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Economic Benefits of Mt. Cook National Park

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Economic Benefits of Mt. Cook National Park Ec.onomic Benefits .. of Mt; Cook ·National Park Economic Benefits of Mt.Cook National Park G. N. Kerr B.M.H. Sharp J.D.Gough Centre for Resource Management University of Canterbury and Lincoln College February 1986 Lincoln Papers in Resource Management No.12, 1986 Centre for Resource Management ISSN 0111-1809 ISBN 1-86931-010-1 Abstract Market and non-market valued decisions are associated with New Zealand's system of national parks. The use benefits of Mount Cook National Park are not priced by the market mechanism, whereas many of the inputs necessary to operate and maintain the Park are priced. Estimates of the economic benefits are relevant information when deciding upon the allocation of resources to, and within, a system of national parks. In 1984, the consumers' surplus for adult New Zealand visitors was about $2.2 million. An estimate of the net national benefits is given by the consumers' surplus obtained by New Zealand visitors, plus the net benefits associated with foreign visitors, less the cost of Park management and land. rental. The net benefit of Mount Cook National Park, as it was in 1984, is likely to be positive, indicating that the benefits associated with the current use pattern of resources exceeds their opportunity cost to the nation. However, this result cannot be used to establish the optimality of current expenditure and management. Approximately 170 000 adults visited Mount Cook National Park over 1984; 29% were from New Zealand, 25% were from Australia, 18% were from the United States, and 7% were from Japan. Visitors to the Park spend money in towns and villages in the Mackenzie Basin area. Average adult visitor expenditure in the Mackenzie Basin area is $58. These expenditures give rise to secondary economic benefits and create opportunities for regional development. Visitor expenditures in the Mackenzie Basin area are associated with $13.4 million of additional regional output, $6.8 mill ion of additional regional income, and 196 jobs. These effects derive their significance from regional objectives; they are not indicators of the national benefits associated with Mount Cook National Park. Contents Page Abstract Tables Figures Acknowledgements 1. Introduction 1 1.1 Mount Cook National Park 2 1.2 The Economic Problem 13 1.3 Study Objectives 15 1.4 Report Outline 15 2~ Economic Benefit 17 2.1 Market Benefits 18 2.2 Non-Market Benefits 23 2.3 Values 26 2.4 Economic Basis for Approach 28 3. Regional Economic Benefits 31 3.1 Secondary Benefits and Costs 32 3.2 Economic Multipliers 33 3.3 Economic Base Multipliers 36 3.4 Keynesian Multipliers 36 3.5 Input-Output Multipliers 38 3.6 Limitations 45 4. Travel Cost Method 49 4.1 Basic Concept 50 4.2 Aggregate Travel Cost Method 52 4.3 Limitations of the Model 56 4.4 Summary 64 Page 5. Study Implementation 67 5.1 The Sample 67 5.2 Questionnaire Design 68 5.3 Sampling Practise 71 5.4 Visitor Numbers 76 6. Regional Analysis 81 6.1 Regional Input-Output Tables 81 6.2 GRIT Method 84 6.3 Applying GRIT 88 6.4 Running GRIT 96 6.5 Visitor Expenditures 102 6.6 Impacts of Different Visitor types 102 6.7 Effect of Expenditures on Park Management 105 7. Travel Cost Analysis 109 7.1 National Travel Cost Analysis 109 1.2 World Travel Cost Analysis 121 7.3 Application of the Travel Cost Method to the World Sample 124 7.4 Summary 131 8. Conclusions 133 8.1 Summary of Results 133 8.2 Interpretation of Results 136 8.3 Implications for Research 138 References 143 Appendix A 149 Appendix B 151 Tables Page 1.1 Estimates of visitor participations in recreation activities 13 3.1 Multiplier definitions for a unit increase in demand for industry j 45 4.1 Visitor and population data 53 4.2 Construction of the demand curve 54 5.1 Estimates of vehicle numbers 78 5.2 Estimates of annual visits by mode of transport 80 6.1 Full-time employment by industry: 23 industries 89 6.2 Full-time employment by industry: 16 industries 91 6.3 Derivation of location quotients 93 6.4 Regional multipliers by industry 98 6.5 Regional multipliers by industry 99 6.6 Regional multipliers by industry 100 6.7 Regional multipliers by industry 101 6.8 Mean expenditure 103 6.9 Regional income, output and employment per adult visitor by visitor type 106 6.10 Regional income, output and employment per dollar spent by visitor type 107 7.1 Summary of visitation rate models 113 7.2 Best visitation rate models 114 7.3 Visits at zero entry fee by zone for travel costs models 115 7.4 Predicted numbers of visits with varying entry fees 116 7.5 Mean consumers' surplus for New Zealand visitors 119 7.6 Actual and predicted visits for travel cost models excluding New Zealand 126 7.7 Regression results for visitation rate models using economy air fares 127 7.8 Regression results for visitation rate models using epic air fares 128 7.9 Predictive ability of selected travel cost models 129 8.1 Adult visitor origins 134 8.2 Secondary effects of visitors 135 8.3 Total consumers' surplus for adult New Zealanders 136 Figures Page 1.1 Location of Mount Cook National Park 5 1.2 Mount Cook National Park 6 1.3 Ski-plane flights 7 1.4 Hut bed nights 9 1.5 Visitors to Park Headquarters 11 1.6 Origin of visitors to Park Headquarters 12 2.1 Market demand 19 2.2 Market supply 21 2.3 Economic costs and benefits 21 2.4 Public goods 25 2.5 Consumer demand for recreation 30 3.1 Hypothetical flow of transactions stemming from $100 accommodation purchase 34 3.2 Inter-industry flows 38 4.1 Individual demand 51 4.2 Preliminary demand curve 53 4.3 Demand curve 55 4.4 Effect of distance on number of substitutes available to recreationists 57 4.5 Effect of number of substitutes on the preliminary demand curve 58 4.6 Effect of substitutes on final demand 59 4.7 Effects of exclusion of travel and on-site time 62 5.1 Survey point 72 6.1 The study area 82 6.2 Coefficients matrix 85 6.3 Revised matrix 85 6.4 Ninety-five percent confidence intervals for adult per capita spending in Mackenzie Basin 104 7.1 New Zealand travel cost zones 110 7.2 Demand for visits by New Zealanders (single destination trips) 117 7.3 Demand for visits by New Zealanders (multi-destination trips) 118 Acknowledgements This research project has benefited from the contributions of many people, businesses, and g0vernment departments. First and foremost, we acknowledge the significant contribution of the Department of Lands and Survey. The Department funded the project. But of greater significance to us, as a research group, was the assistance given by Department staff well beyond the requirements of their respective positions. In particular, we thank Martin Heine, Ray Slater and Alan Wilson (Mount Cook National Park); Nicholas Rae and Ian Whitwell (Head Office), and David Alexander (Christchurch). All have been most supportive throughout the duration of the project. Of the many businesses that have assisted us, we would like to recognise the contribution of staff of Mount Cook Airlines, THC Glencoe, THC Hermitage, and Glentanner Station. These people assisted us with information on bus and plane schedules. They also facilitated the collection of questionnaires. Post Office staff at Mount Cook National Park also assisted with the collection of questionnaires. The Ministry of Works and Development provided road­ side equipment. Mr Williamson (New Zealand Forest Service, Geraldine) advised us on forestry employment in the region. Vaughan Brown, Air New Zealand, supplied us with the necessary data on international air fares. Twizel Development Incorporated were most helpful, providing information on Twizel. This project would not have been feasible without the accommodation provided by the New Zealand Alpine Club. We are especially grateful to Judy Norman for arranging our accommodation over 1984. Special thanks are due to those who assisted us with preparing, distributing and collecting the questionnaire. Carolyn Shaw provided the Japanese translation and prepared the signs. She also translated the returned Japanese questionnaires. The following people assisted by distributing and collecting the questionnaires under a wide range of climatic conditions: Jeanie Ackley, Bill Baker, Margaret Baker, Rodney Hide, Brooks Hull, Kok Jiuan Jiuan, Shirley Matson, Satya Pandaram, Reinhard Pauls, Shaista Shameem and Joy Talbot. Pat Devlin, Anton Meister, Doug Pearce, Ron Sandrey and David Simmonds read an earlier draft and made very useful comments. We are grateful for their suggestions and absolve them from any responsibility for the final product. Five people are directly responsible for the quality of this final report. Pat Prendergast designed the cover of the questionnaire and the cover of this report. Carolyn Brown and Peter Richardson were responsible for the graphic illustrations. Finally, we would like to thank Nan Thomson for typing an earlier draft and Brenda Carter for typing the final manuscript. Janet Gough Geoff Kerr Basil Sharp 1. Introduction Undeveloped land was a relatively abundant natural resource during the early settlement of New Zealand. Government policy and the market process served to facilitate the transformation of this natural resource into goods and services of higher value. Land was cleared for agriculture; minerals were mined; and trees were harvested. Outputs from these processes provided the raw materials necessary for economic growth, international trade, and improved standards of living. Initially, economists did not recognise the services associated with land in its natural state, commonly assuming the opportunity cost of undeveloped land to be at most, zero.
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