The paper identifies and analyses challenges and issues facing the tourism industry in the most developed South Pacific island state, the Fiji Islands. Many of the challenges identified can be attributed to the interplay among historical factors and events, and the vested interests associated with them. The colonization of Fiji, the historical role of foreign capital in its growth and development, the conflicting socio-economic and political demands of the two major ethnic groups (the indigenous Fijians and immigrant Indo-Fijians), the issue of property rights, and more recently the coups of 1987 and 2000 and the resultant political instability are discussed in relation to the growth and development of the tourism industry. The author also discusses the impact of the coups on the tourism industry and the role of private–public partnerships in the industry's recovery follow-ing the coups. Tourism has come to play a significant role in the economies of South Pacific island states in terms of generating employment, income and foreign exchange earnings. Wilkinson (1989) concludes that tourism is 'inevitable' in those island states that lack viable economic alternatives to growth because of their isolation, size, lack of resources and high cost structure, among other inhibiting factors. For those island states that have some economic alternatives for growth, tourism is a welcome diversification that provides additional opportunities for employ-ment, foreign exchange earnings and higher standards of living. Milne (1992), who studied five South Pacific island states (Tonga, Vanuatu, Kiribati, Niue, and Cook Islands), found that these island states had embraced tourism for reasons other than economic growth and sustainability. The states depict MIRAB economic structures: that is, they are characterized by outward migration (MI), a dependence on high-level remittances (R) and aid (A) pay-ments to cover deficits, and a reliance on bureaucracy (B) for job creation.