Legislature(1993 - 1994)
04/06/1993 08:06 AM Senate FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE BILL NO. 85
An Act extending the termination date of the Alaska
Tourism Marketing Council; and providing for an
effective date.
Co-chair Pearce directed that SB 85 be brought on for
discussion and further directed attention to amendments for
the bill. She recalled prior committee discussion relating
to need to shorten the time of sunset and place a task force
on tourism into temporary law. The task force is to work
during the interim and make recommendations next January for
new methods of funding tourism marketing on a public/private
basis. The legislature is interested in a greater private-
sector infusion into the ATMC program. That is reflected in
the budget. Both the Governor's and the Senate budgets
increase the private portion to 20%. The House budget shows
an increase to 22.5%.
Directing attention to page 2, lines 21 and 22, of the
Senate Labor and Commerce version of the bill, Co-chair
Pearce noted that, at the request of the department, bill
language removes the director of tourism as the presiding
officer of the board. Senate Finance received a request
from the Governor's office through boards and commissions
that the Governor be allowed to appoint the presiding
officer from among board members.
BILL PEDLAR, Princess Tours, came before committee. He
advised that all Alaskan businesses in the tourism industry
benefit greatly from cooperative marketing. As a
destination, Alaska competes with Canada, Europe, and other
locations where millions are spent at the federal level to
promote those destinations. Travel to Alaska often ranks as
a foreign vacation rather than travel to another state.
Mr. Pedlar took exception to the perception that certain
members of the industry--most notably, cruise ship
operators--have disproportionately benefitted from
cooperative marketing. From 1986 through 1993, the cruise
industry in Alaska has grown from 201,000 beds to 320,000
beds. That represents over a 60% increase. During that
time, pleasure vacations and visits to friends and relatives
grew only 43%. The cruise market outsupplied growth in the
vacation pleasure/visitor market. That was accomplished by
two things: marketing and supply. The cruise industry is a
supply based segment of the industry. It will find a price
that will clear the supply in the marketplace. If inherent
demand is not there for the destination, the industry will
find a way of liquidating its product at a price that will
fill its assets. From 1986 to 1993, Princess Cruises
increased its marketing budget from $6.1 million to $13
million to market $383 million worth of assets deployed in
the trade. That represents $63 million worth of assets in
the State of Alaska, including hotels, motor coaches, rail
cars, and an equivalent investment of $320 million worth of
ships.
Alaska is the only trade in which Princess Cruises markets
the destination first and the mode of transportation second.
During the time that Princess Cruises increased its
marketing budget 113%, funding for cooperative marketing
increased from $4.5 million to $6.2 million. The industry
contribution increased from $1.2 million to $1.4 million.
The Division of Tourism budget increased from $2 million to
$3.2 million in that same period.
Mr. Pedlar voiced his contention that the cruise industry
has not disproportionately benefitted from cooperative
marketing. It has benefitted from application of its own
resources to an expanding market. He noted that in 1993,
Alaska has no more market share of the world cruise
deployment than it had in 1986. The cruise growth in Alaska
has maintained its position since that time.
The council does an excellent job with the funds it is
given. While the 21 members have not always worked
harmoniously, eleven of the 21 must agree upon how to spend
state funds and the private industry match. It is the best
check and balance the state has to ensure that funds are
spent in an intelligent manner. No one person or one entity
on the council can expend funds. There is no subterfuged
control.
In his closing remarks, Mr. Pedlar voiced support for
continuation of the council, reiterating that there is no
disproportionate benefit to any one entity from generic
marketing. He again attested to the effectiveness of
existing checks and balances associated with council
expenditures. Mr. Pedlar urged committee support for
continued and increased funding for the council.
Co-chair Pearce asked if the marketing increase from $6.1 to
$13 million represents Princess Cruise marketing for Alaska
or for the entire company. Mr. Pedlar answered that
marketing is tracked by trade. The Alaska trade has grown.
Marketing the Alaska destination in light of worldwide
global competition has required additional funds.
In response to a question from Co-chair Frank, Mr. Pedlar
acknowledged that he was in favor of expanding year round
television at the expense of "some of the travel planners."
The last 100,000 distribution of travel planners may not be
the most cost effective advertising. Mr. Pedlar voice his
belief that "One of the things that . . . has hurt the
growth in other segments is the overall, generic appearance
of Alaska in the marketplace." When Princess Cruises
markets Alaska, it has a vested corporate interest in the
minds of consumers. When the state produces generic
television ads featuring the beauty of Alaska, there is
great credibility that builds consumer interest and
awareness. That part of the budget has constantly been
eroded since 1981. When faced with impending budget cuts,
the council reassessed its efforts and felt there was
greater need for consumer awareness of Alaska as a
destination, via increased television advertisements. That
meant sacrificing, in the short term, "a couple of
distributions of travel planners." That was done with the
hope that the planner could again go forward once consumer
awareness was built.
Responding to comments by Senator Kerttula, Mr. Pedlar said
that the general fund allocation to the Alaska Tourism
Marketing Council was approximately $6.2 million for 1993.
Advertising and distribution associated with the travel
planner comprises $4.5 million of that total. The remainder
is for public relations, fam trips, administration, etc.
What is left over is utilized for network or cable
television. Market place rating points for 1993 are not
even close to those of 1983 and 1984.
Co-chair Pearce directed attention to packet information
(copy on file in the original SFC bill file at the
Legislative Finance Division) demonstrating distribution of
funds since 1989.
Co-chair Frank asked if domestic marketing includes the
Alaska Highway. Mr. Pedlar answered affirmatively. He
explained that the Division of Tourism has commenced the
Tourism North project. It funds a strategic market focused
on highway travel.
Co-chair Frank spoke to criticism that marketing does not
focus on Alaskan-owned businesses and is dominated by the
cruise ship industry. He then suggested that it would be
worthwhile for generic advertising to include various
methods of getting to Alaska. Mr. Pedlar said that generic
marketing, through distribution of the travel planner,
features different methods of traveling to the state. The
other impression attempted to convey through ads is the
myriad of interesting things in Alaska. He conceded that
perhaps a picture of an R.V. should be worked into
advertising. Mr. Pedlar next spoke to problems associated
with attempting to target marketing for a specific region or
type of travel under a generic banner, indicating that such
an approach means that there is usually not enough money "to
do anything really well."
End, SFC-92, #53, Side 1
Begin, SFC-92, #53, Side 2
Mr. Pedlar acknowledged that cruise ship marketing sometimes
supplants state marketing in the minds of potential
travelers. He further acknowledged that pricing calculated
to fill ships often makes highway travel appear less
economical.
Co-chair Frank voiced his belief that many potential
visitors do not even know that it is possible to drive to
Alaska. He noted that the recent Alaska Highway 50th
anniversary celebration would have provided a good
opportunity to focus on that type of travel.
Senator Sharp suggested that most state advertising moneys
have been channelled to benefit those who can most afford to
advertise, at the expense of others. There should be
opportunity to channel funding toward a broad scope of
advertisement that benefits many.
Senator Kerttula spoke to the value of the vacation planner,
advising of support from constituents. He voiced concern
over reduced distribution and attested to need to promote
rural wilderness experiences. Increases in the budget
should be dedicated to destination tourism.
Senator Jacko questioned support for expenditure of general
fund moneys for tourism in light of resistance to
expenditure of general funds for seafood marketing.
Co-chair Pearce directed attention to Amendment No. 1,
requested by the Governor's Office, and explained that it
would add the following language at page 2, lines 21 through
23:
the governor shall appoint a presiding officer from
among board members;
Senator Kelly MOVED for adoption. Senator Kerttula
OBJECTED, inquiring concerning the reasoning behind the
change. Co-chair Pearce explained that the director of the
division of tourism currently serves as chairman. The
director did not feel it appropriate that he automatically
be designated. The board consists of 21 members (10
appointed by the Governor, 10 appointed by AVA, and the
director of tourism). The Senate Labor and Commerce
Committee included language requiring that the board elect
the chairman. The Governor's Office indicated that since
the state is funding 77.5% of the marketing effort, the
administration should select the chairman from among board
members. Senator Kelly noted that the director of the
division of tourism would continue to sign all contracts,
regardless of whether he serves as chairman. That provides
additional protection.
Co-chair Frank voiced his preference for retention of the
director of tourism as chairman. That arrangement provides
integration between domestic and international marketing
efforts. He also attested to the benefits of having an
individual working full time in tourism do necessary
background work and form the agenda. To expect a lay person
to fill that role is unrealistic.
TINA LINDGREN, Executive Director, Alaska Tourism Marketing
Council, and WENDY MULDER, Special Assistant, Dept. of
Commerce and Economic Development, next came before
committee. Ms. Lindgren concurred in foregoing comments
that the director of tourism asked that he be removed as
presiding officer of the council. She explained that at
times he has been put in an awkward position when the
Governor's viewpoint is in conflict with the council's
position.
Senator Sharp raised questions concerning the following
explanation associated with Amendment No. 1:
This board approves millions of dollars each year for
state funded tourism promotion. It would certainly
injure the public perception of the ATMC to have the
AVA-dominated board selecting their own chair. At the
least, the chair should be accountable to the public,
not just one private organization. Allowing the
governor to appoint the chair will accomplish this.
He noted that the governor could appoint a representative of
a strong private organization as chairman. He then
suggested that Amendment No. 1 would not preclude the
situation warned of in the above language and advised that
he could not support the amendment. Co-chair Frank
concurred in lack of support.
Co-chair Pearce called for a show of hands on adoption of
Amendment No. 1. The motion carried on a vote of 4 to 3,
and AMENDMENT NO. 1 was ADOPTED.
Co-chair Pearce directed attention to Amendment No. 2 and
explained that it would establish, in temporary law, a task
force on tourism. She attested to concern regarding long-
term funding for generic marketing and past utilization of
those moneys. Senator Kerttula asked if Senate Labor and
Commerce could undertake the effort if provided the
necessary funding. Senator Kelly said that as chairman of
Senate Labor and Commerce Committee, he was not interested
in performing the work. He then suggested that there should
not be great expense associated with the task force. Co-
chair Pearce concurred, advising that no staff would be
involved. Travel would be paid from leadership funds in
both houses of the legislature.
Senator Kelly MOVED for adoption of Amendment No. 2. No
objection having been raised, AMENDMENT NO. 2 was ADOPTED.
Co-chair Pearce directed attention to Amendment No. 3. She
explained that the bill currently has a sunset date of 1997.
Because of concerns surrounding ATMC and the task force, the
proposed amendment would replace June 20, 1997, with
December 30, 1994. That date was chosen since the council
markets on a seasonal bases rather than the state fiscal
year. The task force could thus return to the legislature
with recommendations prior to sunset. Senator Kerttula
voiced support and MOVED for adoption of AMENDMENT No. 3.
Senator Kelly OBJECTED. He said he saw no reason for the
one-year extension. While voicing support for the task
force, he advised that the council "does a fine job." There
is no need to hold the extension over council members'
heads. Co-chair Pearce spoke to concern that extension may
not be forthcoming from the House. It is hoped that the
shortened time frame and interim task force would aid
passage and avoid impending sunset of the Council.
Co-chair Pearce called for a show of hands on adoption of
Amendment No. 3. The motion carried on a vote of 5 to 1,
and AMENDMENT NO. 3 was ADOPTED.
Co-chair Frank suggested that the following language be
added at page 2, following Line 17:
including the promotion of Alaska as a destination and
all form of travel to Alaska, including travel by air,
highway, water
Co-chair Pearce designated the foregoing as Amendment No. 4.
She then directed that action on the amendment be held in
abeyance pending formal presentation of the language in
written form.
Senator Kelly referenced title language at page 1, line 12,
and spoke to need to remove the word "substantial"
therefrom. He explained that Senate Labor and Commerce
Committee action deleted a requirement that certain ATMC
board members be substantially involved in a visitor or
recreation industry business. Such language should also be
removed from the title.
Co-chair Pearce directed that discussion of SB 85 be HELD IN
ABEYANCE pending formal presentation of Amendment No. 4.
[See pages 22-23 for continued discussion of SB 85.]
SENATE BILL NO. 85
An Act extending the termination date of the Alaska
Tourism Marketing Council; and providing for an
effective date.
(Remaining minutes reflect tape transcription.)
Co-chair Pearce directed that discussion revert to SB 85.
Co-chair Frank distributed Amendment No. 4 and explained
that the intent is to place in statute, under ATMC duties,
direction that the council promote Alaska as a destination
in all forms of travel, including air, highway, and water.
He suggested that the new directive would send a signal that
the legislature is concerned about all aspects of the
tourism market.
TINA LINDGREN, Executive Director, Alaska Tourism Marketing
Council, again came before committee. She advised that the
council is attempting to accomplish the intent embodied
within the proposed amendment, noting that the vacation
planner contains information on different modes of travel.
Ms. Lindgren voiced concern that the amendment might
restrict the marketing of highway travel per se since it
might preclude the council from conducting a specific
promotion. Co-chair Frank advised that he did not foresee
that becoming a problem.
Senator Kelly reiterated earlier comments (see page 20 of
these minutes) regarding need to delete the word
"substantially" from title language. He then MOVED for
adoption of that technical amendment. No objection having
been raised, IT WAS SO ORDERED.
[NOTE the drafter subsequently determined that since the
legislation would delete the requirement that certain
members of the council be substantially involved in a
visitor or recreation business, it was necessary to retain
"substantially" within title language. That retention was
cleared with Senator Kelly's office, and "substantially"
remained within the title of CSS 85 (Finance).]
Co-chair Frank MOVED for adoption of Amendment No. 4. Co-
chair Pearce initially OBJECTED to allow time for review of
specific wording by members. Following review of amendment
language, Tina Lindgren advised that she did not foresee a
problem. Wendy Mulder voiced support for the amendment on
behalf of the Dept. of Commerce and Economic Development.
Co-chair Pearce REMOVED her OBJECTION to adoption of
Amendment No. 4. She then called for further objections.
None were forthcoming, and Amendment No. 4 was ADOPTED.
Senator Jacko MOVED that CSSB 85 (Finance) pass from
committee with individual recommendations. Senator Sharp
OBJECTED. Co-chair Pearce called for a show of hands. The
motion CARRIED on a vote of 5 to 1, and CSSB 85 (Finance)
was REPORTED OUT of committee with a zero fiscal note from
the Dept. of Commerce and Economic Development. Co-chairs
Pearce and Frank and Senators Jacko, Kelly, and Rieger
signed the committee report with a "do pass" recommendation.
Senator Sharp signed "Do not pass." Senator Kerttula had
left the meeting and did not sign.
ADJOURNMENT
The meeting was adjourned at approximately 11:15 a.m.
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