Islands are attractive places for tourists and most islands can be, sooner or later,
requested by an increasing tourist demand. But islands are also places where natural
capital has very defined limits. The aim of this paper is to assess the carrying capacity
of islands in terms of water in relation to the tourist demand. We use an Input-Output
Table Model and expand it to include the use of water by the different sectors and by
the households. The model is estimated for Terceira island in the Azores using cross
entropy methods. The structure of the model is obtained from the Input-Output Table of
the Region. The data to estimate the model comes from the employment and production
of the companies in each island and from the respective water demand and supply. We
simulate the model for different levels of water demand and discuss the competitiveness
of the islands' tourist sector and sustainability