Introduction

The travel cost method is used to estimate economic use values associated with ecosystems or
sites that are used for recreation.

The method can be used to estimate the economic benefits or costs resulting from:

• changes in access costs for a recreational site

• elimination of an existing recreational site
• addition of a new recreational site
• changes in environmental quality at a recreational site

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 they 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.

This section continues with some example applications of the travel cost method, followed by
a more complete technical description of the method and its advantages and limitations.

Hypothetical Situation:

A site used mainly for recreational fishing is threatened by development in the surrounding
area. Pollution and other impacts from this development could destroy the fish habitat at the
site, resulting in a serious decline in, or total loss of, the site¡¦s ability to provide recreational
fishing services. Resource agency staff want to determine the value of programs or actions to
protect fish habitat at the site.

Why Use the Travel Cost Method?

The travel cost method was selected in this case for two main reasons:

1. The site is primarily valuable to people as a recreational site. There are no

endangered species or other highly unique qualities that would make non-use values
for the site significant.
2. The expenditures for projects to protect the site are relatively low. Thus, using a
relatively inexpensive method like travel cost makes the most sense.

Options for Applying the Travel Cost Method:

There are several ways to approach the problem, using variations of the travel cost method.

These include:

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 0. A simple zonal travel cost approach, using mostly secondary data, with some
simple data collected from visitors.
1. An individual travel cost approach, using a more detailed survey of visitors.
2. A random utility approach using survey and other data, and more complicated
statistical techniques.

Application of the Zonal Travel Cost Approach:

The zonal travel cost method is the simplest and least expensive approach. It will estimate a
value for recreational services of the site as a whole. It cannot easily be used to value a
change in quality of recreation for a site, and may not consider some of the factors that may
be important determinants of value.

The zonal travel cost method is applied by collecting information on the number of visits to
the site from different distances. Because the travel and time costs will increase with
distance, this information allows the researcher to calculate the number of visits purchased at
different ¡¦prices.¡¦ This information is used to construct the demand function for the site, and
estimate the consumer surplus, or economic benefits, for the recreational services of the site.

Step 1:
The first step is to define a set of zones surrounding the site. These may be defined by
concentric circles around the site, or by geographic divisions that make sense, such as
metropolitan areas or counties surrounding the site at different distances.

Step 2:
The second step is to collect information on the number of visitors from each zone, and the
number of visits made in the last year.

Step 3:
The third step is to calculate the visitation rates per 1000 population in each zone. This is
simply the total visits per year from the zone, divided by the zone¡¦s population in thousands.

Application of the Individual Travel Cost Approach:

The individual travel cost approach is similar to the zonal approach, but uses survey data
from individual visitors in the statistical analysis, rather than data from each zone. This
method thus requires more data collection and slightly more complicated analysis, but will
give more precise results.

For the hypothetical example of the recreational fishing site, rather than simply collecting
information on number of visitors, the researcher would conduct a survey of visitors. The
survey might ask for the following information:

• location of the visitor¡¦s home ¡¦ how far they traveled to the site
• how many times they visited the site in the past year or season
• the length of the trip
• the amount of time spent at the site
• travel expenses
• the person¡¦s income or other information on the value of their time

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 • other socioeconomic characteristics of the visitor
• other locations visited during the same trip, and amount of time spent at each
• other reasons for the trip (is the trip only to visit the site, or for several purposes)
• fishing success at the site (how many fish caught on each trip)
• perceptions of environmental quality or quality of fishing at the site
• substitute sites that the person might visit instead of this site

Using the survey data, the researcher can proceed in a similar way to the zonal model, by
estimating, using regression analysis, the relationship between number of visits and travel
costs and other relevant variables. This time, the researcher would use individual data, rather
than data for each zone. The regression equation gives us the demand function for the
¡¦average¡¦ visitor to the site, and the area below this demand curve gives the average
consumer surplus. This is multiplied by the total relevant population (the population in the
region where visitors come from) to estimate the total consumer surplus for the site.

Because additional data about visitors, substitute sites, and quality of the site has been
collected, the value estimates can be ¡¦fine tuned¡¦ by adding these other factors to the
statistical model. Including information about the quality of the site allows the researcher to
estimate the change in value of the site if its quality changes. To do so, two different demand
curves would be estimated¡¦one for each level of quality. The area between these two curves
is the estimate of the change in consumer surplus when quality changes.

In the example, the researcher might recognize that development around the site is unlikely to
totally destroy the fish population. However, it could diminish the population enough to
adversely affect catch rates. By including catch rates in the model, the researcher can
estimate the lost recreational benefits from reduced catch rates. However, the random utility
model, described in the next section, is a more appropriate approach for this type of
estimation.

Summary of the Travel Cost Method:

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. Thus, peoples¡¦
preferences are revealed by their choices.

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 can be used to estimate the economic benefits or costs resulting from:

• changes in access costs for a recreational site

• elimination of an existing recreational site
• addition of a new recreational site

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 • changes in environmental quality at a recreational site

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.

Advantages of the Travel Cost Method:

• The travel cost method closely mimics the more conventional empirical techniques
used by economists to estimate economic values based on market prices.
• The method is based on actual behavior¡¦what people actually do¡¦rather than stated
willingness to pay¡¦what people say they would do in a hypothetical situation.
• The method is relatively inexpensive to apply.
• On-site surveys provide opportunities for large sample sizes, as visitors tend to be
interested in participating.
• The results are relatively easy to interpret and explain.

Issues and Limitations of the Travel Cost Method:

• 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 most simple 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. It can be difficult to apportion the travel costs among
the various purposes.
• 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. However, there is no strong consensus on
the appropriate measure¡¦the person¡¦s wage rate, or some fraction of the wage
rate¡¦and the value chosen can have a large effect on benefit estimates. 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.
• Those who value certain sites may choose to live nearby. If this is the case, they will
have low travel costs, but high values for the site that are not captured by the method.
• Interviewing visitors on site can introduce sampling biases to the analysis.
• Standard travel cost approaches provides information about current conditions, but
not about gains or losses from anticipated changes in resource conditions.
• In order to estimate the demand function, there needs to be enough difference between
distances traveled to affect travel costs and for differences in travel costs to affect the
number of trips made. Thus, it is not well suited for sites near major population
centers where many visitations may be from "origin zones" that are quite close to one
another.

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 • 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 nonuse
values. Thus, sites that have unique qualities that are valued by non-users will be
undervalued.
• As in all statistical methods, certain statistical problems can affect the results. These
include choice of the functional form used to estimate the demand curve, choice of the
estimating method, and choice of variables included in the model.