Demand analysis for ecotourism products in the South Eastern region of Ecuador

UNIVERSIDAD DE LAS PALMAS DE GRAN CANARIA MSc in Tourism Transport and Environmental Economics Demand analysis for ecotourism products in the South Eastern region of Ecuador TITLE Jéssica del Cisne Macas Romero NIE Y3758385S (Student's signature) Supervised by: Concepción Román García Las Palmas de Gran Canarias 08/06/2015 Table of contents 1. INTRODUCTION ............................................................................................................. 1 2. THE IMPORTANCE OF ECOTOURISM IN ECUADOR ............................................ 11 2.1 Development of ecotourism products in the South Eastern region of Ecuador. Research background. .......................................................................................................... 14 3. DEMAND ANALYSIS ................................................................................................... 17 3.1 The choice experiment .............................................................................................. 17 3.2 The questionnaire and data collection ....................................................................... 21 3.3 Descriptive analysis of the sample ............................................................................ 22 3.4 The demand model .................................................................................................... 28 3.4.1 Theoretical framework ....................................................................................... 28 3.4.2 Modelling preferences for ecotourism products ................................................ 29 4. WILLINGNESS TO PAY FOR ECOTOURISM PRODUCTS ...................................... 37 5. CONCLUSIONS.............................................................................................................. 40 6. REFERENCES ................................................................................................................ 43 Index of tables Table 1. International arrivals to Costa Rica since 2008 to 2013 .............................................. 5 Table 2. Average expenditure per person and stay in Costa Rica for non-resident tourists ...... 6 Table 3. Number of arrivals of nonresidents to Brazil ............................................................... 8 Table 4. Revenue of Brazil international tourism ..................................................................... 9 Table 5. Attributes and levels. ................................................................................................. 18 Table 6. Example of choice scenario. ...................................................................................... 19 Table 7. Graphical information ................................................................................................ 20 Table 8. Surveyed population .................................................................................................. 21 Table 9. Estimation results. Linear effects model................................................................... 31 Table 10. Estimation results. Nonlinear effect model.............................................................. 33 Table 11. Results of test of no-linearity ................................................................................... 34 Table 12. Estimation results. Mixed linear non-linear model. ................................................. 35 Table 13. Willingness to pay estimations. Linear effects model ............................................. 38 Table 14. Willingness to pay estimations. Non - linear and mixed linear non - linear models.39 Index of graphics Graphic 1. Trip Frequency ....................................................................................................... 22 Graphic 2. Day stay.................................................................................................................. 22 Graphic 3. Purpose of the travel .............................................................................................. 23 Graphic 4. Composition of the trip .......................................................................................... 23 Graphic 5. Choice situations .................................................................................................... 24 Graphic 6. Degree of importance of the attributes ................................................................... 25 Graphic 7. Waste sorting.......................................................................................................... 25 Graphic 8. Ways of disposal batteries or stacks ...................................................................... 26 Graphic 9. Level of concern..................................................................................................... 26 Graphic 10. Degree of importance ........................................................................................... 27 Graphic 11. Level of education ................................................................................................ 28 Graphic 12. Occupation ........................................................................................................... 28 Graphic 13. Linear effects model............................................................................................. 30 Graphic 14. Non-linear effects model ...................................................................................... 32 Graphic 15. Attributes impact. Linear effects model ............................................................... 36 Graphic 16. Attributes impact. Non linear effects model ........................................................ 36 Graphic 17. Attributes impact. Mixed linear-non linear effects model ................................... 36 1 1. INTRODUCTION Ecotourism combines passion for travel with the interest in the preservation of nature. Speaking of ecotourism it is related to concepts of sustainability, conservation and participation of the local community, this term has been used to promote tourism activities in the natural environment and attract tourists interested in nature and culture of places to visit. The ecotourism is a segment of the tourist activity that uses in a sustainable way the natural and cultural heritage, encourages its conservation and seeks the formation of an environmental consciousness through the interpretation of the environment by promoting the welfare of the communities involved. For ecotourism contributes to sustainable development of the regions, and to offer alternatives to tourism should be developed according to the guidelines or principles that underpin it, therefore it should be clear what it’s the definition. The following are some of the most complete definitions for ecotourism: Ecotourism is now defined as "responsible travel to natural areas that conserves the environment, sustains the well-being of the local people, and involves interpretation and education" (The International Ecotourism Society , 2015) The Nature Conservancy adopts the definition articulated by the World Conservation Union "Environmentally responsible travel to natural areas, in order to enjoy and appreciate nature (and accompanying cultural features, both past and present) that promote conservation, have a low visitor impact and provide for beneficially active socio-economic involvement of local peoples." (Ceballos Lascuráin, 1993) Another important definition for ecotourism is the one given by the National Chamber of Ecotourism and Sustainable Tourism of Costa Rica (International forum of Ecotourism, 2004): “It is the specialized segment of responsible tourism, which promotes and supports the conservation of nature and the cultural values of the various locations, interpreting them for general public, and sponsoring the socio-economic improvement of local communities in an ethical fashion, aiming to increase awareness and satisfaction of external customers. Its activities are designed to be carried out in accordance with the environment, leading its customers to a direct and personal contact with nature and the local culture” Also the United Nations World Tourism Organization (UNWTO) uses the word ecotourism to mean forms of tourism which have the following characteristics: 1. All nature-based forms of tourism in which the main motivation of the tourists is the observation and appreciation of nature as well as the traditional cultures prevailing in natural areas. 2. It contains educational and interpretation features. 3. It is generally, but not exclusively organized by specialized tour operators for small groups. Service provider partners at the destinations tend to be small, locally owned businesses. 4. It minimizes negative impacts upon the natural and socio-cultural environment. 2 5. It supports the maintenance of natural areas which are used as ecotourism attractions by:  Generating economic benefits for host communities, organizations and authorities managing natural areas with conservation purposes,  Providing alternative employment and income opportunities for local communities,  Increasing awareness towards the conservation of natural and cultural assets, both among locals and tourists. (The British Ecotourism Market, 2002) The characteristics that UNWTO sets for ecotourism have the same basis for action than those established by the Nature Conservancy, for them the ecotourism possesses the following characteristics:  Conscientious, low-impact visitor behavior  Sensitivity towards, and appreciation of, local cultures and biodiversity  Support for local conservation efforts  Sustainable benefits to local communities  Local participation in decision-making  Educational components for both the traveler and local communities Therefore, ecotourism is linked to a sense of ethics because, beyond the enjoyment of the traveler, pursues to promote the welfare of local communities, who are acting as recipients of tourism and the preservation of the natural environment. Ecotourism also seeks to promote sustainable development i.e. growth in the present that does not affect future possibilities. It is important to include community’s perspective because ecotourism cannot be successful without community support. For successful tourism development, community leaders and tourism planners need to view tourism as a ‘local community industry’. As an activity directly related to the nature, it involves protecting certain areas, thus achieving preserve the biodiversity of the area and turning it into a factor of attraction for tourists. It is noteworthy that the importance of ecotourism is based on three fundamental principles, as required by The International Tourism Society:  Is non-consumptive / non-extractive  Creates an ecological conscience  Holds eco-centric values and ethics in relation to nature Ecotourism is important because thanks to its implementation, the understanding of the impacts of tourism on the natural and human environment are taken into account, and allows to generate jobs locally, either directly in the tourism sector or in other supporting sectors. Also, local communities and indigenous cultures can be harmed in different ways by an arrival of foreign visitors, however this same growth generates significant opportunities for both conservation and local communities. It becomes an incentive for the development of industries in the area such as hotels, restaurants, transport, crafts and tourist guide services. Achieving well be an alternative source of income for the local industry and Ecotourism can provide revenues for the protection of national parks and other natural areas. The ecotourism provides some benefits; among which can mention: conservation of natural areas and resources in worldwide, and to promote understanding and respect for cultures, 3 heritage and natural environment. Also it let to discover natural and rural places of great value and beauty, gives the opportunity to live in contact with nature and interact with it, and therefore get away from all types of pollution that exists in big cities. It is ideal to relax and unwind, allowing tourists who enjoy this type of tourism can perform a host of outdoor activities such as hiking, bird watching, horseback riding etc. Besides, ecotourism can increase the level of education and involvement among travelers, making them engage with the cause and effective help of conservation. And even more importantly, ecotourism serves as a very effective starting point of rural populations or communities to boost its economy to remain and take care of its natural and ethnographic environment, achieving a sustainable economic development of the population involved. Some nature reserves have tried to promote a mutual economic interest in ecotourism by: subcontracting certain services and products to neighboring communities, buying local produce, offering cultural activities and services to the tourists inside the reserves, providing the opportunity for locals to sell their stuffs. The UNWTO recognized the importance of ecotourism, and they decided to make a designation of the year 2002 as the International Year of Ecotourism: “In fostering better understanding among peoples everywhere, in leading to greater awareness of the rich heritage of various civilizations and in bringing about a better appreciation of the inherent values of different cultures, thereby contributing to the strengthening of world peace” (United Nations, 1998) Millions of people visit protected areas each year, the current market trend goes to meet growing needs of a tourist looking to enjoy natural areas and cultural offerings. Ecotourism has been implemented in several countries, and it is necessary to review some of the main and more recognized experiences internationally. The International Ecotourism Society (TIES) mentions that: “Some examples of best management practices in ecotourism development include preserving cultural heritage, sourcing locally produced foods and souvenirs, supporting community conservation projects, recycling and treating wastes, and hiring local employees, especially women and minorities, and paying them fair wages. In a message delivered to mark the observance of World Tourism Day 2014, UN Secretary-General Ban Ki-moon emphasized the benefits of tourism for local communities, adding that as an industry it “helps people to develop a variety of skills” and builds “stronger and more resilient communities”. The power of travel can transform people and create change. When executed mindfully, and with the minimum impact, travel can inspire cultural awareness, tolerance, and commitment to environmental responsibility”. Among the most important ecotourism experiences in Latin America we can mention Costa Rica and Brazil. Costa Rica is an eco-destination, Pure Life (Pura Vida) is its motto, and identifies the Costa Ricans. The country is considered the birthplace of ecotourism and also the place where this activity has achieved the highest level of success. This country has an area of 51,100 square kilometers, accounting for 0.3% of the total surface of the planet, here is staying 5% of global biodiversity. Costa Rica has more bird species than the United States Nation and more variety of butterflies than throughout the African continent, for that reason, this Central American nation of 4 million people has gained 4 international recognition justified. Thanks to the Costa Rica's diverse habitats and ecosystems in this place can be found different species of flora and fauna, also 22 national parks, 10 wildlife refuges, 12 biological reserves, 8 forest reserves and 26 protected zones, covering 25% of the national territory. Costa Rica’s tourism industry has been developed taking into account the preservation of the environment and this activity has become lucrative for the country, protecting the natural treasures while bringing economic opportunities to the rural areas. The far attainment environmental and economic benefits of ecotourism cannot be denied. Costa Rica has been able to reach sustainable development and protect the pristine landscapes from the dangers of destructive agricultural practices. The success of Costa Rica's tourism industry, is because “the dual goals of nature conservation and income generation are most often complementary. Nature conservation contributes to the tourism industry and tourism contributes to the national economy.” (Hearne & Salinas , 2002) The growth potential and environmental benefits of ecotourism is a positive factor for developing countries. The investment in ecotourism is a cause worth and provides progressive development for the environment and the country. Responsible tourism has also allowed to respond effectively to the growing demands of the tourism industry and enhance the cultural integrity of the local community. The main reason for success of ecotourism in Costa Rica is the active participation of the private sector, biodiversity and the interaction between the networks of protected areas. International and national NGOs, local businesses, indigenous and government organizations also play an important role in the accomplishment of ecotourism programs. According to IUCN Costa Rica has become an important tourist destination largely on the basis of its excellent park system. Manuel Antonio National Park and the Monteverde Cloud Forest are considered as models for ecotourism and sustainable development. These parks provide critical habitat for many plant and animal species. The cloud forest has extremely diverse flora and fauna (over 100 species of mammals, 2,500 plant species over 400 bird species and over 120 reptile and amphibian species). Tourism was at first developed by a population of about 5,000 Quakers (Christian Community) living in the area. Tourist developments involved the local population who had an interest in the preservation of the forest. In 1972 the 'Tropical Science Centre' purchased an area 320 hectares of forest, to be managed by the Quakers for tourism activities. In 1974 they only received 471 visitors but by the 1990's tourism was be an average of about 50,000 a year. The community was concerned about the growing of the tourism, therefore locals asked for the roads not to be paved, the only access they have is by dirt road 30km of bouncy track only accessible by 4x4s. Some of the benefits that ecotourism had created in this area are: new businesses, has been established the large Santa Elena reserve (300 hectares), and many other smaller reserves have also been created, there are 400 full-time and 140 part-time jobs directly related to tourism and many more indirect jobs, the reserve actually budgets to train and educate locals and tourists about ecotourism and protection of the reserve, locals arts and crafts have been rejuvenated, the local population and private sector value the cloud forest because it creates income. So, they prefer more standing than being cut down. Etc. 5 In 2007 Costa Rica declared that it aims to become the first carbon neutral country by 2021 thanks to the delivered vow by the Costa Rican government, and raised the standard yet again for the global ecotourism community. Martha Honey, co-founder of the Center for Responsible Travel and former executive director of The International Ecotourism Society. Says “Costa Rica is not all eco, but the ecotourism revolution in Costa Rica has been really profound. It … still remains the best example in the world of successful ecotourism." In 2003 Lapa Rios was the first hotel to achieve CST’s (Certification for sustainable tourism) top ranking, level 5, it is one of 148 nationally certified sustainable hotels in the Central American country. They make energy from food scraps, the lodge supports local microbusinesses, and locals use recycled or renewable materials. “The tropical Central American destination offers examples of both the best in sustainable tourism and what could replace it”. (Henly, 2011) Is important to review some statistics of the tourism activity in Costa Rica (see Table 1), and thus be able to observe the actual numbers of the benefits that this activity contributes to the country; the first quarter of 2013 recorded 758,835 international arrivals by all routes (air, sea and land). The 18,134 additional arrivals, representing an increase of 2.4% over the first quarter last year. The data recorded in each of the months of the quarter, are the highest figures for the past six years. Table 1. International arrivals to Costa Rica since 2008 to 2013 2008 2009 2010 2011 2012 2013 January 222723 222664 232314 252532 272718 278426 February 203772 168164 195919 210628 228597 230581 March 221551 179772 208201 222799 239386 249828 April 167000 165352 169853 184735 195456 May 150525 130536 148574 150145 160185 June 176648 158972 169183 176360 189257 July 198672 180792 199479 202362 212044 August 168885 159025 168837 161648 173837 September 117348 113083 120214 121057 127632 October 124965 112320 126661 129086 139591 November 153539 145249 158468 167135 179474 December 183546 186650 202126 213572 225036 Jan - Dec 2089174 1922579 2099829 2192059 2343213 758835 Source: 1. Costa Rican Tourism Institute 12 Ecuador has the largest animal and plant diversity in the world, 10% of all species of plants on earth are concentrated in an area that represents only 2% of the total surface of the planet. Only in Amazon region exists around 8200 species, and identified 2725 species of orchids. Approximately 3,800 vertebrate species, 320 species of mammals, 350 species of reptiles, 375 amphibians, 800 species of freshwater fishes, 450 species of saltwater fish and 1550 species of birds have been documented in Ecuador. Collect 18% of all species in the world, nearly 15% of endemic species in the world are in the mountains, the coast and the Amazon, also is home to more than a million species of insects. Of the twelve key biodiversity areas identified by the naturalist Norman Myers, three are in the continental Ecuador. Ecuador’s 2008 constitution was the first in the world to legally recognize the Rights of Nature. National parks, reserves and wildlife refuges are attracting more and more attention from tourists due to its educational, recreational and aesthetic values. In Ecuador 10 national parks, 14 nature reserves, a refuge for wildlife and recreation area, are considered natural heritage and protected spaces by the state. Its extension approaches 4,669,871 hectares of land and maritime surface 14,110,000, divided into four regions. Biodiversity is the main wealth of these areas, although there are different populations both in urban areas, as in rural the indigenous and peasant. Ecotourism is beneficial for a country like Ecuador because it is a possibility to increase the attraction of protected areas, because it provides an economic reason for protecting them, besides it provides to local population economic incomes by improving their level of life and encouraging them to respect and conserve protected areas. Kutay (1992) cites environmental benefits of community participation, arguing that a close working relationship between the local community and the industry will provide the means to support conservation efforts. As can be seen in Illustration 1, the Ecuador is divided into four regions, Coast, Highlands, Amazon and Galapagos Island or Insular region. Ecuador's Amazon region has an area of 120,000 square kilometers that is extending in the western edge of the Amazon River, and is covered by lush rainforest. The Amazonian ecosystem is considered one of the richest plant and animals habitats in the world, the variety of macro and micro habitats is amazing, since muddy lakes until endless forests. 13 The Amazon is one of the richest regions of the country, for its culture and associated knowledge, and for its biodiversity; water and mineral resources. Among its main attractions are the different protected areas and the variety of ethnic groups that exist. The province of Zamora Chinchipe is located in the southeast of the Ecuadorian Amazon, the geographical position has generated an immeasurable and unknown biodiversity with a high degree and cultural richness, and make this area a favorable environment for the development of ecotourism activities, that have great economic importance to constitute a mechanism of growth. Tourism is a possible alternative to exit the postponement and enter as protagonists in equal conditions. This area has a vast natural and archaeological heritage, because it has a range of possibilities that can be visited for different activities such as: archeology, adventure, culinary, agrotourism, beach, community, health, cultural, bird watching, ecotourism, etc. It is considered necessary and urgent to begin to define development alternatives based in the enormous richness and diversity of the natural resources on which human capital have a leading role in their own development, with participatory and ongoing activities in which the cultural and environmental revaluation are the main characteristics of the area, meanwhile is integrating communities in a collaborative and inclusive framework. The identity of different ethnic groups existing in the province is being lost, the main causes are acculturation, racism, and displacement of native centers. Ecotourism is a means to perform the rescue and preservation of indigenous culture, including knowledge, biodiverse resources and techniques used by native peoples and nationalities, in order to have a population with ethical, moral, identity values and high esteem. Source: 5. www.forosecuador.ec Illustration 1. Ecuador Map 14 2.1 Development of ecotourism products in the South Eastern region of Ecuador. Research background. In the year 2013 the Universidad Técnica Particular de Loja developed a project “Identification and enhancement of an ecotourism route in the cantons Zamora, Centinela Del Condor, Yantzaza and Yacuambi in the province of Zamora Chinchipe” Is important to take into account that these cantons are located in the area of influence of large-scale mining projects, hence the need to consider as priorities in the project. Additionally, the circuit is part of the conservation initiative called Connectivity Corridor Podocarpus - Yacuambi which is being developed by the autonomous government parish of the cantons involved. The objectives of this project were:  Diagnose and characterize the ecotourism potential of natural, cultural resources and physiography of the area.  Analyze existing tourism infrastructure.  Generate information for the planning of productive and environmentally sustainable tourism projects.  To value an ecotourism route in the north of the province of Zamora Chinchipe to contribute to economic development and conservation of the natural capital of the province.  Be a means to integrate the communities as major players in the economic development of the canton, identifying proposals that energize the content of the route to the target market is broader.  Affirm and strengthen national identity, different identities, multinationality and multiculturalism.  Design strategies to promote and disseminate the circuit. The methodology that was used was divided in five stages: In the first stage for an information base on tourism resources possessed by each canton semi-structured interviews with opinion leaders and authorities in the area investigated were performed. Then the eco touristic vocation of the area was characterized by identifying the natural, cultural, monumental and other resources which can be exploited in a tourism way. The methodology for inventory attractions proposed by the Ministry of Tourism was used, this process orderly records the physical, biological and cultural factors that have attractive. Also in this stage the maximum load capacity of an ecotourism site of the route was determined. The second stage consisted in diagnose the currently infrastructure that exist in the area, a compilation of data from secondary sources such as registers, municipalities and various organizations was performed, and then an in-situ contrasting was done touring the cantons to verify the information collected. In the third stage productive and environmentally sustainable tourism projects were determined. The project profiles arise from a socio-economic and tourist diagnosis of cantons involved in eco tourist route, the same as was done by gathering information from secondary sources and field in which the following activities were carried out: validation of tourist inventory, classification of tourist attractions, georeferenced points considered of interest to tourism, meetings with representatives of the parishes of the cantons involved and with the 15 community leaders. These visits allowed to be close to the groups, associations or communities in order to identify with them development proposals. Participatory methodology with communities was then used, and SWOT analysis with the research team, allowing a complete diagnosis of the attractions of the area and to identify precisely those that make up the route. The design of the route was done in the fourth stage, based on the inventory of tourism resources, availability, characteristics and quality of existing infrastructure, such as hosting services, food and beverages and guide tours, like it was taken into account the connectivity that exist in the area. And in the fifth stage promotion and dissemination strategies of the route were designed, by creating promotional material as a printed and digital brochure route, accompanied by a reportage video of the two routes designed. The results of this project were:  Inventory of tourist attractions and updated cadastre of the area.  Identified two proposals of potential projects in the area.  Ecotourism route of the southern Amazon region of Ecuador.  Mysticism. - Cultural Route Composed of 8 attractions, 5 cultural events category and 3 natural sites.  Agro tourist and cultural route. - Composed of 7 attractions ranging cultural events and one natural site category. Due to the acceptance and results that had this project, in 2014 was decided to continue the activities that were developing in the area, and thus continue working for the construction of ecotourism products that enable development for communities identified. The main objective for the second stage of this project is generate community development in the cantons Zamora and Yacuambi since the valuation of ecotourism as a source of income and a factor of improvement quality of life. The objectives of this project were:  Exploit in a sustainable way the natural and cultural attractions in Napurak community and the San Carlos de las Minas parish that are described in the project 2013, "Identification and valuation of a tourist route Zamora cantons, Centinela Del Condor, Yantzaza, Yacuambi” by the Participatory groups.  Recover and promote the ancestral knowledge of the Shuar communities.  Understand and practice environmental interpretation by participatory groups. A diagnosis of the strengths and weaknesses of the members of the community Napurak was conducted. After that, selection and training was held for members of the community according to their affinity with the following tourist activities: group management, tourism management, food handling, basic service techniques, environmental awareness, accounting for inflows and outflows of money trainings were conducted. Then in participatory workshops the tourism product was designed with the community. The results of this project were:  Identification of the Community tourism product Napurak 16  Identification of the requirements of ecotourism equipment from its socio-culture, worldview, environmental conditions and their technological, structural characteristics.  Participatory groups identify the conservation of nature as element of sustainable development and environmental interpretation as a tool to show attractively tourism products. Once the possibilities of exploitation of tourism products, and the main attractions of the area, were defined a demand study was conducted to analyze the preferences of visitors to the area. 17 3. DEMAND ANALYSIS 3.1 The choice experiment Discrete choice experiments are created with the purpose of analyzing the independent effect of different attributes upon certain observed outcomes or choices (Rose & Bliemer, 2004). A typical choice experiment consists in a sample of individuals that complete different hypothetical choice tasks according to some behavioral rule. In many experimental settings the utility maximization is considered, therefore the task consist in choosing the alternative with the highest utility, and alternatives are defined in terms of the different values, or levels, that the attributes can take. In our case, the experiment consisted in the creation of twelve choice scenarios defined by two hypothetical ecotourism products each. Thus, the alternatives were defined in terms of the following attributes: price, hiking, participation in rituals, tasting local cuisine, visit to crafts center and experience of community life. The attributes and levels considered for this purpose are presented in Table 5. As can be seen, all attributes were defined at three levels with the exception of price that had six. For the selection of both, attributes and levels, the attractions identified in the area of Zamora-Chinchipe during the preliminary phase of the project were considered. To obtain the combination of attribute levels defining the choice situations, an efficient design using the softwage N-gene (Choicemetrics, 2009). In order to obtain realistic choice scenarios, some constraints were added to the design. Thus, the ecotourism products showed to the visitors consisted in two or three attractions each. An example of one choice scenario is presented in Table 6, where the individual had to choose among package A, package B or none of the two. Also, to make the scenarios more credible, some pictures were showed to the respondents to help them to better understand the characteristics of the different products. These pictures are presented in Table 7. The creation of efficient designs is focused on the minimization of the sample size required to obtain asymptotically efficient and reliable parameter estimates; or alternatively, minimize the standard error of the parameter estimates for a fixed number of choice observations. Our choice experiment was based on the minimization of the D-error. For this, we have to provide parameter's prior information and the type of model to be estimated. In this regard, our design was generated for a multinomial logit model capable to account for non-linear effects in qualitative attributes. Parameters' priors were chosen according to some qualitative information in order to obtain reasonable willingness to pay figures for potential visitors of the area. 18 Table 5. Attributes and levels. ATTRIBUTES LEVELS DESCRIPTION Cost of activity ($) 1 35 2 40 3 45 4 70 5 75 6 85 Hiking (waterfalls, scenic beauty, flora, fauna) 1 Not included 2 2 hour scenic route.  You will see one waterfall, primary forest and may take a bath in the crystal clear waters flowing down from the mountains Chimbutza.  The difficulty level is medium and you will walk tour 2 ½ km.  Includes native guide and lunch (water, chocolate, fruit and biscuits) 3 4 hour scenic route.  You will use Tarabita (funicular) to cross Yacuambi River.  You will observe endemic flora and fauna and enjoy a panoramic view of the area.  The difficulty level is high and you will walk 5km.  It includes native guide, lunch and dinner (water, chocolate, fruit and biscuits) Participation in rituals 1 Not included 2 Dancing 3 Dancing+ritual in cascade+sanation Tasting local cuisine 1 Not included 2 Tasting a basic menu:  Ayampaco + Chicha + membrillo juice 3 Tasting a full menu:  Ayampaco + Palmito broth with creole chicken + Chicha + membrillo juice Visit to crafts center 1 Not included 2 View and/or purchase 3 View and / or purchase and participate in the development of local crafts Experience of community life 1 Not included 2 1 day performing activities related to:  Agriculture / livestock / gastronomy, includes food (lunch and dinner in the afternoon). 3 2 days performing activities related to:  Agriculture / livestock / gastronomy / psiculture and river fishing / poultry / hunting (15 USD), includes food and lodging 19 Table 6. Example of choice scenario. Attributes Description Package A Description Package B Cost 40 75 Hiking LEVEL 3 4 hour scenic route.  The difficulty level is high and you will walk 5km. Not included Rituals Not included LEVEL 3 Dancing / Ritual in cascade / Sanation Gastronomy LEVEL 3 Full menu Not included Crafts Not included LEVEL 3 View and / or purchase and participate in the development of local crafts Community life Not included LEVEL 2 1 day I choose ① Package A ② Package B ③ None of the two Reason in the case of choose ③ 20 Table 7. Graphical information Hiking Level 2 Level 3 Participation in rituals Level 2 Level 3 Tasting local cuisine Level 2 Level 3 Visit to crafts center Level 2 Level 3 Experience of community life Level 2 Level 3 21 3.2 The questionnaire and data collection The survey that was applied consists of five parts: the first one is about travel information, the second part is the choice experiment, the third corresponds to the environmental perception, and the fourth is concerning to ecotourism in general and the last part is about socioeconomic information. To calculate the sample, the formula for infinite populations was used: 𝑛 = 𝑍2 𝑝𝑞 𝑒2 𝑛 = (1.96)2 (0,5)(0,5) 0,052 𝑛 = 384.16 Where: Z= is the confidence interval p=choice probability q= 1-p e= estimation error n= Sample size According to the Census of population and housing 2010, of the National Institute of Statistics and Census of Ecuador, the corresponding urban populations to Loja is 170280 and for Cuenca is 329928, as can be seen in table 8. To determine the number of surveys that had to apply in both Loja and Cuenca, the percentage of population that corresponds to each canton of the total was established and after was multiplied by the sample size, as indicated below: Table 8. Surveyed population Population Percentage Sample size (Percentage * 384,16) Loja 170280 34,04 130,78 Cuenca 329928 65,96 253,38 Total 500208 100 384,16 28 Graphic 11. Level of education Graphic 12. Occupation 3.4 The demand model 3.4.1 Theoretical framework 3.4.1.1 Discrete choice theory Discrete choice theory (Mc Fadden , 1981) assumes that individuals consume both continuous and discrete goods, being the later represented by the choice among a set of discrete alternatives mutually exclusive. According to Lancaster (1966) postulates, the utility of the alternatives depends on the levels of the attributes that characterize them. Thus, under the utility maximization behavioral rule, the individual must choose the bundle of continuous goods and the discrete alternative that maximizes his utility, given his constraints. 3% 21% 30% 42% 4% Primary Secondary Post Secondary Undergraduate Postgraduate 5% 16% 31% 24% 6% 2% 13% 3% Company manager Businessman Functionary Private worker Technician Worker Freelancer Other 29 As the analyst does not know, for each individual, all of the variables that are influencing the choice, neither the exact way that these influence, probabilistic choice mechanisms are required to in order to model individual choices. 3.4.1.2 Random utility theory (Probabilistic choice theory) The random utility theory is based in that one individual always opt for the alternative with the highest utility. The utility that reports to individual n the alternative j is Unj. This utility is fully known by the one who makes the choice, but partially unknown for the analyst who is trying to model individual's preferences. From the economic point of view, Unj is a conditional indirect utility function. In this regard, the utility has two components, the observed one, called systematic component that will depend on a number of observed attributes as well as on the socioeconomic characteristics of the individual 𝑉𝑖𝑞 , and a random part, unobserved by the analyst that will be treated as a random error 𝐸𝑖𝑞. 𝑈𝑖𝑞 = 𝑉𝑖𝑞 + 𝐸𝑖𝑞 The individual will only choose the alternative with the highest utility from all the other alternatives in the choice set. The alternative i is chosen, if and only if: 𝑉𝑖𝑞 + 𝐸𝑖𝑞 ≥ 𝑉 𝑗𝑞 + 𝐸𝑗𝑞 ↔ 𝑉𝑖𝑞 − 𝑉 𝑗𝑞 ≥ 𝐸𝑗𝑞 − 𝐸𝑖𝑞 And the analyst can only obtain the probability of choosing the alternative i as: 𝑃𝑖𝑞 = 𝑃(𝐸𝑗𝑞 − 𝐸𝑖𝑞 ≤ 𝑉𝑖𝑞 − 𝑉 𝑗𝑞;𝑗 ≠ 𝑖) 𝑃𝑖𝑞 = 𝑃(𝐸𝑗𝑞 ≤ 𝑉𝑖𝑞 − 𝑉 𝑗𝑞 + 𝐸𝑖𝑞;𝑗 ≠ 𝑖) When the error is distributed identically and independently following the Gumbel distribution, the well-known multinomial logit model is obtained. Less restrictive hypotheses about the distribution of the random errors yield more flexible choice models such as those belonging to the Mixed Logit family. 3.4.2 Modelling preferences for ecotourism products The modeling strategy starts by analyzing models accounting for linear and non linear effects, and eventually testing for their statistical significance. 3.4.2.1 Linear effects model Linear effects models are based on the fact that the impact of passing from level 1 to level 2 is identical to that of passing from level 2 to level 3 for qualitative attributes (see Graphic 13). 30 Graphic 13. Linear effects model For these models the specification of the utility is as follows: 𝑈1= 𝜃𝑝𝑃1+ 𝜃𝑠𝑆1+ 𝜃𝑅𝑅1+ 𝜃𝐺𝐺1+ 𝜃𝐴𝐴1+ 𝜃𝐸𝐸1 𝑈2= 𝜃𝑝𝑃2+ 𝜃𝑠𝑆2+ 𝜃𝑅𝑅2+ 𝜃𝐺𝐺2+ 𝜃𝐴𝐴2+ 𝜃𝐸𝐸2 𝑈3= 𝜃𝐴𝑆𝐶3 Where P is the price of the alternative, S represents the level of hiking, R that of rituals, G that of gastronomy, A that of crafts and E that of experience of community life; and θs are the unknown parameters. As the third alternative is the do nothing option, only one alternative specific constant is specified in this alternative accounting for the status quo preference. The estimation results are presented in the Table 9. This model corresponds to a linear effects Multinomial Logit Model with a linear-in-the-parameter utility specification. All the parameters estimates corresponding to qualitative attributes present a positive the correct sign and are significant at a confidence level higher than 95%. The cost parameter (θP) instead presents a negative sign as expected. 31 Table 9. Estimation results. Linear effects model Attributes Estimate (t-test) Hiking (S) θS 0.664 (17.27) Experience of community life (E) θE 0.196 (4.85) Gastronomy (G) θG 0.512 (11.75) Cost (P) θP -0.0109 (-9.37) Crafts (A) θA 0.256 (6.35) Rituals (R) θR 0,329 (7.97) ρ2 0.165 Adjusted ρ2 0.164 l*(0) -6051.156 l*(θ) -5050.605 Observations 5508 3.4.2.2 Non–linear effects model When the non-linear effects specification is considered, the impact on utility of passing from level 1 to level 2 is different than that of passing from level 2 to level 3 (see Graphic 14). In this case, the utility specification is as follows: 𝑈1= 𝜃𝑃𝑃1+ 𝜃𝑆1𝑆1 1+ 𝜃𝑆2𝑆1 2+ 𝜃𝑅1𝑅1 1+ 𝜃𝑅2𝑅1 2+ 𝜃𝐺1𝐺1 1+ 𝜃𝐺2𝐺1 2+ 𝜃𝐴1𝐴1 1+ 𝜃𝐴2𝐴1 2 𝑈2= 𝜃𝑃𝑃2+ 𝜃𝑆1𝑆2 1+ 𝜃𝑆2𝑆2 2+ 𝜃𝑅1𝑅2 1+ 𝜃𝑅2𝑅2 2+ 𝜃𝐺1𝐺2 1+ 𝜃𝐺2𝐺2 2+ 𝜃𝐴1𝐴2 1+ 𝜃𝐴2𝐴2 2 𝑈3= 𝜃𝐴𝑆𝐶3 Where X1 is the dummy equal to 1 when the level of the attribute X is 2 and 0 otherwise; and X2 is the dummy equal to 1 when the level of the attribute X is 3 and 0 otherwise. 32 Graphic 14. Non-linear effects model In the Table 10 the estimation results of the nonlinear effects model are presented. Here you can find two parameters for each attribute, for example in the case of hiking we have θS1 and θS2. The first parameter θS1 measures the impact on utility of passing from level 1 to level 2, and θS2 that of passing from level 1 to level 3. Thus, according to this model, enjoying a 2 hour scenic route increases the individual's utility by 1.05 units; and enjoying a 4 hour scenic route raises the utility to 1.19 units. The difference between these two parameters is interpreted as the impact of passing from level 2 to level 3. Thus, in order to obtain consistent results, the second parameter must be higher than the first. For this model, all estimates are consistent and significant at a significance level higher than 95%, with the only exception of the first parameter of crafts. As in the former case, all parameters were estimated with the expected sign. 33 Table 10. Estimation results. Nonlinear effect model Attributes Estimate (t-test) Hiking (S) θS1 1.05 (10.78) θS2 1.19 (8.35) Experience of community life (E) θE1 0.198 (2.43) θE2 0.307 (2.01) Gastronomy (G) θG1 0.780 (11.57) θG2 0.924 (6.17) Cost (P) θP -0.00872 (-4.95) Crafts (A) θA1 0.219 (1.70) θA2 0.548 (4.43) Rituals (R) θR1 0.337 (3.87) θR2 0.697 (5.03) ρ2 0.179 Adjusted ρ2 0.177 l*(0) -6051.156 l*(θ) -4970.451 Observations 5508 In order to test for the statistical significance of the non-linear effects, we need to check whether in fact all the effects of the second model are present in all the attributes: This is equivalent to test if the following condition is held: 𝜃2= 2𝜃1; 𝜃2− 2𝜃1= 0 Or, in contrast: 𝜃2− 2𝜃1≠ 0 34 For this, we undertake a hypothesis test with the following null hypothesis: H0: 𝜃2− 2𝜃1= 0 Facing the following alternative hypothesis H1: 𝜃2− 2𝜃1≠ 0 The statistic used in this contrast is: 𝑡 = 𝜃2− 2𝜃1 √𝑉𝑎𝑟(𝜃2− 2𝜃1)=𝜃2− 2𝜃1 √𝑉𝑎𝑟(𝜃2)+ 4𝑉𝑎𝑟(𝜃1)− 4𝐶𝑜𝑣(𝜃2,𝜃1) And the decision rule at the 95% confidence level is: If |t| < 1.96 accept H0 i.e. there are linear effects in the attribute. If |t| > 1.96 reject H0 i.e. there are not linear effects in the attribute Results of this test are presented in Table 11 Table 11. Results of test of no-linearity According to the test results, nonlinear effects are only perceived for hiking and gastronomy attributes. This means that for experience in community life, crafts and rituals, the effect of passing from level 1 to level 2 is not significantly different of that of passing from level 2 to level 3. This contrast with results obtained for hiking and gastronomy where the effect of passing from level 1 (i.e. when the activity is not offered) to level 2 is substantially higher than that passing to a higher level. Attributes H0: 𝜃2− 2𝜃1= 0 t -test Decision Hiking -9.931 Reject Experience in community life -0.76014 Accept Gastronomy -5.948 Reject Crafts 0.6829 Accept Rituals 0.23524 Accept 35 3.4.2.3 Mixed linear non-linear effects model In light of results obtained in the previous section, the specification of a mixed linear nonlinear effects model is suggested. Thus, the former model will be re-estimated but now incorporating the constraints given by the null hypothesis when this is accepted. The estimation results of this model are presented in the table 12. Table 12. Estimation results. Mixed linear non-linear model. Attributes Estimate (t-test) Hiking (S) θS1 1.12 (17.97) θS2 1.31 (15.67) Experience of community life (E) θE1 0.218 (4.90) θE2 0.435 (4.90) Gastronomy (G) θG1 0.816 (14.39) θG2 1.04 (10.35) Cost (P) θP -0.00857 (-7.03) Crafts (A) θA1 0.317 (7.27) θA2 0.634 (7.27) Rituals (R) θR1 0.406 (9.33) θR2 0.811 (9.33) ρ2 0.178 Adjusted ρ2 0.177 l*(0) -6051.156 l*(θ) -4971.109 Observations 5508 Like in the previous model, all parameters were estimated with the expected sign and all estimates are consistent and significant at a significance level higher than 95%. Given the introduction of parameter constraints, as we have pointed out, now the effect is not linear for hiking and gastronomy. Thus, In this case not offering hiking activities against offering this product at the intermediate level (level 2) increases the individual's utility by 1.12 units. On the other hand if a higher level with more hiking activities is offered, that is the move from 36 level 2 to level 3, the utility is increased 0.19 units, being this increment substantially lower. A similar effect is perceived for gastronomy, where offering this attribute at the intermediate level increases the utility by 0.82 units, whereas improving this attribute to the highest level increases the utility by 0.22 units. In order to compare the magnitude of the impact of the different attributes on the utility, for the three models analyzed, these effects are depicted in Graphics 15, 16 and 17. Graphic 15. Attributes impact. Linear effects model Graphic 16. Attributes impact. Non linear effects model Graphic 17. Attributes impact. Mixed linear-non linear effects model A common characteristic of these three models is that the attributes which produce the highest impact on the utility are those for which the nonlinear effects are proved, that is to say 0 0.2 0.4 0.6 0.8 1 1.2 1.4 1 2 3 Utility Levels Linear effects model CRAFTS EXPERIENCE CASTRONOMY RITUALS HIKING 0 0.2 0.4 0.6 0.8 1 1.2 1.4 1 2 3 Utility Levels Non linear effects model CRAFTS EXPERIENCE CASTRONOMY RITUALS HIKING 0 0.2 0.4 0.6 0.8 1 1.2 1.4 1 2 3 Utiltiy Levels Mixed linear-non linear effects model CRAFTS EXPERIENCE CASTRONOMY RITUALS HIKING 37 hiking and gastronomy. In particular, in the case of intermediate level (level 2) the impact on the utility of these two attributes is more than twice the impact produced by other attributes when nonlinear effects are considered. In this regard, it is also important to point out that the experience of community life is the attribute producing the lowest impact for visitors of the area under analysis. In order to use model results for the evaluation of different ecotourism policies, these impacts must be evaluated in monetary terms. For this, in the next section the willingness to pay for different ecotourism products are obtained. 4. WILLINGNESS TO PAY FOR ECOTOURISM PRODUCTS Discrete choice models can be used to calculate the amount that a respondent would be willing to pay for a particular good or service. The willingness to pay (WTP) measures are express in monetary terms, the changes in the utility produced by changes in the attributes. These measures can be obtained once the utility function of the different alternatives is estimated. The WTP for continuous variables is calculated as the ratio of the marginal utility of the attribute and the marginal utility of price as: 𝑊𝑇𝑃 = 𝜕𝑈 𝜕𝜃 ⁄ 𝜕𝑈 𝜕𝑃 ⁄ When the resulting value is a negative number (as in all the attributes in our case), the interpretation of the willingness to pay should be in absolute terms since the individual is willing to pay a positive amount of money to obtain improvements in the attribute. In the linear effects model, all variables are treated as continuous, thus, for example, in the case of the WTP for hiking we obtain: 𝑊𝑇𝑃 = 𝜕𝑈 𝜕𝜃 ⁄ 𝜕𝑈 𝜕𝑃 ⁄= − 𝜃𝑆 𝜃𝑃 𝑊𝑇𝑃 = − 0.664 (−0.0109) 𝑊𝑇𝑃 = 60.91743119 It is important to note that in this model the individual's willingness to pay for moving from level 1 to level 2 is the same as the willingness to pay for moving from level 2 to level 3 in monetary terms. The values obtained for all the attributes are seen in the Table 13. 44 Henly, A. (2011). On Earth. (N. R. 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