Is the Willingness to Pay Affected by Beach-Related Attributes? Hedonic Pricing Approach for Valuing Environmental Amenities

Abstract

Hotel room pricing in the tourism sector is a major application of the hedonic pricing method. This study predominantly focused on investigating whether room rates of hotels and guest houses in Hikkaduwa show the value of environmental amenities of the beach. Developing the hedonic pricing model used data from 72 hotels and guest houses, using a multiple linear regression. The explanatory power of the model was strong with an adjusted R 2 value of 0.803. The results lent support to the view that both non-environmental and environmental characteristics of hotels and guest houses, including the environmental amenities in the Hikkaduwa beach, influence the room rates. The significant non-environmental characteristic variables were having a swimming pool, a minibar, the internet access to the room, air conditioning in the room and the size of the room. The presence of a swimming pool increases the room rates by 73.7 %. The significant variables related to the environmental amenities in the Hikkaduwa beach were having sea view to the rooms and the hotel or the guest house being close to the beach. The room rates of hotels and guest houses with sea view to their rooms were 42% higher than the room rates of hotels and guest houses without that opportunity. Similarly, the room rates were 41.5% higher when the hotels and the guest houses are within 25 m from the beach. Moreover, having a garden with flowering plants was significant. The Marginal Willingness to Pay values for having sea view to the rooms and for being close to the beach were Rs. 2496 and Rs. 2466 respectively. These research outcomes will be useful in the decisions on managing hotels and guest houses in Hikkaduwa.