HOUSE SPECIAL COMMITTEE ON INTERNATIONAL TRADE AND TOURISM March 16, 1995 2:35 p.m. MEMBERS PRESENT Representative Beverly Masek, Chairman Representative Alan Austerman, Vice Chairman Representative Jeannette James Representative Pete Kott Representative Brian Porter MEMBERS ABSENT Representative Irene Nicholia Representative Caren Robinson OTHER HOUSE MEMBERS PRESENT Representative Ivan Ivan COMMITTEE CALENDAR Small Business Critique of State Tourism Marketing Programs WITNESS REGISTER DAVE KLOSTERMAN, Co-owner Alaska Bush Carriers, Inc. 4501 Aircraft Drive Anchorage, AK 99502 Phone: 243-3127 POSITION STATEMENT: Offered Critique of Tourism NANCY LETHCOE, President Alaska Wilderness Recreation and Tourism Association P.O. Box 1353 Valdez, AK 99686 Phone: 835-4300 POSITION STATEMENT: Offered Critique of Tourism DONNA TOLLMAN, Executive Director Copper Valley Economic Development Council P.O. Box 9 Glennallen, AK 99588 Phone: 822-5001 POSITION STATEMENT: Offered Critique of Tourism PAUL SMITH, Owner Snowshoe Motel P.O. Box 559 Tok, AK 99780 Phone: 883-4181 POSITION STATEMENT: Offered Critique of Tourism JERRY JERNIGAN Tok RV Village P.O. Box 741 Tok, AK 99780 Phone: 883-5877 POSITION STATEMENT: Offered Critique of Tourism ALAN LEMASTER, Owner Gakona Junction Village P.O. Box 222 Gakona, AK 99586 Phone: 822-3664 POSITION STATEMENT: Offered Critique of Tourism ROBERT DINDINGER, Vice Chair Alaska Tourism Marketing Council Department of Commerce and Economic Development 9085 Glacier Highway Juneau, AK 99801 Phone: 789-0052 POSITION STATEMENT: Rebuttal of Tourism Critique JOHN LITTEN, General Manager Sitka Tours Box 1001 Sitka, AK 99835 Phone: 747-8443 POSITION STATEMENT: Support of Alaska Tourism Marketing Council ACTION NARRATIVE TAPE 95-5, SIDE A Number 005 The House Special Committee on International Trade & Tourism was called to order by Chairman Beverly Masek at 2:35 p.m. Members present at the silent roll call were Representatives Masek, James and Porter. Members absent were Representatives Austerman, Kott, Nicholia and Robinson. CHAIRMAN BEVERLY MASEK began the meeting, despite a quorum, as there was no official action required from the committee; they were hearing testimony only. She announced the meeting was on teleconference with Anchorage, Tok, Glennallen and Valdez. Number 092 DAVE KLOSTERMAN, CO-OWNER, ALASKA BUSH CARRIERS, INC., testified from Anchorage that he has been in the tourist business for over 25 years and has handled thousands of visitors. He acknowledged that a great deal of money is spent by the state in promoting tourism. While that does bring a lot of people to the state, he feels that the majority of the benefits accrue to a small group of large companies, many of which do not reside within the state. He would like to see a higher level of specific accountability for those funds and an analysis of the benefits. MR. KLOSTERMAN added that while money is spent to bring larger numbers of tourists in, the state does little to improve the infrastructure throughout the state that is intended to serve tourism. He feels that the state needs to analyze its approach to promoting tourism and come up with more solid plans of alternative destinations, infrastructure and activities other than the routine programs the major tour companies are engaged in. Number 154 REPRESENTATIVE BRIAN PORTER asked once the committee develops this information regarding the accounting for the expenditure of state dollars, where is the most beneficial place to send it? MR. KLOSTERMAN replied that if it was sent to him, he would ensure that it was distributed to each operator on the Lake Hood complex. REPRESENTATIVE PORTER asked Mr. Klosterman if there was one thing that the existing tourism structures could do to enhance his livelihood and his ability to provide services to tourists, what would that be? MR. KLOSTERMAN responded that the state's attitude toward development, encouragement thereof and improvement on has been severely lacking. They get lost in the wash when it comes to expenditures. There are areas on Lake Hood that have no sewer or water. He feels there's no valid reason or explanation for that. He thinks the Lake Hood seaplane-based complex is unique. It should be developed and treated as a jewel in the tourism crown of the state of Alaska. Number 218 NANCY LETHCOE, PRESIDENT, ALASKA WILDERNESS RECREATION and TOURISM ASSOCIATION (AWRTA), testified on teleconference from Valdez, and expressed six points. First, the current goal of the state marketing program is volume, the total number of people brought into the state. She suggested an alternative such as the type of tourism promoted. She pointed out that a cruise ship passenger spends $252 in the state compared with an overseas visitor that spends $1700. Her organization believes that consideration should be paid to the type of tourist brought into the state. MS. LETHCOE's second point questioned the practicality of a single organization responsible for the marketing program of the state or whether matching funds should be given to a variety of groups, as is the case in the majority of other states. AWRTA concluded that they prefer the single marketing organization within Alaska as it is now but, believe there could be some fine tuning to it. She lamented the fact that the Alaska Tourism Marketing Council (ATMC), reauthorization legislation, HB 220, has not been heard before this committee. AWRTA would like to testify before that with suggestions that would make the ATMC more representative of airlines, bush pilots, hunting, sport fishing, bed and breakfasts, lodges; the small groups that are not as well represented and lack the expertise in marketing that ATMC could bring. MS. LETHCOE's third matter concerned the composition of the ATMC. AWRTA feels there is a need to expand the type of expertise in marketing on the council and that may need to be effected through legislation. She noted that 35 percent of the council currently is from the cruise ship industry whereas sport fishing has no representation. A cruise ship person cannot determine how best to market for sport fishing and vice versa. MS. LETHCOE related AWRTA's fourth issue as being the relationship of tourism to other industries in the state. The state needs to ensure the future of tourism by not forsaking opportunities and expansion now for short-term economic decisions made to benefit other industries. She cited the timber salvage bill that could potentially have a significant adverse affect on the tourism industry. It could clear-cut extensive parts of the highway system and impact the highway traveler's experience. MS. LETHCOE's fifth point is a need for rural training programs, so that people in rural areas can have an opportunity to enter the tourism industry. Many people in Native villages or rural areas are skilled at operating boats on rivers but they don't have the opportunity to get a six-passenger Coast Guard license and cannot be hired by companies or start their own companies. Some attention should be paid to providing courses in rural areas or bringing people into communities where they can get the necessary training to get certificates to enter the tourism industry. Number 292 Representative Austerman arrived at 2:55 p.m. MS. LETHCOE expressed AWRTA's final concern is the impact of tourism on communities. When a community becomes stressed, as some already are, by the influx of tourists, the quality of the tourist's experience goes down. As a state, we need to start asking what benefits does tourism bring to communities and what are the limits of acceptable change for a community with these number of tourists coming in. REPRESENTATIVE JEANNETTE JAMES asked how the salvage timber bill will have an adverse reaction upon the highway traveler. Would the tourist rather see dead trees instead of new trees growing up? MS. LETHCOE responded that they've posed the same question whether regeneration would occur faster by clear-cutting the dead trees or leaving them standing. What their consultations with the foresters revealed is that there are new trees already growing that will likely be genetically immune to the diseases and insects that killed the other trees. Clear-cutting now will remove not only the dead trees, but all the living trees as well and it would set back regeneration another 10 or 20 years. Their market research indicates that tourists regard such areas as a natural part of the forest cycle. Representative Kott arrived at 2:58 p.m. DONNA TOLLMAN, EXECUTIVE DIRECTOR, COPPER VALLEY ECONOMIC DEVELOPMENT COUNCIL (CVEDC), testifying from Glennallen, expressed concern over the marketing effort on behalf of rural communities. The effects of generic marketing need to be looked at as well as the restructuring so everyone benefits and the tourist is given a better opportunity. The CVEDC maintains that a greater, more permanent economic growth will occur throughout Alaska with a program of year-round site and activity-specific tourism promotion that identifies and encourages local tourist products and attractions. Funding and implementation of site and activities-specific tourism promotion will not only balance and complement the state's total marketing effort, it will stimulate local enterprise and economic initiatives currently being held stagnant by reliance on a one-dimensional generic tourism marketing strategy. Representative Ivan Ivan joined the meeting at 3:00 p.m. MS. TOLLMAN added that tourist exit polls show visitors are disappointed when their Alaska experience excludes interface with individual Alaskans, the unique indigenous culture's geography and resources. A site-specific approach will attract visitors to destinations in rural and road-access communities to deliver the Alaska experience that generic marketing cannot. The Alaska Visitors Association (AVA), conclusions cite the lack of reliable tourism products and limited options as obstacles to Alaska's tourism growth. Site-specific promotion is the opposite of generic marketing and is necessary for true Alaska tourism growth and permanence. The small rural tourism business has a great difficulty competing for the marketing dollars available in the state. It's difficult for them to participate now with the advertising cost increases in the Vacation Planner. The CVEDC is not asking for additional money, just a small part of the Vacation Planner and Milepost advertising funds to introduce the world to what they have to offer in their rural communities. They are seeing a positive impact on their own initial site-specific marketing regarding Wrangell-St. Elias. Number 422 MS. TOLLMAN related the example of their organization's promotion of The Nitty Gritty Dirt Band Travels Alaska which is being scheduled for its fifth showing. That's five hours which cost $180,000. The last viewing was 1.3 million people. In the show they listed an address to write to for additional information. Approximately 75 percent of the letters expressed surprise in learning that Alaska was accessible by road. That's an example of the opportunity through some of these other types of marketing that we can give rural Alaska. PAUL SMITH, OWNER, SNOWSHOE MOTEL, via teleconference from Tok, stated that all the avenues to come to Alaska are good, except for the one weak link which is roads and road systems. More information needs to be distributed in promoting the Alaska highway and road access. In addition, the recreational vehicle market has been grossly neglected. Lastly, development by the state for the Wrangell-St. Elias park needs to happen immediately to provide an alternative visitors attraction to the overcrowded Denali park. JERRY JERNIGAN, OWNER, TOK RV VILLAGE, testified via Tok, stating he can't emphasize enough the need for more work and development for highways inside the state, (i.e.. frost-heaves). He agrees that we need to get some of the concentration off of Denali; develop other places to go and to do and develop. He added there is a serious need to disperse tourists and spread the concentration of people across the state to avoid situations like the shoulder-to-shoulder fishing on the Kenai, which foster negative vacation experiences. He'd like to see some effort put forth for the historic trails, cleaning them up and promoting them. ALAN LEMASTER, OWNER, GAKONA JUNCTION VILLAGE, testified via teleconference from Glennallen, and mentioned that because of the matching fund requirement the legislature placed on the AVA to participate in the Vacation Planner, that advertising is becoming extremely expensive. As a result of the increased prices they're losing advertisers. Last year they reported 400 advertisers dropped out of the program because they were unable to participate financially. He was one of those people. Three years ago, he paid $1300 for a display ad and a narrative ad, that now would cost him $2850. He can't afford it and has to defer to other avenues of advertising. The very people who need the Vacation Planner the most are being excluded. The reason is the 25 percent requirement is so heavy on the AVA, they have no other means of raising that money other than to raise the rates. MR. LEMASTER reiterated the importance of the upgrading and maintenance of the highways. He focused on the Taylor highway and the Denali highway, both important to the Copper Valley area. The Denali highway took a back seat to an upgrade as a result of Bert Sharp and Fairbanks folks. He would like the committee to revisit that issue. The survey work of over $350,000 is complete, the bid package is ready and it just needs the blessings of the legislature and the Governor to put it back on the schedule. The paving of the Denali highway will greatly impact the communities from McKinley to McCarthy, from Fairbanks to Valdez, from Tok to Homer. It will give the tourist an option to be able to come to east Alaska. MR. KLOSTERMAN offered over the last three to five years, the requests for information for potential tours into rural areas of Alaska are increasing. Tourists can experience the cultural history and heritage that the village areas have to offer. There is no single source to refer to, to see what's available out there. We need to develop such a source. CHAIRMAN MASEK volunteered that Alaska Village Initiatives (AVI), which were under Community Economic Development Corporation (CEDC), now are set up to work with rural areas to develop tourism, to get rural Alaska involved in tourism. REPRESENTATIVE IVAN IVAN commented that Akiak has been trying to start up a guided fishing operation and the biggest obstacle has been that the village doesn't have enough capable and aggressive managers. The other major obstacle is marketing. TAPE 95-5, SIDE B Number 016 ROBERT DINDINGER, VICE CHAIR, ALASKA TOURISM MARKETING COUNCIL (ATMC), addressed the issues brought up so far. Lack of information is the ATMC's worst adversary in terms of people understanding the state tourism marketing program. He feels that the concern over the need for a greater diversity of the representation on the ATMC is a reaction to the lack of funding rather than the reality of the representation. When they had $12 million in general fund money, they were able to do activity-specific targeted advertising that they are no longer able to do with less than $4 million in general fund money now. MR. DINDINGER charged that the ATMC does currently do site-specific advertising in the form of the Vacation Planner. Where the television and print advertising are generic, the Planner is the specific. The matching contribution requirement increase from 15 percent to 25 percent the ATMC was compelled to raised the ad prices which forced many people out of that program. However, the cost of advertising is inverse to other publications. The bigger the ad, the more you pay. That is the ATMC's effort to make it affordable for smaller businesses. MR. DINDINGER spoke of the matter of managing the volume of tourism. While perhaps the state hasn't done enough development of the infrastructure to adequately accommodate most communities look forward to tourism as their best opportunity for future economic development. We can accommodate more people by being more creative and aggressive in planning our infrastructure. Opportunities have to be provided in more areas of the state, which will cost more money in advertising to explain more areas of the state. Tourism is expanding into rural Alaska with the Native Tourism Association (NTA). The NTA is very active in Alaska now in helping small villages with marketing. MR. DINDINGER concluded that with decreasing funding and increasing numbers of people entering the tourism field, it's almost insurmountable to carry the messages of so many small Alaska businesses through the Vacation Planner. Number 124 REPRESENTATIVE ALAN AUSTERMAN inquired if the ATMC has tried to set any kind of a statewide optimum level of how many people the state can handle comfortably and still maintain the Alaska wilderness experience. MR. DINDINGER replied that the ATMC has not addressed that issue. The ATMC is truly a marketing organization; it is not a planning or policy board. The Division of Tourism or the Department of Commerce is more apt to do that. JOHN LITTEN, GENERAL MANAGER, SITKA TOURS, stated he feels that tourism is working. He personally invests his limited marketing dollars into the Travel Planner and the state's program. It's the only affordable way he can do that. He mentioned the ATMC's effort to include more smaller businesses by creating a new level of participation in the planner where $275 will buy three column lines to list their business name, address and numbers. He feels that is a very affordable way to be able to participate in the program and was directly a response to those people that were forced out. The industry is responding in trying to make it affordable and include as many people as possible. MR. LITTEN continued that the ATMC is having a more difficult time with fewer dollars. They depend on their research to ensure the best value for the dollars they spend. He feels that when there are fewer dollars, it's detrimental to split it up into segments among a few people because then the message wouldn't leave the state. The Division of Tourism should be doing developmental work with the rural remote areas and the marketing people should be telling the rest of the world about Alaska. In response to the capacity of visitors, he feels the individual communities are going to decide those numbers. The demand will be contingent upon the desires of the communities. Also, the AVA is actively working on a federal level to try to find other areas like Wrangell-St. Elias to spread out the visitors across the state and not find them congested on the major corridors. ADJOURNMENT There being no further business before the committee, CHAIRMAN MASEK adjourned the meeting at 3:40 p.m.