Alaska businesses unsure about cruise company merger

Posted: Thursday, October 31, 2002

ANCHORAGE - Alaska tour operators say they're waiting to see how the pending $5.4 billion takeover of Princess Cruises by Carnival Corp. will affect them.

If shareholders approve the deal, the new Carnival-Holland-Princess conglomerate would bring about three-quarters of all cruise-ship passengers to Alaska, said Ron Peck, president of the Alaska Travel Industry Association. The combined firm would have the capacity to carry 90,000 passengers. That would rise to more than 130,000 with the launch of new ships.

Some analysts see the monolithic company having enormous influence in Alaska communities, as well as leverage to dictate the prices they'll pay to local vendors, including hotels and companies that sell flightseeing, rafting and kayaking trips on board the ships.

"When you have the economic power being consolidated into a single corporation, they'll be able to extract greater concessions from vendors that want to do business with the cruise industry," said Ross A. Klein, a sociologist and author of the newly published book, "Cruise Ship Blues."

"Holland America showed Juneau, when it put its head tax in place. They had no qualms about withdrawing their support for charities," Klein told the Anchorage Daily News. He was referring to a 1999 decision by Holland America to stop giving its annual $300,000 in donations to local charities after Juneau voters overwhelmingly approved a $5 per cruise passenger fee that year. The company later backed away from the decision. Carnival owns Holland America Line.

Whether the behavior Klein raises concerns about will actually happen is subject to much debate.

The FTC concluded that Carnival's takeover of Princess did not pose significant concerns for competition and the Alaska attorney general's office expressed confidence in the commission's decision.

"It's not something that strikes us as something that will be a problem in Alaska," said state assistant attorney general Ed Sniffen, an expert in fair business practices. Common ownership doesn't rule out competition among the chains, Sniffen said.

Tim Gallagher, a spokesman for Carnival, said he doesn't think the acquisition will have much impact in Alaska. The three brands will likely keep their separate identities and will continue to make operational decisions independently.

"Our corporate philosophy is that you have a company, a management and a corporate culture behind each of the operating brands," Gallagher said. "They compete with each other now, and they would compete with each other if we are successful in completing the deal."

Several vendors who sell blocks of shore excursions, such as helicopter or dog sledding trips, to the cruise lines said it's too early to gauge how the new company will exercise its pricing power.

"They'll certainly have a lot of leverage," said Bob Dindinger, president of Alaska Travel Adventures, a company that offers cruise passengers fishing, rafting, kayaking and other forms of entertainment in several Southeast communities. "Whether they abuse that leverage, the future will only show."

Dindinger said the cruise industry needs local companies that offer tours. He doubts the new company will exert price pressure to the extent that it would threaten the existence of tour companies.

Even if the new cruise giant extracts higher fees from companies that provide the shore excursions, there will be plenty of people lined up ready to do business, some vendors said.

"Having your product sold on board is the Midas touch. You don't pay for any advertising," said Gary Droubay, president of Goldbelt Corp., Juneau's Native village corporation. Goldbelt subsidiaries sell rafting, canoeing and kayaking trips to cruise passengers, among other activities.

Both Princess and Holland America own hotels, buses and rail cars in Alaska. Gallagher said it's premature to say whether the new company would consolidate or shed some of those assets.



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