Abstract

The aim of this paper is to estimate households’ willingness to pay (WTP) for the development of community based tourism (CBT) around Alelo Bad hot spring water. To achieve the stated objective, relevant data was collected from a total of 157 sample respondents through questionnaires, interviews and field observation techniques. In this study, both descriptive and econometric models (Seemingly Unrelated Bivariate Probit and Probit models) were used to analyze the collected data. The descriptive statistics clearly shows that 66.24% of the respondents were willing to pay for the existence of the proposed project while 33.76% were not willing to pay. The seemingly unrelated bivariate probit model output revealed that the mean WTP of the sample household heads per year for the proposed project was birr 468.75 ($16.401) as well as the total sample respondents has estimated to pay birr 73,593.75 ($2,575.045) per year per household head. Gender, age, family size, off-farm income, education status, social responsibility and initial bid values were statistically significant variables which affect the WTP decision of household heads in the study area. The government should create a conducive environment for different stakeholders to actively engage in boosting the returns of the tourism sector and fulfillment of the proposed project in the study area. The tourism policy should be amended in the form of allocating higher proportion of the revenue obtained from the tourism sector to the local communities for the development of social infrastructure, improving the living standard of the local communities and sustaining resource conservation.

Key words: Alelo bad hot spring water, WTP, seemingly unrelated bivariate probit and probit models, Ethiopia.