HOUSE SPECIAL COMMITTEE ON INTERNATIONAL TRADE AND TOURISM October 6, 1995 1:10 p.m. Fairbanks Legislative Information Office MEMBERS PRESENT Representative Beverly Masek, Chairman Representative Jeannette James Representative Pete Kott Representative Caren Robinson MEMBERS ABSENT Representative Alan Austerman, Vice Chairman Representative Brian Porter Representative Irene Nicholia COMMITTEE CALENDAR Regional report from local tourism International report from Representative James Report from Hank Phillips, President, National Tour Association Discussion: Promoting Cottage Industries in Alaska WITNESS REGISTER AMY REED GEIGER, Manager Visitor Services - Museum University of Alaska P.O. Box Fairbanks, Alaska 99775 Telephone: (907) 474-7505 POSITION STATEMENT: Discussed tourism issues PAUL WELTON Arctic Seven Tours P.O. Box 80488 Fairbanks, Alaska 99708 Telephone: (907) 479-0751 POSITION STATEMENT: Discussed tourism issues DEBBIE EBERHARDT, Owner/Operator A Taste of Alaska Lodge 551 Eberhardt Road Fairbanks, Alaska 99712 Telephone: (907) 488-7855 POSITION STATEMENT: Discussed tourism issues HANK PHILLIPS, Senior Vice President National Tour Association 546 East Main Street P.O. Box 3071 Lexington, Kentucky 40597-3071 Telephone: (606) 226-4255 POSITION STATEMENT: Discussed tourism issues WENDY WOLF, Programs Manager Division of Tourism Department of Commerce and Economic Development P.O. Box 110801 Juneau, Alaska 99811-0801 Telephone: (907) 465-5471 POSITION STATEMENT: Discussed tourism issues SHARON GAIPTMAN, Development Specialist Division of Tourism Department of Commerce and Economic Development P.O. Box 110801 Juneau, Alaska 99811-0801 Telephone: (907) 465-5478 POSITION STATEMENT: Discussed tourism issues DAVE CARP, Executive Director Alaska Tourism Marketing Council 3601 C Street, Suite 700 Anchorage, Alaska 99503-5935 Telephone: (907) 563-2289 POSITION STATEMENT: Discussed tourism issues ACTION NARRATIVE TAPE 95-8, SIDE A Number 004 The House Special Committee on International Trade and Tourism was called to order by Chairman Masek at 1:10 p.m. CHAIRMAN BEVERLY MASEK announced the meeting would be teleconferenced. Members present at the call to order were Representatives Masek, Kott and James. Staff for Representatives Austerman and Porter were in attendance via teleconference. Representative Robinson was in attendance via teleconference from Juneau. Number 116 CHAIRMAN MASEK informed the committee the Alaska Visitor's Association (AVA) is currently having a international trade and tourism meeting in Fairbanks and she thought it would be an excellent time to hear from some of the small businesses throughout the state. CHAIRMAN MASEK said the meeting is one of a series of meetings she is planning on holding until January. She encouraged anyone who is related to the tourism industry to submit information as she is planning to write a report regarding tourism for the House, Senate and the Governor's Office. Number 332 CHAIRMAN MASEK said the first item on the agenda includes addressing regional reports from local tourism businesses on what are: A. The existing opportunities for locally controlled tourism in Fairbanks; B. What is the potential; and C. How to achieve the potential. She said the committee would have a discussion with people who will share ideas with the committee. CHAIRMAN MASEK explained the second item on the agenda is international reports. Chairman Masek noted there would be a report from Representative James on her recent trade delegation trip to China. She also noted there would be a report from Hank Phillips, Senior Vice President, National Tours Association, on the importance of the international market. The committee would then take public testimony. Number 624 CHAIRMAN MASEK invited Mr. Geiger to come before the committee. AMY REED GEIGER, Manager, Visitor Services - Museum University of Alaska, stated he deals with admissions, visitation and daily operations at the museum. He said they are advocates for all of the interior attractions and small business. They encourage small tour groups and local residents to take advantage of the gallery and the special exhibits. Mr. Geiger noted during the summer months, they focus on very pertinent Alaskan topics that would be attractive to the tourist industry. He explained another interest is the museum store which does promote and showcase many local artists and small business. They solicit products from all over the state and a majority of the products in the store are Alaskan products. MR. GEIGER said the museum is in their third year of a collaborative effort with the World Eskimo and Indian Olympics. He noted this is a spectacular show which deals with endogenous Alaskan Native games. It is a good opportunity for endogenous Alaskan Natives to reveal their heritage. Number 908 MR. GEIGER said the museum currently has a annual arts and crafts fair entitled "Treat Yourself to a Toy," which is held in December. They invite a variety of local artists to participate. MR. GEIGER explained they are attempting to build on to the museum in order to create an art gallery and potentially a planetarium. He noted they don't look at this as competition with other attractions. The more attractions that there are in the area means there will be more reasons for visitors to come to the Fairbanks area. Mr. Geiger said they hope to create this phase two over the next seven or eight years in order to show more art. MR. GEIGER said they have realized during the months of May and September there has been a 5 percent increase in visitation. He said the museum is able to take advantage of the 5 percent increase because they are still open whereas there are a lot of local attractions that are only open in June, July and August. Mr. Geiger said he feels that there are some small businesses and locals that could be taking advantage of that shoulder season and it might to something to look into. He noted they are considering changing their summer hours to be from May 15 through September 15. Number 1158 REPRESENTATIVE JEANETTE JAMES indicated she is very interested in the planetarium and asked if it is going to be a display. MR. GEIGER explained the planetarium will be in collaboration with the Geophysical Institute to some extent. He noted there are a lot of Japanese tours in the winter months because of the northern lights. REPRESENTATIVE JAMES inquired as to what the winter hours are at the museum. MR. GEIGER stated they are open year round. He said if you come in June, July or August, there is almost total light all night so there isn't an opportunity for someone from the Lower 48 to view the lights. If they had a planetarium, it would serve a function to be able to view the lights and consolations. MR. GEIGER said he has learned from the meetings held by the Alaska Visitor's Association (AVA) that visitors really like educational programs. He said we might want to encourage other small businesses, local attractions and entities to have informational sources within their attractions of their small business. Number 1505 REPRESENTATIVE JAMES asked if there are guided tours through the museum or is it visual and read as you go. MR. GEIGER indicated currently there aren't guided tours. They have considered guided tours but there are a couple of problems. One is that the floor space isn't particularly large. If they were to provide guided tours, they probably would like to charge a price. It would be hard to try to filter out people that are just coming to the gallery and aren't part of the tour. He noted they provide tours for travel industry people. REPRESENTATIVE JAMES referred to the museum in Juneau and said when she visited, she had met a lady from the library and she gave a personal tour. She said it was wonderful. One thing about reading everything is it takes so long to get through and you miss a lot of it. MR. GEIGER said he agrees with Representative James. He noted one thing they have done in order to capture that feeling is they have started to explain their program which has been very popular. REPRESENTATIVE JAMES noted she had just returned from a three week trip to China and she had the privilege of a guided tour through the Forbidden City. She said she watched other guided tours going through there. The one on two experience they had could not be repeated. Representative James noted she would pay a lot of money for the one on one experience. Number 1827 REPRESENTATIVE JAMES referred to when the tour people decided not to go to the university but to go to the El Dorado and asked if that was damaging to the museum. MR. GEIGER said they are recovering. He noted what bothers him about that is when money shrinks, the first thing that it shrinks in is offering public services. He said the "Explainer Program" that he just discussed, which was free to anybody that came to the museum, is probably on the cutting block. The question is, "Can we still afford to provide this service?" Mr. Geiger said in going over the numbers, they went from 142,000 with Princess to 124,000 without Princess. They realized about a 2 percent increase if you were to subtract the (indisc.) of Princess. He said he wishes there were more options for people on tours. Sometimes he believes it would be more equitable for everybody in Fairbanks if people had more of an opportunity to pick and choose what attractions they would partake in. Mr. Geiger noted they are fortunate to still get Westours which brings great numbers to the museum. Number 2110 CHAIRMAN MASEK asked Mr. Geiger what approach the museum takes in marketing to the individual tourist. She asked how they know the museum exists. MR. GEIGER said they are fortunate to have a lot of "word of mouth" in Fairbanks. He said he believes that is probably the way the museum gets marketed the best. Mr. Geiger said the museum does reach out to tour groups and other groups via mailings and brochures. They have not pursued an aggressive marketing. The public services end of the museum is only one little part of it. He said the museum is a complex place and one of the mandates is research. He noted other things go on there. Mr. Geiger explained over the course of the past decade, the museum has grown tremendously and the employees that deal with the public sector have stayed the same. He noted he is the first new employee added to the public sector realm of the museum since its move in 1982. Number 2327 CHAIRMAN MASEK asked how many people work in the museum's gift shop. MR. GEIGER explained the gift shop is completely run by University of Alaska - Fairbanks students. They are student jobs and you would have to be a full-time student in order to have the job. In the summer, they have approximately 15 museum attendants. In the winter, the number drops to eight or nine. He noted in the summer the attendants are full-time and the winter there are less than 20 hours per week. CHAIRMAN MASEK inquired if those people are part of the educational part of the museum. MR. GEIGER indicated the Explainer Program is handled by the Public Relations and Education Department of the museum which is run by Terry Dickie. He handles the docent programs for school kids which teaches more about Alaskan history. Mr. Dickie also handles the Explainer Program in which there are usually three explainers during the summer. It runs from June through August 30. CHAIRMAN MASEK referred to the university students and asked if they have a real interest in tours and expanding to the tourist industry. MR. GEIGER said often they do. He noted the good thing about being a museum attendant is you can have a big variety of interests and aptitudes and also be a wonderful museum attendant. No only do they work in the store and with tourism, but they also work in the gallery and have to have some knowledge of natural and physical Alaskan history. Number 2744 CHAIRMAN MASEK asked Mr. Geiger how he thinks the state can improve on anything that would impact the museum. MR. GEIGER said he thinks they are lucky to enjoy a legislature and governor that promotes tourism. He explained he is relatively naive of exactly what the legislature and the state does in order to promote tourism directly. There definitely is a need for the state to provide an overview of Alaska. Mr. Geiger referred to an issue talked about in the AVA meeting earlier in the day which was how roadways and campsites were getting exploited by people throwing trash out, et cetera, and how the people of Alaska find that very offensive. He said the AVA talked about efforts of how to perhaps get the state to make an organized effort to clean it up. In addition to that, he believes it would be really good if the state or legislature provided a list of expectations for tourists and Alaskans using the roadways and facilities explaining mandates of what they shouldn't do while using the facilities, et cetera. CHAIRMAN MASEK noted Gail Phillips, Speaker of the House, appointed her to serve on the Marketing Alaska Group which is made up of members from the private sector, the House and the Senate. She noted the litter problem is being talked about. Hopefully, there will be something done because it is really a big problem. Number 3201 The next person to address the committee was Paul Welton PAUL WELTON, Arctic Seven Tours, informed the committee members he is representing a number of small companies including Alaska's Seven Gables which is one of the larger bed and breakfasts in the state of Alaska. It is marketed nationally and internationally. Another is Arctic Seven Tours which has boat, bike, snow machine rentals and reservation services. He said they have a rather aggressive marketing campaign and one of the reasons is that 50 percent of their business comes from overseas. REPRESENTATIVE MASEK said she would like the committee to hear what the existing opportunities are for locally controlled tourism in Fairbanks, what the potential is and how to achieve the potential. She referred to marketing and asked how he feels the state can help smaller businesses. MR. WELTON referred to the question of "What are the present existing opportunities," and said his organization is in its infancy. The first part of any tourism is package tours. A lot of people are afraid to go to places like Russia. They like to go in with a group as you have protection and security. Mr. Welton said after the market continues to mature, then you have the individual travelers making their own reservations. He noted the large tour companies tend to dominate the market and he is very thankful because they do much of his company's marketing for them. They are able to bring in people by the thousands with ship, airplanes, et cetera. Many times the infrastructure cannot hold the number of people they are bringing in. Therefore, it spreads out in to the small economy such as the bed and breakfasts catching the overflow of the larger tour companies. MR. WELTON referred to the question of how to achieve the potential and said one thing that has been very successful is the Alaska Tourism Marketing Council (ATMC). He said the smaller businesses are sorry to hear about the cuts occurring with the ATMC. That affects the small companies because in the beginning, he thought the advertising was free. Currently, for a couple of lines of advertising is $500. He noted he believes the $500 fee is a very good fee when you consider that it is being printed in terms of 700,000 copies which is being distributed throughout the nation and other parts of the world. For people just beginning, $500 is a major cost. MR. WELTON said another area to enhance achievement would be the product Alaska. One of the problems in Alaska is the bottlenecks. This is a major problem in Fairbanks, particularly with the federal controlled and managed Denali State Park. Along with that is the word "access." Access to more of Alaska really needs to be opened up rather than being restricted to predefined areas. MR. WELTON explained a major problem is an identity crises. He showed the committee a brochure from Germany which had a map of Alaska and didn't show the city of Fairbanks. Number 3949 CHAIRMAN MASEK indicated Fairbanks is Alaska's second largest city. She said the state does have an office in Germany and there is a representative who does represent the state of Alaska on tourism. She suggested that the committee may find out from the representative why there aren't more details as it is a big concern. MR. WELTON explained one of the reasons his company had to spend thousands of dollars to go internationally. The mentor of this was Dale Fox who runs marketing and consulting out of Anchorage for large companies that can afford his fees. Mr. Welton explained he had contacted Mr. Fox because he had contacted the Division of Tourism in Juneau numerous times to try and get information on travel guides in Germany. He said he didn't want to spend thousands of dollars to go to Germany to get the travel guides. He said he wasn't getting anywhere with requesting information on the travel guides. Mr. Welton explained that what it came down to is Mr. Fox said either we can pay him a couple of thousand dollars to get the information for him or Mr. Welton could get on a plane and fly to Germany to get their own information. Mr. Welton said he and his wife decided to go to Germany. He showed the committee some clandestine photographs he smuggled out of Germany, which showed the building that the Division of Tourism occupies. He informed the committee there are some plaques on the outside of the building in which there are some misspellings. You'll also notice Alaska isn't the only state being represented but also Miami, Florida. Nobody seems to be aware of the fact that it is Miami and Alaska. Mr. Welton said he was prohibited on more than one occasion by more than one person at the Division of Tourism to take any photographs in Germany. He explained he took the photographs to show what he had found. He was told on two occasions by the Edeltraud Sommer, the director, and the assistant director in Germany, that no photos would be taken under any circumstances. CHAIRMAN MASEK asked if Ms. Sommer explained why. MR. WELTON informed the committee Ms. Sommer reversed the question by saying, "Well why would you want to take photographs?" Mr. Welton said if it is the state's office and he is paying money as a tourist visiting Germany, why can't he take pictures. CHAIRMAN MASEK asked if he was allowed to go into the office. MR. WELTON explained he was allowed to go into the office but wasn't allowed to take photographs inside the office. Number 4419 CHAIRMAN MASEK said there were some people who came to her personally regarding the issue. She referred to a meeting she held in Juneau who brought those same concerns to her. Chairman Masek said she understands Mr. Welton's concerns. They really should be advertising for our state. She noted she would ask a representative from the Division of Tourism to testify after Mr. Welton. Chairman Masek asked Mr. Welton when he made the trip to Germany. MR. WELTON said he couldn't give the exact date but he thought it could be last November. TAPE 95-8, SIDE B Number 110 MR. WELTON showed the committee a book from Great Britain that the travel agencies in Great Britain use to book clients to the United States. He noted the book costs hundreds of dollars. He said the book has about 50 pages of advertising on Florida. Mr. Welton said he looked for Alaska and it wasn't listed. He noted there were three pages of fine print on Ohio which he didn't realize was a major tourist destination. Mr. Welton said how can a travel agent in Great Britain reference Alaska if it isn't in the book. He noted the book has information provided by the states and it doesn't cost anything to advertise in the book. CHAIRMAN MASEK noted the state has other offices besides the ones in Germany and Great Britain. There is an office in Australia where there are trade specialists who are contracted through the state to do the marketing for Alaska. MR. WELTON said he thinks that is the problem. There aren't Alaskans representing Alaska. Imagine if a Japanese corporation came to the United States and didn't have a Japanese representative. Mr. Welton said he finds it ironic that the state can contract with Japan or Germany and never have an Alaskan represent us. He believes it should be an Alaskan representing Alaska rather than other people whose interests are quite divided as they are representing other states. Number 628 CHAIRMAN MASEK said she has traveled extensively throughout Europe several times. She explained she attended a trade show in Italy in 1993. Alaska had no representation. She said Florida had good representation. Chairman Masek said Alaska has to become more competitive. We need to see changes. She referred to budgets being cut and said it has to be done to where there is a positive impact on tourism in our state. We must do everything we can to improve tourism. She asked Mr. Welton if he had additional comments. MR. WELTON referred to the ATMC and said in terms of state money, everyone will agree that the ATMC has done a very good job and has been very effective. He referred to the Division of Tourism and said he believes their budget is $4 million or $5 million. He believes half of that is going to the contractors. Mr. Welton said he would like to point out that when you go to an international contractor's office, they don't give out Alaskan information in terms of tourism. Instead, they are giving out their own lists. He showed the committee some information in which advertised German tour operators but no Alaskan tour operators. He said we're taking our Alaskan money, giving it to a non Alaskan who is representing 77 German tour operators. He indicated this also occurring in Japan. MR. WELTON said the Division of Tourism puts out a generic publication, that is paid for with taxpayers dollars. He said there are lots of beautiful photos in it but there isn't advertising from a particular company. It is very generic. Mr. Welton noted he would like to see the Alaska Milepost Magazine in the Division of Tourism's office in Germany. Most Germans that come to Alaska come for 30 days, rent recreational vehicles and travel. He noted there is also a lot of advertising in the Milepost. Number 1357 REPRESENTATIVE JAMES referred to access and said in Anchorage she attended an all day Joint House and Senate State Affairs Committee meeting regarding RS 2477 trails throughout the state with the interest of being able to provide legal access. One of the discussions is that because of federal regulations, do we allow trails as trails for what they're being used as now. Later, if they are to be used as something else, public input should be allowed. Representative James said we are going to need some help in addressing trails on federal lands. She said the legislature is very concerned about access in the state. She asked that if there is any input on that issue, they should be given to the committee. Number 1532 CHAIRMAN MASEK asked if there were questions to be asked via teleconference. REPRESENTATIVE KAREN ROBINSON indicated she didn't have any questions. CHAIRMAN MASEK asked if Representative Austerman was available in Kodiak. A Cliff Stone, staff member to Representative Austerman, indicated the representative hadn't arrived yet. Number 1600 CHAIRMAN MASEK announced the committee would take a five minute break at 2:15 p.m. CHAIRMAN MASEK called the meeting back to order at 2:34 p.m. She noted Daniella Loper from Representative Porter's office was connected via teleconference. Number 1710 DEBBIE EBERHARDT, Owner/Operator, A Taste of Alaska Lodge, was next to testify before the committee. She noted her business is considered a bed and breakfast and is located in Fairbanks. Ms. Eberhardt said her and Mr. Welton do share a lot of the same ideas but her comments are kind of opposite of what Mr. Welton has said. She mentioned she advertises with the Alaska State Planner and said she bought one of the first display adds that was bought by a bed and breakfast. Ms. Eberhardt said 99.9 percent of the business that her business generates comes directly from that advertisement. She noted she isn't a member of the AVA but hopes to joint in the future. Currently, she feels her efforts seem to be directed through her own marketing division and not through an organization. Ms. Eberhardt referred to the Division of Tourism and said she has attended several workshops and seminars put on by the division. She discussed a European travel fair she attended at the Wedgewood Resort the previous Tuesday. Ms. Eberhardt said the fair was very well organized by the division. She said she can't say that any of the state's opportunities which have directly affected her have been bad. She said it upsets her that the budgets are being cut. If the ATMC budget is cut, the Vacation Planner is out the window. Ms. Eberhardt said she has been in business over the past four years and has found some things work and some things don't. She indicated that budget cuts won't hurt the larger companies but will hurt the small business. MS. EBERHARDT said her biggest complaint is that the state of Alaska is she is in direct competition with them. Her business is located at 5.3 mile of the Chena Hot Springs Road. She is 53 miles from the Chena Hot Springs Resort which is currently owned by the state of Alaska. She said the state is controlling her business as they are involved in tourism in the wrong areas. The railroad is owned by the state of Alaska and the state dictates when the train runs and when it doesn't. Number 2305 CHAIRMAN MASEK asked Ms. Eberhardt if she has any thoughts or ideas as far as the opportunities in Fairbanks for the local controlled tourism and as far as the state being involved. MS. EBERHARDT said the state needs to continue funding and assist the small operators. She indicated there should be more financial support from the state in getting more business going. She suggested that when there are state conferences in Fairbanks, employees should start picking some of the smaller business to use as their overnight lodging and small conferences. MS. EBERHARDT said she thinks there are enough bed and breakfasts in the Fairbanks area but probably not in the state as a whole. She noted dog mushing is very popular but she isn't sure there are any programs to assist a dog musher in getting a program off the ground. Number 2638 CHAIRMAN MASEK said the most concern is with budgets and we will continue to see more cuts. She said that is one of the reasons she is holding hearings and she plans to have several more before session begins. She would like to hear from the small business people who are struggling. Chairman Masek said we need to look for positive ways to spend the money as there probably won't be much more funding. MS. EBERHARDT said if the budgets are going to be cut, those cuts need to be redirected. There is very little money, if any, that is directed towards winter tourism. Everybody says they have to make their money in four or five months. On the contrary for her, she does a lot of tourism in the winter. She stated she survives in the winter on the local and tourism markets. Ms. Eberhardt urged that marketing include the winter months. She stated not enough money is being spent on the winter market. Number 2820 CHAIRMAN MASEK asked if that is individual tours. MS. EBERHARDT said not enough money is being spent for any type of tours whether it is individual or larger companies. She asked why would anyone come to Alaska if they don't hear anything about winter markets. If they just hear about the summer markets, they're only going to come in the summer. She said July in Fairbanks seems to be heavily marketed. In her opinion, May, June, August and September are the premium months for the Fairbanks area. Chairman Masek thanked Ms. Eberhardt for her testimony. Number 3153 CHAIRMAN MASEK noted for the record that Dave Harp, Executive Director, ATMC, was in attendance. She also noted there were several other people present from the Alaska tourism industry and the Governor's office. Number 3234 HANK PHILLIPS, Senior Vice President, National Tour Association (NTA), stated his company is located in Lexington, Kentucky. Mr. Phillips said in preparing for his trip to Fairbanks, he was amazed at the reaction of people that he told he was traveling to Alaska. He said Alaska is blessed as it has a mystic and a magnificent majesty that is all its own. He said he has come to love the people of Alaska. They offer their own special brand of hospitality and have fun and a friendly approach to visitors. MR. PHILLIPS informed the committee the NTA is the largest North American trade association in the package travel industry. NTA has 4,000 corporate members. That membership represents a cross section of the travel industry. Their membership includes more than 600 tour operators who develop, sell, and operate travel packages to destinations in the U.S., Canada, Mexico and around the word. Other categories of membership include 800 destination marketing organizations representing local, regional, state and providential travel promotion offices and more than 2,300 suppliers representing attractions, hotels, restaurants, bus companies, airlines, receptive operators and many others. Mr. Phillips informed the committee there are 36 members of NTA who are based in Alaska. There are a number of others that are very active in the Alaskan industry but aren't necessarily based in the state. He noted that out of the 600 tour companies that are members of the NTA, 290 have told him that they bring groups, tours or packages to the state of Alaska. MR. PHILLIPS said he would comment on how NTA relates to some of the small companies and suppliers like small hotels or restaurants. He said many of those are part of the 2,300 membership. The NTA often tells people that they may not be for them because of the cost of joining the association and participating in the activities of the association. Mr. Phillips said the NTA strongly encourages them to work closely with their local convention and visitor's bureaus (CVB) as there are approximately 700 that are members of NTA. He said they also encourage them work closely with their state tourism offices. He noted all 50 states and all Canadian provinces are members of NTA. MR. PHILLIPS explained NTA has recognized inbound international tourism as an important market segment to the travel industry and NTA's members and is one that will continue to grow as the world's emerging economies produce more and more travelers. Recognizing this, in 1987 NTA established an international committee to develop a comprehensive plan to increase the capabilities of the NTA membership to access and serve the inbound international market. To achieve this, the committee has since focused its work on developing programs in two areas, education and marketing. Through this dual programming effort, NTA educates their members about the overseas markets and also promotes members to the international tour and travel producers. Each year, NTA is represented at various international trade shows to promote the products and services of their members. He noted that the board of directors has approved participation at seven international shows. Three of those will be offered to tour operators to come in and operate under NTA's umbrella. MR. PHILLIPS said we all know that travel and tourism is good business in America and is also very good business for America. The travel and tourism industry is the third largest industry in the U.S. and is the second largest employer with a $417 billion annual impact on our nation's economy. The overseas market currently generates nearly one-sixth of all tourism dollars or $77.6 billion annually. The U.S. travelers spend $22 billion overseas. MR. PHILLIPS informed the committee members during the last ten years, Alaska has seen a steady increase in its overseas market. According to a 1993 AVA survey conducted by the McDowell Group, the number of international visitors has increased 57 percent and overseas spending in the state has increased more than five fold. Although the overseas market represented just six percent of Alaska's total visitation in 1993, it produced $55.4 million in tourism spending during the summer tourist season. The overseas visitor to Alaska spends nearly $1 thousand per day on lodging, transportation, tourism recreation, food and souvenirs. Mr. Phillips said those numbers were gathered from research which was supported by state funding. He noted that same research represents a project that is envy of several other states. MR. PHILLIPS said Alaska is a new frontier of foreign travelers. We are seeing a trend in the overseas markets that could put Alaska high on the list of key destinations. Mr. Phillips said the traditional big cities and major tourist attractions in the Lower 48 are still going to attract foreign visitors but many of the repeat travelers are now looking for new destinations and unique travel experiences. They want to see the wilderness areas and native habitat that is entirely different from their own countries. He noted that adventure travel is becoming increasingly popular. Mr. Phillips said at the international travel shows that the NTA attends, buyers frequently ask for more information about Alaska. Number 4234 MR. PHILLIPS explained the international market is an important tourism marketing segment and is rapidly growing. He referred to Japan and said the forecast indicates substantial growth ahead with over 20 million outbound departures by the year 2000. Currently, over four million Japanese visit the U.S. each year and this is expected to double by the turn of the century. Japan represented 11 percent of all of Alaska's inbound tourism in 1993. Clearly, there is great potential of growth from the Japanese market and this is only one example of Alaska's bright future. There is a challenge and that is effective promotion which is essential for the success of travel and tourism. If you promote, the tourist will come and they will spend. MR. PHILLIPS referred to hearing the Governor speak the previous day and said he made reference to Alaska being a land of dreams, but he pointed out that it is not a field of dreams. Just because it is here and just because it is as great as it is, that doesn't mean people are going to automatically come to Alaska. It is going to take hard aggressive promotion. Mr. Phillips explained the dollars spent on tourism promotion is a good investment that results in a stronger economy. MR. PHILLIPS said traditional methods of marketing to the international market include international trade shows, trade missions, brochures, advertisements and trade consumer publications. Another tried and true marketing method is familiarization tours. He said he learned upon his arrival in Alaska that 20 German and United Kingdom travel producers were in Alaska on a familiarization tour. They saw all the regions of the state and visited Fairbanks where 60 businesses put together a trade show to show their services and products to the travel producers. Number 4601 MR. PHILLIPS said another point is that there are some emerging methods of marketing. One important emerging marketing tool is the information super highway. Automated marketing, just like the other methods of marketing, deserve the committee's awareness and support. He said NTA is convinced that automation is a importance and they have invested large sums in developing two networks called NTA On-Line and NTA Tour and Travel Shop to assist with marketing both domestically and internationally. He said NTA members, including the Alaska members, are able to go on-line. TAPE 95-9, SIDE A Number 013 MR. PHILLIPS said another suggestion he would offer as a part of international marketing is to recognize that it is not just a function of being out there promoting and marketing but that it is critical and essential. Knowing what to do with the business once it arrives is also critical and involves education. It involves educating the travel industry and related businesses so that they understand how to service the international traveler. Once you have the business, you also need to remove barriers. Those who have traveled abroad know how important your comfort level and piece of mind is to an enjoyable travel experience when you visit a foreign country. He suggested there be important international signage. See how able foreign visitors are to exchange their currency or to utilize multilingual services or information. MR. PHILLIPS said another important ingredient is partnerships. The cost of international marketing and the consumer demand are both too high for anyone to try to go at it alone. Here again, Alaska is a standout. He said he doesn't know of any other state where the tourism industry is more united than it is in Alaska. He said in other states unity and partnerships are sometimes the exception more than they are the rule. He commended the legislature and the Division of Tourism, Department of Commerce and Economic Development, for the support that has been provided to the industry. Number 344 MR. PHILLIPS said if Alaska is truly interested in the international market, then he would encourage that everything possible be done to encourage and promote cooperative and mutually supported relations with the different pipelines to the international visitor. He referred to pipelines and said what he is talking about are the airlines that serve Alaska, the cruise lines, key gateway cities such as Seattle and Vancouver, also regions like Vancouver. MR. PHILLIPS noted the Division of Tourism and the entire Alaskan tourism industry has been very helpful to the NTA. He thanked the committee for listening to him. Number 543 CHAIRMAN MASEK thanked Mr. Phillips for his testimony and asked if there were any questions from the committee members. Number 606 REPRESENTATIVE PETE KOTT said there are some people in the state who would suggest a partnership has developed between the state and the private sector to market Alaska. There are some people in the state that would suggest that really the state doesn't benefit directly because we have a very small tax base and there isn't a state income tax or sales tax. If you look beyond that scope, you'll find there are additional benefits. Representative Kott said if the state were to pursue an income or sales tax on statewide bases, would that affect our domestic traveler. MR. PHILLIPS said any increase in traveler's costs will have an impact on the ability of those travelers and those who bring them here. He said anything like a sales tax that would generate higher costs for travelers would not be helpful to Alaska's tourism interests. Number 1002 REPRESENTATIVE JAMES pointed out one issue we have to solve is that tourism cannot pay for the infrastructure that is needed for tourism at this point such as utilities, emergency services, et cetera. She said we need to figure out how tourism can pay its share of our expense to provide a place for tourism to be. REPRESENTATIVE JAMES referred to eco-tourism having a real future and said there is a limit as to what traffic it will bear and not lose the eco that came to seed. She said we're facing lots of dilemmas and we have to plan this or we could have terrible disasters in the state. Number 1613 CHAIRMAN MASEK said she would like to hear from Representative James regarding her trip to China REPRESENTATIVE JAMES told the committee she enjoyed her trip to China and would like to go again but before she does, she would like to learn to speak the Chinese language. She informed committee members there were three who went on the trip, herself, Dr. Jennifer McBeth and Dr. Yoal Wang (Sp.?) from the University of Alaska, Division of Agriculture. She said their main purpose of the trip was to get acquainted with the Chinese and to sell virus reseed potatoes as China is the largest nation of producer potatoes in the world now that the Soviet Union has broken apart. She noted they do use a lot of pesticides and commercial fertilizers. They use their land and they use it and use it. There are a lot of people in China. Representative James said the trip was prepared by Dr. Wang. She said he was sent to China to establish the trip and to be sure there was somebody to meet them at the airport, take them to hotels, et cetera. Representative James said they spent most of their time in Benshie (Sp.?) County which is the area Dr. Wang is from. She explained that is where they eventually did get an order of 40,000 pounds virus reseed potatoes to be shipped after the first of the year. Representative James said they spent most of their time there because before the Chinese are ready to do business with you, they have to know you. She noted this was her first international trip aside from going to Canada. The Chinese really didn't want to business until they had been there about a week. REPRESENTATIVE JAMES informed the committee that 150 pounds of reseed potatoes had been sent to China which they used for a test. The test wasn't very successful but the one thing about the test that convinced them to buy the 40,000 pounds is that our potatoes were disease resistant. Also, their potatoes are more wet and they aren't available to make chips. She said what they would really like to do is exchange one of our varieties with a variety that is currently being grown in China. REPRESENTATIVE JAMES said within three years, they will probably open their port. Their port is currently closed. She noted the Netherlands have been trying to get in. She said China is trying to move into a market economy so they have created little businesses that operate on their own but are owned by the government. An example of this is the Alaska Railroad Corporation. Part of the reason for doing that is to get a market economy going and also to put their people to work. Number 2236 REPRESENTATIVE JAMES said she has a much better attitude about China since she has been there. She said she really has sympathy for the position they're in as they are trying to move out of pure socialism. REPRESENTATIVE JAMES said another goal was to bring back some Chinese ginseng to see if it would grow in Alaska. It is a very sensitive plant and takes three to four years for it to be large enough to use for production. She noted ginseng is a very expensive product and if we could grow it in Alaska, that would be another industry for Alaska and it could put us on the map. REPRESENTATIVE JAMES said the Chinese are interested in growing the potatoes and are also interested in technology to make chips. She noted they are begging for somebody to bring them technology as they don't have technology. Representative James said she went to hot springs at a resort that was built recently. The workmanship was very poor but they are doing the best they can. Number 2656 REPRESENTATIVE JAMES said the Chinese are very interested in sending tourist to Alaska. There are a lot of Chinese who have money and are interested in getting something started but the problem is it is very difficult to get a visa to come to the U.S. REPRESENTATIVE JAMES concluded by saying the trip wasn't all work and play, it was very entertaining and good experience. Number 3110 CHAIRMAN MASEK said the committee would take a break at 3:35 p.m. The meeting was called back to order at 3:50 p.m. Chairman Masked asked the next witness to come forward Number 3149 WENDY WOLF, Programs Manager, Division of Tourism, Department of Commerce and Economic Development, came before the committee and introduced Sharon Gaiptman, Development Specialist. She explained Ms. Gaiptman is charged with reading our international marketing efforts in the United Kingdom and in German speaking Europe. MS. WOLF said she didn't have any prepared testimony but would like to clarify and react to some things she heard from people testifying earlier in the meeting. Number 3224 MS. WOLF explained the purposes of their offices overseas needs to be clarified. It is the normal in trade of international trade that you don't actually send your own people to sit in offices. She said it is very much like Representative James had said in that people need to know you in order to do business with you. Ms. Wolf said they hire a person that knows the trade. There are representatives like this all over the world and they take on several destinations as long as they're not competing destinations. Their job is not to be a consumer office. Consumers do not walk into these offices and they are not present as a place where consumers come and get information. Their job is to get a foreign entry for us into the trade to find the people who send people out of Germany on airplanes, tours, et cetera. They are really there to link us to the trade. An independent traveler will find the Alaska Division of Tourism and get information from them directly. Ms. Wolf explained they have been very successful and the trade is very comfortable with the operation at Aero Traffic. That is the purpose they serve there. The representation in the United Kingdom is brand new. It is about $25,000. Jackie Todd is basically volunteering her time to talk about Alaska. It is not a money maker for her. She is so fascinated about Alaska that her company is letting her be a spokesperson for us in making sure there is a source of information about Alaska. She said when somebody really wants to travel, they use the same collateral that the Marketing Council does. Number 3445 REPRESENTATIVE JAMES asked how much money is spent. SHARON GAIPTMAN, Development Specialist, Division of Tourism, Department of Commerce and Economic Development, said the amount is $425,000. REPRESENTATIVE JAMES asked if the amount includes money for space. MS. GAIPTMAN said it provides part of the space and some of the money goes towards the administration of the contract, but the majority of those dollars go towards trade relations, advertising fam support. She noted they are in the process of securing a third weekly charter from Frankfurt to Anchorage which will begin next summer. Ms. Gaiptman noted that takes a lot of money and time in order to support the operator that is going to be guaranteeing those seats. Most of the money goes into actual trade and some consumer relations. Number 3543 REPRESENTATIVE JAMES asked what kind of record keeping there is in the success of the operation. MS. GAIPTMAN explained she has a great deal of record keeping. She said she would be happy to put together information explaining what they do throughout Europe. REPRESENTATIVE JAMES indicated she would rather spend some time talking with Ms. Gaiptman. MS. GAIPTMAN indicated they would find some time to talk. Number 3625 MS. WOLF said the decisions they make to go into markets are based on lots of things. She indicated in Ms. Gaiptman's moving around through the trade contacts that were made for her in Europe, it became very apparent that there was an interest in the United Kingdom. That is why they decided to move a small effort there. The same happened when they expanded in Japan. They had a lot going on in Japan, but then Australia started to show an incredible increase. MS. GAIPTMAN referred to the information given by Mr. Welton which listed the German tour operators and said she was happy he brought that list because that goes out to somebody in Germany who requests information about Alaska. They get the list of who those tour operators are in German speaking Europe who have Alaska programs. The part that is missing on that sheet is those Alaska programs that are made up of Alaska product. It is only Alaska suppliers with whom those tour operators are working. It is just not listed as to whom each of those are. She noted the division has the brochure that can show whose product it being sold where. Ms. Gaiptman noted there is another brochure they mail out that includes ways that people can get the Milepost. Ms. Gaiptman explained that because they are a state agency, they don't push one persons business over another. Their job is to represent the entire industry in the state. MS. WOLF noted they also had the state highway map translated into German. Number 4002 REPRESENTATIVE JAMES said Alaska couldn't ever compete dollar wise with Miami. MS. WOLF referred to the German office and said there are several staff people in that office. There is one staff person that is dedicated to working on nothing but Alaska, she knows the businesses here, has been to Alaska, met the people here who are the suppliers and worked with the operators. Number 4043 CHAIRMAN MASEK said the intent of having the hearings is to hear from the small business people as to how they feel about the tourism and what can be done to make it better. By bringing everyone views and opinions to the table, it is only going to help with the recommendations that the committee will be putting fourth in coming sessions. It is important the committee hears from all sides of the industry. She said we need to broaden the scope of tourism so it will be based on winter months and not just summer months. MS. GAIPTMAN said she thinks the committee will discover throughout the year that both the Alaska Tourism Marketing Council and the Department of Commerce are both working really hard to increase shoulders and winter tourism into the state. Number 4201 REPRESENTATIVE JAMES referred to winter tourism and its potential and said she agrees that particularly in the southern part of the state that there is real potential for winter tourism. She said her problem in Interior Alaska is she doesn't want these people driving on our roads if they don't know how. She said the only way she feels we can have winter tourism is if we provide transportation and other things for them. The only other thing she sees as a real negative is the ability to get winter tourism if our weather is not dependable. Representative James said if she spent all her money to come and spend two weeks in Fairbanks and it was 60 degrees below zero the whole time, she doesn't think she would give a recommendation to come to Alaska. To just say winter tourism without having some sort of plan turns her off. She said she doesn't want these people driving and causing more accidents on the highways than we're having now. MS. GAIPTMAN said they are looking at primarily focusing on special events like the Yukon Quest or Iditarod. MS. WOLF referred to highway marketing said they don't do any of their highway marketing targeted it towards winter but they do for spring and fall. She referred to the Alaska Railroad and said in the winter it is the Japanese who are riding the railroads. Number 4543 MS. WOLF said referred to the issue of revenues to the general fund and said there is an attachment in the Marketing Alaska Report that they will be submitting to their executive committee the following Wednesday. She said the group looked at several things. The infrastructure was the first issue to be discussed. The funding for infrastructure was a very big topic and they are building some recommendations on that. There is a hugh section on rural and small tourism development. Ms. Wolf noted the Governor had mentioned in his speech the previous day that we are going to create a world tourism development center which will be a joint venture with Alaska village initiatives in which they create a one stop shopping situation... TAPE 95-9, SIDE B Number 001 MS. WOLF informed the committee they are also working on visitor education and visitor industry awareness so that the public can understand the role of the visitor and also learn how to train Alaskans to work in the industry. Ms. Wolf said the final recommendation deals with doing some comprehensive planning. Everybody has a plan but this would bring them all together to look at them on a regional basis. They would take all the land management, community and marketing plans and try to build some sort of picture of what tourism in that region is all about and then figure out where to best use the resources. MS. WOLF said attached to the recommendations is a study that AVA sponsored by McDowell in 1992. It is the total of the revenues to the state of Alaska general fund. Ms. Wolf said it is revenue generated by visitors. The thing that is interesting about it is the visitors spend money on a lot of things and the agency, like state parks who takes in those receipts, would also like to claim credit for these receipts. It is a controversy as to who these belong to. The fact is this is nonresident use. There are state parks, fish and game tags and out of state licenses. Ms. Wolf noted Holland America and Princess pay major dollars to the Alaska Railroad Corporation to haul those cars on the tracks. So that is money which comes into the railroad which, of course, is a state entity. Number 150 REPRESENTATIVE JAMES said she had heard they are losing money. MS. WOLF said if they are, then they need to look at it. REPRESENTATIVE JAMES said they lose money on the passengers but make money on the freight. MS. WOLF said she thinks they charge the cars a pullage fee plus a percentage of the passenger. She said according to data from 1992, the industry is putting about $7 million into the Alaska Railroad for haulage fees plus a percentage of the ticket receipts. MS. WOLF said one thing that was talked about was taxing, such as fuel tax, to pay for the infrastructure. Visitors come, they drive, they use the roads and they use the parks. That does have an impact. Number 309 MS. WOLF referred to the European travel fair and said Ms. Gaiptman has been working on it. She said it was a lot of work. Operators met with people all over the state and ended up in Fairbanks where they met with different businesses. She indicated this worked very well and was a very successful effort. Number 426 REPRESENTATIVE PETE KOTT said he seems to recall some type of reorganization which affected the Division of Tourism. MS. WOLF explained a new assistant commissioner, Debbie Sedwick was hired. Ms. Wolf said she would call her the assistant commissioner for Tourism, Trade and Economic Development. Currently, in her bailiwick there is a Division of Trade and Development that took the Office of International Trade and Economic Development and consolidated them. The division still sets there separately. Ms. Wolf said what they did do in the process was lower the (indisc.) for the Division of Tourism to make it more part of the scheme of working together more. They have talked about submitting an executive order to have them as one. There would still be a person called the director of the Office of Tourism or the Division of Tourism. Ms. Wolf said they hired Tom Garrett to be director of the Division of Tourism. She explained what the Administration is trying to do with the structure is say, "Lets find opportunities to work together." Ms. Wolf discussed marketing techniques in relation to the Ketchikan Pulp Company and the Alaska Bowl Company. She said it is important for connections to be made between companies. When they go out to promote tourism, they are also thinking seafood. Ms. Wolf noted they put on a lot of events where salmon is sold. When they go to implement the recommendations of marketing Alaska, they take the people who are really good at what they do and they can work on a variety of projects. There will still be a Division of Tourism focused on doing the things they do best. Number 637 CHAIRMAN MASEK asked if there were questions or comments. Mr. Stone and Ms. Loper indicated they didn't have any comments. CHAIRMAN MASEK thanked everyone for attending the hearing. She asked if there was any further testimony. Number 836 DAVE CARP, Executive Director, Alaska Tourism Marketing Council, referred to ways to get visitors to visit Alaska during the winter months and said he would like to throw consideration into the mix and that is the activities of the local convention and visitor's bureaus. Mr. Carp said all too often he thinks we overlook the word "convention" and go right to "visitors." Even though conventions are visitors, that market and those efforts are certainly an essential focus point for drawing visitors to Alaska in the winter. One change the ATMC is faced with in terms of the ATMC is that with the limited resources that we have, we have a responsibility to go out and try to bring the maximum number of visitors with those resources. At this state of the game and development in the Alaska visitor industry, they find a good portion of that comes during the summer months. He noted they have been able to modify the program and incorporate aspects of winter and year round visitation to the state and the program. Mr. Carp said what he would like to point out to the committee is that as they deliberate, please consider the notion of convention marketing. He said he isn't just speaking of domestic convention marketing but international convention marketing as well. One thing they find with meetings and conventions is the cost per conversion in terms of what it takes you to go out there and get a group of people to come up. It is far greater when you look at conventions. It is all a crucial part of the mix in terms of the overall cost for conversion in terms of investment. Number 1100 CHAIRMAN MASEK thanked Mr. Carp for his testimony. She thanked everyone for attending the meeting and adjourned at 4:25 p.m.