Economic Valuation of the Recreational Benefit of Negesh Lodge in Woliso, Oromia Regional State, Ethiopia

Table of Content

ABBREVIATION AND ACRONYMS

Acknowledgements

ABSTRACT

CHAPTER ONE: INTRODUCTION
1.1 Back ground of the study
1.2 statement of the problem
1.3 Objective of the study
1.3.1 General objectives
1.3.2 Specific objectives
1.4 Hypothesis
1.5 Significance of the study
5.6 Scope and Limitations of the Study
5.7 Organization of the Paper

CHAPTER TWO: LITERATURE REVIEW
2. Theoretical Frame work
2.1.1 The Need for Environmental Valuation
2.1.2 Economic Approach to Environmental Valuation
2.1.3 Classification of values of environmental resource
2.1.4 General approach Method of valuing environment resource
2.1.5 Travel Cost Method (TCM) of Valuing Environmental Resources
2.2 Empirical Literature review
2.2.1 Application of TCM in valuing Recreation site in Ethiopia

CHAPTER THREE
3.1 METHODOLOGY OF THE STUDY
3.2 Site Description
3.3 Research methods and data resource
3.3.1 Data sources and data collection techniques
3.3.2 Sampling method and sample size
3.3.5 Variables Definition and their expected signs

CHAPTER ROUR: RESULTS AND DISCUSSIONS
4.1. Descriptive analysis
4.1.2. Number of population response to visitation
4.2.1. Demand function and recreational benefit estimation

CHAPTER 5: CONCLUSIONS AND RECOMMENDATIONS
5.1 CONCLUSIONS
5.2 RECOMMENDATIONS

Reference

Appendix I QUESTIONAIRE

APPENDIX II: Summary of Description of Variables

APPENDIX III: Correlation Matrix

APPENDIX IV: Estimation Result of truncated Poisson Models resident and visitor of Negash lodge at truncation point

APPENDIX V: Estimation Result of truncated Poisson Models resident and visitor of Negash lodge at truncation point

APPENDIX VI: Estimation Result of truncated Poisson Models resident and visitor of Negash lodge at truncation point 1 robust

APPENDIX VII: Marginal effects after tpoisson

Appendix VIII:Presenting Data with Graph of demand function

Appendix IX: Check normality of a variable visually by looking at some basic graphs

ABBREVIATION AND ACRONYMS

Abbildung in dieser Leseprobe nicht enthalten

Acknowledgements

First of all I would like to express my limitless gratitude to Almighty God together with his Virgin mother St. Marry who helped me in all circumstances and give everything in reaching me to this position to finish my thesis. Next my special utmost appreciation goes to my thesis supervisors Mr.Muhdin Muhammed and Meron Yohanes for his/her indispensable advice, comments and encouragement which guided me in all phases of the study. I would like to extend my foremost gratitude to my family for financial support.

Finally I would like to thank all my informants who gave tangible information about the issue and enumerators for their effort to get the necessary data.

ABSTRACT

There are many tourist attraction sites in Ethiopia. Woliso town, is located in Oromia Region, South west Shewa Zone, on the way from Addis Ababa to Jimma 114 km away from Addis Ababa. The study was conducted on the economic valuation of trecreational benefit of the Negash lodge (Woliso town) recreational by using the travel cost method.As the result of the study indicated that the demand for Negash logde recreational site has been increasing with the increase of monthly average income of visitors and decrease with the increase of individual visitors travel cost. The study analyzed Economic Valuation of the recreational benefit of Negesh lodge (Woliso town) outdoor recreational by using the travel cost method .

Both primary & secondary data types were used. The primary data was collected from sample size town residents and visitors with questioner and face to face interview. For analysis of collected data Both Descriptive Statistical and Econometric analysis truncated Poisson model) were employed.

The study estimated that the individual outdoor recreational demand (LnV rate = ), where is the coefficient of total travel cost. Total annual recreational benefit of the site (ETB 1,018,512) and total annual Consumer surplus of the site (ETB 621,138).

Therefore, this quantitative valuation may help policy makers make policy-oriented decisions on the area for better planning and management of the environmental resources. Furthermore, the study could motivate other researchers to do better research work on the area

Key Words: Recreational benefit; Travel cost method; truncated model

CHAPTER ONE: INTRODUCTION

1.1 Back ground of the study

Environment is the sum total of all surrounding of living organism, including natural forces and other things like human beings, animal and plants. Especially the surroundings of life of people or society in their life condition. According to (Nuva et al., 2009) environmental resources and public goods have benefits in many different ways for humans. They have importance relating to the environmental resource benefit. They can be used for recreational purpose and ecotourism sites which can enhance national income, and have economic impacts to society around the area of recreation.

Consequently it can contribute to national economic growth. Resource management is increase the importance of obtain reliable measure of relative economic value of environmental resource. Economic Valuation of environmental benefit is the process of establishing a monetary measurement to natural resource. Recreational place is one of the parts of environmental which include forest, water, vegetation, bird species and mammal (Henk Folmer and Tom Tietenberg ,203/2004).

Recreation is an activity of leisure, which increases visitor‟s utility (satisfaction).Human beings are naturally created with the need to satisfy their own interest and to maximize their happiness through different ways. Things those maximize satisfaction for human beings can be characterized by its value. Some of environmental good and services have market value. Such as fish, oil and timber. While others no market price which includes; land scape, recreational place and fresh air (perman, 2002).

Therefore the recreational places have no market price. So it is difficult to measure or indicate by market price and impossible to allocate through market mechanism. The reason is they have no market prices due to their characteristics of public goods. In the public goods and services they are non-competing and non-excludable. Non-competing is when certain goods and services once they are provided. i.e consumption of one person never reduce the availability of the product for others. Non-excludability of goods and services is when there is no formally defined property right to exclude or prevent one or group of society from consumption of good.

In this case all people maximize their satisfaction without control. Thus the goods and services of environmental resource which have no market value can be measure by valuation technique (Timothy C.Haab and Kenneth E.McConnell,2002) Economists have created a variety of empirical tools for estimating the benefits and costs of public actions. These tools are usually called valuation methods.

To estimate the benefits and costs of public actions; the implementation involved data collection, model specification and econometric estimation.Valuation techniques used to estimate the value consumers surpluses on environmental and other public goods can be classified into two broad categories: revealed preference methods and stated preference methods. Some economists like (Freeman; Smith 1984; Feinberg and Mills, 1980) prefer the resource valuation method used for nonmarket goods be based on observed consumption behavior. One of such class of nonmarket valuation method is termed as travel cost method (TCM), in which a recreationist is viewed as selecting one or more sites, site qualities, and site visit rates based in part on travel costs from home to each site.

In principle TCMs assume that consumers often combine market goods with environmental goods in their consumption bag. From this idea it was estimated environmental benefit of recreational place in woliso town case of Negesh lodge by travel cost method.(TCM).

This paper covers the empirical methods for estimating benefits for non-market goods and services by using (ITCM) individual travel cost method. The purpose is to make available guidance to the solution of empirical problems that arise in the estimation and calculation of benefits. The importance of this study was on the practical use of estimation techniques rather than the conceptually correct concepts that have less applicability in the predictable estimation benefit.

1.2 statement of the problem

Valuing of environmental benefit is the process of establishing a monetary measurement to natural resource. According to (Pearce and Turner, 1990) economic value is not only depend on quality of good and services. It only occurs because of the interaction between a demand and price. It follows that environmental attributes only if they enter at least one individual‟s utility function or a firm‟s production function. Before we try to judge the monetary value of any environmental assets; we sure that the Environmental assets have demand either by firms or by consumer. If the environmental asset demanded either by firm or by consumer the assets are normal economic good.

Recreation is a human activity, which increases visitor‟s wellbeing. Following an increase in population, income and mobility the demand for recreation has been increasing in many developing countries (Clawson et. al., 1966). In theory, Clawson (1966) revealed that putting a precise and acceptable value on recreation would be valuable in resource management and need to place values that reflect the true social costs and benefits of recreational activities. Thus, we need to impute values that reflect the true social costs and benefits of recreational activities using some techniques of valuation of environmental resources.

Environmental Valuation technique is a method that has been developed for valuing the environmental goods and services (recreational services) which can‟t be valued through predictable force of market economy. If there is no alternative of economic value of natural resources, it is actually difficult to generate sustainable revenue from internal sources to support the work to be made towards the improvement and expansion of quality of such resources. So the value of recreational place is cannot easily determine by market price. Absence of market for these resources causes underestimation of its benefits and unregulated overutilization.

Apart from this general problem, Woliso Negash lodge recreation site is widely used as a natural recreation area for many people in Woliso town. It is natural hot spring possessing medicinal value; a lodge has a special contribution in generate income for the municipality and creating job opportunity for the town community as well as providing noble services to the customers such as restaurant, swimming pool, lodging, bath, recreation, resort services.

.However, as discussed with the site manager, the researcher do not estimate the economic value of this site by using valuation technique. Due to the fact the site do not estimate by scientific method rather than traditional value judgment.If the site do not estimate by scientific method we can not able to generate revenue concerning the potential environmental benefit of the site Hence, this is the first rigorous attempt to estimate economic value of a recreational environmental resource in Woliso Negash lodge recreation site.

Hence, it is a need to estimate recreational benefit of the site which could help to increase consumer satisfaction. Since the consumer satisfied they have better contribution an increasing welfare of the society (smith and Desvouges, 1983). Thus, study was conducted to estimate the woliso Negash lodge consumer surplus, visitation rate and the total economic value that the people award to multiple services of the lodge by using TCM has important advantage and will contribute to the literature by deal with serious problems. In particular this paper help to show the Negash lodge owner how can extract revenue out of excess benefit to improve the qualities of the lodge and expand the types and variety of the services for the future. Therefore, the paper was to evaluate economic value of woliso Negash lodge recreation site by travel cost method using individual travel cost model.

1.3 Objective of the study

1.3.1 General objectives

The main objective of this study is to evaluate the economic benefit of recreation site in woliso Negash lodge.

1.3.2 Specific objectives

- To estimate the total economic benefit of recreational services for recreational of Negash lodge site
- To evaluate visiting number of individual visitors Negash lodge recreational site per year.
- To estimate consumer‟s surplus for recreational amenities/ services of woliso town recreational site (Negash lodge).

1.4 Hypothesis

Based on theoretical and empirical analyses, the following hypotheses tested.

1: Travel cost will have a negative impact on the number of visitors per individual.
2: As monthly average income of un individual visitors increase ; the demand of consumer for recreational site increase per individual.

1.5 Significance of the study

This study shows how quantitative estimates can be made of the economic benefit of a recreation site. It was focused on the benefit of Negash lodge recreation area. The benefit of this area was measured by using travel cost method (TCM) question. The travel cost method is used to estimate economic use values associated with ecosystems or sites that are used for recreation. It would provide a means for comparing the importance of recreation with other alternative economic uses of the same resources. It can be used to estimate the economic benefits or costs resulting from changes in access costs for recreation site, elimination of an existing recreation site, addition of anew recreation site and change environmental quality at recreational site. Finally it was try to provide information for farther improvements of the lodge and may also help for better planning and management.

5.6 Scope and Limitations of the Study

The scope of this study is limited to the economic valuation of recreational of Negash lodge recreation site. This study does not consider potential visitors in measuring consumer willingness to pay for the recreational use value of the site as it be dependent on-site sampling. Also foreign visitors are not included in this valuation study because they are multi-site visitors. The study also selected only woliso town visitors by assuming that other are held constant and there are also more relevant had the study be done a much bigger sample and limited numbers of secondary data for analysis.

5.7Organization of the Paper

This study has five chapters. The first chapter deals with introduction of the study which includes background of the study, statement of the problem, objective, significant of the study and scope and limitation of the study. Chapter two presents theoretical background on environmental valuation and the literatures on various methods of valuation techniques followed by a review of previous studies particularly empirical literatures related to the method of travel cost method.

In chapter three, the methodological framework of the travel cost, data collection, and survey design issues are presented in detail. In chapter four descriptive statistics and econometrics analysis are presented and analyzed. Finally, in chapter five, the main findings of the study are summarized and some important policy implications are discussed

CHAPTER TWO: LITERATURE REVIEW

This part deals with both theoretical and empirical literature with particular importance on environmental benefit estimation for recreation. In the theoretical literature part importance will be given on the underlying theoretical framework for the different values of environmental resources and the TCM of valuation of environmental resources. In the empirical literature section recent empirical studies on this area was reviewed.

2. Theoretical Frame work

2.1.1 The Need for Environmental Valuation

A main motivation for environmental valuation is to include environmental impacts into cost- benefit analysis and another objective of valuation is to allocate the environmental resources efficiently on the various competing uses in a way that brings the highest possible benefit to the society once monetary value of the non-priced goods (Perman et al., 1999).

Environmental valuation could also be used for decisions regarding environmental regulation. Even though economic valuation may be used in cost benefit analysis, or some other tool for decision making, it does not guarantee any improvement or that correct decisions will arise from it, but according to ( Randall ,1994) it will make the environmental values included easier to handle.

2.1.2 Economic Approach to Environmental Valuation

The value of environmental resources should be taken into account in economic decision making processes as well as to achieve sustainable development. But for a long time due to the difficulties of assigning the value for environmental goods and services, they were considered as they have zero (low) values (Kolstad, 2000).

The economic concept of value generally places only influential value on environmental goods and is based on individual preferences following anthropocentric or useful approach. Human beings attach both use and nonuse value to many environmental resources including recreation sites.

2.1.3 Classification of values of environmental resource

In the environmental economics literature we can see several ways of classifying values of environmental resources. (Freeman, 1979), and (Mitchell and Carson,1989) have presented categorizations of resource benefits from environmental improvements perspectives.

(Freeman ,1993) has categorized environmental service flows in terms of their different sets of features: one way of classifying environmental resource service flows is according to the legal and administrative responsibilities for controlling the pollution or damage that would occur on different environmental resources (e.g. air, water, fisheries, forests, etc); another way of categorizing environmental resource benefits is in terms of their effects on humans either directly (e.g., on human health) or indirectly (e.g., through impacts on ecosystem and inanimate systems).

Finally, environmental resource benefits are grouped according to their effects on the market system (e.g., in the form of changes in incomes to producers and impacts on consumers in the form of changes in the availability of and prices of marketed goods and services).

Loomis et al. (1987) classified natural resource values by their use values and non-use values. The analysis of total economic benefits of environmental resources can in general be broken Down into two categories: use values and non-use values.

Use value - These are the value that an individual or the society places on environmental good for direct or indirect benefits that they derive from using them. For this reason they are classified as direct use, indirect use and option value.

Direct use - The value that given for the benefit obtained from using the resources directly either through physical extraction or with no extraction. Examples of use value include the use of water for transportation, drinking and recreational activities such as swimming and others. This component of value results in the decline in the quantity or the quality of the resource available (Freeman, 1993).

Indirect use - values are the value attached for the indirect benefit derived from the environmental goods and services. For example, use of lakes, oceans, and rivers to assimilate waste, and provide habitat for wildlife; forests act as carbon sinks, prevent soil erosion and encourage soil production; wetlands offer flood control and trap nutrients

Option value- The last type of value is option value which is relatively a little more complex. Option value may be defined as the amount of money an individual is willing to pay, at the current time, to ensure the future availability of the resource. It may be thought of as an insurance premium one may be willing to pay to ensure the supply of the environmental good later in time. For example, people may be willing to pay for preserving biodiversity or genetic materials to ensure the option of having these goods in the future. Some consider option value to be one of the use components, which suggests that it is value of assuring future direct or indirect use of the good.

Others interpret it as a nonuse component, because option value is not related to any current use of the good. Some even argue that option value should be considered a separate value category in addition to the use and nonuse ones, thereby allowing it to capture both future use and nonuse benefits (Dominika, 2009).

Non-use value: Non use values (also called passive use value or intrinsic value) represent value an individual or society places on an environmental resource even if they never intended to use it directly. In other words, nonuse values capture those elements of value that are unrelated to a current, future, or potential use or consumption and also people may benefit from the knowledge that an ecosystem simply exists unfettered by human activity. No use values consist of existence value, and bequest value.

Existence value - arises from the benefit an individual derives from knowing that a resource exists or will continue to exist, regardless of the fact that s/he has never seen or used the resource, or intends to see or use it in the future. For example, some people derive satisfaction from the fact that many endangered species are protected against extinction and many people are willing to pay for protection of these species.

Bequest value- as the name suggests, is derived from the benefits that individuals obtain from knowing that a resource will be available for future generations. For example, many of usare concerned with future damage from global warming and would be willing to pay to reduce them, despite the fact that the vast majority of the damages are expected to happen long after our generation is gone (Dominican, 2009)

In the case ofwoliso Negash lodge, the indirect use value could be the shelter that it gives to all life in the lodge, whereas the direct use value would be the recreation gained by visiting the lodge. Option value is associated with future benefits of the lodge while bequest value represents the future use of the lodge for future generations. Existence value could be the value that represents preserving biodiversity inside the lodge.

Total Economic value=Use value + non-use value

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Source: (per man et al ,2003)

2.1.4 General approach Method of valuing environment resource

In the environmental economics literature we have different valuation methods of environmental benefits. The methods implemented for the economic valuation of goods and services generally include direct methods, which determine the value of person is willing to pay for the products or goods through a resource survey instrument. Indirect methods are also used to determine the value of goods and services.

Direct valuation Techniques

Stated preference techniques are characterized by the use of surveys which estimate stakeholder preferences by directly asking individual stakeholders about their preferences. These techniques include contingent valuation, contingent rating, contingent ranking and choice modeling. Contingent rating, contingent ranking and choice modeling are forms of conjoint analysis, a survey technique more commonly used for market research but more recently acknowledged as a technique which could be utilized for resource management. Contingent valuation and a variation of this, choice modeling, are discussed in more detail below.

The Contingent Valuation Method (CVM)

The stated preference technique which is commonly regarded as superior to the others in terms of its validity and reliability for valuation of the environment is contingent valuation. This technique directly assesses WTP or WTA for a particular environmental outcome in a carefully constructed hypothetical or simulated market. One of the strengths of the technique is that it measures both use and non-use values of an environmental resource. It involves providing a description of the existing situation and the possible changes to the environment which are expected to result from proposed changes in management or use to a sample of the population and then directly asking about how much they are WTP or willing to accept WTA to prevent the proposed change in the environment ( Smith, V.K. and S.K. Pattanayak, 2002)

Indirect valuation techniques

The travel cost method (TCM) is an indirect valuation technique that was designed to model recreation behavior. This method calculates a value based on the fact that the price paid to travel to the site is the ultimate value of that site. It should be considered that no fees may be imposed maintenance of vehicle, time spent travelling there Value Market Value, Non-market Value Use Values, Non-use Values ,Consumptive Values, Non-Consumptive Values ,Existence Value Option Value, Vicarious Value Bequest Value ,Quasi-option Value (Journal of Horticulture and Forestry , 2012).

Hedonic price method (HPM) is an indirect valuation method that could be used to estimate the value of an attribute. Forestance site quality of an environmental resource (such as unpolluted area). In other words, the HPM, through multiple regressions, decomposes the total value of a good into the value of its several attributes. Hedonic price means an implicit price and the method assumes that the value of the attribute is capitalized into the total value of the good (Smith, V.K. and S.K. Pattanayak, 2002).

2.1.5 Travel Cost Method (TCM) of Valuing Environmental Resources

2.1.5.1 Travel cost method (TCM)

The TC method is a revealed preference technique for estimating use values, the recreational benefits of environmental resources. The original idea behind the TCM can be found back to a letter from Hoteling (1947) to the Director of the US National Park Service in which he suggested that the costs incurred by visitors could be used to develop a measure of the recreation value of the sites visited. The method focuses on recreational uses of natural resource systems (e.g. recreation demand of national parks, forests, reserves, fishing and hunting sites (Bowes, M.D. and J.B. Loomis, 1980).

Theoretical assumptions

Weak complementarity: if the individual does not visit the park, he or she does not care about the services that it provides. if travel cost (TC) is zero then utility is not affected by variations in level of economics. Non-essentiality: if there is some income level that would compensate for the closure of the park, then travel cost is non-essential.

Empirical assumptions

Visits to the park are determined by a trip generation function (tgf). Vi=f (Ci, Xi), where Vi is visit rate from ith origin or ith individual, and Ci cost of visits. Visit cost comprises both travel costs, ( TCi), varying with ith individual and admission price, (P) constant across ith individual, and visitors respond the same way for change in travel cost (TCi) and admission price P (perman,2002)

2.1.5.2 Theoretical for valuation environmental goods

Here we current a conventional theoretical framework for valuing environmental benefits for recreation. In this section we deal with the theoretical foundations for the techniques that economists have developed for environmental valuation in relation to services to households. In that development is the assumption that environmental services, or indicators relating to environmental services, can be treated as arguments in well-behaved utility functions. Environmental valuation is a series of techniques that economists use to assess the economic value of market and non-market goods (natural resources and resource services). Environmental valuation is the application of welfare economics when the differences in circumstances relate to the uses or states of natural resources or the quality of the environment. ( DABA, 2014).

2.1.5.3 Practical Approaches of Valuation of a Recreation Site using TCM

There are fundamentally two methods in TCM: Zonal travel cost method (ZTCM) and individual travel cost method (ITCM). Below ZTCM, the total area from which visitors originate is divided into a set of visitor zones. The researcher then defines the dependent variable as the visitor rate (i.e. the number of visits made from a particular zone in a period divided by the population of that zone). In the situation of ITCM, the dependent variable is the number of site visits taken by each visitor over a period.

Problems (limitations) with TCM

Measurement of travel cost; time cost since basically measuring the time spent travelling is not always straight forward. The monetary cost by itself does not receive much care, for example study the matter of a visitor to a site who travels to it from a location where he or she is spending vacation. Should site travel cost be measured as just the expenditure acquired in getting to the site from the vacation location, or should some proportion of the payments of getting to the vacation location from the normal place of habitation be included?

If the latter, how should the proportion be decided? Moreover, consider those who visit several sites during the way of a day trip from home. So how the total travel costs should for the day be distributed over the sites visited? These examples indicate that the amount of TCM involving actual monetary expenditure is something which involves judgment on the part of the TCM analyst (Perman et al, 2003).

Data supplies and statistical (econometric) problems: functional form, estimation method. The trip generating equation shows that linear function but no particular reason apart from suitability. In addition in TCM the trip generating equation parameters are estimated by the method of ordinary least squares, but latterly it has been realized that there are a number of reasons why this may give rise to biased estimates of the parameters. Somewhat the estimation method depends on the functional form for the trip generating function (Perman et al, 2003).

Advantage of TCM

The travel cost method (TCM) only just impression more conventional empirical technique used by economics to estimate economic value based on market price. It is used to what actually people do rather than stated willingness to pay what people say they would do in the hypothetical situation and it is Provide on the site survey opportunities for large sample size as visitors tend to be increase in participating.

2.2 Empirical Literature review

2.2.1 Application of TCM in valuing Recreation site in Ethiopia

A few studies have looked into the valuation of different recreational sites in Ethiopia. Enyew (2003) conducted a research to estimate the valuation of the benefit of out-door Wbi-shebele langano recreational site and demonstrated that the total amount that the site establishments are collecting through entrance fees from visitors per year does not reproduce the true, social recreational benefit of the site. In his study, 232 sample visitors were used as his samples that represent visitors in different recreational activities such as Main Swimming Pool, Little Swimming Pool, Common Bath and individual in the site. Then, random selection was accepted to interview individual visitors at each section.

The interviews included both objective questions and visitors' confidence. In the TCM, a linear demand curve was estimated. In this study, visitors' total enjoyment into travel and on site experience was allocated by asking them how much value they attach to their travel and on-site experience. Then, taking the mean value for the on-site experience to be 68.5%, (as calculated from the sample), per person annual recreational benefit for the on-site experience was estimated as Birr 759.07x68.5%=Birr 520.

Considering the annual visits of 171,336 as obtained from the data and taking the mean value for per person annual visits of 9.069 in the sample, he estimated the expected total on site recreational benefit of Birr 9,824,094.80 per annum. But, the site management collected from Birr 50,000 to 100,000 from gate fees each month to finance its expenses and salaries for employees of the site.

However, TCM does not measure the demand for visits to the specific features of the site (e.g., for different recreational activities at the site such as for main swimming pool, little swimming pool, etc). Thus there may be no need to cluster samples of visitors for different type of recreational activities at the site . TCM basically measures the demand for visits to the site as a whole.

(Terefe , 2000) examined the economic value of Tis-Abay Water Falls using TCM. In his effort to measure the value of outdoor recreation for this site, 140 visitors were used as his sample groups by residence on the basis of distance from the site. In the interview, socio-economic demographic and attitudinal information were gathered from the respondents. Then, using this information on the percentage of sampled visitors from each of the zones, total visitors per year and the population in each zone, the visit rate per 1000 population in each zone was determined.

In his model, he took income, availability of substitute sites, quality and population in addition to travel cost to explain visitation rate /1000 population at zero admission price (entrance fee). Then, TCM was estimated using semi-log independent functional form after dropping insignificant variables. The study indicated that the optimal gate fee is Birr 40 and the maximum expected revenue for the site is Birr 85,812,000 (=40x21378) where 21378 is the number of total visits per year. The economic value of the park was estimated at Birr 2,181,998,095 per year based on the demand curve.

Melaku (2007) applied individual TCM to measure the recreational economic benefit using on- site survey data from Bishangari lodge in Oromya region in Ethiopia. His paper uses a truncated count data demand model to estimate the user„s value of access to this wilderness area based on a sample of 175 individuals.

The regression results showed that distance, travel cost, number of days of stay at Bishangari, income, education, Wayne substitute site and group travel are important determinants of the recreation demand of the site. The coefficient of distance travel cost and the number of days stayed at the site presents negative and significant figure but the coefficient of income, group visits, education, and visit to Weynee lodge brought positive and significant influence on the site visitation

The recreational benefit computed from the regression analysis shows that the aggregate on-site recreational benefit per visit amounted to birr 820. The expected total annual benefit of the site was 3,943,500 birr. Records show that the enterprise is getting only about 25% of the true recreational benefit of the site. When compared to the net-economic benefits of the Bishangari lodge, the economic return the company collects is very low. This is particularly the case when the relative return to the ecotourism area is considered in terms of high accommodation costs and investment expenditures.

Mahmud (1998) conducted a research to estimate the economic valuation of Sodere natural recreation area and demonstrated that the total amount that the site authorities are collecting through gate fees from visitors per year does not reflect the true, social recreational benefit of the site . He estimated linear demand curve by application of the TCM. The result showed that the total annual on-site recreational benefit was estimated to be Birr 9,842,094.80 which is higher than what the authority of the site collected, which is not more than 100,000 birr.

2.2.2 Applications of TCM in Other Developing Countries

Kateregga (1997) employed TCM to measure the value of Kaazin Camping Site (recreation Site) in Uganda. In her effort to estimate the total benefits of the site, 200 adult visitors who came from five different zones were used as her samples. Children visitors were not included in the sample due to the reason that they may not come to the site by their own motivation. Interviews were carried out on Saturdays and Sundays alone because of very few visitors during weekdays.

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