Executive Summary

Economic Valuation of Public Park: An Application of Travel Cost Method for Lumbini Park, Hyderabad
(Master’s Dissertation)

Icfai School of Public Policy
Panjagutta, Hyderabad

Economic Valuation of Public Park: An Application of Travel Cost Method for Lumbini Park, Hyderabad

1.1 Background

Public parks as representative of urban green areas play an excellent role that balances the needs for city conservation against degradation of urban environment while keeping the rapid pace of urban growth. In recent years, the urbanization of many cities advance the need for green space in the community to serve people in multiple objectives of environmental protection, recreation, and to meet people's ability to incorporate physical activity into their daily routines.

However, development, maintenance and preservation of the quality of public park service, are tough issues faced by many city governments and communities. In this relation, an approach to value public park services is considered to be necessary and to identify users’ benefit through travel cost method together with total expense for better management. This approach highlights the dominant functions of public parks from users’ point of view.

1.2 Introduction

The study attempts to evaluate the recreational value of Lumbini Park, Hyderabad which is one of the most visited public parks in the city. In this relation, Travel Cost Method (TCM) which falls under the subject of Economics of the Environment and Natural resources as included in the theory of valuing environmental benefits and damages that involves both direct and indirect methods, namely the Contingent Valuation, Hedonic Pricing and the Travel Cost Method to generate an economic value to environmental goods.

With the relevance of the application of TCM in the study, TCM being a revealed preference method is claimed to be the oldest of the non-market valuation techniques, as an economic valuation approach to determine value figures to non-marketed goods which also relates to other cost factors influencing the value. The TCM in this respect aim to value the recreational value of the environmental assets like parks, lakes and other public areas which host a good deal of recreational activities and necessitates significant expenditure for their enjoyment.

The basic tenet of the Travel Cost Method is that although the actual value of the recreational activity does not have a price label but the costs incurred by individuals in travelling to the recreational sites can be used as the proxy value. Therefore, the assumption of the TCM is that the incurred costs of visiting a site reflect its recreational value in some way.

The method accordingly is used to estimate the value of recreational benefits of the ecosystem, which assumes that the value of the site or its recreational services is reflected in how much each individual is willing to pay to get to the site. The method as part of the revealed preference method applied in measuring nonmarket values uses the actual behavior and choices of the individual to infer these values. Hence, peoples’ preferences are revealed by their choices. TCM is further classified into zonal travel cost method and individual travel cost method.

1.3 Research Gap

Travel Cost Method, in India has mostly been used to make extensive studies in valuing national parks and ecological important areas while very few attempts have been made to value public parks. Hence, having a limited application for valuing Public Park, the study focuses on Lumbini Park which lies in the heart of the city of Hyderabad, Andhra Pradesh in India. The study attempts to bridge this gap and enhance the scope for further valuation of public parks which is a major element for environmental recreation, especially in urban cities.

1.4 Objective

The main objectives of the study were:
· Valuation of Lumbini Park in Hyderabad by investigating recreational behavior of the park users using the Individual Travel Cost Method.
· To suggest necessary policy recommendation to local government policy makers for suitable management plan in maintaining and improving the quality of the park services.

1.5 Methodology/ Data Source

The study has used both primary and secondary sources of data. To be able to fulfill the purpose of the study the individual travel cost method is chosen focusing only on the local visitors. The travel cost method being a survey based method uses the respondents’ travel cost as a measure of the willingness to pay for visiting the park. It uses cost of travel as a surrogate for the willingness to pay to use the recreation site. It includes actual transportation cost, miscellaneous costs and the opportunity cost of travel time spent on the journey (Hanley and Spash 1993). Using the random sampling method, data is collected on both week days and weekends. The study includes a sample size of 70 visitors.

The study as aimed to find the recreational value of Lumbini Park of Hyderabad where visitation rate marks as the dependent variable with the average income of the visitor, round-trip travel costs, age, infrastructure, etc as the independent variables. Thus, the visitation rate shows the average willingness to pay to visit the Park per year.

The study focused Lumbini Park since it provides various recreational facilities like boating; laser shows and children’s play area, besides it lies in the heart of the city. For this, a survey was conducted to collect information about travel cost of local visitors, their general information and other expenses to visit the park. The data was thus analyzed to find out the distances travelled, income and travelling expenses. Additional information on mode of transport used by the visitors and substitute sites was also compiled.

1.6 Study Area

Lumbini Park located at a distance of three kilometers from Hyderabad, lies within a stretch of ten kilometer radii Necklace Road that connects the city of Secunderabad and Hyderabad, which is the focal junction of the city. In the beginning of the 1980’s the plan for a park around the lake took a grip and from 1987 to 1990, a piece of land was reclaimed from the water (lake) to build a park for the public. The construction of the recreational site then started and was completed by 1994 through the Hyderabad Urban Development Authority (HUDA) and was named after the garden that was the birth place of Lord Buddha. (India Folks 2007)

The highlight of the Lumbini Park is the spectacular musical dancing fountain and water cascading provided with colorful lights. Besides, it provides boating facility whose service is looked over by the Andhra Pradesh Tourism Development Corporation (APTDC).Lumbini Park falls under the Buddha Purnima Project Authority (BPPA) that was constituted for the development of Hussain Sagar Lake and its environs covering an area of nine hundred and two hectares that was declared as Special Development Area, with the prime focus on orderly growth and environmental growth.

1.7 The Findings

The paper having applied the individual travel cost method (TCM) to determine willingness to pay to visit Lumbini Park interprets the following results:
· In the demand function, taking both the round trip costs, visitation rate was impacted significantly by travel cost, where when travel cost increased visitation rate decreased. This shows that greater is the distance to be travelled, lower is the number of visits. However, the average distance travelled by the local visitors was taken as three kilometers.
· Age and annual income also affected the visitation rate significantly. Higher income group people were visiting more than the lower group.
· The visitors were passive in nature and visited the park more for relaxation and fun, unlike active ones like for exercising, cycling, etc.
· The consumer surplus from users’ point of view was found out to be Rs 45.45 per visitor per year, which means that each individual at an average is willing to pay Rs 45.45 to visit the park per trip.
· The survey result showed that the visitation rate of visitors is 6.22 times per year, which means that individuals are likely to visit Lumbini Park at an average of six times a year.
· With the application of a linear regression analysis, the total average willingness to pay per visitor per year was calculated as Rs. 282.69. Therefore, the economic value of Lumbini Park is Rs. 282.69 per visitor per year, which could be further multiplied with the total number of visitors to get the total economic value.

1.8 Policy Suggestions

Form the above findings, the study has been able to suggest relevant policy suggestions to the Buddha Purnima Project Authority (Hyderabad Urban Development Authority, HUDA)[1] in order to further improve the recreational facilities of the Park, for which the park can increase the average willingness to pay of the visitors in visiting the site.

The study hence, puts forth a policy recommendation on the basis of the data analysis and visitors’ response as:
· To increase the entry fee from Rs. 5 to Rs. 10 per visitor.
· The main reason for not improving the recreational park facilities was said to be due to lack of revenue.

This can improve the quality of the park as the Authority can generate larger revenue and hence, invest more for improvement of the park. The resulting suggestions are also based on various feedbacks from the Authority, staffs-in-charge and the visitors.
In addition, with various responses from the visitors irrespective of the income and the distance travelled, they are willing to visit the park whenever possible provided the park is worth spending. For this, the further recommendations are put forward:

· To increase the recreational activities to attract more visitors, like more children play items, since most visitors were inclined to come for their children’s enjoyment.
· Improve parking facilities and quality of food items, and
· Regular cleaning of Hussain Sagar as Lumbini Park lies adjacent to the lake, which could affect the reason for visitors in visiting the park.

1.9 Conclusion

With the application of the individual travel cost method, the study revealed that travel cost however is not the only factor to find the actual recreational value of a non-marketed environmental good. The economic factor like income of the visitors, social factors like age, education, infrastructure, their environmental attitude and their importance to recreation all affect the individuals’ number and willingness to pay to visit the park.