Seventeen years ago, economist Michael Porter put forward the recipe for competitive success by establishing that winning industries or regions will be those that differentiate themselves by promoting their uniqueness.
Alaska tourism has a competitive advantage by virtue of its beauty, location and natural resources, and the tourism industry has worked hard to promote the state’s exceptional attractions.
But an increasingly competitive global marketplace is bearing down on us, and it is no longer enough to have a great product. As Porter said, we must have the means to compete and differentiate ourselves in a marketplace where other destinations are willing and able to spend much more to reach their markets.
The good news is that tourism, through its destination marketing efforts, offers a strong pipeline a marketing pipeline that connects the Alaska travel experience and Alaska businesses with consumers all over the world. The deliverable is immediate and equates to more than 1.9 million visitors every year.
Like other natural resource industries, we endeavor to reach the market but our pipeline built more than 50 years ago needs refurbishing. The current destination-marketing budget combines $5 million in private funds raised from the industry with $5 million matched by the state, all managed by the Alaska Travel Industry Association (ATIA). But that amount is no longer enough for our message to penetrate the market. Increasingly, other destinations are flooding consumers with more television commercials, travel stories, co-promotions, direct mail, brochures and Internet marketing. In fact, Alaska now ranks 38th out of the 50 states in terms of public sector funding for tourism marketing.
ATIA anticipates that its marketing effort will be further impacted when industry partners with bigger tax bills to pay are forced to abandon their voluntary contributions to the marketing program. Conservatively, ATIA stands to lose $2.5 million in industry contributions along with the matching $2.5 million from the state. Other state and municipal taxes, fees, transport charges, a new car rental tax, lodging tax increases and pending cruise industry taxes now account for an estimated $140 million collected from tourism businesses and our visitors. This number increases when you add in other relevant municipal and state assessments.
So who gets hurt when Alaska’s competitiveness dwindles? Small tourism businesses, those who want jobs in the tourism industry, our economy and our economic advantage.
The decision to help grow Alaska’s travel industry should be an economic development and investment decision not a budget decision in which the governor and the Legislature participate. As the tourism industry faces an ever-competitive future with dwindling resources, the Legislature has been asked to consider several ways to address this challenge, to look at tourism as a renewable economic resource and to develop the economic potential of the industry by overhauling the existing pipeline to bring Alaska’s travel resource to market.
Options to discuss include:
1. Increase the funding level for the ATIA core destination marketing program in the next state operating budget to $20 million;
2. Increase the current funding level for a separate program to entice more independent travelers to $8.5 million equal to the amount of the current vehicle rental tax; and,
3. In concert with the administration, work to make needed amendments to ensure that the cruise ship tax is implemented in a way that does not hinder the future growth of this important sector of Alaska’s travel industry, with particular focus on environmental monitoring, financial disclosure and eliminating duplicative taxes.
The potential for the travel industry to further strengthen Alaska’s economy and enhance its residents’ quality of life is tremendous each vacationer spends about $1,260 to enjoy flightseeing trips, fishing charters, museums, glaciers, Native culture and state and national parks. But developing it further will not happen by accident. If Alaska is to stay competitive for the good of future generations, it will be important to remember tourism is not just ATIA’s business or the state’s business or the Legislature’s business. Tourism is everyone’s business.
Ron Peck is the president of the Alaska Travel Industry Association.
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