Tourism worth the investment

Posted: Thursday, March 31, 2011

Question: Why should the Kenai Peninsula Borough invest $300,000 in tourism marketing?

Answer: Tourism marketing is an investment that generates new tax revenues for government, revenues that are used to fund important needs for the Kenai such as education, roads and waste.

In 2010, tourism generated $161 million in taxable sales to the borough. This equates to $4.8 million in sales tax revenue. This does not include any revenue from businesses like gas stations or retail stores.

Question: Why should the borough be investing in marketing that promotes one industry? Nobody helps me market my local business.

Answer: The borough is the number one benefactor of the tourism dollar, as they receive sales tax from every visitor who comes to the Kenai, regardless of the community they visit or the business that they stay with.

The borough is not paying to promote "Joe's Guide Service." The borough is promoting the borough. All of KPTMC's materials promote the Kenai and our communities as a whole, including many areas that are unincorporated and have no means to promote themselves.

Tourism businesses don't have a captive market like other retail businesses do. A local clothing store or movie theater can advertise in the local paper or on the radio and reach the customer. It is in the best interest of the borough as a whole to draw Alaskan visitors to the Kenai, then individual communities and businesses can target them from the pool that we create.

Question: Shouldn't tourism businesses pay more to KPTMC programs so my tax dollars don't have to support it?

Answer: The money that is re-invested in marketing is a small fraction of the sales tax dollars that visitors pay.

Members provide 40 percent of our budget. To keep up with their competitors, tourism businesses on the Kenai have to invest in a multitude of marketing arenas. local chambers, KPTMC, the ACVB and ATIA, just to name a few. These costs add up quickly.

To make up the difference in KPTMC revenue if the borough were to no longer invest in marketing, our membership would have to increase from $150 to $1,000. This would create a spiraling decline in revenue, as very few members could afford to invest at that level.

If the borough is the number one beneficiary of visitor spending, why would the borough shift the entire burden of marketing the Kenai Peninsula Borough on to its small businesses?

Question: Don't all sales tax dollars go to pay for school funding?

Answer: Sales tax makes up about 45 percent of total borough tax revenue, with the remainder from property tax. All sales tax revenues go to education, with the remainder of education funding taking about half of the property tax. The other half of property tax funds everything else. Several years ago, the borough sales tax went from 2 percent to 3 percen, in an effort to provide property tax relief and have a larger percentage of total funding come from outside the borough (read "tourists").

Further efforts to have visitors fund borough programs led to the per-person per-day method of taxing tourism businesses. (Generated $480,000 in new sales tax revenue in 2008.) That, along with the per-room per-night taxing of hotels/motels/B&Bs means that tourism businesses are the only ones in the borough without the $500 tax cap that other business customers enjoy.

Question: How does your budget compare to other areas of Alaska?

Answer: Tourism in Alaska is big business, and communities are aggressively competing for visitor dollars.

Anchorage has a total budget of $7 million, Juneau is just over $1 million, Fairbanks is at $2.9 million, and the Mat-Su Borough invests $768,000. When you look at self-generated revenue vs. revenue from reinvestment of visitor taxes, KPTMC by far generates the largest percentage of its overall budget. Our total budget for 2011 is $538,550, 44 percent of which we will generate on our own. Compare this to the Mat-Su, which generates only 24 percent of its own revenue.

Question: I am not a business owner and don't work in the industry, how does tourism benefit me?

Answer: Tourism provides sales tax dollars that go to our schools and keeps our property taxes low. Visitor spending in the summer provides the influx of money that allows many of our restaurants and stores to stay open year round. In short, visitor dollars improve the quality of life of every resident on the Kenai.

The borough not only has something to gain from tour business vitality, it, and property tax payers, have something to lose if the visitor industry isn't hitting on all cylinders. More marketing = more customers = more sales tax revenue.

Visitors are customers, and customers have choices. Investing in tourism marketing is just good business for the Kenai Peninsula Borough.

Shanon Hamrick is the executive director of the Kenai Peninsula Tourism Marketing Council.

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