Saving a sinking industry

After a dismal 2009 tourist season, the Alaska travel industry is predicting further declines in 2010 and asking lawmakers to approve a tax credit for companies that help pay for marketing the 49th state as a dream destination.

Tourism backers note that while oil may take center stage as a revenue maker for Alaska, which collects at least 85 percent of its annual income from that one resource, tourism produces an estimated one in seven Alaska jobs. Hundreds of small businesses depend on the seasonal influx of tourists. People come from around the globe to charter halibut fishing boats in Homer, book private planes for a bird's eye view of Mount McKinley, journey to Fairbanks or even farther north for a taste of the midnight sun, and fill hotels all over the state.

State leaders have long looked at tourism as one way to diversify the oil-dependent Alaska economy, but a global economic downturn now appears to be keeping many people at home. Travel has fallen so precipitously and people are sitting so tight in their neighborhoods that a new word has been added to the nation's cultural lexicon -- stay-cations.

Hawaii, which depends on tourism much the way Alaska depends on oil, has been especially hard hit by this. In the State of the State address there Monday, Gov. Linda Lingle said declining tourism sparked a downward financial spiral in both business and construction. The result was a decline in tax revenues that put the Hawaii state budget in a $1.2 billion hole, she said. Hawaii is now facing what Lingle called a financial crisis.

Alaska is better off, in part because the largely seasonal tourism industry here is small potatoes compared to Hawaii's year-round business. In Hawaii, the industry brings in more than $10 billion per year and provides one in every three jobs, making the business five times more valuable than in Alaska and more than twice as important in the job market.

Still, according to Alaska state data, tourists spend $2 billion in the 49th state each year. And economists say that when you add a "multiplier effect'' to determine how the money spreads through the economy, the $2 billion doubles to $4 billion in terms of the real economic benefit to communities large and small. The industry also fuels around 40,000 jobs, and feeds roughly $15 million annually into the state's treasury.

Or at least this has been the case. Last year's numbers, scary trends being seen in other tourism destinations, and this year's projections for Alaska are making some wonder about the future. The figures are frightening to those whose businesses rely on the annual inundation of plastic-wielding tourists. Many in the tourism business said the fallout has already been obvious.

Bob Howard, a charter boat operator in Homer, said Monday that while he's doing OK, "hotels here are hurting. Restaurants are hurting.''

Two years ago, Alaska hosted 1.7 million summer tourists, of which 1 million came by cruise ship. Last year, the total dropped to 1.6 million, even though cruise passenger numbers held steady thanks to dramatic price slashing. Some small businesses in Alaska reported they saw the effects in a new class of budget-conscious cruise ship passengers who spent little when they got off the boat. And now the cruise lines have moved to ensure they aren't required to do the same kind of cost cutting in 2010 that they did in 2009. They're sending ships elsewhere. Cruise lines serving Alaska will have 140,000 fewer berths available this season.

To offset projected declines in cruise ship passengers and expected drops in visitors by air and road, Alaska Travel Industry Association chief executive Ron Peck wants more money to pitch Alaska around the world. The association has long held a state contract for marketing Alaska as a travel destination. State funding for that promotion hit an all-time high of $22.7 million in 1990, but has generally fallen since. Beginning in 2007, revenues collected from a new tax on car rentals were dedicated to the association, setting up a $9 million state contribution that the association's membership agreed to boost by 30 percent.