Entrance and Activity Fees (Tourism)

2.   Methodology

2.2 Feasibility

The goal of this phase is to assess the feasibility of the system and identify potential challenges and optimal design options. The feasibility study can be designed to assess one entrance or activity fee system, but it would ideally be part of a PA Business Planning process that reviews options for complete long-term financing of the PA or PA system. Typically, the PA management authority will commission a consultant with business and financial planning expertise to conduct a comprehensive feasibility study, which may take several months to complete. The study should feed financial, management, planning, and operations information into the design phase. A sample terms of reference for a tourism-based finance feasibility study are provided in the Appendix.  Costs can exceed US$25,000, and may vary substantially depending on the size of the area, existing data, management capacity, and other factors.

A feasibility study for entrance or activity fees should assess the key factors that may affect the viability and success of such a mechanism:

1)    Economic Feasibility: Will the time and financial costs associated with the entrance and activity fee system greatly exceed the cost of establishment and management of that system? This is largely dependent on the attractiveness of the site and existing or potential infrastructure (roads, airports, trails, etc.)

2)    Socio-Political Feasibility: Do socio-political considerations risk blocking or delaying implementation or cause excessive expenses? Are most stakeholders open to this concept? Will the PA management authority be able to retain revenue to use for conservation? If legal mechanisms for collecting and retaining visitor fees currently do not exist, is there a political will to enact new laws or regulations or to try to change existing ones?

3)    Environmental Costs and Benefits: Will successful implementation benefit or pose serious risks to the ecological integrity of the sites under consideration. 

4)    Practical Implementation: Are the other basic issues that could derail or cause excessive transaction costs for the system (i.e. lack of transparency, trust, and risky financial management). 

Box 1 provides a sample outline of a feasibility study for conservation finance solutions and a more detailed Excel™ worksheet is available for a detailed tourism fee feasibility assessment. The description of the finance solution should include a list and overview of specific infrastructure needed for implementation (e.g. entrance station or visitor centre), including scheduling, expected costs, and funding sources. The marketing strategy should consider socio-economics and demographics of current visitors relative to target markets, and financial projections should be based on historical and projected visitation rates. Market demand can be assessed through a willingness-to-pay (WTP) study or comparative study. WTP studies are sometimes implemented to better understand market demand for tourist sites and services (e.g. Bruner et al. 2015). However, WTP studies capture economic value and generally overestimate the actual cash a visitor is happy to pay for an entrance ticket to, or activity in, a PA or site of interest (Blumenschein et al. 1997). A more effective and lower cost approach is a comparative study that compares the PA or activity of interest with similar sites within the country or region and maps the price and quality of the experience. It should be noted that the entrance/activity fee does not exist in isolation but as part of the travel package that brought the visitor to the site, and their food, lodging and entertainment. Pricing must also consider the alternatives visitors have, and how values compare – for example, they could stay on a beach for free (a good value) or pay for a bus, guide, and entrance fee to a forest park. Often PAs near beach resorts offer a nice alternative experience to another day at the beach but risk pricing themselves out of the market.

Box 1: Feasibility Study Outline for Conservation Finance Solutions A feasibility study should determine if a specific finance solution or mechanism is likely to achieve its stated objectives in a given country or situation. Ideally a feasibility study will produce two major outcomes: 1) a clear indication of likelihood of success and 2) identification of key design features that optimize chances of success and minimize risks (including social and environmental safeguards). The following feasibility study outline can be used for a wide range of finance solutions.
1. Executive Summary – the summary contains all the essential information that a high-level policy or other decision maker needs to know in a concise format that should not exceed a few pages. It should include the detailed description of the question being addressed and all major conclusions. If there are key graphics or a summary bulleted table, this will facilitate comprehension in a rapid review.
2. Finance Solution Description – This introductory section should include a very detailed description of the specific finance solution under review. Generalized solutions, such as “Payment for Ecosystem Services”, are not easily assessed in a feasibility study as there are too many aspects that will require definition. The specific nature of the finance solution must be detailed including a) area of focus – both geographical and sectorial, b) key actors and stakeholders, c) sources of financing, d) financial instruments involved, and e) specific expected outcomes. Also include a section on the background of this solution at the site, country, or region.
3. Environmental, Social, and Political Considerations – This includes risks and opportunities as well as legal and regulatory issues that should be considered or addressed in the design.
4. Market Demand or Finance Sources – for market-based finance tools, it is essential to understand market demand including the willingness (and ability) to pay for the associated goods and services including ecosystem services. Demand can be assessed through market studies, interviews, surveys, and comparative studies. If the tool is not market-based, this section should analyze likely finance sources and their interest in supporting the development and long-term financing of the instrument.
5. Marketing or Communication Strategy – A brief marketing analysis and main elements of a marketing strategy is essential for all market-based instruments. Alternatively, for non-market instruments, a communication strategy to reach and convince key donors, finance sources and other stakeholders is useful. Since this is a feasibility study, the marketing or communication strategy can be concise and highlight main issues.
6. Organization and Staffing – identifies the human resource and institutional needs for success including existing and required technical and implementation capacity. 7. Schedule – elucidates what a realistic timetable would be for implementation including identification of key milestones.
8. Financial Projections – Detailed timeline of design, startup, and operational costs as well as financing needs and sources. Projections should be on a yearly basis and even if estimated, should cover the years required to reach a financially viable state for the solution in question.
9. Findings and Recommendations – summary conclusions including key opportunities and challenges. The recommendations should be very specific and provide guidance on design features if the planned finance solution were to advance to the next stage.

Feasibility for tourism development should include a clear understanding of carrying capacity of a PA and its key tourist sites (Leung et al. 2018). It is critical for PA managers to identify the major environmental, social, and economic risks early on, in order to establish and implement mitigation strategies and safeguards. These strategies will inform the development of monitoring, evaluation, and adaptive management efforts (section 2.5), and the estimated costs of these strategies should be incorporated into the financial structure of the mechanism (section 2.3.2). Environmental and Social Impact Assessments are types of structured risk assessment that may be applied to proposed large-scale tourism development activities within PAs and their buffer zones.