Cost-Benefit Analysis Technique for Tourism Development: CBA in tourism can be extremely beneficial so as to estimate the amount of cost acquired in making of the destination and the benefit resulted through the cost made. It should be mandatory for all the policy makers, government tourism agencies and private players to estimate the benefit through the CBA technique. This will provide them a beneficial framework with a clear vision of what the tourism will bring about for the place and the community.

Every agency before starting any project undergoing this technique will come to know whether or not the tourism will bring more of benefits to the community or only increase the negative impacts of tourism for the residents and the environment.

Cost-Benefit Analysis Technique for Tourism Development

Cost-Benefit Analysis Technique for Tourism Development

CBA technique in tourism allows listing the advantages and disadvantages of the practices taking place in the destination therefore highlighting the positive and negative impacts of tourism. While the applicable cost and benefits are listed, some come out to be accurate and some to be erroneous. The following information is to be gathered to perform the technique for tourism development of a destination:

  • An account of public and private support services must be created. The public support services may include the recreational parks, sewage system, solid waste management system, water supply, medical facilities, footpaths and road maintenance, etc. whereas the private support system may include cab services, hotel and motel room services, guides in the tourist sites, restaurant services, etc. If the capacity of the private and public support systems does not meet the present or the future needs of the destination, its communities and the visitors, expansion of the services could be done so as to meet demands and needs of the community and visitors.
  • A forecast survey can be conducted based on the previous year’s tourists arrivals of how many tourists will be arriving in following years so as to keep the destination services sufficiently ready for the tourists. This will help in management of the services and not allow the wastage or scarcity of services by providing the enough facilities.
  • Impact of the visitors’ expenditure on the local revenue needs to be calculated so as to estimate the benefit of the tourist spending on the local livelihood and revenue generated. It can be calculated by estimating the expenditures incurred by different types of tourists arriving at the destination including the overnight, day visitor or camper and multiplying it by projected increase in each type of tourists, including the changes occurred in the expenditure levels with the introduction and arrival of new facilities to estimate the increase in sales as a result of tourism development. 
  • If the additional revenue generated by the tourist activities increases in a destination and it exceeds the cost of additional services, the tax relief can be provided to the local residents. This can help the local residents incur more benefits from the tourists’ expenditure and the activities on which they spend when the investment and maintenance cost of those activities will be less than the expenditure of the tourists.  
  • There exist a lot of seasonal fluctuations in a destination. Tourism can reduce these variations by providing employment and creating new opportunities for the local residents during the peak as well as off season of the destinations. This can increase the benefits provided by the tourism activities and thus reduce the cost invited for setting up of the tourism related activities in the destinations.
  • Apart from economic benefits, tourism also provides cultural benefits for the residents of the place where the tourism activities are performed. The tourists can renew the dying art and culture of any destination by showing interest in the tangible and intangible art forms of the destination. Several tourists are attracted towards the local festivals and cultural events which promote the unique culture of the place.

The costs and benefits of tourism development can be measured in different ways and different levels of precision. The positive side of tourism development can be investing in those projects which in few years would bring up economic benefits, like recreational parks, heritage hotels, museums and other site seeing places. The negative side of tourism activities can be that these constructions cause environmental degradation and cultural extinction. 

To get an increased benefit from the tourism in a particular place, listing down the costs and benefits separately and subtracting the costs from the total benefit would imply the net measurable benefits. If the net measurable benefit is positive only then the destination should proceed with the tourism development otherwise they should plan for increasing the benefits and reducing the cost of practicing tourism in the destination for the betterment of the community and the environment. 

Also read Cost Benefit Analysis