Using IRR and NPV models to evaluate societal costs of tourism projects in developing countries

Abstract

This paper examines some societal costs involved in tourism development in developing countries, and argues – using the theory of developmental economics – that although the social value of an act of tourism investment should exceed its social cost, the valuation techniques used to estimate these costs during the investment decision process are not fully developed. It provides modified internal rate of return ( IRR) and net present value ( NPV) models, as possible measurement tools to be considered in the investment criteria to help solve this problem. Policy makers can incorporate these models into studies of tourism’s overall desirability.