Optimal carrying capacity in rural tourism: Crowding, quality deterioration, and productive inefficiency

Abstract

This paper introduces a novel framework for characterizing destination overcrowding in rural tourism using a production approach. We build upon destination life cycle, carrying capacity, and consumer preference theories to characterize optimal levels of overnight stays in the presence of disutility from crowding. Using panel data for rural tourism in Spanish provinces, we model crowding non-linearly as a demand shifter within a service production function. To deal with plausible endogeneity, we use a control function approach within a Stochastic Frontier regression. Consistent with our theoretical predictions, we show there is a non-linear concave relationship between overnight stays and crowding. We calculate optimal carrying capacity levels (turning points) for each province and illustrate which regions are exhibiting negative externalities from overcrowding.