Alaska Cruises: Will the Head Tax Get the Axe?

August 7, 2009
Alaska Head Tax As the Alaska cruise season starts to wind down, talk of the region's troubles is just ramping up. The 2006 implementation of a $50 head tax -- part of a statewide travel initiative, put into place by voters to generate revenue -- has sent cruise ships packing, with Royal Caribbean, Cruise West and Carnival Corp. (parent company of Carnival, Princess Cruises and Holland America) reducing their Alaska itinerary offerings. Sure, fares are lower -- but so is demand.

So what's going to happen to the cruise industry in Alaska?

On July 24, the First Things First Alaska Foundation, a nonprofit organization that promotes economic development and resource management through public education, sponsored a summit in Juneau for Alaska officials -- everyone from business owners to state representatives -- to speak out about what the state needs to do to woo travelers, and particularly cruise passengers, back to the region.

Most who attended the summit agreed that the best way to make the region more welcoming is to repeal or, at the very least, revamp the $50 head tax currently assessed to all cruise passengers. PeggyAnn McConnochie, First Things First Alaska Foundation executive director, agrees that the head tax is a good place to start.

The following major recommendations were made at the summit:

Remove the $50 head tax, or find a more affordable common ground and revamp it. "People are making choices about where to go and how much to spend," McConnochie tells us. "As cost goes up, interest in the area goes down. People aren't going to come just because you have a beautiful destination. You have to be fair and offer value. What benefit does a person being charged receive by coming?"

Implement a new marketing campaign, aimed at drawing travelers back to Alaska. At the summit, Steve Hites, a local business owner, said that the head tax isn't the only thing keeping vacationers away from the area. McConnochie agrees, saying that a combination of issues have resulted in waning Alaska travel. Most notably, she cited the region's lack of a viable travel-marketing campaign, which she says is crucial for generating traveler interest.

Educate Alaska residents about the initiative and its taxes. McConnochie says many residents who voted to pass them believed port cities would see a direct profit, even though that's not the case. McConnochie also says she is hopeful that the state's new governor, Sean Parnell, who replaced former Governor Sarah Palin on July 27, will bring positive change, noting that he has already taken steps toward addressing the initiative's shortcomings.

But, after five hours of presentations and brainstorming, no decisions were made that will directly affect the tax at this time. And, regardless of any action taken to improve the situation, McConnochie tells us it will be impossible to recoup what has already been lost. Although she said specific figures aren't known to date, a $25 million loss is expected for summer 2010 in Juneau alone.

"It's a long shot, but if we act now, we might be able to draw some of the cruise ships back for 2011," McConnochie explains.

If nothing else, this whole ordeal may be a warning to other regions considering policies that would generate additional taxes for travelers. The United States and Canada recently requested Emission Control Area designation for coastal ports in those regions -- an environmentally friendly move, which could be less wallet-friendly for cruisers, as ships would be required to switch to more expensive fuel.

"I would tell them to look very carefully at the unintended consequences of what they do," McConnochie says. "Are they really helping or hurting themselves? When you start taxing people who don't live there, where are you going to get that money if they leave?"

Representatives from Carnival Corp. and Cruise West, major players in the region, said neither company had a presence at the summit. Representatives from the Cruise Lines International Association and the NorthWest CruiseShip Association offered no comment when asked about the event.

Currently, a second summit is scheduled for August 20 in Anchorage. A third summit may also take place in Fairbanks, likely sometime in September.

In other news, the port of Sitka is cracking down on vendors to improve the cruise experience there. What do you think? Vote here!

--by Ashley Kosciolek, Copy Editor