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State tourism officials are warning that 2009 could be a bleak year for Alaska’s tourism industry, with some projecting decreases in business of about 30 percent. If that scenario plays out, Alaska businesses could suffer severely, they projected. "Certainly, it is looking to be a very potentially scary summer," said Dave Worrell, spokesman for the Alaska Travel Industry Association. "Optimistically, I would like to believe we would be down slightly. Pessimistically, we could be down dramatically. It really depends on what the economy does." A 10 percent decrease wouldn’t surprise him in the least, but declines could be as high as 25 to 30 percent, he said.
That doesn’t bode well for the state economy, with the average visitor spending almost $1,000 while in Alaska, enabling 40,000 full-time equivalent jobs. In 2008, that spending translated to a $1.7 billion boost to the state economy. "That’s a big hit," Worrell said. "It’s something our policy leaders need to be very, very concerned about."
Fewer visitors coupled with less spending by budget travelers, could have a "dramatic impact," he warned. "That money probably rolls around the economy two and a half, three times," Worrell said. "That $1.7 billion easily becomes $3 billion to $5 billion in economic activity."
Cruise lines in particular are heralding declines. The Alaska Cruise Association represents nine cruise lines that bring about 1 million visitors to Alaska annually. "All the indications from them are that bookings and sales are off dramatically," association president John Binkley said. "Our hope is that the trends are just changing, that people will eventually come, but they’re waiting to book."
Binkley is close to the tourism industry in other ways as well. His family operates the Riverboat Discovery in Fairbanks, where his son, Ryan, is president and CEO. John Binkley acknowledged the summer outlook is bleak for businesses catering to tourists, with an unprecedented shift in an industry that tends to grow each year.
Only in 1967, when floods hit with a vengeance, and in 2002, the year after the terrorist attacks of Sept. 11, 2001, was business down from previous seasons. "Those events really pale in comparison to the level which we may be facing this summer," Binkley said.
The Riverboat Discovery started treating tourists to trips on the Chena River in 1950. In the ensuing years, Binkley has never seen a drop quite like this. Advance bookings already are down about 38 percent from a year ago. That means the business will probably hire fewer people than in a typical season. "Hopefully, it will start to turn around, and we’ll be able to hire more people than we anticipate," he said.
Diane Shoemaker is sales director for Fountainhead Hotels, which includes Sophie Station, the Wedgewood and the Bridgeport. Many of the hotel rooms are booked through tour operators, who say it’s hard to tell just yet what the summer season will bring, Shoemaker said. Some downturn is expected. "We’re pretty much still holding out hope that things will rebound a little after the first of the year," she said. A rebound could hinge on how well the state steps up advertising Alaska to potential tourists across the nation and the world.
The state contracts with ATIA to market Alaska, using a budget of about $11.7 million. About 70 percent of that comes from the state, with the industry pitching in the remainder. Worrell said the marketing budget is inadequate, especially when compared to other states, such as Hawaii, where the state spends $50 million to $70 million annually to lure visitors.
"We believe strongly that Alaska should be spending at least $20 million a year to be competitive in the marketplace," he said. Binkley said this is a "critical time" for Alaska to boost advertising. "My belief is the state should step up to a greater extent," Binkley said. "This is really an important time for the state to be bold in getting into the marketplace and not losing market share."
Several Interior legislators also pushed the need for state government to boost the industry, which feeds local economies through the busy tourist season. Sen. Gene Therriault, a North Pole Republican, said a downturn in travel spending is happening nationwide and that other states are probably stepping up marketing programs to snag what visitors they can. Alaska should do likewise or risk losing out on market share, he added. Additional funding could help. "We are always struggling for adequate marketing of the state as a destination," Therriault said.
While ads running in magazines and on television across the country are promoting Alaska, the messages were honed months ago, well before the economic downturn, Worrell said. The association is doing what it can to refocus those messages on the value an Alaska vacation offers.
"We are definitely doing what we can to enhance our messages and let people know this is a great time to come to Alaska," Worrell said. "Our marketing program is going to try to focus people’s attention on some of the great discounted opportunities that are going to be available this summer."
Worrell said people with fewer flexible dollars will be looking for bargains. Will Alaska be their destination? With cut rates on some cruise lines, it could be, he said, citing one seven-day cruise package being offered at less than $500. Cruise lines have set their itineraries months to years in advance, and will likely do "whatever it takes" to fill berths, he said.
Those deals could net a different type of tourist than Alaska is accustomed to, Worrell said. The visitors might be those on a tight budget, willing to dole out fewer dollars on discretionary purchases like restaurants meals, side trips and souvenirs. They might opt for a T-shirt instead of a flightseeing trip. "A lot of it is going to really impact a lot of the smaller businesses, the ones that supply tour product, activities, restaurants," Worrell predicted. "There is a lot of concern."
Even a bleak outlook has its silver lining. In 2009, that could be lower gas prices that boost visitors driving up from the Lower 48, Worrell said. "A lot of it is going to depend on the economy," he said. "But if gas prices stay low …"
Over-the-road visitation was down in 2008, credited to gas at almost $5 per gallon. The saving grace proved to be increases in international travel, particularly from Japan and German-speaking European countries, driven by a weak dollar. But the situation has since changed. "The value of the dollar is picking up dramatically," Worrell said. "The U.S. and Alaska are not on sale right now, and probably won’t be on sale this summer. We probably won’t have that silver lining to help us out again this year."
Theodore is the Co-Founder and Managing Editor of TravelDailyNews Media Network; his responsibilities include business development and planning for TravelDailyNews long-term opportunities.
