Final answer:
An economic feasibility study including a cost-benefit analysis, market analysis, and site analysis is key in determining if tourism development projects are a viable investment. It includes evaluating benefits and costs of environmental protection and using marginal analysis for pollution reduction. Feasibility studies help balance profit with local economy and environmental sustainability.
Step-by-step explanation:
Investors and developers determine if tourism development projects will generate sufficient returns on investment primarily through an economic feasibility study. This involves a comprehensive cost-benefit analysis to evaluate the potential financial returns against the costs involved. Market analysis is also critical to understand the demand for tourism in the area and the competition. Site analysis is necessary to assess the physical and environmental aspects while a carrying capacity analysis evaluates the environmental impact and sustainability. These assessments help to ascertain the viability of the development and its impact on local economies and environments.
Moreover, it is essential to evaluate the benefits and costs of environmental protection, especially in tourism, where ecotourism can play a significant role. Applying marginal analysis helps to illustrate the marginal costs and marginal benefits of reducing pollution, outlining how tourism can be balanced with environmental conservation efforts. In regions like the Caribbean Basin, the investment in tourism infrastructure must be weighed against its benefits to local communities and the potential for overreliance on outside interest that can lead to multiplier leakage, where profits do not significantly benefit the local economy.