Valuing welfare losses of cruise tourism in a contingent valuation framework: not as bad as they make it out to be

Abstract

Some impacts of cruise tourism, such as air pollution, overcrowding, traffic congestion, etc., can be described as negative externalities. Valuing them is a major challenge due to their non-market nature. The aim of this paper is to show how the potential welfare losses associated with these externalities can be estimated within a contingent valuation framework and to illustrate this with a case study. To this end, residents of the two main port cities of the Canary Islands were asked about their willingness to accept (WTA) monetary compensation for the potential welfare losses caused by cruise tourism. Although a majority of respondents believe that the benefits generated by the cruise industry outweigh the costs, results show that for those willing to accept compensation, the mean WTA estimated using a probit model with a correction mechanism for hypothetical bias was <euro>88.50. As air and noise pollution have been identified as the most significant environmental concerns for local residents, the progressive decarbonisation of the shipping sector by 2050, as derived from EU regulations is expected to improve these issues. In the meantime, it is suggested that an annual reduction in the municipal property tax be implemented for neighbourhoods surrounding the port area affected by the externalities of cruise tourism, as a compensation mechanism. If implemented, the estimated mean WTA values would reflect a hypothetical property tax reduction of between 29 % and 32 %. Finally, limitations and suggestions for further research are provided.