Each coin has two sides. Benefits were dealt with in the preceding section, but there is no economic activity or project without costs. A distinction is made between private costs (e.g. a hotel) and external diseconomies. The costs the latter impose are called incidental costs. The sum of private costs and incidental costs is called the social costs of an activity. There is an extensive literature dealing with benefits and costs of tourism. Some authors have emphasized the cost side (Krippendorf, 1975; de Kadt, 1979), others have stressed the benefits (Archer, 1991a), and a third category pays attention to both sides of the coin (Mathieson and Wall, 1982; Bull, 1995; Frechtling, 1994).

It is often commented that few studies have attempted to pay attention to economic costs of tourism in a systematic way. Mathieson and Wall assert that research has been limited largely to the measurement of the more obvious costs, such as investment in facilities, promotion and advertising, transportation and other infrastructure. Most studies have failed to address the indirect costs, such as the importation of goods for tourists, inflation, the transfer of the profits, economic dependence and opportunity costs (Mathieson and Wall, 1982).Nevertheless, a correct assessment of benefits takes into account a number of these qualifications.

Indeed, all transfers and imports should be eliminated. As a consequence, leakages are taken into account and the tourist income multiplier is lower. However, local inhabitants might change their buying behaviour due to a 'demonstration effect' of tourists (e.g. purchase...