Valuation of Parks using Travel Cost Method

R. A Jayasinghe

The travel cost method is used to estimate the value of recreational benefits generated by ecosystems. It assumes that the value of the site or its recreational services is reflected in how much people are willing to pay to get there. It is referred to as a “revealed preference” method, because it uses actual behavior and choices to infer values.

The basic premise of the travel cost method is that the time and travel cost expenses that people incur to visit a site represent the “price” of access to the site. Thus, peoples’ willingness to pay to visit the site can be estimated based on the number of trips that people make at different travel costs. This is analogous to estimating peoples’ willingness to pay for a marketed good based on the quantity demanded at different prices.

The travel cost method is relatively uncontroversial, because it is modeled on standard economic techniques for measuring value, and it uses information on actual behavior rather than verbal responses to hypothetical scenarios. It is based on the simple and well-founded assumption that travel costs reflect recreational value. It is often relatively inexpensive to apply.

This method has some limitations as well. The travel cost method assumes that people perceive and respond to changes in travel costs the same way that they would respond to changes in admission price. The simplest models assume that individuals take a trip for a single purpose – to visit a specific recreational site. Thus, if a trip has more than one purpose, the value of the site may be overestimated.

Defining and measuring the opportunity cost of time, or the value of time spent traveling, can be problematic. Because the time spent traveling could have been used in other ways, it has an "opportunity cost." This should be added to the travel cost, or the value of the site will be underestimated. In addition, if people enjoy the travel itself, then travel time becomes a benefit, not a cost, and the value of the site will be overestimated.

The availability of substitute sites will affect values. For example, if two people travel the same distance, they are assumed to have the same value. However, if one person has several substitutes available but travels to this site because it is preferred, this person’s value is actually higher. Some of the more complicated models account for the availability of substitutes.

The travel cost method is limited in its scope of application because it requires user participation. It cannot be used to assign values to on-site environmental features and functions that users of the site do not find valuable. It cannot be used to value off-site values supported by the site. Most importantly, it cannot be used to measure non-use values. Thus, sites that have unique qualities that are valued by non-users will be undervalued.

However, due to its own merits or a lack or alternatives–it is one of the most significant tools we have for the estimation of user value for non-market assets.