What do consumers value in tourism? This question is of practical interest to the $1.2 trillion/year world tourism industry, policy makers in tourism-dependent countries such as Maldives, as well as economists interested in the theory of consumer behavior.[1]Answering this question is difficult, primarily because most of the tourism services (e.g. hotel accommodation) are a bundle of many characteristics that are not separately traded on the market (Rigall-I-Torrent & Fluvià, 2007, 2011). For example, for tourists, the choice of a hotel to stay depends on not only room rate but also various characteristics of hotels, such as the design of the building, the number of rooms, food quality, other service quality, and the utility that they would derive from physical environments surrounding the hotels (Espinet et al., 2003; Rigall-I-Torrent & Fluvià, 2007, 2011).
In order to consider the growth potential and sustainability of tourism in many developing countries, it must be important to examine how the tourism industry can provide quality services and attractive amenities and preserve environments. This applies in particular to small island developing states (SIDS), where tourism is a leading sector employing a large part of the population and the beauty of beaches, the sea, and the sky is an important part of national wealth. A considerable compilation of micro-oriented empirical studies seems to be called for to understand what can be done and what are actually being done by tourist businesses for enhancing their growth sustainability. To my knowledge, however, there have been very few attempts to gather firm-level data in the literature on the economic analysis of tourism (Song et al., 2012).
One of the major findings of this paper is that the suppliers mostly capture the added benefit that comes with improving the quality of environment or service as means of increasing price rather than growth in tourist’s consumer surplus. Study finds that tourists value the natural environment. Findings suggest hotels located in islands with lengthy beaches can quote a higher price, on the other hand, overcrowding due to free-rider problem, and poor waste management practices are having adverse effects on prices. For example, results indicate that MWTP for clean environment (e.g. beach) varies between USD 1 to 3.5.
Second, findings suggest that the tourist’s value manager’s experience and training For example, when staff in the guesthouses can speak an additional foreign language, the price increases in the range of 4-7%. Also, hotels having managers with at least three months of training can set (on average) price 17% more than a hotel with otherwise identical characteristics but without trained managers. It was also observed that more educated and experience managers are aware of environmental challenges.
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