Investment in Ecotourism: Assessing its Economics

After briefly defining ecotourism, factors affecting the demand for it, its relative growth and its value for nature conservation are discussed. There has been an upsurge in interest in ecotourism as a possible profitable means to ensure sustainable ecological development. However, investment in ecotourism does not always have the favourable consequences claimed for it. Investment in ecotourism may fail to give a favourable private return for reasons outlined. Factors to be taken into account in assessing private profitability of investment in ecotourism and the likely demands for it at a site are examined. Assessment of social returns from investment in ecotourism are made on a wider basis than the determination of private returns. All investment for the development of ecotourism, whether privately incurred or not, is taken into account along with any external benefits or costs generated. It may also be necessary in calculating social return to include an allowance for increased consumers' surplus obtained by ecotourists from investment in ecotourism. The user-pays principle is discusssed because social return is not necessarily dependent on payments. Nevertheless tourism development has to be financed and one source of finance is payments by tourists. The transaction costs involved in imposing fees affects the economics of charging and means to reduce such costs are considered. In conclusion, it is pointed out that investment in ecotourism is liable to cause damage to natural environments and offset policies are proposed as a way to compensate for this