Cruise With cruising in decline, Alaska generates new tourism ideas By Johanna Jainchill / November 17, 2009 Share 1 -- In sunny Santa Barbara, Calif., far from the glaciers, mountains and bears that draw visitors to Alaska every summer, a group of the state's tour operators, lodge owners and tourism officials gathered last month to tout the Frontier State to members of the media. The Alaskans were talking about improvements they were making to their properties, tours they were launching and the museums and cultural centers that were opening up from Fairbanks to Anchorage. The mood was surprisingly upbeat at the Alaska Media Road Show, especially considering that Alaska's current visitor trends could severely cripple the state's tourism sector if they were to continue over the next few years. In the cruise sector alone, Alaska will experience a downturn in passengers next summer that will set the state back by a half-decade. In 2004, 876,000 cruise passengers visited the Frontier State. By 2009, that number had climbed to 1 million, according to the Alaska Travel Industry Association, which hosted the event. Next summer, the ATIA expects 860,000 cruise passengers, fewer than in 2004. If this were to happen in New York, which in 2008, the last time the city counted, had about the same number of cruise visitors as Alaska, the effect would be a wrinkle in the city's tourist arrivals, which totaled 47 million that year. But in Alaska, those 1 million cruise passengers represent the bulk of the state's nearly 1.6 million visitors. The Alaskans in Santa Barbara all expressed strong opposition to the Cruise Ship Initiative voted into law by Alaskans in 2006, which levies a $50 head tax on cruise passengers and imposes a host of new taxes and environmental regulations on cruise lines. The cruise industry has blamed the initiative for having to pull its ships from the state next year. Princess Cruises, Holland America Line, Royal Caribbean International and Norwegian Cruise Line will all downsize their Alaska operations in 2010, and some lines have threatened to cut back more in 2011. Next year's 14% cruise passenger decline in the state will compound an overall tourism downturn that began this year as a result of the recession: 573,300 noncruise visitors visited the state in 2009, compared with 574,000 noncruise visitors in 2004. In Anchorage alone, hotel tax revenue was down 18%, and Fairbanks has reported similar declines. For Juneau, the 14% decline in cruise passengers will cost the city $208,000 a day in local spending during the height of the 2010 cruise season. And Ketchikan expects to be down about $20 million in local spending next season due to the drop in cruise passenger spending. With all that these Alaskan businesses are facing, gloom would seem to have been a more appropriate mood. But as the operators explained it, that wouldn't have been Alaskan. The state has long known the ups and downs of being reliant upon finite resources. Whether it's oil, salmon, gold or tourists, Alaskans are familiar with boom and bust cycles, and these business owners and tourism officials say they are preparing to deal with the current bust in cruise tourism by finding other ways to fill their beds, tours, trains and planes. The operators at the Road Show were talking about changing their marketing tactics to attract more independent and group travel, about reaching out to the travel agent community to attract different kinds of visitors to their state. They know that there remains a large pool of potential visitors around the world for them to target. "People have been cruising to Juneau since the beginning of the Gold Rush," said Elizabeth Arnett, the tourism marketing manager for Juneau's Convention and Visitors Bureau. "I can't imagine it will go away." But that doesn't mean the adjustment won't be difficult or painful, and Juneau, as much as any destination in the state, is prepared to face it. "Going back to 2004 levels will be difficult for operators to adjust to, because they have built up to 2009 levels," Arnett said. "In 2004, we had four whale-watching tours. Now there are 12. We're not sure who will survive. We are facing that." Juneau is among the Alaska towns that will be hardest hit by the downturn in cruise tourism. It's the only state capital that cannot be reached by road, and 95% of Juneau's visitors arrive on cruise ships. One million people came by ship this summer, as opposed to 80,000 noncruise tourists. But Arnett said there was an upside to this, and she is already thinking of a marketing angle for the downturn. "There will be less congestion on the streets of Juneau," she said, adding that fewer people "might be a good thing for cruise passengers." The businesses and tourism officials at the Road Show spoke often of increasing their marketing and changing their message, even when budgets were down. "We are hyping up our efforts to encourage people to visit us," said Patti Mackey, executive director of the Ketchikan Visitors Bureau. "Now is the time to market. I have to tell the City Council, 'Don't cut my funds.'?" Mackey said tourism is the single largest employer in Ketchikan and supplies local government with 25% of its revenue. Currently, 93% of its visitors are cruisers. Mackey is looking to market to non-cruisers to make up for the anticipated 12% falloff in cruise passengers in 2010. "We need to attract the independent, adventurous types," she said. "We're also going to look at the meetings and conventions market. We didn't have accommodations before because the hotels were full. It's a new opportunity for us." The Alaskans at the Road Show said they were also focusing more efforts on bringing additional international travelers to Alaska, specifically targeting Japan and German-speaking Europe. "They stay longer and spend more money," said Bonnie Quill, executive director of international visitors for Matanuska-Susitna's Convention and Visitors Bureau. "If we get more marketing [funding], I'm sure we'd market more to them." Some Alaskans are looking much closer to home to fill their beds. "We are promoting our festivals to each other," said Karen Lundquist, vice president of marketing for the Fairbanks Convention and Visitors Bureau, where hotel inventory increased 8% this year. She said Fairbanks was marketing more within the state this year to draw Alaska residents to events such as the World Ice Art Championships. "Sometimes we miss our own opportunities," she said. Many operators now see one of those missed opportunities in the travel agent channel. For many Alaskan businesses, working with travel agents, and paying them commissions, is a new concept, and one that is not always readily understood. "Some operators don't know how to pay commissions," said Sharon Gaiptman, of Gaiptman Communications in Juneau. Many Alaska destinations have not yet matured, Gaiptman said, adding that they have not yet learned to work with the broader travel network. "They are learning," she said. "They say, 'We are too small to pay commission.' And I tell them, 'Then you are too small to sell tours.'?" This year, at the annual convention the ATIA holds for its membership, the association dedicated a workshop to the question of how to work with the travel trade. It included a segment on commission structures and "what a commission really is," recalled Jillian Simpson, the ATIA's director of travel trade and international marketing. The message, she said, was "that it's not discounting your product or giving it away -- that it's compensation for the agents' distribution channel and the marketing they are doing on your behalf." The workshop also pointed to commissions offering a great return on investment, she said, because "unlike an ad that you buy, you don't pay for anything unless you have a booking. I think that struck a chord with a lot of people." Denali Park Resorts has traditionally drawn 85% to 90% of its business from cruise lines. Seeing the downturn in cruise ship arrivals next year, the company is wasting no time in targeting a different source of customers. "We are looking at other ways to fill our beds," said Carol Fraser, regional director of sales and marketing for the company, which has two lodges at Denali National Park. One way, she said, would be reaching out to travel agents. The company is launching a new travel agent incentive, offering 15% commission across the board for bookings at its properties, and revamping its website to add a landing page exclusively for travel agents. "We are reaching out to travel agents in many ways," Fraser said, adding that the company was also buying banner ads on GDS sites and visiting travel trade shows. "There are a lot of travel agents out there, and we are not ignoring them like the airlines do," Fraser said. "We're going to keep increasing our contact with them, to get more business." The ATIA recognizes that as much as Alaskan businesses have to be educated about working with agents, travel agents need to understand how to sell Alaska. "Because we are such a large touring destination, it can be a little complicated and intimidating to package it," Simpson said. The association created an online training program in 2005 that enables agents to become Alaska Certified Experts. The course is free, and once agents complete the course, they are listed on the ATIA site for consumers who are looking for a referral. This year, the ATIA is introducing still more ways to reach the agent community. In January, the group will launch specials specifically for Alaska Certified Expert agents, such as higher commissions or client incentives. "They will offer something special just for those agents to use," Simpson said. Many operators and lodge owners have long been working with agents, and some say it has helped them during the down times. "Our success is agent-driven," said Kirsten Dixon, owner and manager of Within the Wild, which operates three remote adventure lodges. Dixon, her husband and children have run their three properties for 27 years, and they have long been tapped into the upper-scale travel agency segment, working mostly with Virtuoso agents to fill their small, high-end lodges. It has proven successful. While most Alaska businesses reported declines this year, Within the Wild enjoyed a growth year. "We are very focused on a particular target market: the experiential traveler," she said. "We are very active with our agents." And operators here think they have a good value proposition for agents, as well. "People don't come and see us [only] once," said Dee Dee Kay, the lodge sales manager for Alaska Heritage Tours. "We have very good return business, because we want people to come back." But none of these operators would suggest that they don't want or need the cruise ship traffic that has buoyed their tourism industry for so long. And for many of them, it's almost irreplaceable. "The challenge for some businesses is they are so reliant on the cruise ship visitors taking shore excursions that it's a little tough to say, 'Change your business model to get independent travelers,'?" said Ron Peck, the ATIA's president. "It depends where you are and what business you are in. "If you are [renting] kayaks exclusively to cruise line passengers, it's not that you wouldn't want to hang your hat somewhere else," he added. "It's [a question of] where."