Tourism Demand and Environmental Investment: A Model with Three Tourist Regions

Abstract

In this short paper we present a simple model of three tourist regions to study the incentives of hotels to invest in environmental quality. In particular, we show that theprice of a hotel room depends positively on the level of investment to preserve the natural characteristics of the region and negatively on the relative investments of the other regions. In this sense, we show that to maintain the tourist demand for rooms the hotels must invest continuously in environmental quality. Regions with low investment in preserving environmental quality have a high probability of disappearing as a tourist destination. We also show that the incentive to invest in environmental quality is a decreasing function of the number of hotels located in a particular region and that the incentive of hotel chains to invest in environmental quality is dependent on whether they are local or international.