Introduction
The overall economy of Belize has become increasingly dependent on revenues resulting from tourism. Thus, it is important to understand which factors affect this revenue, and which lead to sustaining it. This raises an important question, can Belize ignore the environment and continue to have increased levels of tourism revenue. To test this, it is important to come up with a quantitative measurement for the protection efforts of Belize’s natural resources and how they affect the overall revenue of the tourism sector. The original model was Ytourism = f(natural capital) + other. Through further evaluation of tourism in Belize it became apparent that the coral reefs and the tropical forests were the country’s main attractions. Inhabiting these are rare species of animal and plant life that provide a main tourist attraction for the country. Prugh believes the primary value of natural capital is life support; life supports life. In the case of Belize, Prugh would say that the tropical forests, mangroves, coastlines and barrier reefs all play a role in life support (Prugh 52). The preservation of this life is of utmost importance to continual increasing revenues in tourism.
Data
The data used in this analysis consists of seven independent variables annually calculated from the year 1991 until 2000 and a dependent variable of tourism revenue. The independent variables consist of cruise ship passenger arrivals on the coast of Belize, visitors to the country’s parks and reserves, percentage of the country’s land that is protected, the presence of a Hurricane in that particular year, the mangrove area measured in hectares, and the number of existing hotel rooms. These seven variables provide a well-rounded estimate of what factors into the tourism revenue of Belize. The dependent variable, tourism revenue, and the independent variables are shown in appendix A.
The original equation is:
Ytourism = b0 + b1x1 + b2x2 + b3x3 +b4x4 + b5x5 + b6x6 + b7x7
Where: X1= Cruise Ship Arrivals
X2 = Visitors to Parks/Reserves
X3 = Percentage of all of Belize’s land which is protected
X4 = Presence of a Hurricane (0=yes 1=no)
X5 = Mangrove Area in Hectares
X6 = Number of Hotel Rooms
After running a regression on all six independent variables, analysis shows that the R2 adjusted is .969. Therefore, 96.9% of the variability in tourism revenue y is explained by the estimated multiple regression equation with all six of the independent variables. In evaluating the F-statistic, a value of 48.77 signals that the overall regression had extreme significance. See Appendix B. The regression equation is:
Ytourism = 3,167,963,038 + 67,358.1x1 – 37,439.8 x2 + 54,575,209.67x3
- 99,059,014.17x4 - 12,469.3 x5 –420,959.38 x6 + error
Where:X1= Cruise Ship Arrivals
X2 = Visitors to Parks/Reserves
X3 = Percentage of all of Belize’s land which is protected
X4 = Presence of a Hurricane (0=yes 1=no)
X5 = Mangrove Area in Hectares
X6 = Number of Hotel Rooms
After evaluating the results of this regression it became apparent that the variable X4 , presence of a hurricane was not significant in the testing of tourism revenue. It had a p-value of .313 when tested at an alpha of .1, or a 90% confidence interval. The remaining five variables were significant, having p-values of less then .1 (see table).
Cruise Ship Arrivals / 0.00427132Parks/Reserves Visitors / 0.066887214
% All Land Protected / 0.007142662
Hurricane (0=No 1=Yes) / 0.313479698
Mangrove Area (Hectare) / 0.037234432
#Hotel Rooms / 0.036916989
As a result, the independent variable for presence of a hurricane, X4 , was removed from the equation. Also, the negative value of -429,059.38 for the effect increasing hotel rooms, X6, has on revenue is counterintuitive. Thus, further analysis of this variable is necessary in determining its significance.
After running an individual regression between X6 and the dependent variable, tourism revenue, it appears that X6, number of hotel rooms, is in fact insignificant. The r-squared for this individual regression is extremely low at .18, meaning only 18% of the variability in tourism revenue is explained in the regression with number of hotel rooms as the independent variable. Also, the p-value for the independent variable, hotel rooms, is .21 which is greater then alpha .1 and therefore insignificant. See Appendix C.
Following the regression analysis of the four significant variables, two of the independent variables, mangrove area and parks/reserves visitor, become insignificant. Their p-values increased significantly, and are greatly above alpha of .10. Removing this independent variable disturbs the regression more so then leaving it in. Therefore, keeping X6, number of hotel rooms, in the equation helps maintain a balance between relatively high r-squared adjusted and significant p-values.
The resulting equation is
Ytourism = 2,764,697,103 + 60,337.03 X1 - 30,689.23 X2 - 48,851,340.31 X3
-10,844.2 X4 - 372,657.45 X5 + error
where: X1= Cruise Ship Arrivals
X2 = Visitors to Parks/Reserves
X3 = Percentage of all of Belize’s land which is protected
X4 = Mangrove area in Hectares
X5 = Number of Hotel Rooms
This regression has an r-squared adjusted of .966, meaning 96.6% of the variability of tourism revenue is accounted for in the regression with these five independent variables. The F-statistic is greatly significant at 52.23. See Appendix D. The resulting p-values for the independent variables are shown in table 1, all proving to be less then alpha of .1, and thus significant.
Cruise Ship Arrivals / 0.000809839Parks/Reserves Visitors / 0.073529105
% All Land Protected / 0.002450268
Mangrove Area (Hectare) / 0.03295509
#Hotel Rooms / 0.032726498
This equation explains that for every arrival of a cruise ship passenger, the tourism revenue increases 60,337.03 dollars. Such immediate growth was expected, but the question arises, does cruise ship arrivals have an effect on mangrove area. Many nutrients collected in the mangroves go to the health of surrounding coral reefs, a major tourist attraction. Thus, it is important to distinguish if there is a relationship between cruise ship arrivals and the depletion of mangroves. In running a simple linear regression between these two variables, it appeared they were not collinear. It is standard that if the sample correlation coefficient is greater then .70 then there is collinearity. However, the value of the sample correlation coefficient for this simple linear regression is right on .70.
Environmentally, it is apparent that cruise ship travel pollutes the ocean. These surrounding pollutants travel into the mangroves, and eventually cause their depletion. Belize’s coral reefs rely on the mangroves for necessary nutrients, and thus are harmed by the depletion of Belize. As coral reefs die, foreign incentive to travel to Belize is reduced, lowering the tourism revenue in the long run. Whether correlated or not, these two variables have an obvious long-term relation that will eventually reduce tourism revenue if regulation does not occur.
For every additional parks/reserves visitor, the revenue decreases 30,689.23. This result seems counterintuitive because parks/reserves are a main attraction for tourism in Belize. Though, many of these reserves are free admission, it is popular to buy into an eco-tourist package that provides tours and transportation for these venues. It is possible, however, that these free admission reserves take away from other more profiting tourist attractions such as scuba diving trips. Nonetheless, tropical forests and other reserves are a main reason for Belize’s increasing popularity as a place to visit.
For every additional percentage point of land protected, the revenue decreases 48,851,340.30. Protecting land prevents expansion of physical capital, such as hotels. Thus it seems logical that the immediate revenue decreases as protected land increases. This is one of the main issues in Belize to date. Why protect land when profit can be made on its use? It is important to foresee the results of continually building on this land. Though it may seem profitable, it is destroying natural resources, and the ecosystem in Belize.
These natural resources are a main factor for the countries increasing tourism. Currently these natural resources exist in plentiful amounts, but in the future they may not. Thus, even though increasing land protection is decreasing immediate tourism revenue, it is preserving the ecosystem and natural resources for future years. This will lead to continual growth in the tourism sector of the economy.
For every additional hectare of mangroves, the revenue decreases 10,844.2. This provides an interesting relationship; as tourism revenue increases, the hectares of mangroves decrease (see graph). Mangroves are on the coast, many times being destroyed by added hotels and restaurants that bring in revenue. Once again the important issue here is locals want to keep expanding physical capital on the shoreline to make profit. Similar to the land protection, these mangroves play an important long-term role in the ecosystem by aiding to the preservation of coral reefs. Therefore, it is only logical, that decreasing amounts of mangroves will not forever add to tourism revenue. In the future, the lack of coral reefs will detract from tourism, so in turn will the depletion of mangroves.
Conclusion:
This paper examines the factors that affect tourism revenue. It is hard to answer, empirically, if Belize can ignore the environment and continue to have increased levels of tourism? Statistically, this is a hard topic to grasp an understanding of because many measures taken to preserve natural resources actually decrease revenues. It is hard to put a statistic on the benefits that a measure will have on future events. The use of natural resources brings in a substantial amount of revenue, so to increase their preservation goes against current economic growth. To many people, a negative effect on profit growth is the only resulting factor of natural resource preservation. Those who can see beyond the immediate monetary figures understand that the preservation is essential to long- term revenue growth.
Belize is a young country (1981) and has just recently become a tourist hot spot. Therefore, the country’s current levels of natural resources can be fully utilized while remaining quite plentiful. The existing environment in Belize is in no immediate danger. As a result, revenue continues to grow regardless. Though, in future years, if these natural resources deplete and become endangered, Belize’s popularity will decrease, as will its levels of tourism. It is therefore important that the government and non-profit organizations, such as the Program for Belize, continue to place increasing importance on the preservation and protection of the country’s natural resources. It is only natural that the citizens of the country will place more importance on profit then on the preservation. The government must step in and provide an understanding the importance of sustaining natural resources and implementing regulation. Increasing amounts of protected lands, and a reduction in the loss of mangroves are two important indicators that suggest the country is developing this understanding. Sacrificing some amounts of revenue today will lead to higher revenues in the future. An added protected hectare of land today could be thousands of dollars in revenue tomorrow.
Appendix A:
Year / Tourism Revenue / Cruise Ship Arrivals / Parks/Reserves Visitors / Mangrove Area (Hectare) / #Hotel Rooms / Hurricane (0=No 1=Yes) / % All Land Protected1991 / 70,000,000 / 1,290 / 7,989 / 90,000 / 2,784 / 0 / 10.75
1992 / 67,000,000 / 1,455 / 8,126 / 90,000 / 2,896 / 0 / 10.75
1993 / 69,000,000 / 5,904 / 8,598 / 78,000 / 3,325 / 1 / 12.7
1994 / 71,000,000 / 6,574 / 8,400 / 78,000 / 3,504 / 0 / 12.7
1995 / 77,000,000 / 7,953 / 9,892 / 75,000 / 3,708 / 0 / 14.1
1996 / 89,000,000 / 8,192 / 11,452 / 75,000 / 3,690 / 0 / 14.1
1997 / 87,000,000 / 7,993 / 13,161 / 30,000 / 3,905 / 0 / 20.9
1998 / 88,000,000 / 14,183 / 22,536 / 30,000 / 3,921 / 0 / 20.9
1999 / 103,700,000 / 34,130 / 22,112 / 28,000 / 3,963 / 0 / 45.9
2000 / 1,300,000,000 / 58,131 / 29,717 / 28,000 / 4,106 / 1 / 45.9
Appendix B:
Regression StatisticsMultiple R / 0.994913174
R Square / 0.989852224
Adjusted R Square / 0.969556671
Standard Error / 67334693.06
Observations / 10
ANOVA
df / SS / MS / F / Significance F
Regression / 6 / 1.327E+18 / 2.2113E+17 / 48.7718778 / 0.004418072
Residual / 3 / 1.36E+16 / 4.53396E+15
Total / 9 / 1.34E+18
Appendix C:
SUMMARY OUTPUTRegression Statistics
Multiple R / 0.430067289
R Square / 0.184957873
Adjusted R Square / 0.083077607
Standard Error / 369537998.1
Observations / 10
ANOVA
df / SS / MS / F
Regression / 1 / 2.47914E+17 / 2.48E+17 / 1.8154436
Residual / 8 / 1.09247E+18 / 1.37E+17
Total / 9 / 1.34038E+18
Coefficients / Standard Error / t Stat / P-value
Intercept / -1109844610 / 980736523.7 / -1.13164 / 0.2905629
#Hotel Rooms / 366464.055 / 271981.9022 / 1.347384 / 0.2147714
Appendix D:
SUMMARY OUTPUTRegression Statistics
Multiple R / 0.992428056
R Square / 0.984913446
Adjusted R Square / 0.966055254
Standard Error / 71101554.52
Observations / 10
ANOVA
df / SS / MS / F / Significance F
Regression / 5 / 1.32016E+18 / 2.64032E+17 / 52.2273516 / 0.000980788
Residual / 4 / 2.02217E+16 / 5.05543E+15
Total / 9 / 1.34038E+18
Works Cited
* Statistics taken from:
World Resources. World Resources Institute. Basic Book, Inc. New York. Yrs. 1985-
2000.
World Development Indicators 2001. World Bank. 2001. Development Data Center
Stat Yearbook. United Nations. 44 issue. Yrs. 1985-1999.
Prugh, Thomas. “Natural Capital and Human Economic Survival”. Second Edition.
Lewis Publishers.
Tourism Revenue in Belize
Scott Hettermann
Prof. Casey – Econ 380
Dec. 7, 2001