Economic Issues: On-Line Lesson
Ecotourism's economic impact is undeniably one of the most significant financial tends in the world today. The advantages of ecotourism is that it promotes both national conservation efforts and tourism development. The most often cited benefits of ecotourism development are:
 | profits for companies; |
| local job creation; |
| government revenues from taxes and fees; and |
| promotion of local conservation efforts |
However, tourism is also an unstable form of economic development. The most often cited detriments of ecotourism development are:
| low paying service sector jobs; |
| seasonal nature; |
| fluctuates with political changes; |
| fluctuates with currency rates; |
| increased local costs for land and basic staples; |
| natural disasters (hurricanes, earthquakes, etc.); and |
| whims of tourists (trendy locations). |
Economic impact and economic value are the two essential economic concepts used in describing or measuring ecotourism in economic terms. Economic impact refers to changes in sales, income or jobs derived from ecotourism development. Economic value attempts to determine the economic values placed on intangibles such as visitor experiences, preservation of biodiverstiy and maintenance of watersheds.
Multiplier Effect: Tourist's expenditures are re-spent throughout the local economy, through transactions from laborers to local markets, benefiting the whole community.
Leakage: Leakage occurs when large multinational companies which purchase their supplies and products outside the country. Leakage may run as high as 80 to 90 percent, meaning only 10 cents out of every dollar may go to the local community.
Linkages: A new concept of "linkages" was created to promote local and regional good and services to supply the tourism sector. Linkages means the tourism industry uses locally produced goods and services instead of importing them. Maximizing linkages minimizes leakage and lessens local economic dependence on outside factors.
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Tourism Fees: fees are used to recover visitor management costs, traditional conservation management expenses or funding community development programs. Fees are generally higher for foreign visitors with lower fees for residents. Economic Management Objectives 1) Cost Recovery: Fees are charged which equal the cost of providing the service including capital expenses (facilities) and operating costs (maintenance and upkeep of area and facilities). Fees may also include indirect costs of environmental degradation and negative effects of tourism operations on the local community. 2) Profit Maximization: Fees are charged to generate as much profit as possible. The profits may be used to pay for conservation efforts, develop new tourism opportunities, subsidize recreational opportunities for residents. Montazuma Castle National Monument, AZ |
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maximizing revenues: is based on attracting as many tourists as possible.
maximizing profits: means identifying the level of visitation that will result in the most cost efficient operation. At some point increasing the number of tourist visits will increase financial, environmental and social costs higher than the income produced by fees.
3) High Fees Used for Visitor Disbursement: Setting high fees to reduce the number of visitors and disperse tourists from crowded sites to less visited attractions. Studies have shown that high fees also reduce litter and vandalism (Aukerman, 1990).
4) Enhancing Local Economy: Fees may be reduced to less than the cost of providing services in order to attract tourists to the area and through their spending, increase the economic activity of the local community.
Estimating Ecotourism Demand: Methods used to determine tourist demand for visiting a particular site and their willingness to pay for transportation, lodging, restaurants, attractions and local services.
1) Market Evaluation Method: A specific attraction can set their fees based on those currently charged by other attractions of similar appeal, cost of travel, and other demand factors. New developments, which increase supply, will put pressure on prices at existing attractions to be lowered.
Common Demand Factors |
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| International Factors | National & Local Factors |
Income |
* Quality of Attraction |
| Population | * Quality of General Trip Experience |
| Tastes | * Political and Economic Stability |
| * Destination Image | * Complementary Attractions |
| Competing Attractions | * Cost of Travel (time and money) |
| Cost of Travel (time and money) | |
* Factors often affected by careful planning and management. |
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2) Survey of Tourist Demand Method: Tourists estimate their own demand for a specific attraction based on a tourism survey. Information may include the visitors willingness to pay for services and how much they would be willing to pay. A concern related to this method is that tourists often underestimate what they actually would be willing to pay.
3) Demand Curve Analysis Method: A demand curve measures how much tourists are willing to pay to visit an attraction and the trade off between price and the number of visitors (supply and demand curve).
4) Market-based Reactive Management: Responding to the tourism market based on current trends. If demand is high raise fees, but if visitation declines then lower fees accordingly.
5) Auctions Method: Is used to disperse concessionaire permits for a protected area. The auction will result in the top dollar being paid if, as they should be, the permits are limited. Most of these permits are high-value opportunities including hunting, whitewater river operations and exclusive wildlife viewing.
The best method for determining fees will be based on local conditions, availability of survey data, and good judgement by the land management agency.
Types of Fees
| Entrance Fee |
| Admission Fee |
| License or Permit |
| Sales and Concessions (Goods and services either sold directly by the land management agency or as a percentage of the income generated by a concessionaire) |
| Donations |
Fee systems will depend upon:
| type of visitation (individual vs group); |
| level of industry cooperation; and |
| protected area agency management efficiency |
Fee Collection Methods
| Direct on-site collections |
| Indirect collection through tour operators |
| Indirect collection through other sectors of the tourism industry |
Important Principles For Initiating A Tourism Fee Policy
1) Tourism fees should be used to supplement, not replace existing protected area agency's budgets.
2) Dedicate a specific percentage of fees collected to be returned to the protected area which collected them.
3) Establish national guidelines for fees but allow the specific sites to set their own fees.
4) Recognize that not all areas should have fees imposed depending on visitor demand or other factors.
5) Maintain accurate accounting systems to track revenue and expenses.
Using Ecotourism To Support for Local Economic Development
Reasons to Support the Local Economy
1) To offset the reduction or lose of traditional resources (timber, hunting, and mineral extraction).
2) To increase the level of local support (political, emotional, etc.) for the protected area.
3) Ecotourists prefer to support local economies.
Methods for Increasing Local Economic Benefits
| local ownership/management of ecotourism resource |
| local leasing of services or equipment |
| partial ownership in ecotourism resource |
| profit sharing between local community and tourism industry |
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Ways to Increase Local Economic Benefits (increasing linkages and decreasing leakage)
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Navajo Guide in Canyon De Chelly, AZ |
Additional References:
Lindberg, Ph.D., Charles Sturt University, 3 November, 1996
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