02 October, 2018

Dealing with overtourism: A complex solution for a simple problem

This contribution starts easy and ends complex. Overtourism is a simple and easy-to-explain challenge. Solutions might be quick and easy. However to get there, we are encountering a serious challenge: The allocation of property rights with regard to public goods.

Let me start with a quick diagnosis. Those who have read my first contribution on overtourism (April 29, 2018) might already be familiar with the diagnosis of the problem. The reasons we are encountering overtourism in one or the other location on this planet is – in the worst case – a combination of the following developments:

(1) Expansion of global and partially regional demand in general, demand which is notably allocated at best suitable points of attractions (mostly first and second tier attractions)

(2) Market penetration and expansion of low cost airlines, which allow everyone to make trips as often as they like. Not money is the restrictive factor, but time.

(3) Expansion of peer-to-peer accommodation (this has nothing to do with sharing), expanding – in core – accommodation capacities in popular places.

(4) Expansion of the cruise supply, putting a heavy burden on popular coastal cities.

Take all 4 developments combined, and you have your perfect storm!

Scientifically spoken, we have a situation, in which profits and benefits are privatized (with an increasing number of actors) and some but major negative impacts (congestion such as too many people, pollution such as noise, etc.) are socialized, literally imposed on the general public (of which also tourist are part of). In sum, and again scientifically spoken, we have increasing external effects from tourism (“congestor and polluter does not pay”) which are not being taken into account. Hence, benefits and damages are not properly distributed.

Why is this happening?

For a simple reason. We lack an allocation of property rights with regard to public goods/ commons; everyone can use them free und mostly unconditional. However, if is there is something for free, we eventually encounter rivalry in consumption. As a result, public goods are being “overused”. When I say public goods, I mean tangible elements, such as (congested) locations equally and as well as non-tangible elements, such as (polluted) air, (lack of) silence, etc..

The degree of overuse (when is too much use too much use?) however is a perceptual or in certain cases a pure physical issue. The “too much” is a result of before mentioned rivalry of consumption For instance, one single visitor on Markus square in Venice (no matter if it is a local or tourist) will most likely not trigger the perception of rivalry of consumption, less a feeling of overuse.

Now, if the reason for the problem is the lack of allocation of property rights: let us try to allocate property rights! What sounds easy poses in fact another serious challenge. Let me illustrate this with a thought experiment, based on the Coase Theorem (Ronald Coase was a British economist and Nobel Prize Laureate in 1991). Say, there is a beautiful alpine valley. In this valley, among some local inhabitants, there is a tourist resort (RESORT) and a steel foundry (STEEL). STEEL emits quite a significant amount of pollution (noise, air), hindering the business of RESORT (guests do not like noise or polluted air). Hence, RESORT sues STEELS, (1) demanding compensation for the bad course of business and (2) requiring the instant stop of the operation of the steel foundry. STEEL thereupon demands compensation from RESORT for stopping steel foundry operation. Who pays whom in this situation? One can only answer this question if property rights (of the air) are clearly and unequivocally have been allocated.

Remedy: What is there to do?

Regulate by, e.g., defining thresholds (to allocate rights on – at the moment – public goods without property rights) or bring in pricing mechanisms for the external effects (which would first need to be measured; the degree of congestion, for instance, is a perceptual issue; in the eye of the beholder). However, when one does so, one has to be sure that one accounts for newly and additionally generated distributional effects (there are losers and winners of such measures; now there are losers and winners with the existing situation). Those distributional effects stem from the redistribution or redefinition of property rights; this redistribution has therefore to be executed along a (potentially participatory) democratic political process, in which all stakeholders can lodge their claims.

In conclusion, and with regard to research, we would first need:

(1) …measurement scales and empirical results for the acceptance of congestion and pollution by tourism (to have hints of where and how to allocate property rights to the “users” and the “congestors”) as well as

(2) …contingent price valuations (or the like) to put a price tag on a, e.g., “congested historic city” (hence to have a quantitative grip on the problem).

(3) … Ideas of designing a political process for property rights allocation (here tourism scholars could contribute to a wider discussion in other domains)

The discussion will be interesting – the potential solutions even more. Bring them on!

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