A bright spot in recession, tourism outlook dims with uncertainty

  • The Grand Princess cruise ship is seen in San Francisco Bay off Hunter’s Point from Alameda, Calif., on March 19. More than 70 percent of Alaska’s visitors each summer come via cruise ship, but the outbreak of coronavirus has thrown a wrench of uncertainty into what was a bright spot of Alaska’s economy amid a lengthy recession. (Photo/Ben Margot/AP)

For the past five years, tourism has been one of the bright spots in Alaska’s struggling economy. This summer, it may dim down.

The rapid spread of the novel coronavirus and its associated illness, COVID-19, across the United States this spring has interrupted almost every aspect of American life. Air travel has plummeted, and cruise ships across the U.S. have voluntarily suspended all service for at least a month. Another record number of tourists, some 1.4 million, were expected to arrive by cruise ship this year according to the Cruise Line Industry Association-Alaska.

Alaska Airlines has dropped a number of regular flights and has indicated plans to further reduce service in the face of reduced travel. Canada has limited all non-essential land border crossings, and Alaska now requires all people entering the state between March 24 and April 21 to self-quarantine for two weeks.

The Port of Seattle also announced March 24 it is suspending cruise travel indefinitely.

All of those things bear ill omens for Alaska’s 2020 tourism season. About 70 percent of Alaska’s tourists arrive by cruise ship, visiting communities from Ketchikan to Fairbanks. In addition to the voluntary shutdown by the U.S. cruise industry, Canada announced that it would close its ports to cruise traffic through July 1. Because all cruise vessels on their way to Alaska are required to stop over in Canada, the closure would cut off about half the season.

To try to reopen that part of the season, the Alaska Travel Industry Association, or ATIA, has requested an exception to the Passenger Vessel Services Act, which would allow vessels carrying more than 500 passengers to bypass Canada on their way to Alaska.

“The loss of these weeks of the season will devastate Southeast Alaska ports, and reduce the number of visitors to all other regions of the State,” the ATIA wrote in a letter to Alaska Sens. Lisa Murkowski and Dan Sullivan and Rep. Don Young. “The economic impacts to our communities—and to the hundreds of small businesses and their thousands of employees who rely on cruise ship visitors for their economic livelihoods—will be decimating.”

An exemption to the foreign port rule would help preserve tourism jobs in the state, mitigating job and revenue losses, the letter states. The ATIA is also advocating for federal assistance to businesses affected by the outbreak. The U.S. Travel Association projects a total loss of approximately $809 billion in the 2020 travel industry, with a loss of 4.6 million jobs, 3.5 million of them directly in tourism, said ATIA President and CEO Sarah Leonard in an email.

Alaska is highly reliant on out-of-state and international visitors, making the state vulnerable to disruptions in national and international affairs, she said.

“I can only project that the level of economic loss, including tourism jobs and revenue in Alaska will be significant as the impact is happening now and will likely last into the summer season,” she said. “Tourism businesses have already taken a hit and are struggling with solvency and cash flow decisions, due to cancellations and refunds.”

The Cruise Line Industry Association did not sign onto ATIA’s letter but supports the efforts to communicate the importance of the industry, said CLIA Alaska Public Affairs senior director Lalanya Downs.

“For CLIA, we are focusing our efforts on evaluating ways we can improve our protocols to better protect our passengers, crews, and the communities we visit,” she wrote in an email. “Since the voluntary suspension of cruise operations, we have also been very focused on finding ports for our vessels and helping our guests return to their homes and families during these challenging times.”

Though CLIA does not track individual company bookings, there have been some sailing cancellations so far; however, the situation is fluid and hard to predict, Downs said. Since the World Health Organization declared a public health emergency Jan. 30, cruise lines have begun denying boarding to people who have traveled from, visited, or traveled through airports in South Korea, Iran, China, and municipalities in Italy under lockdown.

Other ships were held off shore in search of ports, including in the U.S., when passengers fell ill on a cruise to Mexico from California.

CLIA met with Vice President Mike Pence about further health safety measures, including more rigorous boarding procedures, adding more medical resources on board and temperature screenings at departure.

“Our focus right now continues to be on evaluating ways we can safely return to service at the appropriate time,” Downs said.

Fairbanks, where winter tourism has been growing significantly in recent years, has already seen a drop in revenue. Though businesses reported good January and February returns, “the bottom fell out” in March, said Deb Hickok, the president and CEO of Explore Fairbanks, the region’s tourism marketing organization.

“March is our most popular winter month,” she said. “In-season winter cancellations were felt immediately … and then we’re hearing more and more cancellations for summer visitation.”

Winter tourism has been a growing season in Fairbanks, with visitors coming in to enjoy the skiing, winter activities, and northern lights via the airport and on the Alaska Railroad.

About 20 percent of the visitors during the aurora season — which runs roughly from Aug. 21 through April 21 — come from China, where the COVID-19 outbreak began. This year, the visitation definitely dropped, Hickok said. The Alaska Railroad cancelled its remaining Aurora Train and Easter Train services between March 19 and April 30 as well.

Though Fairbanks is about 400 miles from the Gulf of Alaska, the tourism industry there is also dependent on cruises. The Alaska Railroad takes many cruise ship passengers north from Southcentral, where they disembark at Seward or Whittier, north through Denali National Park to Fairbanks.

Approximately 160,000 cruise ship passengers go north to Fairbanks, about 41 percent of the area’s visitation, and the businesses reliant on them are grappling with the uncertainty of when the season will start and how big it will be this year, Hickok said.

Other businesses are wondering how big of a season to predict, in part because of travel restrictions and in part because of the shock to consumer confidence, which may stop people from traveling even if the planes, roads and ships are open.

“There are some businesses built on cruise-land tourism,” she said. “(Another factor) is that confidence shock. (Businesses are) really grappling now. How many staff should they hire? When should they start operations?”

Some of the tourism industry spending in Alaska comes from Alaskans traveling to various regions of the state, staying in hotels and participating in activities in other regions. However, the state’s population isn’t very large, and likely wouldn’t make up for a large loss in out-of-state tourism, Hickok said.

ATIA estimates that the tourism industry was worth about $4.5 billion in total revenue within the state in 2018, supporting about 1 in 10 private-sector jobs.

Businesses and tourism industry advocates are working on their plans now, but the future is still uncertain, she said.

“Last week we were in shell shock,” she said. “Now we’re just trying to figure it out, what it means. We might not have the answers for a while.”

Elizabeth Earl can be reaced at [email protected].

Updated: 
03/25/2020 - 9:42am