My turn: Tourism is everyone's business

Industry's competitive advantage is slipping due to taxes and fees

Posted: Friday, March 23, 2007

Seventeen years ago, economist Michael Porter put forward the recipe for competitive success by establishing that winning industries or regions will be those that differentiate themselves by promoting their uniqueness.

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Alaska tourism has a competitive advantage by virtue of its beauty, location and natural resources. The tourism industry has worked hard to promote the state's exceptional attractions. Nevertheless, an increasingly competitive global marketplace is bearing down on us, and it is no longer enough to have a great product. As Porter said, we must have the means to compete and differentiate ourselves in a marketplace where other destinations are willing and able to spend much more to reach their markets.

The good news is that tourism offers a strong marketing pipeline that connects the Alaska travel experience and Alaska businesses with consumers all over the world. The pipeline equates to more than 1.9 million visitors every year.

Like other natural-resource industries, we endeavor to reach the market, but our pipeline, which was built more than 50 years ago, needs refurbishing. The current destination-marketing budget combines $5 million in private funds raised from the industry with $5 million matched by the state. The budget is managed by the Alaska Travel Industry Association. But that amount is no longer enough for the message to penetrate the market.

Increasingly, other destinations are flooding consumers with more television commercials, travel stories, co-promotions, direct mail, brochures and Internet marketing. In fact, Alaska now ranks 38 out of the 50 states in terms of public-sector funding for tourism marketing.

The Alaska Travel Industry Association anticipates its marketing effort will be further affected when industry partners with bigger tax bills to pay are forced to abandon their voluntary contributions to the marketing program. Conservatively, the association stands to lose $2.5 million in industry contributions along with the matching $2.5 million from the state.

Other state and municipal taxes, fees, transport charges, a new car rental tax, lodging tax increases and pending cruise industry taxes now account for an estimated $140 million collected from tourism businesses and Alaska visitors. This number increases when you add in other relevant municipal and state assessments.

So who gets hurt when Alaska's competitiveness dwindles? The answer: small tourism businesses, those who want jobs in the tourism industry, the economy and Alaska's economic advantage.

The decision to help grow Alaska's travel industry should be an economic development and investment decision - not a budget decision - in which the governor and the Legislature participate.

As the tourism industry faces an ever-competitive future with dwindling resources, the Legislature has been asked to consider ways to address this challenge, to look at tourism as a renewable economic resource and to develop the economic potential of the industry by overhauling the existing pipeline to bring Alaska's travel resource to market.

Options to discuss include:

1. Increase the funding level for the Alaska Travel Industry Association core-destination marketing program in the next state operating budget to $20 million.

2. Increase the current funding level for a separate program to entice more independent travelers to $8.5 million - equal to the amount of the current vehicle-rental tax.

3. In concert with the Palin administration, work to make needed amendments to ensure the cruise ship tax is implemented in a way that does not hinder this sector's future growth, with particular focus on environmental monitoring, financial disclosure and eliminating duplicative taxes.

The potential for the travel industry to further strengthen Alaska's economy and enhance its residents' quality of life is tremendous. Each vacationer spends about $1,260 to enjoy flight-seeing trips, fishing charters, state and national parks, museums, glaciers and Native culture. But developing it further will not happen by accident. If Alaska is to stay competitive for the good of future generations, it will be important to remember tourism is everyone's business.

• Ron Peck is president of the Alaska Travel Industry Association.

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