Fees for Reefs:
Economic Instruments to Protect Mexico’s Marine Natural Areas
By:
Marisol Rivera Planter & Carlos Muñoz Piña
Instituto Nacional de Ecología
[email protected]
[email protected]
Abstract:
Stated preference methods can be used to estimate the demand function where no price
variation has been observed before. This is the situation of the Mexican coral reef natural
protected areas, where after the 2002 approval of a $20 pesos fee (US$1.80) the Ministry
of the Environment is now considering increasing the amount of the fee, not only to raise
more revenue for the park, but also to curb the number of visitors in the cases where there
is excess demand. There are concerns that the very success of the reefs is bringing
associated environmental damage that threatens its sustainable use. To estimate the
reaction of visitors to different fee levels, we carried out a Contingent Valuation survey,
and constructed with its results an aggregate demand for each park. This demand was
then divided by seasons and nationalities, to explore the benefits and costs of
differentiating fees, looking at both the revenue maximizing and the welfare maximizing
fees. Finally we discuss how these fees would change when environmental damage
functions are taken into account. The recommendation is that increasing fees up to the
point where they cover both private and environmental costs would bring the highest
amount of economic benefit compatible with the sustainable use of these complex and
wondrous marine ecosystems.
Key words: contingent valuation, reefs, user fees, protected areas, linear-logarithmic model,
price discrimination.
1
1. Background
Marine Natural Protected Areas benefit society in many ways; besides their indirect global
ecological functions, and the commercial fisheries they indirectly support, the biodiversity and
scenery they protect provide direct recreational benefits to the people that visit them. For
Mexico, the coral reefs situated along its Caribbean Coast represent one of the main attractions
for visitors to the region, an area that in total receives more than 3 million tourists every year.
Near Cancun, the area’s flagship development and thriving tourism oriented city, the Mexican
Federal Government created 4 marine natural protected areas: 1) Punta Cancún, Nizuc & Isla
Mujeres, 2) Reefs of Cozumel, 3) Reefs of Puerto Morelos, and 4) Contoy Island. Together they
represent the 93% of total dives into coral reefs in Mexico.
Figure 1. Marine Protected Areas in the Caribean Coast
Punta Cancún, Punta Nizuc Isla
Mujeres
Source: Instituto Nacional de Ecología.
Coral reefs in Mexico are threatened by the very success they have created.
There is an
increasing environmental pressure from the growing number of tourists that visit them to scuba
dive or snorkel. This has to do with the creation and expansion of tourism destinations in the
2
coral reef coastal area. Pressure depends also on the various degrees of care and abilities
exhibited by tourists and their tourist operators. This is an important issue in Mexico, given that
new hotels and tourism destinations provide easier access to non-specialized tourists, and that the
new business opportunities attract new operators with less experience.
To reduce this
environmental impact the two aims of park managers are, first, to communicate and enforce
better diving and anchoring practices, and second, to reduce the total number of visitors. The
second part of the strategy can be achieved either by directly limiting entry or by setting an entry
fee to curb demand. The use of fees can have the additional benefit of providing revenue for the
communication and enforcement of regulations.
In Mexico, all Protected Natural Areas (PNA) receive funding from the federal budget, where
they have to face strong competition from investment projects and social programs, a situation
which has inevitably resulted in low level of resources over the years. To overcome this problem
and link funding to levels of use, the executive branch presented an initiative, approved by the
Congress to be effective in 2002, which set a fee of $20 pesos (approximately US$ 1.80) per
individual per entry to any Marine Natural Protected Area, earmarking all revenues to the park
that generated them. The approval and successful implementation of the fee allowed the National
Protected Areas Commission to collect more than $ 2 million dollars in revenue in 2003, nearly 50% their
budget and to invest them in park infrastructure, increase in staff, and environmental education campaigns.
The chosen amount of the fee was the result of a negotiation where service-provider interest
groups lobbied for a low, homogenous fee. It was not intended to manage the demand in any
way; at this stage the government was more concerned in getting the instrument passed, than
setting a useful fee level. Currently, the Federal Environmental and Natural Resources Agency is
interested in increasing the fee, and in using it not only to obtain revenue, but to manage the increasing
demand that threatens the sustainable use of the reefs.
Be it to raise revenue or to manage demand, the practical problem for implementation of any feebased policy in Mexico is that the government bodies taking the decisions have little information
on the relationship between fee levels and number of visitors that would go at that fee, that is,
they do not know the demand functions. The direct way to provide this information is to estimate
3
these demand functions by looking at past visitor numbers and to examine the way in which they
have responded to different price levels. However, where historical fee levels show insufficient
variation or have been non-existent, such as is the case in Mexico, this approach is impractical.
The alternative chosen in this paper is to obtain the demand through a stated preference
approach; where through a contingent valuation method (Mitchell and Carson, 1989) individuals’
willingness to pay to enter the site is elicited.
Contingent willingness to pay (WTP) is considered to be an appropriate measure of the economic
value which a person derives from the given activity.
This is because a well designed
questionnaire can force people to weight the value of what is being offered to them against
alternative uses.
The direct survey approach to estimating recreation demand has gained
acceptance among both academics and policy makers as a versatile and valid methodology for
benefit estimation in the case of environmental improvements and other public goods. Strong
support for this method, with equally strong guidelines, was given by a special academic panel
appointed by the United States’ National Oceanic and Atmospheric Administration (NOAA) in
1993 (Arrow et al., 1993). The panel concluded that CV studies could produce estimates reliable
enough to be used in a judicial process of natural resource damage.
The paper is organized as follows: first we describe the relationship between the demand and the
willingness to pay, followed by the framewok to that presents the optimal pricing strategy
depending on the objectives of the natural parks authority; the economic valuation methodology
is presented followed by the literature review of contingent valuation studies. The next sections
describe the methodology used for the survey and its main results, followed by the data analysis,
the policy implications and further recommendations for the price strategy.
2. Demand and Willingness to pay
All tourists visiting the region have a certain maximum willingness to pay to visit its natural
protected areas, an undisclosed value that they compare to the actual prices they face before
taking their decision to undertake the trip. Given different tastes and different income levels, this
willingness to pay is unevenly distributed across individuals, with the possibility of finding some
4
individuals for whom it is zero, this is, people who would not go to the parks if they had to pay
any fee, or would not go unless they are paid to do so. If willingness to pay is ranked by the
individual with the greatest willingness to pay down to the individual with the least willingness to
pay then the demand curve for a site emerges.
Figure 2: Demand curve and consumer surplus
Willingness to pay
to enter the park
Demand function
Fee 2
Fee 1
0
Visitors 2
Visitors 1
Number of visitors per year
A demand function is the relationship between different fee levels and the number of individuals
who would choose to visit the site at each of those fees, all in a particular timeframe. We
construct it so it measures only the willingness to pay to enter the National Park, given a current
cost of transport, equipment and other services provided by tour operators.
For a particular fee and corresponding number of visitors, the total economic value of the
recreational benefits provided by the reefs during the year is the area under the demand function,
the total sum of the willingness to pay of those that would visit at that fee. Subtracting what they
actually pay to enter the park, we would obtain the consumer surplus. The revenue obtained
from the fees minus the total costs of operating the park would give us the producer surplus.
Together, the consumer and producer surplus represent the economic value of the recreational
services of the reefs. It is important to incorporate the value of any environmental damage, or the
5
expenses incurred in its restoration, into the costs of operating the park so the value obtained is
the real social value of the reefs.
3. Pricing strategies
The socially optimum number of visits to the reef occurs where the sum of the producer and
consumer surplus is maximized. At that point, the fee represents the marginal shadow cost of
admission, which includes management costs, congestion costs because of overcrowding, and
any environmental costs that the visit might have (Dixon, 1990).
This ensures that the
willingness to pay for any dive that actually takes place is greater or equal to the full social cost
of providing the experience.
This optimal number of visits can also be reached by limiting entry to a maximum number of
visitors, as in a quota system. Sites such as Yellowstone Park in the U.S. are considering
establishing these quotas in the case when the price already in place does not limit the number of
visitors enough. It is important to note that in a system that combines fees and entry quotas only
one of them would be binding, although a non-binding fee would still bring in revenues, and a
total quota could be targeted to work only for peak periods.
There are different objectives that the Marine National Parks system administrators might pursue
that would lead to different pricing strategies. One of them is to maximize revenues, which given
the fact that federal government is the only supplier of protected marine areas, means choosing
the same price a monopolist would set. The cost of this strategy is the loss of welfare-improving
visits, which are all those visits where tourists would gain more than the private and
environmental cost of their visit but less than the monopolistic price.
6
Figure 3:
Price discrimination with two groups
Price
Demand
Monopolistic price
Revenue
Competition price
0
Marginal costs
Vm
Vc
Source: Friedman (2001), Microeconomics for public policy analysis, USA
Visitors
Whenever visitors can be divided into separate and clearly identifiable groups, then monopolistic
power can be used to further increase revenue. By differentiating fees by group, and applying the
monopolistic price that would prevail in case each group was the only one, maximum revenue
from each of them is obtained. This is done either by a set of fees, or by setting the fee at the
highest level and then providing discounts to members of the group with the lower monopolistic
prices. Those with the lower fees benefit, but overall the welfare losses are higher.
This discriminating strategy is currently being followed by countries such as Costa Rica,
Ecuador, Antilles, Belize and Peru where there are two types of fees, one for foreign tourists and
the other for national ones (Lindbergh, 2001). It is important to note that price discrimination is
not always used to increase revenue. It can also be used to favor certain groups, like seniors or
children, cross-subsidizing them with the revenues brought in by other population groups
(Perloff: 2001). In the cases mentioned it is unclear if discrimination follows a pattern of
identifying foreign tourists as being richer and having higher willingness to pay (WTP), or if it is
intended as a cross-subsidy favoring nationals.
7
4. Literature review
Contingent valuation (CV) has been extensively used to study the demand for visits to natural or
cultural sites where no price has been charged before, or where the price range observed does not
include the prices considered for a policy decision. Second to these are revealed preference
approaches such as the travel cost methods. Table 1 shows some of the studies that served as
reference for our study, either because of the method or the type of demand being estimated.
Table 1: Overview of contingent valuation studies of natural areas
Total
Consumer
Surplus per
year
(US $)
Revenue
collected
Site
Author
Values
considered
Population
considered
Method
Average
Consumer Surplus
per Visitor
(US $)
National Parks
in Costa Rica
Chase
(1996)
Visiting the site
Foreign
tourists
Contingent
valuation
$21-$25
n.a
n.a
Bonaire Marine
Park
Dixon
(1995)
Visiting and
preserving the
park
Foreign
tourists
Contingent
valuation
$17
$325,000
$10 per visitor
$187,000 p/year
Monterverde
Private Reserve
in Costa Rica
Echeverría
(1995)
Visiting the site
Foreign
tourists
contingent
valuation
$121
$2,380,0001/
n.a.
Protected areas
in Kenya
Brown
(1994)
Elephant
viewing and site
conservation
Foreign
tourists
(1) travel cost
(2) contingent
valuation
$499-$858 (1)
$332-$550 (2)
n.a.
n.a.
All tourists
contingent
valuation
$15
$7,725,000
$590,000 p/year
Ras Mohamed
Medio
National Park in
Visiting the site
(1996)
Egypt
1/
39% has a Consumer Surplus of zero
5. Survey design and implementation
The survey used for this valuation study was carried out at two different dates: October 2001 and
January 2002, representative months of the region’s low and high tourism season respectively.
To obtain more information a stratified random sample of tourists was surveyed. The first
stratum is representative of all tourists arriving at the airport to visit the area for any purpose, be
it sea & sun, nightlife, aquatic sports, nature, arqueology, etc.
The second stratum is
representative of those tourists that were actually visiting the Marine Natural Protected Areas,
intercepted at the sites. The validated database has 1321 respondents in the general tourist
stratum, and 2066 respondents that were visiting the protected natural area.
8
The questionnaire used the payment card elicitation technique (Michel and Carson, 1989; Pierce,
2001), where each respondent is presented with a ladder of prices ranging from $0 to $100 pesos
at $10 pesos intervals, with the option of writing down a higher than $100 pesos WTP. In a
follow-up question the respondents were asked if they would change their mind with respect to
their maximum willingness to pay if they were certain that all revenues from the fees would be
channeled towards long term conservation of the reefs, and by how much.
7. Survey results
Table 1 presents the summary of the basic selected socio-economic variables and trip
characteristics for the respondents in the sample. Out of the total visitors to the area 68% are
foreign.
This percentage changes when looking at Natural Protected Area visitors.
They
represent 59% of the visitors to the Cancun-Nizuc NPA, 74% of those visiting the reef site and
bird sanctuary of Contoy Island, and more than 90% for Cozumel, the crown jewel of scuba
diving in Mexico, and the relatively unknown Puerto Morelos site.
The origin of these foreign tourists varies, with a 10% of European tourists overall, and between
2% and 5% European visitors for all parks except Contoy, where they represent 35% of the total
visitors, surpassing even the ones from the USA and Mexico.
This difference in visitor
composition of the sites may arise from a selection process. Those Europeans wishing only to
enjoy the sea and sun can find a less expensive way to do it in Mediterranean resorts, so those
observed visiting a farther destination as Mexico are probably doing so because of a combination
of higher incomes and strong interests in diverse natural and archeological sites.
As expected, gender is equally represented in the general tourists.
However, looking at
individual parks in Cozumel and Puerto Morelos, males represent almost 2/3 of all visitors. The
age distribution varies less, with only the segment of 55+ having a more much larger than
average proportion in Puerto Morelos. Regarding the income there was a high rate of nonresponse of the tourists, as expected in direct interviews, however we can observe small
differences between foreign and national tourists.
9
The survey also asks if the visitors had given donations or participated in any environmentalist
groups back home. The results are impressive, nearly 25% of the people interviewed had made a
donation to an environmental cause in the past year, and 10% stated that they were members of
an environmental group.
Table 1 includes trip characteristics. More than the 95% of the respondents says that purpose of
the trip was leisure, not business.
Approximately, 80% of the sample had as their main
destination the resort of Cancun. The Cozumel reefs visitors stayed in Cozumel, while the visitors
to Puerto Morelos reefs stayed in Playa del Carmen and other hotels in the Mayan Riviera.
The average length of stay is 6 to 8 days. The length average is nine days for Contoy Island and
Reefs of Cozumel. More than the 70% of tourists was its first trip to this destination, while more
of the half of the sample travels buying an all-inclusive package. The price of the package varies
from US$400 to US$1,000, while the average total expenditures are between US$1,000 and
US$1,600.
10
Table 2
Tourist characteristics
All
tourists
Tourists visiting the Protected Natural Areas
CancunI. Contoy
Cozumel
P.
Nizuc
Morelos
Nationality
Mexicans
Foreign
USA
Europe
Latin American
Other
24%
76%
46%
14%
12%
4%
41%
59%
41%
4%
11%
3%
26%
74%
32%
35%
2%
5%
7%
93%
85%
5%
2%
8%
2%
98%
78%
2%
2%
16%
Education
High school or less
College
Higher degree
Other
2%
33%
53%
11%
23%
61%
13%
0%
26%
60%
7%
1%
24%
73%
3%
0%
11%
74%
14%
1%
All
tourists
Tourists visiting the Protected Natural Areas
CancunI. Contoy
Cozumel
P.
Nizuc
Morelos
Gender
Women
Age
15-24
25-34
35-44
45-54
55 or more
48%
45%
49%
33%
38%
8%
41%
35%
11%
5%
3%
30%
43%
15%
6%
9%
37%
25%
18%
11%
3%
31%
41%
19%
6%
2%
34%
34%
15%
15%
Average income (annual, after tax, USD)
Foreign tourists
$20,962
$13,668*
$37,590
na
$35,709
Mexican tourists
$8,758
$7,891*
$25,388
na
$5,350
57%
61%
33%
89%
23%
Refusal rate of
response
Source: National Institute of Ecology (2001), “Marine protected natural areas in Mexico survey”, Environmental Economics and Econometrics department, Mexico
Table 3: Trip information
All
tourists
Buys travel package
Average price of
package (USD)
Tourists visiting Protected Natural Areas
CancunI. Contoy
Cozumel
P. Morelos
Nizuc
All tourists
Tourists visiting Protected Natural Areas
CancunI. Contoy Cozumel
P.
Nizuc
Morelos
50%
44%
42%
40%
79%
Main destination
$ 700
$420
$634
$359
$924
Cancún
67%
94%
73%
18%
33%
$1,100
$1,029
$1,638
$2,743
$1,411
Riviera Maya
11%
1%
9%
2%
12%
Playa del Carmen
15%
1%
11%
14%
48%
Belonging to an
environmental group
5%
12%
10%
3.3%
8.9%
Cozumel
6%
1%
1%
63%
0%
Other
1%
3%
7%
3%
6%
Donation to an
environmental group
25%
24%
27%
9%
23%
7
7
9
7
9
Average
expenditures (USD)
Length of stay
(average days)
Source: National Institute of Ecology (2001), “Marine protected natural areas in Mexico survey”, Environmental Economics and Econometrics department, Mexico
11
a) Visiting the Marine Natural Protected Areas
The Marine Natural Protected Areas (NPA) cover only key parts of the marine areas surrounding
the Cancun resort, where the reefs are, while almost completely covering the diving areas around
the island of Cozumel. Nearly 30% of the tourists interviewed at the airport at the end of their
trips mention visiting one of the two at least once during their vacation. Contoy Island and Reefs
of Puerto Morelos are a more exclusive destination, visited by only 2.5% of total tourists
interviewed at the airport.
Among aquatic activities, snorkeling is the most widely practiced activity in the protected areas.
In Cozumel, 30% of tourists practice it, while it increases to 94% in Puerto Morelos. Scuba
diving is important only in Cozumel, with almost half of the visitors practicing it, and Cancun
(10%), but not so in Contoy and Puerto Morelos where less than 2% undertake it. Kayaking is an
activity practiced by more than 13% of the visitors to the Cancun-Nizuc NPA, but is much less
important for the other parks. Photographing and taking videos of natural elements in the parks
are key activities in Contoy Island where the nesting and resting grounds for seabirds are one of
its main attractions.
Table 3. Activities done in the Natural Protected Area
(percentage of tourists in the NPA that undertake it)
Activity
Snorkeling
Scuba Diving
Kayac
Watching nature
Photography and video
Others
Knowledge of status of
protection
CancunNizuc
68%
14%
3%
4%
.2%
11%
Contoy
Cozumel
40%
1%
1%
10%
.5%
48%
29%
47%
1%
1%
0%
22%
Puerto
Morelos
93%
1%
1%
0%
0%
5%
20%
42%
3%
24%
Source: National Institute of Ecology (2001), “Marine protected natural areas in Mexico survey”,
Environmental Economics and Policy Research, Mexico
Despite they were officially decreed protected areas more than 3 years ago; a minority of the
tourists visiting them know or are informed about their status. The park where people are best
informed is Contoy Island, where nearly two out of every five tourist know about its protected
status. Not so in Cancun-Nizuc, where less than 17% of the tourists know it is a protected area.
12
During President Zedillo’s administration (1994-2000) tourist operators in the NPAs signed a
voluntary agreement to set up trust funds which would be funded through donations asked from
tourists visiting the areas. However, tour operators had few incentives to maintain their effort in
collecting donations, and most areas performed badly.
This was evident in the 2001-2002 survey where the voluntary agreement was still valid, and the
obligatory fee system had not yet been implemented. Only 1/3 of those visitors to the CancunNizuc, Puerto Morelos and Cozumel NPAs had been asked for a US$2 donation. The better
organized effort of the tour operators in Contoy Island also showed in the survey; almost half of
those interviewed were asked for and paid a US$5 dollar donation.
c) Valuation section
Through a payment card showing numbers from $10 pesos1 to $100 pesos in $10 pesos intervals,
tourists were asked what would be their maximum willingness to pay to enter the Natural
Protected Area they were currently visiting. Table 4 has the results, showing the percentage of
visitors that would be willing to pay up to the various amounts.
Table 4. Percentage of visitors at different levels of WTP
WTP (pesos)
/Park
High Season
Cancun
Cozumel
Puerto Morelos
Isla Contoy*
Low Season
Cancun
Cozumel
Puerto Morelos
Isla Contoy*
Averag
e WTP
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100 > $100
100%
100%
100%
100%
95%
83%
76%
59%
91%
80%
69%
56%
91%
51%
51%
55%
86%
39%
45%
53%
75%
35%
34%
52%
71%
17%
12%
14%
46%
17%
12%
13%
41%
16%
11%
12%
39%
12%
9%
12%
32%
12%
9%
9%
30%
0%
0%
3%
$70
$35
$31
$25
100%
100%
100%
100%
84%
90%
85%
60%
83%
86%
80%
53%
83%
57%
52%
53%
80%
26%
43%
33%
76%
21%
37%
30%
71%
14%
13%
27%
46%
9%
11%
7%
44%
5%
10%
5%
40%
2%
7%
5%
35%
1%
7%
2%
35%
0%
1%
0%
$74
$38
$33
$19
*The sharp drop in willingness to pay reflects the fact that half of the visitors are already paying a voluntary donation of US$ 5.
Source: National Institute of Ecology (2001), “Marine protected natural areas in Mexico survey”, Environmental Economics and Policy Research, Mexico
1
At the time of the surveys the exchange rate was close to $10.10 pesos per dollar. In June 2004 the
exchange rate was $11.50 per dollar.
13
As table 4 shows, more than the 85% of the tourists said they would still visit the park at 2 USD
actual fee, a result very close to the estimates of what really happened after the fee was approved.
In Contoy the results reflect the fact that a voluntary quota of 5 USD was being asked to tourists
visiting the bird sanctuary, so it should be read as a fee in excess of that amount.
Tourists view positively the introduction of user fees to acces the parks. When asked if they
would approve of the measure, visitors to the Cozumel PNA had the highest acceptance rate
(83%), followed by Cancun-Nizuc PNA (75%), Isla Contoy (70%) and Puerto Morelos (61%).
Tourists were later asked if their stated willingness to pay would have been higher if they were
assured that the revenues from the fees they paid would be earmarked for conservation of the
reefs. These results, shown in Table 5, vary widely, being the highest in Puerto Morelos, and
almost creating no change in Cozumel. Under a less altruistic motivation, tourists were asked if
their stated willingness to pay would be different knowing that the imposition of the fee would
reduce congestion in the park. This change in the quality of the experience also elicited a higher
willingness to pay.
Table 5:
Percentage of respondents that would pay and earmarking fee for conservation and congestion
% of respondents that…
Cancún
Contoy
Cozumel
Would pay more if fee is earmarked for conservation.
Would pay more if fee would ensure less congestion at
the site.
29.4%
12.1%
2.57%
Puerto
Morelos
41.45%
13.9%
10.7%
1.67%
38.94%
Source: National Institute of Ecology (2001), “Marine protected natural areas in Mexico survey”, Environmental
Economics and Policy Research, Mexico
8. Aggregate demand
In order to estimate the aggregate demand function the data was organized as follows: Tourists
were divided into 4 groups combining their nationality (Mexican/Foreign), and the season they
were visiting the area (High season/Low season). Then, based on their maximum willingness to
pay, the number of tourists that would visit the park per month was determined for each one of
the prices asked. Each one of these is an observation of the aggregate demand, where the
14
nationality and the season can shift the entire demand function upward or downward. The
following model was estimated using ordinary least squares (OLS) with a log-lin specification:
lnQ = β0 − β1(nac) + β2(season
) − β3( fee) + β4( fee*nac) + β5( fee*season
) +ε
(1)
, where the explanatory variables are:
1) Fee (WTP), the different levels of maximum willingness to pay to which the visitors react.
2) Nac (nationality), taking a value of 1 for Mexican tourists, and 0 for foreign tourists. This
variable influences the intercept, reflecting the proportion of Mexicans to foreigners visiting
the area, and interacts with the fee to reflect differences in the reaction to price by nationality.
3) Season, taking a value of 1 for observations corresponding to high season, and a value of 0 for
those from low season. This variable shifts the intercept reflecting the different starting points
of the number of visitors in different seasons, and interacts with the fee to show the different
reactions to price according to the time of the year.
The dependent variable lnQ is the logarithm of the number of tourists that would go at the
corresponding fee. The error term is assumed to have a normal distribution.
The regression analysis was done for two marine NPAs that have a good mix of nationalities:
Cancun and Isla Contoy. Table 6 shows the results for these areas. Further work will estimate the
demand for the other two areas, but a new division of the groups will be needed, perhaps by type
of activity undertaken
15
Table 6
Estimates of the demand for visits to the coral reefs natural protected areas
Logarithmic-Linear regression;
Dependent variable: Number of visitors per month
Punta Cancun, Punta Nizuc& Isla Mujeres
Parque Nacional Isla Contoy
Variable
Season
Nationality
Entry fee
Coefficient
1.0488
-0.3077
-0.0116
t-statistic
(0.000)
-3.14
(0.002)
-22.20
(0.000)
-1.90
Nationality
-0.9112
-4.21663
Entry fee
-0.0490
-12.64002
(.005)
(.000)
(.000)
4.194619
0.0152
3.963525
128.64
Constant
7.3734
36.29814
R-square
0.9339
79.9641
41
-0.0031
F( 6, 51)
Number of
observations
0.7197
Entry fee *
season
Entry fee *
season
0.9714
288.29
Season
(0.000)
(0.063)
R-square
t-statistic
3.01564
0.0130
-0.0017
9.9364
Coefficient
Entry fee *
nacionality
Entry fee *
nacionality
Constant
Variable
10.73
-3.69
(0.000)
F( 6, 34)
Number of
observations
58
(.000)
(.000)
(.000)
The estimated coefficient for season is positive, reflecting the higher number of visitors per
month received in high season.
The estimated coefficient for nationality is negative,
corresponding to the smaller share of Mexican tourists visiting both parks, as compared to foreign
tourists. The entry fee sign represents the inverse relationship between quantity and price, at
higher prices less tourists would be willing to visit the park.
Equation 2 shows the inverse demand equation that is obtained for each of the 4 groups once the
estimated coefficients are combined: Mexican tourists in high season, foreign tourists in high
season, Mexican tourists in low season and foreign tourists in low season.
ln Q = α − β wtp
(2)
, where: Q: number of visitors,
α: Estimated intercept: Nationality + Season + Constant
β: Estimated coefficient of the entry fee
16
WTP: entry fee
Figure 4 shows the estimated relationship between the daily fee and the number of visitors that
would be observed each month in Isla Contoy. Figure 5 does the same for Cancun-Nizuc.
Figure 4:
Demand to visit Isla Contoy marine park
(number of visits per month)
30
25
fees (USD)
20
Season:
15
high
10
low
5
0
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
visits per month
17
Figure 5:
Demand per season Cancun marine park
(visitors per month)
50
45
Season:
40
low
fees USD
35
high
30
25
20
15
10
5
0
0
20000
40000
60000
80000
100000
120000
visitors
According to these results, in a high season month the Cancun-Nizuc-Isla Mujeres Park would be
receiving 45,181 foreign tourists and 40,627 Mexican visitors when no fee is charged. If the
entry fee were set to $20 pesos (1.80 USD) the number of visitors would fall to 30,037 and
25,483 respectively.
The price elasticity of demand is the percentage change in the quantity demanded as a response to
a percentage change in the price or fee. The higher the number is the more sensitive the number
of visitors is to a change in fees. Table 9 shows the price elasticities measured for a small
change, called point elasticities, in this case measured at the current level of $20 pesos.
18
Table 7:
Point price elasticities of demand
(at the 20 pesos level)
Area
Cancún
Contoy
High
Low
Foreign
Mexican
Foreign
Mexican
-0.29
-0.67
-0.33
-0.41
-0.23
-0.98
-0.26
-0.72
In all cases except for Mexican tourists visiting Isla Contoy in low season, demand is inelastic,
this is, it takes values is between 0 and -1.0, meaning that an increase in 1% in the fee would
bring a reduction in less than 1% in the number of visitors. Nevertheless, the number of tourists
falls quickly and at levels beyond US$15 per day it seems to disappear. Although a large drop in
the number of dives would be expected, the result is probably underestimating those that would
reluctantly pay and still go at those levels, a feature not captured by contingent valuation studies
with payment cards such as ours.
9. Maximizing revenues and demand management issues
The inverse demand functions in table 10 are used in this section to estimate the optimal fees
under different scenarios. The scenarios use two marginal cost functions: The private cost
function, which reflects the associated management and operation costs for the park, is assumed
to be constant and set at the $20 pesos level. This means that each additional visit would have
the same cost as the previous ones. The marginal environmental costs, on the other hand, are
assumed to be an increasing function of the number of visitors, reflecting larger and increasing
environmental impact from having too many tourists.
19
Table 10: Estimated demand functions
Cancun-Nizuc
Mexican
Foreign
Isla Contoy
Mexican
Foreign
High Season
Low Season
ln Q = 10.6774 − 0.01634 fee
ln Q = 10.9851 − 0.01469 fee
ln Q = 9.6286 − 0.01323 fee
ln Q = 9.9363 − 0.01157 fee
ln Q = 7.1818 − 0.0209 fee
ln Q = 8.0931 − 0.0339 fee
ln Q = 6.4621 − 0.0364 fee
ln Q = 7.3734 − 0.0494 fee
* Q is the quantity of visitors per month, and fee is the daily fee charged.
Monopolistic prices
Under the only objective of maximizing revenue, without considering environmental damage
from the number of visitors, the park managers would set the fee so the marginal income equals
the marginal cost. We analyze the case where the monopolistic park manager can set differential
fees according to nationality and season. Table 11 compares these results with the one that would
exist in perfect competition, where price equals the marginal cost, the one that maximizes total
economic welfare.
As can be observed in the table, the consumer surplus losses can be substantial following the
objectives of just maximizing revenues. For every additional dollar of revenue beyond the social
optimal point revenue there are more than ten dollars lost in social welfare.
20
Table 11
Socially optimum and Discriminating Monopolist fees for visits to Coral Reefs NPAs
Cancun
high season
Mexican
Foreign
low season
Total per month
Mexican
Foreign
Total per month
Social optimum fees* (USD)
2
2
2
2
2
2
Number of visitors per month
25,483
30,037
55,520
12,022
16,576
28,599
Revenues (USD)
$50,966
$60,074
$111,040
$24,045
$33,153
$57,197
$3,165,626
$6,196,639
$9,362,266
$338,449
$745,017
$1,083,466
20
36
4
7
Consumer surplus (USD)
Discriminating Monopolist
fees (USD)
6,947
7,117
14,064
5,067
6,055
11,122
$159,781
$291,813
$451,594
$25,335
$48,440
$73,775
$1,952,417
$3,801,805
$5,754,222
$168,925
$421,498
$590,423
2
2
2
2
2
2
Number of visitors per month
Revenues (USD)
Consumer surplus (USD)
Contoy
Social optimum fees* (USD)
Number of visitors per month
598
722
1,320
245
370
615
Revenues (USD)
$
1,196
$
1,445
$
2,641
$
490
$
740
$
1,230
Consumer surplus (USD)
Discriminating Monopolist
fees (USD)
$
29,257
$
54,269
$
83,526
$
5,685
$
895
$
6,580
9
Number of visitors per month
Revenues (USD)
12
179
$
1,791
3
216
$
395
4
140
131
271
3,027
$
4,818
$
419
$
657
$
1,076
Consumer surplus (USD)
$ 14,719
$ 31,695
* Scenario considering a marginal cost of $20.
$
46,414
$
2,805
$
197
$
3,002
Including environmental costs
There is a small but important literature on the relationship between the number of dives in a
coral reefs and their environmental impact. Some of the earlier papers sought to establish a
threshold of carrying capacity of the reef, a critical density of dives per area beyond which there
would start to be evident environmental damage, for example less visibility, more rubble, higher
than natural rates of dead coral which would lead to the eventual destruction of the reef’s
diversity. Based on interviews with divers and photo analysis, Dixon (1994) found that some
diving sites in the Caribbean were in the border of exceeding their carrying capacity, which he
placed between 4,000 and 6,000 dives per year.
21
Figure 6
Reef quality
Threshold
high
low
4,000
6,000
Number of dives per year
Source: Dixon, J. (1994), The Bonaire Marine Park in the Caribbean, World Bank, Latin-American Technical Department, Environmental
Division
Mostafa, H. et al, (1999), and Abou Zaid, M (2002), estimate the correlation between the
percentage of coral damage and the number of dives per year. Both study some of the most
popular diving sites in the Red Sea which are visited by nearly 100,000 divers per year. Both are
careful to point out that the carrying capacity will depend on other factors such as diver
education, and special infrastructure such as mooring sites.
Once studies estimating the relationship between the number of dives and environmental impact
on corals in Mexico are available, the optimal fees can be set at the level where they are equal to
the marginal costs that include environmental damage. This will probably mean that a higher fee
would be set for the most popular parks and the high season months.
22
9. Policy implications
The introduction of fees to access the Marine Natural Protected Areas in Mexico presents a
unique opportunity to use them as management demand tools. However, all depends on the
objective of the park administration. If the objective is to maximize revenue there is a strong
argument for differentiated fees across Natural Protected Areas, and seasons. Discriminating by
nationality is a difficult issue, because it is prohibited in the Mexican legislation, although the
National Institute of History and Arqueology is applying it to some historical sites. However, it
is important to point out that the increase in revenue through monopolistic pricing masks large
losses in consumer surplus, and thus in social welfare, derived from tourism in the reefs.
However, if the objective is to manage demand so the “tourist carrying capacity” is not surpassed,
then differentiated fees can act as important policy tools. Our estimates show that tourists are
very sensitive to the level of fees, which makes them excellent demand management tools. Thus
it would be socially optimal to discriminate between parks, and between high and low season.
We also find out that tourists would be willing to pay more if they were assured that their fees
would be used for conservation. They would know that they are not only paying for their
recreation, but also contributing to the preservation of global public good for them and future
generations.
Opposition to fees by tour operators is based on the concern that fees will reduce visitor numbers.
While this last perception is true, it is a short-term perspective. Unsustainable use of reefs would
foreclose future business in the area. The use of fees can be a positive policy tool that delivers
healthy, biodiverse, and enjoyable reefs for today and the future. .
23
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