A cruise industry official told a recent Ketchikan Chamber of Commerce lunch crowd that his company continues to invest in Alaska, but some proposed state taxes could hurt the bottom line of the industry, which could limit plans for growth.
Ralph Samuels is Holland America and Princess Cruise Lines’ vice president of government and community relations. He was in Ketchikan to talk about Alaska’s share of the world cruising market, and what it would take to increase that share.
Before 2004, Alaska had about 9 percent of the global cruise market. Now, though, it’s down to 4 or 5 percent. Samuels said that’s because the number of ships that come to Alaska has remained flat, while the industry has grown elsewhere, especially in Asia.
“The Asian market has grown. And it’s not North Americans flying to Asia to take a cruise… It is Chinese citizens going to Chinese ports,” he said. “So the Asian market has grown internally, and it has now taken over third place behind the Mediterranean and the Caribbean. Caribbean is first, Mediterranean is second.”
Increasing the number of ships that come to Alaska is a complex process that depends on many factors. Samuels said it’s a huge investment that may or may not pay off. If there are too many ships and not enough demand, he said, they’ll have to lower ticket prices to fill the ships.
If that’s the case, the cruise company likely could have made more money if it hadn’t added a ship.
But, if a cruise line determines the market can absorb another ship, Samuels said it has a big ripple effect for the entire tourism industry.
“If Princess adds a ship to Alaska, that’s about 50,000 more people that you guys get to collect tax money from; all the retailers get another shot at somebody walking by the store; shore ex people get another shot at trying to get somebody on the flightseeing trips or the four-wheeling trips or the logging show, whatever,” he said. “If you add another ship to the market, it is probably the best thing for tourism.”
Samuels said some proposals under discussion right now in Alaska’s local and state governments could make it more difficult to add ships to the market.
He said the industry opposes a proposed increase to the state head tax. Other proposed state taxes also could eat into the profit, such as a fuel and alcohol tax hikes.
They may all seem small, but Samuels said all those little increases add up, especially if each local community the cruise lines pass through also increases its bed tax. That’s something communities are considering in response to cuts in state revenue sharing with local governments.
“As I explained to the mayor in Anchorage, if you stop in Ketchikan, stop in Juneau, stop in Skagway, stop in Sitka, end up in Seward and Whittier, and then you go to the Mat-Su Borough and Denali Borough and Fairbanks, and everyone said it’s just $3; it’s $21 a head. It all matters,” he said.
Samuels said everyone in Alaska would benefit more from trying to encourage more ships, rather than squeezing more revenue out of the industry.
“Tourism is doing very well in Alaska right now. So, how do you increase the pie, rather than try to get the last nickel from the guys that are already coming,” he said.
But, Samuels said, while possible increased taxes are a concern, Holland America/Princess won’t give up on Alaska. In fact, the company just made a big investment in one of its hotels up north.
“The McKinley Chalet Resort is a hotel just south of Healy. And the Holland America Group has put about $50 million into this facility,” he said. “And for a cruise line to spend $50 million on a land asset, it’s a sign that you’re bullish on Alaska that we made the investment because now it’s more difficult for us to transition out of Alaska.”
Samuels also addressed marijuana legalization in Alaska. He said pot is not allowed on cruise ships, no matter what, and he hopes marijuana retail stores throughout Alaska’s ports post signs making that clear.
Samuels said a passenger who is caught with any marijuana product on board will be kicked off the ship.
That shouldn’t be a big problem this season, though, since the state doesn’t expect to issue retail licenses until September, at the earliest.