While governments are typically entrusted with the administration and enforcement of environmental protection, they often lack the commitment or capability to manage ecotourism sites effectively. The regulations for environmental protection may be vaguely defined, costly to implement, hard to enforce, and uncertain in effectiveness. Government regulatory agencies, as political bodies, are susceptible to making decisions that spend budget on politically beneficial but environmentally unproductive projects. Because of prestige and conspicuousness, the construction of an attractive visitor’s center at an ecotourism site may take precedence over more pressing environmental concerns like acquiring habitat, protecting endemic species, and removing invasive ones. Finally, influential groups can pressure and sway the interests of the government to their favor. The government and its regulators can become vested in the benefits of the ecotourism industry which they are supposed to regulate, causing restrictive environmental regulations and enforcement to become more lenient.
Management of ecotourism sites by private ecotourism companies offers an alternative to the cost of regulation and deficiency of government agencies. It is believed that these companies have a self interest in limited environmental degradation, because tourists will pay more for pristine environments, which translates to higher profit. However, theory indicates that this practice is not economically feasible and will fail to manage the environment.
The model of monopolistic competition states that distinctiveness will entail profits, but profits will promote imitation. A company that protects its ecotourism sites is able to charge a premium for the novel experience and pristine environment. But when other companies view the success of this approach, they also enter the market with similar practices, increasing competition and reducing demand. Eventually, the demand will be reduced until the economic profit is zero. A cost-benefit analysis shows that the company bears the cost of environmental protection without receiving the gains. Without economic incentive, the whole premise of self interest through environmental protection is quashed; instead, ecotourism companies will minimize environment related expenses and maximize tourism demand.
The tragedy of the commons offers another model for economic unsustainability from environmental protection, in ecotourism sites utilized by many companies. Although there is a communal incentive to protect the environment, maximizing the benefits in the long run, a company will conclude that it is in their best interest to utilize the ecotourism site beyond its sustainable level. By increasing the number of ecotourists, for instance, a company gains all the economic benefit while paying only a part of the environmental cost. In the same way, a company recognizes that there is no incentive to actively protect the environment; they bear all the costs, while the benefits are shared by all other companies. The result, again, is mismanagement.
Taken together, the mobility of foreign investment and lack of economic incentive for environmental protection means that ecotourism companies are disposed to establishing themselves in new sites once their existing one is sufficiently degraded.