Consumer surplus and macro valuation of tourism projects

Abstract

There cannot be a tourism industry without projects. These projects can take different forms, such as development of attractions, accommodation, entertainment, transport, new resorts, congress centre, events, ski infrastructure, etc.. They all involve considerable investment. This paper focuses on five topics. First, it focuses on the nature of investment appraisal and explores the difference between micro and macro approaches. Secondly, attention is paid to externalities in tourism. Indeed many projects belong to the general tourism infrastructure, and the benefits do not only accrue to the paymaster, who may not consider the negative effects. In other words, externalities must be taken into account. A third section deals with the identification of cost and benefit items or the cost-benefit scheme. Environmental costs are an important part of the scheme. In the same section we proceed with the quantification and valuation of cost and benefit items and the calculation of the NPV (net present value) and IRR (internal rate of return). In a fourth part we pay special attention to the valuation of the consumer surplus of non-priced tourism resources and more particularly to two methods often applied to measure the consumer surplus: 'The Travel Cost Method' and 'The Contingent Method' A fifth part of the paper is focused on CBA versus economic impact analysis. (original abstract)