Visitors anchor SE economy
Some 89% of all cruise visitors to Alaska make a stop in Ketchikan, which is expected to greet 1.28 million passengers this year.
The visitor industry is the largest private sector industry in Southeast, both in jobs and since 2016, in total workforce earnings. Indeed, if the industry continues to grow it is set to eclipse both the municipal and state government sectors in total wages (it is already larger than both in terms of employment) and become the region’s largest sector overall. The visitor industry accounted for 18% of regional employment (8,004 annual average jobs) and a quarter of all private sector employment.
Since 2011, tourism has added more than 2,000 year-round equivalent jobs to the Southeast economy. Those working in the visitor industry earned $249 million in 2018 — or 11% of all regional employment income. The average annualized wage in the visitor industry is $31,152, significantly lower than the average regional wage of $50,002, but it is a figure that has been steadily increasing over time.
In 2018, 1.6 million air, ferry, and cruise passengers came to Southeast Alaska from outside the region, a 19% increase over 2014. Airline passenger traffic from outside the region grew 17%, and cruise passenger traffic to the region increased by 13%. However, ferry arrivals from outside the region fell by 32%due to decreases in funding and service.
Most passengers arriving in the region come by cruise ship than any other mode. When tourists only are considered, that figure will be 90% by 2020. Cruise passenger traffic has seen massive increases in recent years. Between 2010 and 2020, the number of cruise passengers arriving in the region is projected to increase by a staggering 65%, including two-year growth of 23% expected between 2018 and 2020. Southeast Alaska will receive 5% of all global cruise ship passengers in 2019.
In 2020, 10 new ships and 29 additional port calls are expected to be added, while 7 ships will be phased out of the region. Lines with new ships will include Carnival, Princess, Royal Caribbean Norwegian, and Oceania. Lines that plan to reduce their Alaska fleet include Holland America, Crystal, and Azamara, which has no ships scheduled to visit Alaska in 2020.
Southeast Alaska is the most visited part of the state, with two-thirds of all tourists coming to the region. One-third of all Alaska visitor spending occurs in Southeast, where visitors are expected to spend nearly $800 million in 2020.
For the fourth year in a row, in 2018 Southeast Alaska saw a record-breaking number of airline passengers from outside the region, with 435,476 arrivals. However, in 2019 air passenger numbers declined. As of July 2019, airline passenger arrivals were down 4% over the first half of 2018.
The visitor industry has the strongest outlook of all Southeast Alaska industries. Alaska’s popularity as a visitor destination has continued to grow. In 2018, Glacier Bay was rated the best cruise designation in the world by cruisers. More Americans are traveling due to a strong national economy and international travel destinations are increasingly perceived to have security risks. Cruise passenger arrivals are expected to continue to rise as larger, higher-capacity vessels visit the region. Along with increased visitors, the number of jobs and associated income in this sector will continue to rise.
Source: Southeast Conference
Economic Q & A
Q. How much do cruise lines pay to state and local governments?
A. $121.8 million in taxes and fees. This includes a $34.50 passenger fee that is shared with local ports. Other state revenues include environmental fees, corporate income tax and a casino tax. Many municipalities collect sales tax and property tax, along with bed and vehicle rental taxes.
State of Alaska revenues, 2019
Total:$125.6 million
Cruise line payments: $38.6 million
Municipal revenues, 2017
Total:$88.5 million
Hotels, lodges and bed and breakfasts in the state’s major destinations saw bed tax revenues rise in 2018, a reflection of more tourists visiting the state. Bed tax revenue in the Municipality of Anchorage totaled $28 million, an increase of $1.8 million over 2017. Rental vehicle taxes rose $400,000 during the same period.
Q. How is the commercial passenger vessel (CPV) excise tax shared with the state and port committee?
A. CPV excise tax revenue is shared with the first seven port communities and ship visits. If a port city is in an organized borough, the city and borough can receive $2.50. Between 2007 and 2016, 17 city or borough governments have shared in the CPV excise tax revenue totaling $114.3 million
For the state’s latest report on how communities spend their CPV revenues, click here.
Click here to view the Alaska Department of Commerce, Community and Economic Development’s 2017 Commercial Passenger Vessel Excise Tax Annual Report. Click to enlarge the revenue chart below.
Q. Why can’t we tax cruise passengers to fund state government?
A. The U.S. Constitution, through the Commerce and Tonnage clauses, restricts the use of passenger taxes to services that are directly connected to the passenger and vessel. These restrictions allow residents and goods to flow freely from state to state without onerous local taxation. Imagine what a cross-country trip would cost if you had to pay a new tax every time you crossed a state line. The Tonnage clause restricts the states from imposing taxes on any shipment of cargo without the consent of Congress. Taxing passengers to pay for services available to all citizens is considered restrictive of interstate commerce. In a recent court decision, a federal judge ruled that the per-passenger cruise ship fees levied can only be spent on projects that directly benefit the ships.
Q. Where do the numbers come from?
2014 Cruise Market Watch- Cruise Pulse™
2014 North American Cruise Market Profile
CLIA Cruise Industry Outlook 2019
2018 McDowell Group The Role of Visitors in Alaska’s Economy