Tourist dollars are easy come, easy go

Economic study finds money slips out of Skagway almost as fast as it comes in

Posted: Tuesday, May 16, 2000

Only a dime of every dollar visitors spend in Skagway stays there.

The rest leaves when the summer workers and business owners do, or is spent in Juneau, Whitehorse or beyond, according to an economic study done for the city of Skagway.

``A lot of the money that's spent or made, whether it's a paycheck or a purchase, is sent straight out of town,'' said Skagway City Manager Bob Ward. ``In many cases it's not even deposited in the bank, so it's not circulating through the economy.''

The study, done last summer by Southeast Strategies of Juneau, examines direct and indirect impacts of all visitors and tourism employees in Skagway.

The impacts are profound. Skagway's population more than doubles in the summer, as seasonal workers come to fill nearly 1,500 summer jobs. Fewer than a third of those jobs exist in the winter, when most of the 250 businesses close. Almost all of them are there to serve, in one way or another, the 700,000 tourists who come through Skagway each summer spending nearly $60 million. Only $8.7 million is re-spent there.

The economic study was done in self-defense, Ward said. Skagway is often assumed to be the third richest community in Alaska, based on the calculation the state uses to determine how much each town can pay for its schools. The state takes the total assessed value of land in the community, and divides it by the number of residents. Oil-rich Valdez and the North Slope Borough top the list, followed by Skagway.

But in Skagway, land values are inflated by tourism businesses bidding up the property price, Ward said. And half of those business owners leave Skagway when the tourism season ends, taking their profits with them. A full 60 percent of the land value belongs to nonresidents, who aren't even included in the population count.

``In general, we found that businesses owned by seasonal residents made more income than businesses owned by full-year residents,'' said Linda Snow of Southeast Strategies, which did the study. ``Seasonal residents had more employees and brought in more income and targeted visitors to a greater extent.''

Employees working in the oil industry in Valdez and on the North Slope make more than three times as much a month as workers in Skagway, where the average monthly wage is $2,000.

``The things that visitor industry supports, are, by and large, entry-level, seasonal, service positions,'' Ward said. ``We have a very transient, low-paid population that comes in in April and is gone in September. I'm not saying that's a bad thing. I'm just saying don't compare us to those who do (have a year-round economy).''

Christina Petty certainly doesn't plan to spend much in Skagway. The 25-year-old plans to save half the money she makes this summer as a waitress in Skagway so she can travel abroad. Last year she was able to take a three-month vacation in Montana, Texas and Seattle with the money she saved working over the summer in Skagway.

``There's not really that much to spend money on in town and I worked about 45 hours a week waiting tables, so I was able to save a lot last year,'' she said.

The money she spent was on a few trips to Whitehorse, going out to eat, and sometimes a few drinks at the bars.

On average, the seasonal workers save almost a third of their earnings, at least until they leave Skagway. Many are young, saving for college, travel or just the off-season.

Even older workers, such as Glendia Barry at the White Pass and Yukon Route railroad, save their money. Barry, 47, and her husband are putting some away for retirement. They also spend some money on trips in the winter and visits to their family farm in Missouri.

What they buy in Skagway is basically groceries and an occasional drink at the Bonanza Bar & Grill on the way home.

``The rest of the stuff here is tourist-oriented. As far as T-shirts and hats, that type of thing I do not spend a lot of money on,'' Barry said.

Many of the seasonal workers also work more than one job and just don't have time to spend money, Snow said.

``I was talking to this one girl who was bartending at the Golden North, and she had been out guiding kayaking tours for 10 to 12 hours,'' Snow said. ``Kayaking for 12 hours is enough to wipe out any humanoid.''

Skagway residents do about 70 percent of their spending in Skagway. They go elsewhere, most often Whitehorse, for the rest, including household furnishings, clothing, health care, entertainment and some groceries.

``The problem with Skagway is that they don't have much in the way of retail business,'' Snow said. ``It's more a function of the size of the community. If there were places to buy furniture, to buy clothes, to buy wholesale, it would probably be done there, but the year-round economy isn't big enough to support that kind of business.''

Skagway's situation isn't unique. Statewide, a quarter of the employees in the visitor industry are from outside Alaska, and many of the jobs are lower paying.

In the end, even the paychecks Alaskans earn end up going out of state.

``Eventually all of our money leaks out of the economy of any community in Southeast, since we don't really manufacture anything at all,'' said Jim Calvin, a managing partner with the McDowell Group, an economic research firm. ``But it varies from industry to industry,'' he added.

``It's a safe assessment to say the more seasonal the industry the higher the level of leakage, if only because a seasonal industry will draw more nonresident labor than a year-round industry,'' Calvin said.

The amount of money leaking out also varies from town to town. Generally, the larger the community, the longer the money stays because there are more places for people to spend and re-spend it, Calvin said.

A previous study by the McDowell Group showed that money often goes from Haines and Skagway to Juneau. The same is true of other small communities in Southeast, so as they gain tourism, Juneau benefits.

Skagway businesses do 21.6 percent of their shopping in Juneau, which pleased Kirk Flanders, acting director of the Juneau Economic Development Council.

``We must have some pretty strong wholesale activity going on in Juneau,'' Flanders said.

But Flanders questioned a few of the assumptions the Skagway study made about business spending. The survey did not ask businesses how much they spend on rent, property taxes and utilities, which could account for a considerable portion of their profits, Flanders said.

``That could really swing this picture one way or another,'' Flanders said.

The Southeast Strategies survey is the first such analysis of the tourism industry in Southeast. The McDowell Group is now doing a similar study of the overall economic impacts of visitors in Ketchikan, Juneau, Sitka and Haines for the Southeast Conference. The study should be finished in about four months.

A McDowell Group study in 1998 looked only at direct impacts of the cruise ship industry. The North West CruiseShip Association is paying for both studies.

Calvin expects the results won't be as extreme for Juneau as they were for Skagway, since Juneau has a larger, more well-rounded economy.

``The tourist industry is great. They are contributing to the economy,'' said Snow, who did the Skagway study. ``I just don't think they are contributing to the economy as much as some people say they are.''

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