Hansika writes*
King’s Day is usually a cause for celebration across the Kingdom of the Netherlands yet for many Aruban locals, it signified a day to protest against the unregulated growth of hotels. Protestors marched on April 27th, 2024, to oppose Aruba’s mass tourism, which they argue was damaging the environment, the economy and their quality of life (Billy, 2024).
The problem: Hotel construction in Aruba has been vast, and each additional hotels adds to the burden on the island’s infrastructure and fragile environment. For example, high levels of pollution and sewage produced by the hotels leak into the surrounding areas, causing smog and contaminating fresh water sources nearby. Many of these hotels have also privatized beaches that were previously open to the public. Such hidden costs are not paid by the hotel nor the tourists that use their facilities, but local communities. A negative externality graph illustrates this problem.
As hotel expansion exceeds the socially optimal price (Po) and quantity (Qo), the marginal private cost (MPC) surpasses the marginal social cost (MSC). MPC refers to the direct costs to businesses such as utilities and labor, while MSC refers adds costs to society such as environmental harm and land loss. The blue triangle between MPC and MSC represents deadweight loss, i.e., the economic inefficiency caused by excess hotel construction, which falls on society.
Moreover, the majority of these hotels are all-inclusive, which encourages tourists to spend money on hotel activities, rather than local ones—a risky model in a country where tourism is the backbone of its economy. In Aruba, tourism accounts for more than 70% of its GDP, yet the economic benefits are limited, fostering dependency on hotel construction instead of local businesses (López, 2024). As tourism expands, external costs, such as those mentioned above, increase, and lead to the overconsumption of tourism-related goods and services. These costs fall on local communities while the benefits go to hotel developers.
Furthermore, the Dutch Caribbean islands do not represent themselves on international platforms as The Netherlands is supposed to speak on behalf of the whole Kingdom. This has caused relations between the two to deteriorate as climate priorities have diverged. For example, an NGO in Bonaire has sued the Dutch government for the latter’s perceived failure to protect the island from climate change (Holzhausen, 2024).
Bottom line: Demonstrations across the Dutch Caribbean islands emphasize how the local population are fighting not only for the environmental integrity of their islands, but also for their economic sovereignty.
* Please help my Applied microeconomics students by commenting on unclear analysis, alternative perspectives, better data sources, or maybe just saying something nice 🙂
Thank you for shedding light on this topic, Hansika. We don’t discuss this nearly enough in the Netherlands.
Our government has maintained control over the islands through a rather strategic arrangement. Instead of granting full independence and paying the necessary reparations (an act that could set a precedent for other countries seeking similar reparations) the Dutch government keeps Aruba as a special municipality of the Kingdom. This setup grants the island access to government support but strips it of the right to represent itself on international platforms. In 2024, Bonaire sued the Dutch government for failing to adequately represent the island in the fight against climate chaos. Unfortunately, given the current cabinet, this situation is unlikely to change anytime soon.
Tourism is a tricky issue. When my grandmother grew up there, she used to tell me the island was mostly untouched: just vast desert landscapes and beautiful ocean shores. There was a strong sense of community and care for the island’s biodiversity. Now, with rising demand for travel, driven by both increased financial capacity and social pressures (Instagram, etc.), the islands are overflowing. We tend to ignore the negative externalities because private corporations have the freedom to maximize profits. Many argue this benefits the economy since the islands depend on tourism, but as you pointed out, all-inclusive resorts don’t always deliver fair economic returns to local communities.
Beyond economic concerns, there’s also the loss of public utility: the restricted beach access for locals and the environmental destruction that comes with unchecked development. So where do we go from here? Should we shift from all-inclusive resorts to traditional hotels? Impose limits on the number of hotels? Ban private beaches altogether?
Tourism and tourism-driven growth is a complex topic especially when things go south for local communities. Its going to be tough for governments and island leaders to find a balance between economic growth and the unchecked expansion which can (and probably will) erode the very nature that make these destinations attractive to tourists in the first place. I would argue that moving away from all-inclusive resorts is a step in the right direction since it encourages money to be spent outside the hotel walls, and into local businesses. Further (and stronger) regulation on hotel development is necessary to maintain environmental biodiversity, and sustainable tourism policies like eco-taxes and the public management of beaches (essentially limiting private beaches that can be owned by foreign corporations and hotels) is also worth considering so indigenous people can retain access to their land. Ultimately, a productive conversation is needed between the government and community activists to figure out the most effective approach.