corporate governance are kind of inextricably linked to the conversation of who the genuine beneficiaries of tourism activities really are. I think the key point there really is how do you know if your overall impact is genuinely beneficial to a community if you're not measuring it? And how do your customers know what you're saying isn't just fiction if you're not disclosing the methods and measurements behind it? So I think, to really answer your question, the core tenet of the economic distribution disclosure is really what I said for it's a tool to bring more honesty and transparency to who is really benefiting from tourism and discourage those who are making false claims about their impact. So it's through that provision of transparency that we'll be able to, as an industry, better tackle these complex issues and encourage more genuinely positive impact within the destinations that we're selling and operating.
- [05:55]
B
Yeah, it's fascinating. You set up the discussion pretty nicely there. Just before we go on to delve a little bit deeper, I noticed something, your press release that sort of really, really jumped out at me and that was the fact that you said this initiative marks a first of its kind in the industry, which is quite a damning statement, really. Why is that, do you think? And do you expect your other competitors to try and play catch up pretty quickly?
- [06:21]
C
So when we say that, we're talking specifically about the touring sector. So there are some actually really great examples of this in the accommodation sector, such as the economic nutrition label of Fogo Island Inn, which is developed a nonprofit organization called shfast. But. But after evaluating that, it doesn't translate perfectly to touring and there's a significant amount of different considerations that we've had to make. You also have the Ripple score by G Adventures, but unfortunately this relies on on kind of a single surface level metric, and it basically classifies anything registered with over 51% ownership as staying local. Unfortunately, this percentage of ownership by nationality doesn't really bear any relevance towards how much money remains and genuinely benefits local communities and destinations, especially somewhere like Thailand, where we're faced with the ongoing challenge of companies illegally using nominee shareholders in order to obtain and hold their operating licenses. So I think it's quite a sensitive topic for many businesses. Many companies have spent years sort of carefully developing this narrative that they support local communities without, you know, any evidence. And so there's potential that this could create a rather embarrassing moment for them if they were to adopt something like this. And their actual impact proved not to be as positive as they've been advertising for so long. So I think there is a long list of reasons why businesses don't or wouldn't want to engage in efforts like this. So I'm not really expecting any competitors to play catch up. I think what's more likely is, is that we'll see smaller, local, sort of more social purpose businesses be the ones sort of leading the way and adopting this in various destinations around the world to help them differentiate and stand out better in the marketplace. You know, something like this will help to enhance their credibility and, and help them to better communicate the genuine impact that they're having.
- [08:17]
A
I want to talk more generally about economic leakage because this is obviously, you know, an issue that we have seen coming up more and more. I think, you know, it was in the dark depth of the pandemic. This wasn't something that wasn't really discussed. But I think, you know, back in light of over tourism and the impact now that tourism does have on communities, this concept of economic leakage is getting more and more coverage in the travel industry, media and in media more generally. Tell us a bit more about what exactly is economic leakage?
- [08:52]
C
Sure. I mean, there's definitely a growing awareness and interest surrounding economic leakage. It's not a new topic, but it's mainly sort of being talked about within the realm of academia rather than the private sector. And in many ways, I think it closely relates to the reason why it's become more public and forward facing. In many ways, I think it relates closely to the growing amount of discourse we're seeing surrounding the decolonization of the tourism industry and the wider conversation of over tourism in general. Think in destinations around the world, we're seeing increasing amounts of frustration and discontent by local populations because they're the ones that are feeling the majority of tourism's negative impacts. You know, they're getting, they're seeing rising house prices, rising food costs, water shortages. You know, of course these aren't all attributable to tourism, but it is a contributing factor. And yet they very rarely enjoy any benefits of any meaningful significance. I mean, sure, we could argue about job creation all day. That's usually the main sort of counter argument that comes up. But the reality is the majority of these jobs are poorly paid clerical roles and they don't really help a great deal to break down discriminatory barriers or provide high quality training and development to open up career pathways to leadership positions. I think the conversation is definitely littered with complexities. I think one really important aspect to emphasize strongly though is that what we're doing isn't protectionism or nationalism as some kind of knee jerk reactions tend to claim. I think it's not something designed to pit locally owned businesses versus foreign owned businesses or anything like that. I think that perspective paints Too narrow a picture of what leakage is. And part of what we were doing was actively looking at internal leakages as well. Because for us, the conversation doesn't necessarily need to be about how much is remaining in the country, but how much is genuinely benefiting the people that the marketing conducted by travel companies say it is benefiting. So we don't just look at what percentage of our expenses are being transferred overseas or leaking overseas. We look more deeply at what percentage even remains within rural local communities instead of leaking out to provincial or national urban centers.
- [11:11]
B
That's a great explanation, Ewan. I think another thing that really jumped out at me from your pretty detailed press release is about economic leakage being particularly pronounced in destinations like Thailand. I wonder why that is. And. And how other sea nations compare. And one of the things that sort of jumped out about. About that as well for me is that, you know, Thailand's tourism authority has been saying quite a lot in the media that it wants to promote tourism around regions, you know, outside of the key destinations out in the regions. So why is it that leakage is so pronounced in Thailand?
- [11:47]
C
I mean, look, I'm no economist, so I'm probably not the ideal person to answer this question. But as part of our initial research phase for this project, we've combed through enormous amounts of research and academic papers on the subject of leakage in particular. Like I said, a lot of it is somewhat dated. For instance, we haven't found much research looking into leakage post pandemic, which could have shifted figures quite significantly. I know there was a bit of a fire sale as larger companies that were sitting on cash piles capitalized and brought up a lot of smaller market players during those years. But one thing that did stand out consistently across all of our research was that the more dependent a destination became on tourism or was on tourism, the higher leakage it was reported to have. So island tourism, for example, such as the Maldives or the Caribbean, these are places that are usually reported to have among the highest leakage in the world. People are putting out figures of 80% or more. That's not remaining in the country. Meanwhile, Thailand was estimated at about 70% by the UN Environment Program. And this kind of makes sense, I think, given how big a slice of the country's GDP is attributable to tourism. It's much larger than some other destinations in the world in terms of how that relates to the wider Southeast Asia region. I think even there, again, statistics are few and far between. But from what we could find, it sits among the Worst. And the World bank came out with a report that suggested a regional average of 47 from Southeast Asia destinations. Interestingly, they also reported that Vietnam only sits at 27% leakage, which is extremely low. But an important consideration of this is that it can vary drastically within destinations as well. For example, a research paper by Glasgow Caledonian and Swansea University that was done in 2022 pointed to far higher leakages in SAPA than in the rest of Vietnam due to external Tor companies basically taking over the market there. So it's that deeper kind of analysis that really highlights why we need to be looking at this from a more localized perspective rather than just at a purely a country level.
- [13:57]
A
That's interesting. So it's not just, you know, it doesn't make sense to look at that country, it's to look at the region, to look at even that locality itself where the tour is happening. And take that more nuanced analysis of where is that economic leakage going rather than A Thailand's at 70% for example.
- [14:17]
C
Yeah.
- [14:19]
A
Is achieving zero economic leakage realistic?
- [14:24]
C
No. The way I like to sort of encourage people to think about this is really just in terms of common sense logistics. I mean, for starters, even 100% locally owned travel companies are going to have some leakage. There's import leakages through any imported beverages or some produce served in hotels. You know, if you have a Coke or a Fanta or an imported beer while you're on holiday, some of that money is going overseas. Next. If you think about general business operations, you have things like website hosting, you have computer equipment purchases, vehicle purchases, you've got fuel for vehicles, all of these types of things. And there's almost always leakages registering in these items. For most countries and businesses, I don't think leakage is automatically a bad thing. Thing. There are very often leakages that are a necessity to run the business. And then if you look specifically at community based tours and the issue of localized leakage, I think these are some of the programs most commonly getting the short end of the stick with some of the creative embellishment we see in travel marketing. Let's quickly walk through that. Most countries will have a VAT. Here in Thailand it's 7%. So you're immediately looking at 7% leakage from any rural community program out to the country's capital as taxes on top of this. Again, you've got to consider the operational logistics. Most of the time clients are being taken from an urban hub, let's say Chiang Mai, for example, out to rural communities and Then back again at the end of the day. And with this comes your tour guide fees, your vehicle costs, your fuel, your driver's fees, all of that money that is not actually benefiting the local community. It's benefiting the regional hub where these services are coming from. And these can make up between 40 to 60% of tour costs in many basis. So you have to ask yourself, how is that then possible, that any community program can sincerely be advertised as 95% of revenue staying in the community? That's the kind of thing that we need to get people thinking more critically about. If they sincerely want to make a positive impact, then they need to begin with getting truthful information. As for your point of how much of a difference can be made, I don't really think a clear answer can be given to that yet. And that's because there hasn't previously been a way for the private sector to practically evaluate what their leakage is now and where they can tweak the logistics or review their supply chains to reduce whatever their current figure is and ensure that more revenue actually gets to the localized areas where tours are happening.
- [16:58]
B
It's a fascinating topic and just broadening out the discussion a little bit. Ewan, away from economic leakage a little bit. At the top of the show you talked about the Economic Distribution Disclosure Initiative being a bit of a sensitive subject within the industry. But looking at it away from just issues of economic leakage, we're talking about, you know, key issues of governance, ethical governance, tax ethics, profit sharing, that kind of thing. You're actually encompassing much, much more than just the actual community impact. It is a sensitive issue. Have you encountered any pushback or any negative responses from within the industry?
- [17:36]
C
Yes, we have, absolutely. But it's only really in private channels, which it probably wouldn't be appropriate to discuss here. But the issues of profit shifting and tax evasion and ethical governance, such as complying with local laws here in Thailand, in particular, nominee shareholder laws and labor protection laws, which are quite often abused. Historically, there's been an incredible lack of enforcement and so it's become commonplace to ignore them. The businesses that are taking advantage of this and acting in exploitative and extractive ways, they're not going to like the fact that we keep talking about it. But the reality is we're not responsible for their businesses or their decisions on how to act. It's just not a consideration for us. Our responsibility is to our own mission and vision and values, which considers all of our stakeholders, including the local individuals, businesses and communities everywhere that we operate and who are impacted, whether directly or indirectly, by our operations. So I can only sympathize with it so much. I'm afraid it's for them to choose which side of history they want to be on, you know, business as usual or doing everything within their power to improve things for everyone. I think the biggest, most impactful changes are completely within their hands to make, and I'll be the first to celebrate them when they do.
- [18:53]
A
I like that answer. A very, very tactful one. But, yeah, I can see that. It's. It's not easy, I think, to be the first one to put this out there and to be a vocal voice, somebody really calling out the industry for a practice that, as you say, has been ongoing for quite some time. So, Ewan, I'm intrigued. You're talking about calculating economic leakage and some things, particularly within your tools, are within your control. But how do you then account for those industries that are further along the supply chain, you know, ones that you don't really have that direct influence on, whose data might not be so easy to get hold of? How do you go about doing that to get that accurate calculation?
- [19:40]
C
So this has been one of our biggest challenges as we've been going through the process of developing our methodology. And it's the main reason why we had to break our disclosure into several phases. The more we learned, the less we realized we knew. You know, for example, hotels have been among the most challenging aspect and where we've sort of faced the most reticence to provide us a richer picture of financial flows. And for this part, we're working with a brilliant consultancy in the UK who are currently developing and validating their own framework in this area. Another significant challenge was fuel for vehicles and getting to grips with the supply chain and revenue flows of the petroleum industry. These two challenges are significant not just because of the, you know, sort of opaqueness of where the money goes, but also because they sit among the largest portions of torque costs that we can't directly attribute anywhere. And so overcoming this has really just been about making new connections and networking with people who have a greater visibility into these industries and who are willing to help us out. So for the fuel costs, for example, we're speaking with ptt, which is one of the most common petrol stations where our vehicles are fueled, to understand how much benefits the local petrol station owners who will then likely spend it within the economy, and how much goes regionally to distribution centers, how much goes nationally to headquarter profits or to in country refineries, and how Much goes overseas to raw materials where we simply don't have data or haven't found a way to get it yet. An example of this is the Internet provider for our office. You know, it's a Singaporean telecoms company, but with a massive presence in Thailand. For things like this, where we haven't been able to get that information, we've had to fall back on making assumptions. We now we. We try to get these as accurate as possible as we can, but it's not perfect. And so these will all be made publicly available when we publish our methodology in case anyone would like to dispute the figures that we've arrived at.
- [21:35]
B
Yeah, interesting. And so bringing this back to the business itself, Ewan, what are the potential benefits for your customers?
- [21:42]
C
So the disclosure itself is not about calculating tangible benefits. It's about providing a level of transparency that the industry and consumers have never had available to them before. This, in turn, will allow them to make far more informed decisions about who they work with or travel with. Instead of saying, we are supporting local communities with nothing to back that statement up, we are saying, this is exactly how your booking will benefit the local community. We believe this approach will result in establishing far more trust with those who partner with us and allow consumers that are shopping with sort of a conscious mindset to make more informed travel decisions and begin asking the right questions when it comes to evaluating the impact of their trips.
- [22:22]
A
I know it's been early days, really, since you've not launched this very long yet, but how has this initiative been received by your customers? Are you seeing them kind of engaging with this section on your website? Because I went on and I saw every tour at the bottom has this big section, right, where it talks about where the economic leakage is or isn't, how much staying within the community. Yeah. How's the reception by your customers been?
- [22:46]
C
Yeah, I mean, as you said, it is very early days. I mean, we only published this and announced this only less than two weeks ago. So many people may not have even seen the announcement yet. But we have received a lot of interest from people wanting to get involved. And this interest spans from academia with multiple universities wanting to discuss research opportunities with us, all the way to large private sector organizations, some of which were quite surprising, asking about the possibility of adopting our measurement framework and labeling system for their own business. We've been invited to speak at a ToT conference in Bangkok about the work we're doing, and one of our partners has expressed an interest in setting up an industry working group to determine how they can Sort of translate this work into a consumer facing approach. And so there's a lot of different conversations going on. But this is such a new thing. I think most people are still wrapping their heads around how they can best leverage this for their own organizations.
- [23:42]
B
Yeah, that's interesting. It does strike me because as you said, this is pretty new to the industry here in Southeast Asia that you are going to get, get incorporated into other projects and you have actually been working on other projects as well. I think you contributed to a UN Tourism, I think an Oxford University ESG framework for tourism businesses. Tell us a bit more about that. I mean, is this what you're trying to do? Are you trying to promote this globally or is it a sort of Southeast Asia initiative that's just gaining attention globally.
- [24:12]
C
In the long term? Yes, we'd love to see sort of a global uptake of this disclosure initiative. We'd love to see more people adopting it for their businesses. But in terms of relation to the contribution that we made to the UN Tourism and Oxford University ESG framework, there's no relationship between those two projects other than they both seek to bring more transparency to the industry. To the best of my knowledge, I think the UN Tourism and Oxford University ESG framework won't be looking at sort of details such as leakage and tax ethics and there's more controversial kinds of topics. I could be wrong, I'm not that deep into it. But they seem to be focused on developing a universally applicable disclosure that's simple enough to help small businesses and micro entrepreneurs talk about their sustainability efforts and the impacts they are having where typically they might have struggled. But in the same sort of vein as that, I have been looking personally at a larger, more impact disclosure for tripseed that goes into all aspects of our impact. And I've kind of put that work temporarily on hold for now. I mean, we're busy enough keeping the business running and with this, and with this economic distribution disclosure work and we'd like to see what sort of comes out of the UN Tourism and Oxford University collaboration. And we may seek that to utilize that within this wider, this wider impact disclosure. I think a greater level of standardization is necessary to make a genuine impact, but more comparable between companies. Otherwise we're going to end up in the same scenario as with environmental impact reports where everyone is measuring everything differently, even with the same methodologies. And so nobody really knows who is doing better than anybody else or what everyone's performance is and how it relates to each other. So it all becomes a bit meaningless. So if we can standardize that then. We absolutely will.
- [26:09]
A
It sounds like you've got a lot of interest and you know, in your press release, you were saying that you're hoping to release your methodology under Creative Commons. Why not keep it to yourselves?
- [26:19]
C
Keeping it to ourselves. You know, we're a small business at the end of the day, you know, as fast as we're growing, we are, we are still a small business, especially compared to a lot of, a lot of the competition. We can't make that big of an impact. You know, whatever we do, you know, in terms of employee welfare and things like that, we're affecting 10 people. Right. The stuff that we're developing, I think can have a much wider and broader impact if it's adopted by, by other companies that are also wanting to make a positive impact. And so that's really the sort of ideology behind releasing this into Creative Commons. We're looking at that for a number of reasons. There are some flexible variations of Creative Commons licensing that allows for restrictions or requirements for use while keeping it to as open a standard as possible. You know, we've got no intention to profit off this work, but I do feel that it's important that all the team's hard work doesn't sort of go unrecognized. So we would look to require attribution from anyone adopting it. Also, we don't want to see our framework sort of co opted and abused for further impact washing. You know, we've designed it to be part of the solution and not to add to the problem. So some of these, some of the variations of Creative Commons would allow us to require that destinations are disclosed separately. You know, we often see regional travel companies and multinationals promoting the decent work that they're doing in other countries as if it is representative of how they operate here in Thailand, which in our experience isn't usually the case. So regional disclosures would continue to enable this concealment. So we would like to anyone adopting our methodology and our framework, we would like to require that they do this reporting at an individual destination level. And lastly, we're also looking into whether or not we require a sort of complementary tax ethics disclosure to be published wherever the economic distribution disclosure is used, given its significance to the topic. But again, we're still in two minds about this. This may be too detrimental to gaining adoption. So it's still under consideration.
- [28:25]
B
Really appreciate you coming on articulating so eloquently some really complex elements of this initiative that you've got going, Ewan. And you know, only we wish you the very, very best with it because it's really, really topics that just don't get discussed enough. What's next, what's your next plan for this distribution initiative? Have you got a kind of phased implementation or is it, you know, out there now and you get on with the rest of your work?
- [28:51]
C
No, there's still a lot more in the pipeline. So phase two will see us publishing our corporate disclosure. This will cover all of our company's selling and administration costs. So our salaries, equipment purchases, memberships, taxes, etc. This is where all of, all of that stuff will disclose all of our expenses that are not related to talk costs basically. We'll also be refining the phase 1 disclosure figures based on the latest revisions to our methodology because they are sort of at different stages of development. So this will bring in the improved accuracy that we've been working on tracking the distribution of fuel costs, for example. So we will be revising some of those initial phase one figures that we've put out. Phase three will come once we've cracked the hotel challenge. This is the biggest barrier for us right now and this will allow us to disclose the vast majority of our businesses economic impact because that is, that is our multi day fit touring. That's, that's, you know, the majority of what we do. You know, this, this a better understanding of hotel leakage is really the one thing standing in the way for that. So as soon as, as soon as we can sort of crack that, that challenge then we should be, we should have a 100% a disclosure covering 100% of our business. I think alongside this probably with phase two is when we'll also be publishing our tax ethics policy as well as a tax disclosure. We believe that this level of transparency and honesty will really set us apart in the Thailand DMC sector for potential partners who really care about making a genuine difference and a genuine impact with a partner that they can fully trust.
- [30:37]
A
Wow, it sounds ambitious. Sounds like you've got a lot to, to do as well as running a tour operator business, Ewan.
- [30:44]
C
Yes. Yeah. And with limited bandwidth to do it. So we're not making any promises sort of about timescales or when things are going to be rolled out. We're just getting to it as fast as we can.
- [30:56]
A
Such a great initiative and as Gary said, such an important discussion to be having particularly as we look to what the future of tourism should be in the region. So thank you Ewan so much for coming on the show. It has been really enlightening and that brings the show to a close for this week. We hope you enjoyed the podcast and don't forget to send us your thoughts on comments on anything we discussed or anything we missed out. You can drop us a message at our LinkedIn page. The Southeast Asia Travel Show Yep.
- [31:26]
B
And as always, you can catch up with the Southeast Asia Travel Shows full back catalog on our website, the seasiatravelshow.com and you can find us on any international podcast platform.
- [31:39]
A
So that's a wrap for today, but we'll be back next week to talk more Southeast Asia travel and tourism with you then.