Fees for Reefs: Economic Instruments to Protect Mexicos Marine Natural Areas

By: Marisol Rivera Planter & Carlos Muo Pia Instituto Nacional !e Ecolo"#a marivera$ine%"o&%mx carmuno $ine%"o&%mx A&stract: 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 $20 pesos fee (US$ .!0" the Ministr# of the $nvironment is now considerin% increasin% the amount of the fee, not onl# to raise more revenue for the par&, but also to curb the number of visitors in the cases where there is excess demand. There are concerns that the ver# success of the reefs is brin%in% associated environmental dama%e that threatens its sustainable use. To estimate the reaction of visitors to different fee levels, we carried out a 'ontin%ent (aluation surve#, and constructed with its results an a%%re%ate demand for each par&. This demand was then divided b# seasons and nationalities, to explore the benefits and costs of differentiatin% fees, loo&in% at both the revenue maximi)in% and the welfare maximi)in% fees. *inall# we discuss how these fees would chan%e when environmental dama%e functions are ta&en into account. The recommendation is that increasin% fees up to the point where the# cover both private and environmental costs would brin% the hi%hest amount of economic benefit compatible with the sustainable use of these complex and wondrous marine ecos#stems. 'ey (or!s: contin%ent valuation, reefs, user fees, protected areas, linear+lo%arithmic model, price discrimination.

. Bac)"roun! Marine ,atural -rotected .reas benefit societ# in man# wa#s/ besides their indirect %lobal ecolo%ical functions, and the commercial fisheries the# indirectl# support, the biodiversit# and scener# the# protect provide direct recreational benefits to the people that visit them. *or Mexico, the coral reefs situated alon% its 'aribbean 'oast represent one of the main attractions for visitors to the re%ion, an area that in total receives more than 0 million tourists ever# #ear. ,ear 'ancun, the area1s fla%ship development and thrivin% tourism oriented cit#, the Mexican *ederal 2overnment created 3 marine natural protected areas4 " Punta Cancn, Nizuc & Isla Mujeres, 2" Reefs of Cozumel, 0" Reefs of Puerto Morelos, and 3" Contoy Island. To%ether the# represent the 506 of total dives into coral reefs in Mexico.

Fi"ure *% Marine Protecte! Areas in t+e Cari&ean Coast

Punta Canc,n- Punta Ni uc Isla Mu.eres

Source4 7nstituto ,acional de $colo%8a.

'oral reefs in Mexico are threatened b# the ver# success the# have created.

There is an

increasin% environmental pressure from the %rowin% number of tourists that visit them to scuba dive or snor&el. This has to do with the creation and expansion of tourism destinations in the

coral reef coastal area. -ressure depends also on the various de%rees of care and abilities exhibited b# tourists and their tourist operators. This is an important issue in Mexico, %iven that new hotels and tourism destinations provide easier access to non+speciali)ed tourists, and that the new business opportunities attract new operators with less experience. To reduce this environmental impact the two aims of par& mana%ers are, first, to communicate and enforce better divin% and anchorin% practices, and second, to reduce the total number of visitors. The second part of the strate%# can be achieved either b# directl# limitin% entr# or b# settin% an entr# fee to curb demand. The use of fees can have the additional benefit of providin% revenue for the communication and enforcement of re%ulations. 7n Mexico, all -rotected ,atural .reas (-,." receive fundin% from the federal bud%et, where the# have to face stron% competition from investment pro9ects and social pro%rams, a situation which has inevitabl# resulted in low level of resources over the #ears. To overcome this problem and lin& fundin% to levels of use, the executive branch presented an initiative, approved b# the 'on%ress to be effective in 2002, which set a fee of $20 pesos (approximatel# US$ .!0" per individual per entr# to an# Marine ,atural -rotected .rea, earmar&in% all revenues to the par& that %enerated 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 !ud"et and to invest them in par# infrastructure, increase in staff, and environmental education campai"ns$ The chosen amount of the fee was the result of a ne%otiation where service+provider interest %roups lobbied for a low, homo%enous fee. 7t was not intended to mana%e the demand in an# wa#/ at this sta%e the %overnment was more concerned in %ettin% the instrument passed, than settin% a useful fee level. Currently, the %ederal &nvironmental and Natural 'esources A"ency is interested in increasin" the fee, and in usin" it not only to o!tain revenue, !ut to mana"e the increasin" demand that threatens the sustaina!le use of the reefs$ :e it to raise revenue or to mana%e demand, the practical problem for implementation of an# fee+ based polic# in Mexico is that the %overnment bodies ta&in% the decisions have little information on the relationship between fee levels and number of visitors that would %o at that fee, that is, the# do not &now the demand functions. The direct wa# to provide this information is to estimate

these demand functions b# loo&in% at past visitor numbers and to examine the wa# in which the# have responded to different price levels. ;owever, 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 throu%h a stated preference approach/ where throu%h a contin%ent valuation method (Mitchell and 'arson, 5!5" individuals1 willin%ness to pa# to enter the site is elicited. 'ontin%ent willin%ness to pa# (<T-" is considered to be an appropriate measure of the economic value which a person derives from the %iven activit#. alternative uses. This is because a well desi%ned =uestionnaire can force people to wei%ht the value of what is bein% offered to them a%ainst The direct surve# approach to estimatin% recreation demand has %ained acceptance amon% both academics and polic# ma&ers as a versatile and valid methodolo%# for benefit estimation in the case of environmental improvements and other public %oods. Stron% support for this method, with e=uall# stron% %uidelines, was %iven b# a special academic panel appointed b# the United States1 ,ational >ceanic and .tmospheric .dministration (,>.." in 550 (.rrow et al., 550". The panel concluded that '( studies could produce estimates reliable enou%h to be used in a 9udicial process of natural resource dama%e. The paper is or%ani)ed as follows4 first we describe the relationship between the demand and the willin%ness to pa#, followed b# the framewo& to that presents the optimal pricin% strate%# dependin% on the ob9ectives of the natural par&s authorit#/ the economic valuation methodolo%# is presented followed b# the literature review of contin%ent valuation studies. The next sections describe the methodolo%# used for the surve# and its main results, followed b# the data anal#sis, the polic# implications and further recommendations for the price strate%#. /% 0eman! an! 1illin"ness to 2ay .ll tourists visitin% the re%ion have a certain maximum willin%ness to pa# to visit its natural protected areas, an undisclosed value that the# compare to the actual prices the# face before ta&in% their decision to underta&e the trip. 2iven different tastes and different income levels, this willin%ness to pa# is unevenl# distributed across individuals, with the possibilit# of findin% some

individuals for whom it is )ero, this is, people who would not %o to the par&s if the# had to pa# an# fee, or would not %o unless the# are paid to do so. 7f willin%ness to pa# is ran&ed b# the individual with the %reatest willin%ness to pa# down to the individual with the least willin%ness to pa# then the demand curve for a site emer%es. Fi"ure /: 0eman! curve an! consumer sur2lus
Willingness to pay to enter the park

Demand function

Fee 2

Fee 1 0
Visitors 2 Visitors 1 Number of visitors per year

. 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. <e construct it so it measures onl# the willin%ness to pa# to enter the ,ational -ar&, %iven a current cost of transport, e=uipment and other services provided b# tour operators. *or a particular fee and correspondin% number of visitors, the total economic value of the recreational benefits provided b# the reefs durin% the #ear is the area under the demand function, the total sum of the willin%ness to pa# of those that would visit at that fee. Subtractin% what the# actuall# pa# to enter the par&, we would obtain the consumer surplus. The revenue obtained from the fees minus the total costs of operatin% the par& would %ive us the producer surplus. To%ether, the consumer and producer surplus represent the economic value of the recreational services of the reefs. 7t is important to incorporate the value of an# environmental dama%e, or the

expenses incurred in its restoration, into the costs of operatin% the par& so the value obtained is the real social value of the reefs.

3% Pricin" strate"ies The sociall# optimum number of visits to the reef occurs where the sum of the producer and consumer surplus is maximi)ed. .t that point, the fee represents the mar%inal shadow cost of admission, which includes mana%ement costs, con%estion costs because of overcrowdin%, and an# environmental costs that the visit mi%ht have (?ixon, of providin% the experience. This optimal number of visits can also be reached b# limitin% entr# to a maximum number of visitors, as in a =uota s#stem. Sites such as @ellowstone -ar& in the U.S. are considerin% establishin% these =uotas in the case when the price alread# in place does not limit the number of visitors enou%h. 7t is important to note that in a s#stem that combines fees and entr# =uotas onl# one of them would be bindin%, althou%h a non+bindin% fee would still brin% in revenues, and a total =uota could be tar%eted to wor& onl# for pea& periods. There are different ob9ectives that the Marine ,ational -ar&s s#stem administrators mi%ht pursue that would lead to different pricin% strate%ies. >ne of them is to maximi)e revenues, which %iven the fact that federal %overnment is the onl# supplier of protected marine areas, means choosin% the same price a monopolist would set. The cost of this strate%# is the loss of welfare+improvin% visits, which are all those visits where tourists would %ain more than the private and environmental cost of their visit but less than the monopolistic price. 550". This ensures that the willin%ness to pa# for an# dive that actuall# ta&es place is %reater or e=ual to the full social cost

Figure ! Price discrimination "it# t"o groups

Price

Demand

Monopolistic price Competition price Revenue Marginal costs

Vm

Vc

Source4 *riedman (200 ", Microeconomics for public polic# anal#sis, US.

Visitors

<henever visitors can be divided into separate and clearl# identifiable %roups, then monopolistic power can be used to further increase revenue. :# differentiatin% fees b# %roup, and appl#in% the monopolistic price that would prevail in case each %roup was the onl# one, maximum revenue from each of them is obtained. This is done either b# a set of fees, or b# settin% the fee at the hi%hest level and then providin% discounts to members of the %roup with the lower monopolistic prices. Those with the lower fees benefit, but overall the welfare losses are hi%her. This discriminatin% strate%# is currentl# bein% followed b# countries such as 'osta Aica, $cuador, .ntilles, :eli)e and -eru where there are two t#pes of fees, one for forei%n tourists and the other for national ones (Bindber%h, 200 ". 7t is important to note that price discrimination is not alwa#s used to increase revenue. 7t can also be used to favor certain %roups, li&e seniors or children, cross+subsidi)in% them with the revenues brou%ht in b# other population %roups (-erloff4 200 ". 7n the cases mentioned it is unclear if discrimination follows a pattern of identif#in% forei%n tourists as bein% richer and havin% hi%her willin%ness to pa# (<T-", or if it is intended as a cross+subsid# favorin% nationals.

4% 5iterature revie( 'ontin%ent valuation ('(" has been extensivel# used to stud# the demand for visits to natural or cultural sites where no price has been char%ed before, or where the price ran%e observed does not include the prices considered for a polic# decision. Second to these are revealed preference approaches such as the tra$el cost methods. Table shows some of the studies that served as reference for our stud#, either because of the method or the t#pe of demand bein% estimated.
6a&le *: 7vervie( of contin"ent valuation stu!ies of natural areas
9alues consi!ere! (isitin% the site (isitin% and preservin% the par& (isitin% the site $lephant viewin% and site conservation Po2ulation consi!ere! *orei%n tourists *orei%n tourists *orei%n tourists *orei%n tourists .ll tourists Avera"e Consumer 8ur2lus 2er 9isitor :;8 <= $2 +$2D $ E $ 2 $355+$!D! ( " $002+$DD0 (2" $ D 6otal Consumer 8ur2lus 2er year :;8 <= n.a $02D,000 $2,0!0,000 F n.a. $E,E2D,000 Revenue collecte! n.a $ 0 per visitor $ !E,000 pF#ear n.a. n.a. $D50,000 pF#ear

8ite ,ational -ar&s in 'osta Aica :onaire Marine -ar& Monter$erde -rivate Aeserve in 'osta Aica -rotected areas in Gen#a

Aut+or 'hase ( 55C" ?ixon ( 55D" $cheverr8a ( 55D" :rown ( 553"

Met+o! 'ontin%ent valuation 'ontin%ent valuation contin%ent valuation ( " travel cost (2" contin%ent valuation contin%ent valuation

Ras Mo#amed Medio ,ational -ar& in (isitin% the site ( 55C" $%#pt F 056 has a 'onsumer Surplus of )ero

>% 8urvey !esi"n an! im2lementation The surve# used for this valuation stud# was carried out at two different dates4 >ctober 200 and Hanuar# 2002, representative months of the re%ion1s low and hi%h tourism season respectivel#. To obtain more information a stratified random sample of tourists was surve#ed. The first stratum is representative of all tourists arrivin% at the airport to visit the area for an# purpose, be it sea I sun, ni%htlife, a=uatic sports, nature, ar=ueolo%#, etc. The second stratum is representative of those tourists that were actuall# visitin% the Marine ,atural -rotected .reas, intercepted at the sites. The validated database has 02 respondents in the %eneral tourist stratum, and 20CC respondents that were visitin% the protected natural area.

The =uestionnaire used the pa#ment card elicitation techni=ue (Michel and 'arson, 5!5/ -ierce, 200 ", where each respondent is presented with a ladder of prices ran%in% from $0 to $ 00 pesos at $ 0 pesos intervals, with the option of writin% down a hi%her than $ 00 pesos <T-. 7n a follow+up =uestion the respondents were as&ed if the# would chan%e their mind with respect to their maximum willin%ness to pa# if the# were certain that all revenues from the fees would be channeled towards lon% term conservation of the reefs, and b# how much. ?% 8urvey results Table forei%n. presents the summar# of the basic selected socio+economic variables and trip This percenta%e chan%es when loo&in% at ,atural -rotected .rea visitors. The#

characteristics for the respondents in the sample. >ut of the total visitors to the area C!6 are represent D56 of the visitors to the Cancun%Nizuc ,-., E36 of those visitin% the reef site and bird sanctuar# of Contoy Island, and more than 506 for Cozumel, the crown 9ewel of scuba divin% in Mexico, and the relativel# un&nown Puerto Morelos site. The ori%in of these forei%n tourists varies, with a 06 of $uropean tourists overall, and between 26 and D6 $uropean visitors for all par&s except 'onto#, where the# represent 0D6 of the total visitors, surpassin% even the ones from the US. and Mexico. This difference in visitor composition of the sites ma# arise from a selection process. Those $uropeans wishin% onl# to en9o# the sea and sun can find a less expensive wa# to do it in Mediterranean resorts, so those observed visitin% a farther destination as Mexico are probabl# doin% so because of a combination of hi%her incomes and stron% interests in diverse natural and archeolo%ical sites. .s expected, %ender is e=uall# represented in the %eneral tourists. ;owever, loo&in% at

individual par&s in 'o)umel and -uerto Morelos, males represent almost 2F0 of all visitors. The a%e distribution varies less, with onl# the se%ment of DDJ havin% a more much lar%er than avera%e proportion in -uerto Morelos. Ae%ardin% the income there was a hi%h rate of non+ response of the tourists, as expected in direct interviews, however we can observe small differences between forei%n and national tourists.

The surve# also as&s if the visitors had %iven donations or participated in an# environmentalist %roups bac& home. The results are impressive, nearl# 2D6 of the people interviewed had made a donation to an environmental cause in the past #ear, and 06 stated that the# were members of an environmental %roup. Table includes trip characteristics. More than the 5D6 of the respondents sa#s that purpose of .pproximatel#, !06 of the sample had as their main

the trip was leisure, not business.

destination the resort of 'ancun. The 'o)umel reefs visitors sta#ed in 'o)umel, while the visitors to -uerto Morelos reefs sta#ed in -la#a del 'armen and other hotels in the Ma#an Aiviera. The avera%e len%th of sta# is C to ! da#s. The len%th avera%e is nine da#s for 'onto# 7sland and Aeefs of 'o)umel. More than the E06 of tourists was its first trip to this destination, while more of the half of the sample travels bu#in% an all+inclusive pac&a%e. The price of the pac&a%e varies from US$300 to US$ ,000, while the avera%e total expenditures are between US$ ,000 and US$ ,C00.

10

6a&le / 6ourist c+aracteristics

All tourists Nationality Mexicans *orei%n &'( )urope *atin (merican +t#er 24% 76% 46% 14% 12% 4% 6ourists visitin" t+e Protecte! Natural Areas CancunI. Contoy Cozumel P. 41% 59% 41% 4% 11% 3% 26% 74% 32% 35% 2% 5% 7% 93% 85% 5% 2% 8% Aen!er 2% <omen 98% 78% A"e 2% D+23 2% 2D+03 16% 0D+33 3D+D3 DD or more 11% 74% 14% 1% All tourists 48% 8% 41% 35% 11% 5% 6ourists visitin" t+e Protecte! Natural Areas Cancun@ I% Contoy Co umel P% 45% 3% 30% 43% 15% 6% 49% 9% 37% 25% 18% 11% 33% 3% 31% 41% 19% 6% 38% 2% 34% 34% 15% 15%

E!ucation ;i%h school or less 'olle%e ;i%her de%ree >ther

2% 33% 53% 11%

23% 61% 13% 0%

26% 60% 7% 1%

24% 73% 3% 0%

Avera"e income :annual- after tax- ;80= *orei%n tourists Mexican tourists Aefusal rate of response $20,962 $8,758 57% $13,668* $7,891* 61% $37,590 $25,388 33% na na 89% $35,709 $5,350 23%

Source4 ,ational 7nstitute of $colo%# (200 ", KMarine protected natural areas in Mexico surve#L, $nvironmental $conomics and $conometrics department, Mexico

6a&le 3: 6ri2 information

11

All tourists Buys travel 2ac)a"e Avera"e 2rice of 2ac)a "e :;80= Avera"e ex2en !iture s :;80= Belon"in" to an enviro nment al "rou2 0onation to an environmental "rou2
50 $ )00

6ourists visitin" Protecte! Natural Areas CancunI. Contoy Cozumel P. Morelos

(( $(20 (2 $+3( (0 $35* )* $*2(

All tourists Main !estination 'ancMn Aiviera Ma#a CE6 6 D6 C6 6 E

6ourists visitin" Protecte! Natural Areas CancunI. Contoy Cozumel P.

536 6 6 6 06 E

E06 56 6 6 E6 5

!6 26 36 C06 06 E

006 26 3!6 06 C6 5

$,,,00

$,,02*

$,,+3-

$2,)(3

$,,(,,

-la#a del 'armen 'o)umel

,2

,0

3$3

-$*

>ther 5en"t+ of stay :avera"e !ays=

2D6

236

2E6

56

206

Source4 ,ational 7nstitute of $colo%# (200 ", KMarine protected natural areas in Mexico surve#L, $nvironmental $conomics and $conometrics department, Mexico

12

a" 9isitin" t+e Marine Natural Protecte! Areas The Marine ,atural -rotected .reas (,-." cover onl# &e# parts of the marine areas surroundin% the 'ancun resort, where the reefs are, while almost completel# coverin% the divin% areas around the island of 'o)umel. ,earl# 006 of the tourists interviewed at the airport at the end of their trips mention visitin% one of the two at least once durin% their vacation. 'onto# 7sland and Aeefs of -uerto Morelos are a more exclusive destination, visited b# onl# 2.D6 of total tourists interviewed at the airport. .mon% a=uatic activities, snor&elin% is the most widel# practiced activit# in the protected areas. 7n 'o)umel, 006 of tourists practice it, while it increases to 536 in -uerto Morelos. Scuba divin% is important onl# in 'o)umel, with almost half of the visitors practicin% it, and 'ancun ( 06", but not so in 'onto# and -uerto Morelos where less than 26 underta&e it. Ga#a&in% is an activit# practiced b# more than 06 of the visitors to the 'ancun+,i)uc ,-., but is much less important for the other par&s. -hoto%raphin% and ta&in% videos of natural elements in the par&s are &e# activities in Contoy Island where the nestin% and restin% %rounds for seabirds are one of its main attractions.
6a&le 3% Activities !one in t+e Natural Protecte! Area (percenta%e of tourists in the ,-. that underta&e it"
Activity Snor&elin% Scuba ?ivin% Ga#ac <atchin% nature -hoto%raph# and video >thers
Gnowled%e of status of protection

Cancun@ Ni uc +,( 3 ( $2 ,, 20

Contoy (0 , , ,0 $5 ((2

Co umel 2* () , , 0 22 3

Puerto Morelos *3 , , 0 0 5 2(

Source4 ,ational 7nstitute of $colo%# (200 ", KMarine protected natural areas in Mexico surve#L, $nvironmental $conomics and -olic# Aesearch, Mexico

?espite the# were officiall# decreed protected areas more than 0 #ears a%o/ a minorit# of the tourists visitin% them &now or are informed about their status. The par& where people are best informed is 'onto# 7sland, where nearl# two out of ever# five tourist &now about its protected status. ,ot so in 'ancun+,i)uc, where less than E6 of the tourists &now it is a protected area.

13

?urin% -resident Nedillo1s administration ( 553+2000" tourist operators in the ,-.s si%ned a voluntar# a%reement to set up trust funds which would be funded throu%h donations as&ed from tourists visitin% the areas. ;owever, tour operators had few incentives to maintain their effort in collectin% donations, and most areas performed badl#. This was evident in the 200 +2002 surve# where the voluntar# a%reement was still valid, and the obli%ator# fee s#stem had not #et been implemented. >nl# F0 of those visitors to the Cancun% Nizuc, Puerto Morelos and Cozumel ,-.s had been as&ed for a US$2 donation. The better or%ani)ed effort of the tour operators in Contoy Island also showed in the surve#/ almost half of those interviewed were as&ed for and paid a US$D dollar donation. c= 9aluation section Throu%h a pa#ment card showin% numbers from $ 0 pesos to $ 00 pesos in $ 0 pesos intervals, tourists were as&ed what would be their maximum willin%ness to pa# to enter the ,atural -rotected .rea the# were currentl# visitin%. Table 3 has the results, showin% the percenta%e of visitors that would be willin% to pa# up to the various amounts.
6a&le 4% Percenta"e of visitors at !ifferent levels of 16P
16P :2esos= BPar) High Season Cancun Co umel Puerto Morelos Isla ContoyI Low Season Cancun Co umel Puerto Morelos Isla ContoyI <C 006 006 006 006 006 006 006 006 <*C 5D6 !06 EC6 D56 !36 506 !D6 C06 </C F*H ECH DFH >DH E3H EDH ECH >3H <3C 5 6 D 6 D 6 DD6 !06 DE6 D26 D06 <4C !C6 056 3D6 D06 !06 2C6 306 006 <>C ED6 0D6 036 D26 EC6 2 6 0E6 006 <DC E 6 E6 26 36 E 6 36 06 2E6 <?C 3C6 E6 26 06 3C6 56 6 E6 <EC 3 6 C6 6 26 336 D6 06 D6 <FC 056 26 56 26 306 26 E6 D6 <*CC G <*CC 026 26 56 56 0D6 6 E6 26 006 06 06 06 0D6 06 6 06 Avera" e 16P $E0 $0D $0 $2D $E3 $0! $00 $ 5

.The sharp drop in willin"ness to pay reflects the fact that half of the visitors are already payin" a voluntary donation of /0$ 5$ 0ource1 National 2nstitute of &colo"y 3200,4, 56arine protected natural areas in 6e7ico survey8, &nvironmental &conomics and Policy 'esearch, 6e7ico

.s table 3 shows, more than the !D6 of the tourists said the# would still visit the par& at 2 US? actual fee, a result ver# close to the estimates of what reall# happened after the fee was approved.
1

At t e ti!e o" t e surve#s t e e$c ange rate %as close to $10&10 'esos 'er (ollar& )n *une 2004 t e e$c ange rate %as $11&50 'er (ollar&

14

7n 'onto# the results reflect the fact that a voluntar# =uota of D US? was bein% as&ed to tourists visitin% the bird sanctuar#, so it should be read as a fee in excess of that amount. Tourists view positivel# the introduction of user fees to acces the par&s. <hen as&ed if the# would approve of the measure, visitors to the 'o)umel -,. had the hi%hest acceptance rate (!06", followed b# 'ancun+,i)uc -,. (ED6", 7sla 'onto# (E06" and -uerto Morelos (C 6". Tourists were later as&ed if their stated willin%ness to pa# would have been hi%her if the# were assured that the revenues from the fees the# paid would be earmar&ed for conservation of the reefs. These results, shown in Table D, var# widel#, bein% the hi%hest in -uerto Morelos, and almost creatin% no chan%e in 'o)umel. Under a less altruistic motivation, tourists were as&ed if their stated willin%ness to pa# would be different &nowin% that the imposition of the fee would reduce con%estion in the par&. This chan%e in the =ualit# of the experience also elicited a hi%her willin%ness to pa#.
6a&le >:
Percenta"e of res2on!ents t+at (oul! 2ay an! earmar)in" fee for conservation an! con"estion

H of res2on!ents t+atJ <ould pa# more if fee is earmar&ed for conservation. <ould pa# more if fee would ensure less con%estion at the site.

Canc,n 2*$( ,3$*

Contoy ,2$, ,0$)

Co umel 2$5) ,$+)

Puerto Morelos (,$(5 3-$*(

Source4 ,ational 7nstitute of $colo%# (200 ", KMarine protected natural areas in Mexico surve#L, $nvironmental $conomics and -olic# Aesearch, Mexico

E% A""re"ate !eman! 7n order to estimate the a%%re%ate demand function the data was or%ani)ed as follows4 Tourists were divided into 3 %roups combinin% their nationalit# (MexicanF*orei%n", and the season the# were visitin% the area (;i%h seasonFBow season". Then, based on their maximum willin%ness to pa#, the number of tourists that would visit the par& per month was determined for each one of the prices as&ed. $ach one of these is an observation of the a%%re%ate demand, where the nationalit# and the season can shift the entire demand function upward or downward. The followin% model was estimated usin% ordinar# least s=uares (>BS" with a lo%+lin specification4

15

ln , = 0 ( nac ) + 2( season" 0( fee" + 3( fee O nac " + D( fee O season" +

-./ , where the explanator# variables are4 " Fee -01P", the different levels of maximum willin%ness to pa# to which the visitors react. 2" Nac -nationalit#/, ta&in% a value of for Mexican tourists, and 0 for forei%n tourists. This variable influences the intercept, reflectin% the proportion of Mexicans to forei%ners visitin% the area, and interacts with the fee to reflect differences in the reaction to price b# nationalit#. 0" 'eason, ta&in% a value of for observations correspondin% to hi%h season, and a value of 0 for those from low season. This variable shifts the intercept reflectin% the different startin% points of the number of visitors in different seasons, and interacts with the fee to show the different reactions to price accordin% to the time of the #ear. The dependent variable ln, is the lo%arithm of the number of tourists that would %o at the correspondin% fee. The error term is assumed to have a normal distribution. The re%ression anal#sis was done for two marine ,-.s that have a %ood mix of nationalities4 Cancun and Isla Contoy. Table C shows the results for these areas. *urther wor& will estimate the demand for the other two areas, but a new division of the %roups will be needed, perhaps b# t#pe of activit# underta&en

16

Ta le !
)stimates of t#e demand for $isits to t#e coral reefs natural protected areas
Logarithmic-Linear regression; Dependent variable: Number of visitors per month Punta Cancun- Punta Ni uc& Isla Mu.eres ParKue Nacional Isla Contoy
9aria&le 8eason Nationality Entry fee Entry fee I nacionality Entry fee I season Constant R@sKuare F: D- >*= Num&er of o&servations Coefficient t@statistic 9aria&le 8eason Nationality Entry fee Entry fee I nacionality Entry fee I season Constant R@sKuare F: D- 34= Num&er of o&servations Coefficient t@statistic

,$0(-90$30)) 90$0,,+ 90$00,) 90$003, *$*3+( 0$*),( 2--$2* 5-

,0$)3
+0&000,

0$),*) 90$*,,2 90$0(*0 0$0,30 0$0,52 )$3)3( 0$*33* )*$*+(, (,

3$0,5+(
3$0054

93$,(
+0&002,

9($2,++3
3$0004

922$20
+0&000,

9,2$+(002
3$0004

9,$*0
30&063,

($,*(+,*
3$0004

93$+*
+0&000,

3$*+3525
3$0004

,2-$+(
+0&000,

3+$2*-,(
3$0004

The estimated coefficient for season is positive, reflectin% the hi%her number of visitors per month received in hi%h season. The estimated coefficient for nationalit# is ne%ative, correspondin% to the smaller share of Mexican tourists visitin% both par&s, as compared to forei%n tourists. The entr# fee si%n represents the inverse relationship between =uantit# and price, at hi%her prices less tourists would be willin% to visit the par&. $=uation 2 shows the inverse demand e=uation that is obtained for each of the 3 %roups once the estimated coefficients are combined4 Mexican tourists in hi%h season, forei%n tourists in hi%h season, Mexican tourists in low season and forei%n tourists in low season.
ln , = wtp

-2/

, where4 P4 number of visitors, 4 $stimated intercept4 ,ationalit# J Season J 'onstant 4 $stimated coefficient of the entr# fee

17

<T-4 entr# fee *i%ure 3 shows the estimated relationship between the dail# fee and the number of visitors that would be observed each month in Isla Contoy. *i%ure D does the same for Cancun%Nizuc. *i%ure 34
Demand to visit Isla ontoy marine park !number of visits per m onth" 30

25

20 fees !#$D"

15

.eason/

10

ig

lo%

0 -

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

visits per m onth

18

*i%ure D4
Demand per season ancun marine park !visitors per m onth"

50 45 40 35 fees #$D 30 25 20 15 10 5 0 % &%%%% '%%%% (%%%% visitors )%%%% *%%%%% *&%%%% lo% ig

.eason/

.ccordin% to these results, in a hi%h season month the 'ancun+,i)uc+7sla Mu9eres -ar& would be receivin% 3D, ! forei%n tourists and 30,C2E Mexican visitors when no fee is char%ed. 7f the entr# fee were set to $20 pesos ( .!0 US?" the number of visitors would fall to 00,00E and 2D,3!0 respectivel#. The price elasticit# of demand is the percenta%e chan%e in the =uantit# demanded as a response to a percenta%e chan%e in the price or fee. The hi%her the number is the more sensitive the number of visitors is to a chan%e in fees. Table 5 shows the price elasticities measured for a small chan%e, called point elasticities, in this case measured at the current level of $20 pesos.

19

6a&le ?: Point 2rice elasticities of !eman! :at t+e /C 2esos level=

Area Canc,n Contoy Forei"n 90$2* 90$+) Li"+ Mexican 90$33 90$(, Forei"n 90$23 90$*5o( Mexican 90$2+ 90$)2

7n all cases except for Mexican tourists visitin% Isla Contoy in low season, demand is inelastic, this is, it ta&es values is between 0 and + .0, meanin% that an increase in 6 in the fee would brin% a reduction in less than 6 in the number of visitors. ,evertheless, the number of tourists falls =uic&l# and at levels be#ond US$ D per da# it seems to disappear. .lthou%h a lar%e drop in the number of dives would be expected, the result is probabl# underestimatin% those that would reluctantl# pa# and still %o at those levels, a feature not captured b# contin%ent valuation studies with pa#ment cards such as ours. F% Maximi in" revenues an! !eman! mana"ement issues The inverse demand functions in table 0 are used in this section to estimate the optimal fees under different scenarios. The scenarios use two mar%inal cost functions4 The private cost function, which reflects the associated mana%ement and operation costs for the par&, 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 mar%inal environmental costs, on the other hand, are assumed to be an increasin% function of the number of visitors, reflectin% lar%er and increasin% environmental impact from havin% too man# tourists.

20

Ta le "#$ %stimated demand functions

+igh $eason Lo, $eason ancun-Ni-uc ln , = 0.CEE3 0.0 C03 fee ln , =5.C2!C 0.0 020 fee Me$ican ln , = 0.5!D 0.0 3C5 fee ln , =5.50C0 0.0 DE fee 0oreign Isla ontoy ln , =E. ! ! 0.0205 fee ln , =C.3C2 0.00C3 fee Me$ican ln , =!.050 0.0005 fee ln , =E.0E03 0.0353 fee 0oreign 3 , is the =uantit# of visitors per month, and fee is the dail# fee char%ed.

Mono2olistic 2rices Under the onl# ob9ective of maximi)in% revenue, without considerin% environmental dama%e from the number of visitors, the par& mana%ers would set the fee so the mar%inal income e=uals the mar%inal cost. <e anal#)e the case where the monopolistic par& mana%er can set differential fees accordin% to nationalit# and season. Table economic welfare. .s can be observed in the table, the consumer surplus losses can be substantial followin% the ob9ectives of 9ust maximi)in% revenues. *or ever# additional dollar of revenue be#ond the social optimal point revenue there are more than ten dollars lost in social welfare. compares these results with the one that would exist in perfect competition, where price e=uals the mar%inal cost, the one that maximi)es total

21

6a&le ** 8ocially o2timum an! 0iscriminatin" Mono2olist fees for visits to Coral Reefs NPAs Cancun
8ocial o2timum feesI :;80= ,umber of visitors per month Aevenues (US?" 'onsumer surplus (US?" 0iscriminatin" Mono2olist fees :;80= ,umber of visitors per month Aevenues (US?" 'onsumer surplus (US?"

+i"+ season
Mexican Forei"n
6otal 2er mont+ Mexican

lo( season
Forei"n 6otal 2er mont+

/
2D,3!0 $D0,5CC $0, CD,C2C

/
00,00E $C0,0E3 $C, 5C,C05 $

/
DD,D20 ,030 $5,0C2,2CC

/
2,022 $23,03D $00!,335

/
C,DEC $00, D0 $E3D,0 E

/
2!,D55 $DE, 5E $ ,0!0,3CC

/C
C,53E $ D5,E! $ ,5D2,3 E

3D
E, E 3,0C3 $3D ,D53 $D,ED3,222 $25 ,! 0 $0,!0 ,!0D

4
D,0CE $2D,00D $ C!,52D

?
C,0DD $3!,330 $32 ,35! , 22 $E0,EED $D50,320

Contoy
8ocial o2timum feesI :;80= ,umber of visitors per month Aevenues (US?" 'onsumer surplus (US?" 0iscriminatin" Mono2olist fees :;80= ,umber of visitors per month Aevenues (US?" $ $ $

/
D5! , 5C 25,2DE $ $

/
E22 ,33D D3,2C5 $ $

/
,020 2,C3 !0,D2C $ $

/
23D 350 D,C!D $ $

/
0E0 E30 !5D $ $

/
C D ,200 C,D!0

F
E5 ,E5 $

*/
2 C 0,02E $ $ 05D 3,! ! 3C,3 3 $ $

3
30 3 5 2,!0D $ $

4
0 CDE 5E $ $ 2E ,0EC 0,002

'onsumer surplus (US?" $ 3,E 5 $ 0 ,C5D * .cenario consi(ering a !arginal cost o" $20&

Inclu!in" 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 sou%ht to establish a threshold of carr#in% capacit# of the reef, a critical densit# of dives per area be#ond which there would start to be evident environmental dama%e, for example less visibilit#, more rubble, hi%her than natural rates of dead coral which would lead to the eventual destruction of the reef1s diversit#. :ased on interviews with divers and photo anal#sis, ?ixon ( 553" found that some divin% sites in the 'aribbean were in the border of exceedin% their carr#in% capacit#, which he placed between 3,000 and C,000 dives per #ear.

22

Figure 6
eef !uality

.hreshold

ig

lo% 4,000 6,000

Number of dives per year

0ource1 :i7on, ;$ 3,**(4, The <onaire 6arine Par# in the Cari!!ean, =orld <an#, >atin9American Technical :epartment, &nvironmental :ivision

Mostafa, ;. et al, ( 555", and .bou Naid, M (2002", estimate the correlation between the percenta%e of coral dama%e and the number of dives per #ear. :oth stud# some of the most popular divin% sites in the Aed Sea which are visited b# nearl# 00,000 divers per #ear. :oth are careful to point out that the carr#in% capacit# will depend on other factors such as diver education, and special infrastructure such as moorin% sites. >nce studies estimatin% 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 the# are e=ual to the mar%inal costs that include environmental dama%e. This will probabl# mean that a hi%her fee would be set for the most popular par&s and the hi%h season months.

23

F% Policy im2lications The introduction of fees to access the Marine ,atural -rotected .reas in Mexico presents a uni=ue opportunit# to use them as mana%ement demand tools. ;owever, all depends on the ob9ective of the par& administration. 7f the ob9ective is to maximi)e revenue there is a stron% ar%ument for differentiated fees across ,atural -rotected .reas, and seasons. ?iscriminatin% b# nationalit# is a difficult issue, because it is prohibited in the Mexican le%islation, althou%h the ,ational 7nstitute of ;istor# and .r=ueolo%# is appl#in% it to some historical sites. ;owever, it is important to point out that the increase in revenue throu%h monopolistic pricin% mas&s lar%e losses in consumer surplus, and thus in social welfare, derived from tourism in the reefs. ;owever, if the ob9ective is to mana%e demand so the Ktourist carr#in% capacit#L is not surpassed, then differentiated fees can act as important polic# tools. >ur estimates show that tourists are ver# sensitive to the level of fees, which ma&es them excellent demand mana%ement tools. Thus it would be sociall# optimal to discriminate between par&s, and between hi%h and low season. <e also find out that tourists would be willin% to pa# more if the# were assured that their fees would be used for conservation. The# would &now that the# are not onl# pa#in% for their recreation, but also contributin% to the preservation of %lobal public %ood for them and future %enerations. >pposition to fees b# tour operators is based on the concern that fees will reduce visitor numbers. <hile 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 polic# tool that delivers health#, biodiverse, and en9o#able reefs for toda# and the future. .

24

References .bou Naid, M (2002", K7mpact on divin% activities on the 'oral Aeefs alon% the Aed Sea 'oast of ;ur%hadaL, mimeo, Marine 4iology and Fis# 'cience, Noolo%# ?epartment, .l+.)ahar.

Universit#, 'airo in ;erman, '(2002", The $conomics of <orldwide 'oral Aeef ?e%radation, <<*+7'A.,.

.rrow, G., A. Solow, -. A. -ortne#, $. $. Beamer, A. Aadner and ;. Schuman. ( 550". QAeport of the ,>.. -anel on 'ontin%ent (aluation,Q *ederal Ae%ister, vol. D!, no. 0 (Hanuar# D", pp. 3C0 +3C 3. .)=ueta, ? ( 553", (aloraciRn econRmica de la calidad ambiental, Mc 2raw ;ill, $spaSa

'hase, B, Bee, ?, Shult)e, < and .nderson, ?, ( 55C", $coutourism demand and differential pricin% of ,ational -ar& .ccess in 'osta Aica, Band $conomics, ,ovember 55!, (ol E3, num 3, 3CC+3!2. ?ixon, H and Sherman, - ( 550", $conomics of -rotected .reas4 a new loo& at benefits and costs, 7sland -ress, US., TTTTTTTTTTTTTTTTTTTTTT ( 553", The :onaire Marine -ar& in the 'aribbean, <orld :an&, Batino america Technical ?epartment $nvironmental ?ivision.

$*T$' ( 555", The economics and financial sustainabilit# of the mana%ement of the historic sanctuar# of Machu -ichu, *inish *orest and -ar& Service. *riedman (200 ", Microeconomics for public polic# anal#sis, US.

25

Mitchell and 'arson, ( 5!5", The use of simulated political mar&ets to value public %oods, ?iscussion paper, !E+E, ?epartment of $conomics, Universit# of 'alifornia, San ?ie%o.

Mostafa,;, et al, ( 555"4 K. coral dama%e index and its application to divin% sites in the $%#ptian Aed Sea, 'oral Aeefs, Sprin%er (erla%. >'?$(2002", ;andboo& of :iodiversit# (aluation, >'?$, -aris. -earce. ?, U)demiro%lu et. al, (2002", $conomic (aluation with Stated -reference Techni=ues, ?epartment for Transport, local %overnment and re%ions4 Bondon, March. -erloff, H. (200 ", Microeconomics, .ddisson <esle#, US..

26