As the weather warms at last in the north with the snow melting and the now long days growing ever longer, it is time for Alaska residents to take a deep breath before the full-on invasion of summer visitors, relax and think money, money, money.
The upside of more than 2 million tourists rushing in to temporarily swell the Charleston-size population in the Land of the Midnight Sun is that they come north with pockets full of cash.
Lots and lots of cash.
“The University of Alaska Center for Economic Development (CED) estimates that
in-state consumer spending related to outdoor recreation trips amounts to nearly $3.2 billion annually,” according to its latest report.
And that’s a low-ball estimate, said Nolan Klouda, the CED’s executive director.
“In some cases,” he said, “we don’t have perfect data.” In those cases, the Center picked the lowest estimate of economic value.
“The numbers are very conservative,” Klouda said.
Still, the spending figure in the March 2019 study ticked up from that in a study of 2017 Alaska tourism conducted by the McDowell Group for the Alaska Department of Commerce, Community and Economic Development. That study put spending somewhat lower at $2.8 billion but pegged the visitor industry’s economic output at $4.5 billion.
Cruise on in
The state’s big money makers, according to the CED study, are wildlife viewing, fishing and hunting in that order. Those three activities generate more than 95 percent of spending with cruise-powered wildlife viewing far and away the state’s biggest draw.
Driven by cruise-ships tours and day-boat cruises such as the glacier tours out of the port of Whittier and the wildlife tours out of the port of Seward, the wildlife viewing category accounts for about two-thirds of the economic activity.
The cruise/tour business is three times the size of the $654 million sport fishing business, which is in turn about four times the size of the $162 million hunting business, according to the study that pulled together data from the U.S. Fish and Wildlife Service, the Alaska Department of Fish and Game, the National Park Service, the Alaska Division of Park and Outdoor Recreation.
“While this (data) does not create an entire picture of all of the outdoor recreation related activities in the state – most notably it misses the impacts of local activities
and equipment expenditures – it does speak to the size and impact of the economy,” the study said.
The value of the short, busy summer season to the Alaska economy clearly jumps out in the accounting of recreation spending.
Traditional winter sports – downhill skiing/snowboarding ($3 million), cross-country skiing ($4 million) and snowmachining ($49 million) – comprise less than 2 percent of annual consumer spending in the state, the study says.
A seasonal favorite of many Alaskans but an attraction for few tourists, downhill skiing/snowboarding is dead last as an economic engine. The sport might power the ski-resort community of Girdwood about 35 miles southeast of Anchorage, but its reach doesn’t go far beyond that valley enclave of about 2,000 people.
Other sports on the list falter as economic drivers because the costs of entry are generally low. In terms of participation, bicycling in Alaska is seven and a half times as popular as downhill skiing/snowboarding, the study says, more than five times as popular as all-terrain and off-road vehicle recreation, almost three times as popular as cross-country skiing, two and a half times as popular as snowmachining, and nearly as popular as camping and hunting.
And yet it generates a paltry $2.9 million in consumer spending – $1 million less than cross-country skiing, $46 million less than snowmachining, and $159 million less than hunting – all sports that either require much bigger investments in gear or confront tourists with other costs.
Snowmachines are costly for anyone. Nonresident hunters are required to hire costly guides to escort them when pursuing most big-game animals in the state. Many resident hunters contract with costly air taxis services to reach remote hunting areas.
Growth
Along with snapshotting the Alaska outdoor recreation industry, the CED report focuses heavily on opportunities for expanding outdoor reaction not only as a driver of tourism growth but as a quality of life attraction and marketing backdrop to attract new businesses to the state.
On the tourism front, it notes that if existing visitors were to spend but one additional day recreating in Alaska,”these visitors would (spawn) $64.5 million in new spending in Alaska, creating 1,154 additional jobs. The labor income from these jobs would be over $40 million.”
And if only half of Alaska residents – already the most outdoor active people in the nation – “spent one additional day engaged in an outdoor trip, they would spend over $34 million,” the study says. “In the process, that spending would create 610 jobs with a payroll of over $21 million.”
On the business front, the study outlines the successes other states and communities have found in selling themselves as business friendly on a variety of fronts.
“The Idaho Department of Commerce counts ‘recreation technology’ among eight key industries targeted for growth by state policymakers,” the study says. “To strengthen the Idaho brand in outdoor gear, the Idaho Department of Commerce launched Tested in Idaho as a marketing campaign.”
The program is intended to help promote outdoor-related businesses in Idaho and encourage them to stay in Idaho. Alaska has seen some significant start-ups in recreation technology only to have some of them leave the state.
Fatbikes, another modern piece of “recreation technology,” were born in Alaska. They’ve done a better job of hanging on. Two bike companies – Fatback Bikes and 9-Zero-7 – still call Alaska home. But they battle for sales in a market dominated by major bike manufacturers with much bigger budgets for promotion and advertising.
The same is true of Anchorage-based Relevate Designs, which revolutionized bike-packing packs and now faces global competition from an army of copy cats.
Individually all of the still-in Alaska companies push the state as part of their brand, but there is no coordinated effort to market these companies and others in the bigger context of Alaska Tough versus Idaho Tested.
The CED report sees that and other weaknesses in selling Alaska as an opportunity.
“The economic impacts of outdoor recreation are wide reaching in Alaska, but the potential for growth may be even greater still,” the report concludes. “Strategic development of opportunities in emerging areas of the outdoor economy could contribute to Alaska’s development as a destination for visitors.
“The quality of life component of outdoor recreation helps Alaskans stay happy and healthy, especially in the winter. However, a thriving outdoor recreation industry can help attract and retain workers as they move through their career. In the process, they fill workforce shortages that might otherwise constrain the state economy.”
What the report doesn’t address is whether Alaskans want this. Growth entails change, and change invariably brings with it some difficulties.
Efforts of the Matanuska-Susitna Borough to help grow sportfishing businesses along the streams and rivers at the head of Cook Inlet have been stymied by the Inlet’s commercial fishermen who have long harvest 75 percent or more of the Inlet’s salmon and think of those fish as theirs.
A vicious fish war now rages there.
Meanwhile, the loss of “wilderness” fishing opportunities on the fabled Kenai River on the Peninsula of the same name south of Alaska’s largest city has angered some long time Alaskans. So, too, the two-lane Seward Highway running south from Anchorage to the Kenai that now runs bumper-to-bumper with traffic for good parts of the summer.
There are some Alaskans who today look upon the coming tourist season not as an opportunity but as a scourge. It is hard to believe this could be in the least densely populated state in the nation, but it is – largely because more than half of the state population now lives in the sprawling urbanity of the Anchorage metro area with only three roads out.
One goes south to dead ends on the Kenai. One goes north to Fairbanks. One goes east to Canada. Most Alaska outdoor recreation concentrates in the corridors along those roads, and as a result it can sometimes get a little crowded.
Still, the state has plenty of wilderness. Get 10 miles away from almost any of those Alaska roads, and you are sure to find it.
We used to get 25% more out of the cruise ship head tax. Funny how Parnell and his fellow Republicans do not respect the vote of the people. Now Dunleavy”s boy Brune thinks ocean rangers need to go away. Who cares what the voters wanted it is not what Dunleavy wants.
Thanks Leo, for bringing some light to the issue at point. Parnell and his gang of former COP employees did us a good one, and no one said a word.
There’s gold in them thar hills…. Help is on the way…..
“The media was all atwitter about the announcement that Alaska might be the next oil boom province, based on a new report from IHSMarkit which estimated that 28 billion barrels of recoverable resources remain in the Alaskan North Slope (where supergiant Prudhoe Bay lies), as well as significant amounts of natural gas (geologically significant, but unfortunately not economically significant). This, the firm estimates, could lead to a 40% increase in crude production in the next eight years. That would amount to 200 thousand barrels per day, not very significant on a global scale, but important for the state and nation.”
https://www.forbes.com/sites/michaellynch/2018/08/23/north-to-alaska-the-next-oil-boom/#38ad74ac66fd
Craig,
I am surprised you did not mention Valdez in your article. Besides being the terminus for the Alyeska pipeline, which has guided tours, we have a world class hatchery, about a 1/4 mile from the tanker docks. VFDA also has guided tours.
Stan Stephens (RIP) cruise company is going strong. With 3 vessels doing the Columbia Glacier trip, daily during peak of season.
Also lots of day charters, with at least 25 guided boat operators.
They always slow down and observe the comm fish boats fishing in Valdez Arm, when they come out of the Port of Valdez. These cruise and charter companies have more paying tourists, than Whittier & Seward combined.
Winebago Park is next to the entrance to Valdez boat harbor. Salmon start returning to the VFDA hatchery in late June and continues on until end of September. Thousands of lbs of Coho & Pink salmon are pulled from the water daily, and the tourists love it. The charter boats take tourists and Alaskans out into PWS, to fish for Halibut and Rockfish.
City of Valdez has Halibut and Coho derbys. Valdez is the gateway to Prince William Sound.
James,with regards to the Valdez pink fishery,I was blown away by how smoggy the Port gets on a sunny still air day in the Bay from the good sized seine fleet all bottle up.
Its far worse imo than when all the Terminal berths used to be full back in the day.
I guess thats one of the benefits for the peeps of Valdez.
Dave Mc,
I was involved in the PWS seine fishery from the middle ‘70s for 25 years. The amount of CO2 emissions produced by the seine fleet for 3-4 weeks out of the year, pales in comparison to the levels of CH4, CO2 & NOy released at the oil terminus in the Port of Valdez. The smell of rotten eggs produced by the release and evaporation of benzene is ever present all over the Port. I am not complaining, it is the by product of producing, pumping and shipping ANS. Part of doing business with oil production, which AK depends on so greatly m. No different than Houston, TX except their air quality is worse, due to their refineries.
I have spent many days in Port of Valdez, Valdez Arm and Valdez harbor. I do not see the problem you describe, or are you just bashing the hard working comm fleet? Give it a break, you know not what you speak of.
Well gentlemen, you’ve certainly raised the pertinent issue. Does Alaska, to steal a line from Sarah Palin, get its “fair and equitable share” out of the tourism industry.
I guess the upside, according to the Institute for Social and Economic Research at the University of Alaska, is that at least the state isn’t in the red on this industry:
“Counting only state revenues (excluding local revenues), the state spends more to manage fishing than it collects from the industry. State revenues from tourism roughly equal what the state spends for management. Mining brings in about six times more than the state spends to manage it.”
And tourism does provide some big boosts locally. The entire Denali Borough budget is funded by a bed tax primarily coming from those Denali Park hotels, and the Kenai Peninsula Borough gets a big surge in sales tax revenues when the tourons arrive in the summer, not to mention whatever it collects in property tax from people with second homes there.
ISER again: “All three industries pay more in combined state and local taxes than the state spends to manage them. Revenues from tourism and commercial fishing are especially important to local governments: 60 percent of the revenue from tourism and 40 percent from fishing goes to local governments.”
But overall, the state is not very creative at taxing the tourism industry. It has always seemed foolish to me that we lack a seasonal sales tax. I wouldn’t want to pay it, but it is an easy way to snag some of that tourism revenue.
And there are clearly some VAT taxes worth a look, not to mention some state business opportunities. I’ve long been convinced that if State Parks opened a coffee shop concession at Glen Alps in Chugach State Park it would likely generate enough revenue to cover the cost of most park operations.
The main difficulty I see is that figuring out a way to effectively tax anything but oil in this state (ie. taxing without putting downward pressure on the state economy) is difficult, so it is always been easier for the state to just tax oil. We are lucky in that regard that the oil flow has been stabilized with some new production.
We could be a lot worse of than we are, but the the biggest problems this state faces going forward remain economic.
“A vicious fish war now rages there.” We have Tourettes syndrome and then we have the Medred syndrome wherein an ordinary discussion about ANYTHING will include a nasty snip about commercial fishers. Doesn’t matter what the topic is, you know it’s gonna happen.
Ah yes, Mark, when writing about industries, reporters should always ignore the impediments to growth in those industries. Reality, sadly, isn’t a nasty anything. It’s reality.
MatSu tourism businesses have a hard time making angling work if there are no salmon to catch. And maybe you failed to notice that sport-fishing tourism revenue statewide has declined ever so slightly in recent years.
A part of that is due to the reallocation of halibut away from the charter halibut sector down there around Kachemak Bay. But I’m guessing you’d just as soon seen your neighbors in the charter business go broke. So I guess that isn’t worth mentioning either.
We need a statewide sales and income tax. That is our new source of revenue.
Tax them all and let God sort it out!
James, where would all that new tax revenue end up?
Bryan,
If you have not noticed our out of state budget director for the Gov, slashed spending across the board. Even the AMHS is going away. 1/2 of AK population lives in cities, villages and municipalities of 5K people or less.
Everything the Gov has slashed could be taken care of by new state revenue.
Think of the corruption and pofk barrel projects. I mean, it all sounds good but, we know it never ends up where it is truly most.
https://www.adn.com/politics/alaska-legislature/2019/02/05/some-good-budget-news-alaska-state-debt-is-declining/
The proposed income tax under the failed Walker Administration amounted to $200-300 million…and destroy our economy. We don’t need an income tax. In order to fund the current deficit spending levels we would need to tax incomes at 5 to 8 times the amount proposed under Walker.
Great work on the Johnstone disaster. I hope they figure out how to keep the fake news from affecting all the issues that are considered by the legislature. If there are no consequences it will become the norm. Is there an another article in “What next?”
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Tourism activities bring in millions but . . . . How much stays in Alaska, gets into the general fund for education, social services, infrastructure?? Visitor recreational fishing for example, the cruise costs thousands, the fishing trip costs hundreds per day and the state “revenue” is the fishing license. License money goes into the fish and game fund which has to be spent on benefits to those who buy licenses.
If you could tax the whole industry at 5%, at even $4 billion total, the $200 million can’t begin to “fill the gap” between spending and income. The hourglass holding oil is dripping away.
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Majority of the caribou migration arrives via ship. The cruise companies are the best in the world at control of the wallet. Not a lot of value, relatively speaking, sticks here. I suspect we are at least as much of a colony for tourism as we are for oil, mining, seafood, transportation, the former forest products industry etc. We confuse volume with value. Some people make money but there can be no doubt that the tourists have a negative impact on our quality of life (Road, fishing holes, restaurant congestion etc.) For those of us who live here because of the outdoor experience v. the economic opportunities, is it worth it?
Do we make enough off of them or are we just a conduit that passes money through?