Commissioner Louis Sola examined the economic impact of COVID-19 on the cruise industry in Alaska, Washington and Oregon. He traveled to Anchorage, Whittier and Seward to meet with elected officials, port directors, business executives and labor leaders. His report, latest in a series, covers 16 Alaska ports as well as Seattle and Oregon's Astoria.
Tourism one of three economic pillars
'While tourism benefits all our Northwestern states, it is one of three pillars of the Alaskan economy. Passenger cruising is a vital part of the Alaskan tourism business and the loss of an entire cruise season has led to the loss of revenue for a disproportionate number of Alaskans,' Sola said.
Alaska’s economy rests on three key industries: energy, fishing and tourism. Tourism has been a growth industry for the state, with the number of visitors increasing 45%, from 1.5m in 2010 to 2.2m in 2019. Cruising has been a key driver.
'In 2019, twice as many people than the number who live in the state came to Alaska and took a cruise. With the suspension of the cruise season, the economic activity of 1.3 million was wiped out of the Alaskan economy for the year,' Sola said. 'Under the best of circumstances and in any other state, there would be no disguising the consequences of losing that much revenue. In Alaska, in the context of the cruise industry, the consequences are greatly exacerbated.'
Some Alaska port facilities and terminals exist solely to support passenger vessels. A chunk of the hotel sector specializes in serving cruise ships. As in other US locations, cruise passengers spend on a variety of activities such as dining, lodging, transportation and shopping that support the local economy and infrastructure.
In some places, cruising is the sole economic driver
The difference between Alaska and other states is that in many locations, the cruise industry may be the only economic driver.
Another economic consequence of the loss of the 2020 Alaska cruise season is the missed direct contribution cruise companies make to the state. In addition to providing services to tourists, lines base thousands of employees in the state. Those seasonal residents pay rent, shop in grocery stores, eat in restaurants and purchase services. Furthermore, cruise lines and their subsidiaries spend close to $300m in procuring goods and services from Alaska-based companies.
'If a ship does not call, especially at some of the smaller cruise-focused ports in Alaska, people do not make money. If there is no cruise ship in port, there is no work for the longshoremen. If there is no cruise ship in port, no one is shopping in local businesses or eating in local restaurants. If there is no cruise ship in port, landside tour companies have no clients,' Sola said. 'In major metropolitan areas with major seaports, there will more likely be other opportunities for people to pursue while they wait for cruise ships to begin operating again.
'In many places in Alaska, the cruise business is the local industry,' the commissioner continued. 'These are cities of hundreds, or a few thousand, residents. The people, businesses and ports in those locations are facing the unenviable challenge of what to do before next year’s cruise season.'
Lost fees and taxes
Cruise ships and their passengers are subject to a variety of fees that finance necessary cruise industry infrastructure and environmental conservation efforts that protect areas where the ships operate. The Commercial Vessel Passenger Tax, the Commercial Passenger Vessel Environmental Compliance Program and the Ocean Ranger Program all rely on fees paid by cruise lines and passengers.
Ports of Seattle and Astoria
The Port of Seattle is the homeport for many cruise ships, and more than 1m individuals fly in and out of the Seattle-Tacoma International Airport to take cruises. The hotel, ground transportation and tourism sectors have all been affected by the cessation of cruise operations in general and the suspension of the Alaska season in particular. The Port of Astoria, Oregon, is weathering a similar economic impact.
Sola's report is here.