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The Travel Cost Method

Several studies have used the TCM for determining demand for recreational sites. These studies take into account sites’ attributes and/ or attractions. Attributes, such as location or quality of the site, may influence demand. For example, Font (2000) found that the area in which the recreational site is located helps to promote the site itself. Johnstone and Markandya (2006) examined river site choice and found that rivers with higher quality attribute levels were preferred by those surveyed. Attractions (e.g. available activities), may enhance the experience of visiting the site. Shrestha et al. (2002) found that, as recreational fishing in wetlands was an extremely important activity to visitors, similar activities would increase the benefits of the site. Wineries may also offer additional attractions and attributes that visitors may enjoy. These additions may have a positive effect on the demand for visiting wineries.

In this research, the recreational sites are wineries. Based on their origin, visitors to wineries face varied costs, including the prices for accessing and participating in the activities. From these costs/prices, along with other factors enumerated below, demand for wineries can be determined. In order to collect this information, a survey would be distributed to a random sample (Boardman et al., 2006, p. 354). Demand could then be found by analysing the data collected.

The demand by an individual, q, is expressed as a function of the price of actually visiting a particular winery (known as the own price), p, the price of substitutes (competing winery sites and alternative non-winery recreational sites), ps, the visitor’s income, Y, and the visitor’s tastes and preferences, Z:

(Boardman et al., 2006, p. 354). The authors have adapted this equation slightly to include a , which are the attractions that a recreational site potentially provides. The resulting equation is:

The full (complete) own price, P, of visiting the winery is a compilation of a visitor’s opportunity cost of the time spent travelling to and from these wineries and the cost of travelling (fuel costs, tolls, the cost of the mode of transportation, lodging, vehicle use, admission costs, winery activity fees, etc.) (Boardman et al., 2006, p. 354). The costs of visiting other recreation sites should be counted if these additional sites are visited on the same day as the wineries (complements). Complements may also be added to the right-hand side of the equation in one of two other ways: (i) as a distinct monetary value or (ii) as a dummy variable. To obtain the own price, the value of the time spent travelling and visiting the winery (opportunity costs) is converted into a monetary unit and then added to the financial costs of visiting. The common way to value the opportunity costs of travelling and visiting is to derive a monetary estimate based on the hourly wage of the visitor. This wage is the amount of compensation the visitor would have earned working instead of taking the trip.

The price of substitutes, ps, is the prices of other activities or admission to different recreational sites. Visiting these sites or engaging in other activities is what visitors could be doing instead of visiting a particular winery. However, if an individual visits one of these sites in addition to a particular winery, that site would be considered as a complement. The researcher must review survey responses carefully to make the distinction.

If the researcher chooses to survey one visitor of all the visitors from the same household, the visitor’s income, Y, should include all household income. If not, income may not be accounted for accurately. However, the researcher may decide to survey each member of the household as a separate observation to gain more information.

Visitor tastes and preferences, Z, may vary greatly among respondents. For example, some visitors may prefer a winery that has an adjoining restaurant; others may prefer to visit a restaurant in the town where the winery is located. One visitor may want to do a multiple-winery tour in one day; another may want to visit only one winery per day. Also, preferences for transportation should be asked about if researchers or wineries are interested in determining if that might be a factor in demand.

To find out which, if any, attractions would increase the number of visits to wineries, researchers may incorporate a set of hypothetical questions into a. These questions would comprise potential attractions that would enhance the winery experience, like special events hosted by the winery or scenic areas that visitors can explore. Attractions would be provided by either wineries or other entities, such as nearby towns. Table 12.3 lists some of the attractions the researcher may want to consider. The attractions presented are starting points that may be expanded upon by the researcher. Respondents would be given hypothetical questions about which attractions would be provided by wineries and/or by other entities. They would then state which attractions they would prefer and how many more visits they would make.

As mentioned above, to obtain this information, researchers would conduct a random sample survey. Potential visitors are surveyed about their preferences, their actual visits to the sites, the costs of their visits, their income and any other relevant information (Boardman et al., 2006, p. 354). This sample would include four groups: visitors to Philadelphia who are not planning to visit wineries; Philadelphia residents who have not visited wineries; visitors to Philadelphia who have visited or plan to visit wineries during their trip; and Philadelphia residents who have visited or plan to visit wineries. The sites where respondents are surveyed would be determined by the researcher. The researcher might also survey respondents by telephone or through a combination of sites and by telephone. The table in the appendix shows a list of possible survey questions.

The resulting estimation of this equation will produce an empirical functional relationship of visitation and the price of travel and other variables (whether the effects of the variables are positive or negative). Another result of the estimation allows for predictions of visitation to

Table 12.3. Possible attractions offered by wineries and by other entities.

Wineries’ attractions

Hosting events like weddings, showers and corporate retreats

Restaurants and bed and breakfasts adjoined to the winery

Musical events and concerts

Holiday activities

Other events such as movie or game nights

Vineyard tours (if winery has a vineyard)

Wine trails or tours

Culinary classes and wine pairing demonstrations

Purchased wine is shipped to visitor’s home

Ability to purchase wine via website

Other entities’ attractions located near wineries

Restaurants and hotels or bed and breakfasts

Museums

Tourist shopping areas

Scenic areas (e.g. parks) available to explore

Historic towns or cities

change if there are changes in the right-hand side variables. If SEPTA were to receive an increase in funding at the local, state and/or national levels, rail fares may be lowered. This reduction in fares could lead to a decrease in the own price and an increase in winery visitation.

From the answers provided to the questionnaires, demand can be estimated. The wineries and/or interested tour companies can quantify the answers into variables. After the OLS regression has been completed, the interested parties should examine the coefficients (betas) for significance, especially Z and a. The signs and significance of the coefficients for these variables may indicate how much interest visitors, both actual and potential, have in transportation between Philadelphia and the wineries and the attractions that could be offered to them.

The TCM does have limitations. One such limitation is the estimation of costs. Opportunity costs may not be accurately estimated. The costs of travelling, such as the cost of vehicle operation, may not be accurately accounted for either. As mentioned previously, if the visit to the winery included visits to other recreational sites, these visits must also be included in the cost of the trip (Boardman et al., 2006, p. 360). There may be econometric issues as well. One issue is that visitors may decide, at the same time, not only to travel to a winery but how much the visit will cost as well. This problem is called endogeneity, which could arise because visitors who live close to wineries select specific wineries because of short travel time (Boardman et al., 2006, pp. 360-361).

 
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