Attack on a tax
Analysis shows cruises not as cheap as industry suggests
Cruise lines are blaming Alaska's $50 per person "head tax" for falling revenues in their profitable Alaska business.
There's talk of ticket prices that have dropped as low as $300, but cruise officials say passengers are still being driven away by the tax.
The industry's Alaska Cruise Association is attacking the tax in court as unconstitutional, but at the same time they're on the attack politically, trying to convince the Alaska public and legislators that the head tax is bad for business.
But do cruise passengers really pay $300 for a seven-day cruise through Alaskan waters as the industry suggests?
The New York Times travel section has reported that number, which was repeated by Holland America Line Vice President Ralph Samuels to the Juneau Chamber of Commerce this summer.
At $300 it would mean that the head tax adds about 15 percent to the cost of a ticket, or closer to 20 percent if other per passenger taxes, such as Juneau's $5 municipal head tax, are added in.
Industry spokesmen such as John Binkley, president of the Alaska Cruise Association, said the industry considers that information proprietary and keeps it confidential.
So what does a visitor really pay for an Alaska trip
"I don't know what that number is," Binkley said, declining to speculate.
Both Carnival Corp. and Royal Caribbean Ltd. are publicly traded companies that report extensive financial data to the Securities and Exchange Commission.
Those two companies and their subsidiaries bring 80 percent of the cruise ship passengers to Juneau, the state's top cruise destination.
An Empire analysis of the most recent information, which includes most of the difficult 2009 summer cruise season, shows the average cruise ship passenger spent $1,340 on a cruise ticket, with additional expenses such as onboard purchases, additional tours and tour commissions that bring the cost of an Alaskan visit to about $1,900 per person based on industry data and Empire analysis.
That estimate does not count money spent on airfare, tipping and money made by associated businesses such as downtown jewelry stores, whale watching tours, scenic flights or rafting Mendehall Lake and River.
The Empire's average is likely low as well because it doesn't include high-end cruise operators such as Regents and Silversea. Other companies are privately held and don't publicly report their profits.
Carnival and Royal Caribbean don't separate out their Alaska operations, so the Empire's estimates are based on company-wide averages. That too may understate the cost of an Alaska visit, as Carnival says it "receives a significant premium" on tickets to the Alaska market.
Tax not a 'deal breaker' for some
Cruise passengers interviewed by the Empire said they were unaware of the head tax, but it didn't or wouldn't dissuade them from visiting Alaska.
"Doesn't everybody have something like that," said Rudy Rotunda of Lynwood, Ill. "If it stays that low, it wouldn't concern us very much."
The Rotundas had the additional expense of taking Amtrak from Illinois to Seattle, where they boarded the Celebrity Infinity for Alaska.
Mary Ellen DeAngelo said she and her husband, Tony, had an even greater expense.
"We're from Connecticut, so our airfare was also very expensive," she said.
The DeAngelos were also going on to visit Denali, further adding to the cost of their Alaskan vacation, which they expected to amount to $7,000.
"This is probably the only time we'll come to Alaska, so if it were the difference of a $50 tax we'd pay it for an opportunity to see the beauty," she said.
"These trips are so expensive to begin with, another $50 isn't going to be the deal breaker," Tony DeAngelo said.
Tickets for $300 - and lower
This summer when Holland America's Samuels spoke of $300 cruise fares to the Juneau Chamber of Commerce, he explained why prices got so low as demand dropped.
"You're going to keep lowering the fares until you fill the ship," said Samuels, the company's Alaska-based vice-president and formerly a top state legislator for Anchorage.
Holland America ships were scheduled to arrive in Juneau 158 times this summer, the most of any cruise line.
Carnival Corp. parent company to Holland America, Princess and other cruise lines, makes a quarter of its revenue selling extras aboard the ship, ranging from alcohol to merchandise to commissions on tours offered in ports.
"We're going to discount it because we want the people on the ship," he said.
Clearly, the cruise lines did discount fares this year. The same analysis of Alaska cruise costs last year shows estimated ticket prices of $1,670 and total trip cost of $2,360.
The state of Alaska's average cost of a cruise ship ticket for its Ocean Ranger environmental monitors fell from $1,800 last year to $1,400 this year.
The Alaska Cruise Association President John Binkley defended using the $300 ticket price when talking about the head tax.
"One of my staff got a $249 ticket," he said, and also got an incentive of a $100 on-board credit.
Top industry executives say it's been the head tax and not the economy that has caused their Alaska business to decline.
"There is no question that the referendum had a significant impact," Micky Arison, Carnival Cruise Lines Chairman and CEO told Wall Street analysts this summer.
What Arison called the "referendum" was the measure passed by voters in 2006 that established a $46 head tax and an ocean ranger program that charged an additional $4 to place marine engineers aboard cruise ships to ensure compliance with environmental rules.
Together they make up the $50 head tax that Arison said is so bad for the industry that it has made selling Alaskan cruises more difficult and forced cruise companies to relocate ships to more hospitable locations.
Some cruise lines, however, are moving in. Disney Cruise Line announced this month it would begin offering Alaska cruises starting in 2011, with stops in "popular ports such as Juneau, Ketchikan and Skagway." Disney Wonder will sail a total of 18 seven-night cruises to Alaska, starting at $939 per person.
Visitors to Juneau this summer told the Empire they're paying much more than $300, and may be spending $5,000, $7,000 or more per couple for what is sometimes a once-in-a-lifetime trip to Alaska.
"We're not just doing the cruise, were going on to Denali and it's costing us pretty close to $9,000," said Stacey Vieira of Chico, Calif., visiting Juneau aboard the Diamond Princess with husband, Al.
Juneau cruise tax advocate Joe Geldhof acknowledged that some $300 tickets were sold, but they were more rare than the discussion of them would make it seem.
"They're like the alligators in the New York city sewer system," he said.
The cruise ship companies, including industry leader Carnival, have been stepping up their campaign against the head tax, arguing not that it cuts in to the industry's Alaska profits but that the extra cost boosts ticket prices and dissuades visitors from coming to Alaska.
"It's a pass through, anything that increases the cost of a cruise in a very, very price sensitive market is a deterrent to a potential cruise passenger," said Tim Gallagher, spokesman for Carnival Corp.
Carnival, the leading cruise company in Alaska, is among those who say it is the $50 tax added to the cost of a ticket that makes visiting Alaska so expensive that fewer visitors want to come here. The Empire's analysis indicates that overall ticket prices have declined $330 in the last year. Data provided by the Department of Environmental Conservation shows the price they've had to pay for berths for Ocean Rangers has declined by $400 this year.
Carnival CEO and Chairman Micky Arison told industry analysts earlier this year that demand in Alaska was down so much that ships were being moved out of Alaska, and he blamed the head tax.
"The only explanation for me is the referendum," Arison said.
Last week Carnival Chief Operating Officer Howard Frank said the claim by head tax advocates that the decline was due to the economy was "obviously an incorrect conclusion."
"It appears that the proponents of the head tax had been able to convince the political leaders in Alaska that the global economic crisis is the reason for declining passenger numbers in 2009," Frank told industry analysts Tuesday.
That's not what passenger Tony Deangelo thought.
"Oh, it's the economy," he said, though he's not a fan of taxes himself.
"If they keep adding taxes it might make it a little difficult for future trips, but $50 isn't going to make a difference," he said.
• Reporer Kim Marquis contributed to this story. Contact reporter Pat Forgey at 523-2250.