Editor's note: This article has been corrected to show that total taxable sales for primarily tourism businesses in 2016 was $175 million, up 1.7 percent from 2015.
The tourism season in Alaska is projected to grow by 2 percent over this year, but the future for the industry’s marketing is still uncertain.
More than 2 million people visited Alaska in 2015, breaking previous records. Early numbers for 2016 show that air, cruise ship and highway traffic to the state are up, as well as traffic to parks like the Kenai Fjords National Park. For the 2017 season, the Alaska Travel Industry Association is predicting a small gain in visitation of about 2 percent, said Sarah Leonard, president and executive director of the association.
In a presentation at the Industry Outlook Forum in Kenai on Wednesday, hosted by the Kenai Peninsula Economic Development District, Leonard said the tourism industry in Alaska provides about 47,000 jobs and $4 billion in economic activity around the state, including revenue to both state and local governments. The industry association advertises for Alaska around the world and supports local organizations like the Kenai Peninsula Tourism Marketing Council, which promote individual regions within the state.
“Many travelers still have Alaska at the top of their bucket list,” Leonard said. “ATIA wants to make sure that Alaska stays top of mind as we work to sell Alaska over other destinations.”
The average Alaska visitor is coming with a partner or family and is about 51 years old with an average salary of $107,000 per year, she said. About 10 percent of them are international visitors, and within the U.S., Californians are the most frequent visitors, followed by Washingtonians, she said. Almost half of their spending is in the southcentral region, which includes the Kenai Peninsula.
In 2016, the peninsula saw approximately $175 million in spending in primarily tourism businesses, up 1.7 percent from the previous year, said Shanon Davis, the executive director of the Kenai Peninsula Tourism Marketing Council, in a presentation at the Wednesday forum.
By sector, tourists spent more on accommodations, food, guided tours, like bus tours, and guided land tours this year, Davis said. Guided water tours, which include sportfishing guided trips, were down about 1.1 percent but were still the third largest sector of tourism spending on the peninsula. Car rentals were down as well, which Davis said might be largely related to the pullback in activity on the Alaska LNG Project as the field work was scaled back and completed this summer.
By community, Seldovia’s tourism revenue grew by 1 percent, Seward’s grew by 5.6 percent, Homer’s by 4.7 percent and Soldotna’s by about 1.2 percent. The only community that decreased was Kenai, by about 10 percent. Davis said Kenai saw a 45 percent increase in 2015 over 2014, also likely related to the increased activity with the Alaska LNG Project.
At the same time, taxable sales in the borough fell significantly in the second and third quarters of 2016 as compared to 2015 — about 3.1 percent, or from $664 million to $644 million. One contributing factor could be the change in Soldotna’s nonprepared tax policy, Davis said.
In past years, Soldotna collected grocery sales tax year-round, but after a citizen initiative passed in the October 2015 election, the city could only collect sales taxes in the summer months. Thus, there were two months in the summer the city did not collect sales tax the way it historically had, leading to a loss of approximately $16.6 million. Soldotna residents voted to adopt a home rule charter in October 2016, and the city council reapplied the nonprepared food tax at one of its meetings less than a month later, effective Dec. 1.
The Kenai Peninsula also isn’t keeping pace with other areas of Alaska, like the Mat-Su, where expenditures by tourists grew about 7 percent this year, Davis said. The council, which has a budget of more than $600,000, spends less than other areas of Alaska — the Mat-Su region spends about $900,000 and Juneau spends more than $1 million, she said.
“Competition is fierce for those visitor dollars in Alaska, so we need to be really smart and strategic about how we are spending our marketing dollars,” Davis said.
Among last year’s budget cuts by the Legislature was the statewide marketing funding for Alaska’s tourism industry. The Alaska Travel Industry Association handles the state’s marketing efforts and received $1.5 million in 2017 as compared to more than $4.5 million in 2016 and $9.6 mill ion in 2015. That has led to the closure of multiple overseas offices and no tourism ads in magazines this year or directed mail, Leonard said. Cruise companies, which bring thousands of visitors to Alaska every year, plan their itineraries years in advance, which has a lag effect. Marketing efforts also have a lag effect, so even though there is predicted growth next year, the reduction in marketing may lead to decreases in visitation in the future.
“It takes a couple of years in the marketplace for marketing strategies to bring returns and to realize those economic benefits,” Leonard said.
The tourism industry is projected to continue to grow in the future as the population of the country and world grow. International marketing will be important as other countries, like China and Brazil, develop and Alaska has to compete for market shares in those countries, she said. This year, because of the reduced funding, Alaska has no representation in overseas markets and is not working with international airlines to provide access.
“We have had to stop efforts to attract 10 percent of our visitors,” Leonard said. “Imagine what that would do for your business. The national advertising program has essentially been eliminated … for the first time in 40 years, Alaska will not have its own trip planning publication.”
The Alaska Travel Industry Association is asking tourism businesses around the state to put money toward marketing efforts through a statewide Tourism Improvement District, which would levy a tax on all tourism businesses for that purpose. Leonard said at the forum that businesses are working toward a consensus about it. The Legislature would have to authorize it in statute, as previously reported by the Clarion.
Reach Elizabeth Earl at firstname.lastname@example.org.