Legislature(2007 - 2008)CAPITOL 106
03/13/2007 11:00 AM House ECONOMIC DEV., TRADE, AND TOURISM
| Audio | Topic |
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| Start | |
| HB147|| HB167|| PRESENTATION - ALASKA TOURISM INDUSTRY ASSOCIATION | |
| HB147 | |
| HB167 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| *+ | HB 147 | TELECONFERENCED | |
| *+ | HB 167 | TELECONFERENCED | |
^PRESENTATION - ALASKA TOURISM INDUSTRY ASSOCIATION
11:02:57 AM
[Contains discussion of HB 147 and HB 167.]
CHAIR NEUMAN announced that the first order of business would be
a presentation by the Alaska Tourism Industry Association.
[Although not formally stated, the presentation will include
public testimony on HB 147 and HB 167]
11:03:01 AM
RON PECK, President and Chief Operating Officer, Alaska Travel
Industry Association (ATIA), informed the committee that the
visitor industry annually supports 40,000 private sector jobs
and that it is a vital and growing part of Alaska's economy.
The mission of ATIA is: "To provide a broad-based association
of individuals and companies with an interest in the tourism
industry and to act as advocates on their behalf." Mr. Peck
relayed that ATIA serves to promote and facilitate travel to and
throughout the state, in addition to raising awareness of the
value of the tourism industry. Alaska Travel Industry
Association also plans and executes a national and international
marketing campaign that promotes travel to Alaska. Today, he
said, he would like to describe how ATIA will continue its
programs in the coming years.
MR. PECK noted that current ATIA membership includes 1,040
businesses; however, less than one percent is large companies of
more than 500 employees. Most members represent a diverse range
of small Alaska businesses. In 1999, ATIA was created from a
consolidation of the Alaska Visitors Association, the Alaska
Tourism Marketing Council, and a sector of the Alaska Office of
Tourism, Office of Economic Development, Department of Commerce,
Community, & Economic Development (DCCED). He noted that a
large portion of ATIA's work is done through the support of the
private sector and in collaboration with DCCED. Mr. Peck said
that ATIA's core marketing budget for fiscal year 2007 (FY 07)
totals $10 million. Fifty-six percent of this total is directed
to consumer advertising and direct mail; the remaining is
directed to trade, web site development, international
marketing, and public relations.
11:11:50 AM
MR. PECK displayed a video that illustrated activities of the
tourism industry.
11:13:11 AM
CHAIR NEUMAN asked how many calls for further information are
received at the toll free phone number advertised by ATIA.
MR. PECK responded that 50,000 to 70,000 calls each year are
received at the televised toll free number.
REPRESENTATIVE GATTO noted that ATIA claimed a return of $168
for every $1 invested in marketing.
MR. PECK replied that this figure is based on a projected
revenue of $1.6 billion from tourism.
REPRESENTATIVE GATTO asked how [ATIA] knows that the revenue
from tourism was the result of the funds that were spent on
marketing. Perhaps, he said, if [ATIA] spent zero, [Alaska]
would still get visitors.
MR. PECK agreed that the funds his agency spends can not be
distinguished from those of other industries that also support
tourism.
REPRESENTATIVE GATTO remarked:
The last question is: if we added a dollar on the
tail-end of all this millions of dollars; the last
dollar, kind of like your tax rate, the last dollar of
your rate, would be higher than the first dollar. If
we added one dollar, would that, do we know what that
would result in?
MR. PECK affirmed that it is more expensive to convince the last
visitor to come to Alaska than it is to convince the first. He
continued to say that ATIA's marketing is research driven.
However, to measure ATIA's return on its investment of $5
million of government funds and $5 million of private sector
funds, ATIA utilizes a direct mail campaign. The direct mail
campaign consumer response rate is 11 percent of approximately 4
million mailings. Over a four-year period ATIA records show
that 31 percent of responses to the first direct mailing will
result in a visit to Alaska. In addition, $625,000 of ATIA's
budget supports a public relations effort to promote specific
destinations and businesses related to Alaska tourism. Mr. Peck
noted that formulas from the media industry are used to assist
ATIA in determining the value of advertising.
11:18:08 AM
REPRESENTATIVE DOLL asked if ATIA can document the statement
that visitors are coming to Alaska in response to its direct
mail campaign.
11:19:49 AM
MR. PECK stated that ATIA, after 20 years of experience, can
measure how it has raised awareness of Alaska as a destination
for the traveler. In answer to a question, he confirmed that
all visits, via independent travel, cruise lines, air carriers,
or Alaska Marine Highway System (AMHS), are included in ATIA
records.
REPRESENTATIVE DOLL pointed out that the cruise industry
generates a tremendous amount of advertising.
CHAIR NEUMAN asked how the present level of funding compares
with the 1999 level of funding through the Alaska Visitors
Association, the Alaska Visitors Marketing Council, and DCCED.
MR. PECK responded that in FY 99 the overall budget was less
than $8.5 million, adjusted for inflation. In FY 90, the
marketing budget for the three agencies supporting tourism was
$23 million, adjusted for inflation. Since 1990, he said,
marketing costs have doubled. In addition, Alaska receives
substantial tourism marketing competition from other states and
international destinations. Alaska ranks 38th out of the 50
U.S. states in the amount of public sector funding appropriated
to tourism marketing. Mr. Peck also told the committee about
marketing competition from exotic destinations, such as New
Zealand and Australia. Alaska Travel Industry Association
members support an increase in funding to compete against the
marketing campaigns of other destinations, he said.
MR. PECK advised the committee of another challenge to Alaska's
tourism industry: the decline in the numbers of independent
travelers. Independent travelers support rural communities and
businesses along the Alaska Highway. In 2006, the number of
border crossings coming into Poker Flats, Alaska, from Canada
decreased by 13 percent. Private campgrounds along the
Richardson, Taylor, and Glenn Highways and in the Mat-Su Valley
are also reporting a decrease in bookings. Mr. Peck informed
the committee that taxes on rental vehicles were increased three
years ago, and that has resulted in a decline in the rental of
recreational vehicles (RV) by international travelers. However,
95 percent of the international visitors renting RVs in
Whitehorse, Canada, still travel to Alaska.
11:27:23 AM
REPRESENTATIVE JOHANSEN asked Mr. Peck to describe the
differences between the independent road traveler, sometimes
referred to as the rubber tire traveler, and a typical airline
and/or cruise traveler.
11:28:03 AM
MR. PECK stated that RV travelers stay in Alaska 20 to 30 days
and they spend money on gas, food and campgrounds. We need, he
said, to focus marketing toward road travelers and to inspire
travelers to drive up the Alaska Highway, or fly to Alaska and
then tour in a rented RV. He noted that the Alaska Office of
Tourism "2006 Profile of Visitor" survey will compare
expenditures of visitors traveling by different methods.
Statistics from this survey will be provided to the committee
prior to March 23, 2007.
11:29:17 AM
REPRESENTATIVE JOHANSEN reminded the committee of the importance
of tourism marketing to the small businesses along the Alaska
road system.
REPRESENTATIVE DOOGAN asked whether higher gas prices have
contributed to the decrease in independent travelers.
11:30:20 AM
MR. PECK said he felt that a bigger influence is a change in the
demographics of RV travelers.
REPRESENTATIVE DOOGAN questioned whether the impact of gas
prices would require a different conversion rate for the
advertising expenditures that are directed toward independent
travelers.
MR. PECK said he believes that ATIA needs to focus on both
potential visitors; the traveler who will fly to Alaska and then
rent a vehicle, and the traveler who will drive his or her
personal RV up the Alaska Highway.
11:32:43 AM
REPRESENTATIVE LYNN asked if ATIA is encouraging the movie and
television industry to consider filming at locations in Alaska.
MR. PECK responded that ATIA is directed to focus on the visitor
industry at this time. He further advised that DCCED is better
staffed to address that issue.
11:34:13 AM
REPRESENTATIVE GATTO observed that there is a possibility that
the reduction in airport arrivals is a shift to business travel
rather than a decline in tourism.
MR. PECK acknowledged that ATIA statistics indicate arrivals and
departures for the four major airports were up slightly in 2006.
However, cruise and motor coach travelers to Alaska do not
travel independently on the road system and, therefore, do not
support small businesses throughout the state.
REPRESENTATIVE GATTO questioned whether all arrivals, including
air, sea, pedestrian, highway, and rail, are increasing.
MR. PECK confirmed that arrivals in 2006 increased from prior
years.
PATTI MACKEY, Chair, Alaska Travel Industry Association (ATIA);
Executive Director, Ketchikan Visitors Bureau, informed the
committee that she believes that the legislature and the
governor's office are an integral part of the success of the
tourism industry in Alaska. The travel industry is an economic
engine which needs government support to compete successfully in
the world market. She expressed her concern that there is a
complacency about tourism and that the state is quickly being
overtaken by the extensive marketing campaigns of other
destinations.
MS. MACKEY further said that ATIA's core program is funded far
below the amount needed to compete in the visitor industry. In
addition, the marketing program needed to attract the
independent traveler back to Alaska has just been implemented.
In conclusion, Ms. Mackey requested that the committee give due
consideration to HB 147 and HB 167 and that both bills be moved
out of committee.
11:40:48 AM
REPRESENTATIVE DOLL questioned whether tourists are spending
less money during their visits.
MS. MACKEY indicated that statistics from Ketchikan show that
cruise and independent travelers are spending more each year.
11:41:40 AM
JOHN KREILKAMP, Vice-President, Alaska Land Operations, Cruise
West, informed the committee that Cruise West is America's
largest small ship cruise line and that it maintains a staff of
80 employees at six land divisions in Southeast and Southcentral
Alaska. Cruise West operates eight small ships in Alaska, seven
of which spend most of the season in Alaskan waters. Cruise
West's passengers board vessels at Juneau, Ketchikan, and
Whittier. After boarding, passengers then cruise to the main
ports in Southeast and may also visit the small communities of
Metlakatla, Petersburg, Cordova, Dutch Harbor, St. George,
Kodiak, St. Lawrence Island, Nunivak Island, Little Diomede, or
Nome. Cruise West vessels make stops at 20 communities in
Southeast Alaska and six communities in the Interior.
MR. KREILKAMP pointed out that his company supports many locally
owned businesses and that it has established partnerships with
the Native Corporations of Cape Fox Corporation; Goldbelt, Inc.;
Doyon, Limited; and Huna Totem Corporation. Due to the small
size of its ships, Cruise West is able to visit villages and
support rural and subsistence economies. Its visitors bring new
money into small and isolated communities. He stressed that
major television marketing is needed to support the visitor
industry in rural communities that have no advertising options.
Legislative support of HB 147 and HB 167, he said, is not a
handout, but is an investment in a renewable, non-extractive
industry. Everyone in Alaska benefits by tourism, Mr. Krailkamp
concluded, and he urged the committee to appreciate, and to make
an investment in, the asset of tourism.
11:48:15 AM
REPRESENTATIVE GATTO asked Mr. Kreilkamp to explain how tourism
returns money to the state.
MR. KREILKAMP replied that, in addition to corporate income
taxes, tourists bring new money into the local economies.
Moreover, he said, the $50 per passenger Cruise Ship Taxation,
Regulation and Disclosure Initiative (cruise ship head tax) is
expected to provide $50 million to $70 million in revenue to the
state this year.
STAN STEPHENS, President, Stan Stephens Glacier & Wildlife
Cruises, informed the committee that he represents thousands of
Alaskans who are affiliated with the tourism industry primarily
because they are inspired by their way of life. Mr. Stephens
explained that when he established his Prince William Sound
business in 1971, the state was very supportive of marketing
programs for the visitor industry. During the 1970s and 1980s,
he said, his business grew from 1,500 to 22,000 annual visitors.
However, during the 1990s the state's support of the visitor
industry declined dramatically, and so did his business. Mr.
Stephens said that at this time his cruise company in Valdez is
again beginning to grow. However, he warned, his company, and
other small businesses, will not grow without the legislature's
support of tourism marketing.
11:53:08 AM
MR. PECK advised the committee that the number of cruise
visitors increased during 2006; however, the number of
independent travelers arriving by airline, ferry, and the Alaska
Highway decreased in 2006. This decline is a concern because
independent travelers are an important source of revenue for
Alaska. In fact, DCCED statistics show that vehicle rental
taxes, corporate taxes, fishing and hunting licenses, and AMHS
passenger fees totaled $20 million in 2006.
11:54:37 AM
REPRESENTATIVE GATTO asked if revenue from the cruise ship head
tax can be allocated to support ATIA.
MR. PECK replied that he believes funds from the cruise ship
head tax can not be designated to ATIA.
[HB 147 and HB 167 were discussed again later in the hearing.]
11:54:55 AM
HB 147-TOURISM CONTRACT MATCHING FUNDS
11:55:15 AM
CHAIR NEUMAN announced that the next order of business would be
HOUSE BILL NO. 147, "An Act relating to matching funds in state
tourism marketing contracts with trade associations."
REPRESENTATIVE JOHN HARRIS, Alaska State Legislature, sponsor,
introduced HB 147. Representative Harris stated that this bill
is an indication of the level of visitor industry marketing that
the legislature will support. House Bill 147 is a change from
present state statute that requires 50 percent of state general
funds to be matched by 50 percent of funding from private
industry. One of the reasons this change in necessary, he
explained, is due to the fact that a significant portion of
Alaska Travel Industry Association's (ATIA) support comes from
the cruise ship industry. However, the Cruise Ship Taxation,
Regulation and Disclosure Initiative (cruise ship head tax), may
divert cruise ship funds from ATIA.
REPRESENTATIVE HARRIS reminded the committee that tourism is a
great industry for the state as it is a renewable resource that
does not cause many environmental problems. The tourism
industry also provides jobs, but does not add to the problems of
the Public Employees Retirement System and the Teachers
Retirement System. Representative Harris concluded by saying
that the intent of HB 147 is to show that the legislature and
the Palin Administration strongly support the tourism industry
in Alaska.
11:59:08 AM
REPRESENTATIVE JAY RAMRAS, Alaska State Legislature, informed
the committee that during the summer tourist season, his company
employs 300 staff members and that 250 of those staff members
are involved directly with the tourism industry. In addition,
his hotel and restaurant businesses pay $220,000 in property
taxes, $50,000 in alcohol taxes, and approximately $400,000 in
bed taxes annually. Representative Ramras continued to say that
80 to 90 percent of his guests are departing or arriving through
Fairbanks International Airport. In addition, his businesses
complete capital improvements each year that support the local
construction industry. He advised the committee that the
hospitality industry is an economic driver for the state and
pays a tremendous amount of tax revenue to local municipalities
and to the state. Representative Ramras urged the committee to
support HB 147, Version C, and HB 167.
12:01:44 PM
CHAIR NEUMAN noted that HB 147 reduces the minimum percentage of
funds needed for a trade association to qualify for matching
grants from 50 percent to 10 percent. House Bill 167, he said,
will provide an additional $15 million from the state to support
the tourism industry. He then asked Representative Ramras what
effect HB 147, and HB 167 will have on the tourism industry.
REPRESENTATIVE RAMRAS praised the quality of the marketing that
ATIA is producing for printed material, for the media, and for
the Internet. The additional support, he said, will amplify the
tourism marketing message and will particularly help the
advertising campaigns of smaller tourism businesses.
12:04:04 PM
REPRESENTATIVE MIKE KELLY, Alaska State Legislature, voiced his
support of HB 147. He pointed out that HB 147 will not result
in a decrease of funds from the private sector; in fact, the
tourism industry must continue to provide a significant match to
qualify for funds. Representative Kelly noted that the visitor
industry provides local jobs and pays taxes to local
communities. He concluded by saying that he felt the support of
the visitor industry is an investment in the state and a
legitimate function of the legislature.
12:05:52 PM
CHAIR NEUMAN asked Representative Ramras how many small tourism
businesses can be strengthened by customer referrals from a
larger business in the same industry.
REPRESENTATIVE RAMRAS expressed his belief that his large
business sends customer referrals to 50 smaller businesses.
Many of these referrals, he said, are to businesses that provide
flightseeing and side trips to small or remote communities in
Alaska.
[HB 147 was held over with public testimony open.]
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