Slow Tourism Project to Redistribute Tourist Demand in Lazio: Cost-Benefit Analysis Using Monte Carlo Simulation

Abstract

This paper examines the potential financial advantages and disadvantages of a project called Feudo Turistico, which proposes the establishment of a slow tourism destination between Rome and Fiuggi. The objective of the project is to reduce the concentration of tourist demand in the city centers of Rome and Fiuggi and instead distribute it across the Lazio region by providing a local cultural and active tourism experience with new services that are currently unavailable in the region. To assess the project’s feasibility, a cost-benefit analysis is conducted using Monte Carlo Simulation with 10,000 trials. This method allows for obtaining the net present value, internal rate of return, and discounted payback period for each simulated combination of input variables and then exploring the location and dispersion of these indicators. A simple random sampling technique is employed to simulate different sets of input parameters using a factor range between pessimistic and optimistic scenarios, where minimum and maximum values are determined based on existing literature, historical data in statistical reports of research institutions, and calculations derived from this data. Furthermore, two different settings are considered regarding the initial distribution of input parameters, and their outcomes are compared. The results and distribution of net present value, internal rate of return, and discounted payback period indicate that the Feudo Turistico project possesses a financially self-sufficient business model, generating cash flows that can repay the initial investment within a few years with a high probability. Keywords: slow tourism, cost-benefit analysis, discounted cash flow, Monte Carlo Simulation