Legislature(2007 - 2008)CAPITOL 106

03/13/2007 11:00 AM House ECONOMIC DEV., TRADE, AND TOURISM


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11:02:57 AM Start
11:03:01 AM HB147|| HB167|| PRESENTATION - ALASKA TOURISM INDUSTRY ASSOCIATION
11:55:15 AM HB147
12:08:43 PM HB167
12:10:57 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Presentation by Alaska Travel Industry TELECONFERENCED
Association
*+ HB 147 TOURISM CONTRACT MATCHING FUNDS TELECONFERENCED
Heard & Held
*+ HB 167 APPROP: TOURISM MARKETING TELECONFERENCED
Heard & Held
^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 167-APPROP: TOURISM MARKETING                                                                                              
                                                                                                                                
12:08:43 PM                                                                                                                   
                                                                                                                                
CHAIR NEUMAN announced  that the next order of  business would be                                                               
HOUSE  BILL   NO.  167,  25-LSO656\C,  "An   Act  making  special                                                               
appropriations for a contract with  a qualified trade association                                                               
and  for a  marketing  program; and  providing  for an  effective                                                               
date."                                                                                                                          
                                                                                                                                
12:09:24 PM                                                                                                                   
                                                                                                                                
REPRESENTATIVE CRAIG JOHNSON,  Alaska State Legislature, sponsor,                                                               
introduced  HB 167.   He  noted  that this  bill establishes  the                                                               
actual amount  of funding  that will  be sent  on to  the finance                                                               
committee,  and,  therefore,  is  more that  just  talking  about                                                               
commitments to  the tourism  industry.  He  pointed out  that the                                                               
funding authorized by  this bill is an investment  in the future.                                                               
Furthermore,  support  of  tourism   impacts  every  one  of  the                                                               
districts  in the  state.   Representative Johnson  stressed that                                                               
additional  support  for  the   visitor  industry  is  especially                                                               
critical  at this  time.   In fact,  the Alaska  tourism industry                                                               
should begin  an advertising campaign  to coincide with  the 2010                                                               
Winter Olympics  to be held  in Vancouver, British Columbia.   He                                                               
concluded  by saying  that this  funding is  needed to  reach the                                                               
independent traveler, and to balance the effects of the changes                                                                 
in cost sharing by the cruise ship industry.                                                                                    
                                                                                                                                
12:10:57 PM                                                                                                                   
                                                                                                                                
CHAIR NEUMAN announced that HB 167 would be held over with                                                                      
public testimony open.                                                                                                          

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