Alaska cruise visitors to top 1 million for first time since 2009

For the first time in seven years, the cruise industry is set to send more than a million visitors to Alaska.

The surge in passenger numbers for the 2016 season comes even as major cruise companies Carnival Corp. and Royal Caribbean Cruises reported price increases for their Alaska itineraries in their earnings reports.

"Pricing is holding up in Alaska. It's one of the more stable pricing regions that the operators are deploying in right now," said Jaime Katz, an analyst who tracks the leisure industry at investment research and management firm Morningstar.

The numbers indicate the industry has emerged from a slowdown in Alaska. Passenger numbers rebounded from a 10-year low of 878,000 in 2010 to a projected 1,014,000 this year.

Passenger numbers stayed above 1 million annually throughout the late 2000s, when cruise companies slashed fares worldwide to keep as many berths full as possible during the worst years of the global recession, and the introduction of a state head tax in 2007 cut into bottom lines.

In 2010, cruise companies cut capacity by about 14 percent, saying the $50-per-passenger head tax was too much to bear. A lawsuit filed by the cruise industry association in Alaska resulted in a reduction of the tax in time for the 2011 season. Since then, the companies have been adding berths to their Alaska itineraries nearly every year with the exception of 2014, when they diverted capacity to the fast-growing China cruise market.

"If they're more profitable, they'll bring more ships," said John Binkley, president of Cruise Lines International Association Alaska.

Between May and September of 2015, 56 percent of Alaska's 1.78 million visitors were cruise ship passengers, according to the Alaska Visitor Statistics Program. The vessels bring with them air pollution, sewage waste and crowds. But they also bring tax revenue, inject outside money into local economies and provide jobs to Alaskans and non-Alaskans alike.

Bob Bartholomew, finance director for the city and borough of Juneau, said Alaska's capital city has seen a 3 percent increase in passengers as of July 31 over the same period in 2015. Sales tax revenue generated by cruise passengers is on pace to hit $7.7 million this year. The head tax will likely bring in the same amount, he said.

Juneau sees more cruise ship passengers than any other Alaska community, but Bartholomew said their $250,000 additional contribution to local government coffers this year will not make up for the loss of close to $4 million in state funding resulting from budget cuts.

"The cruise revenue is helpful, but not going to make up for it," he said.

The state collects a very small share of revenue from cruise ships through a head tax that added an average of $2.4 million annually over the past four fiscal years to the general fund. A tax on gambling aboard cruise ships brought in about $6 million annually, according to the Alaska Department of Revenue.

Worldwide, cruises have grown in popularity since 2009, according to the Cruise Lines International Association, but while the absolute number of Alaska cruise visitors has recovered, Alaska's market share dropped from 8 percent in the mid-2000s to 4 percent in 2016. 

Alaska is competing on a global scale against tried-and-true routes in the Caribbean and newer itineraries in Asia and Antarctica. River cruises in Europe are also increasingly popular.

Sarah Leonard, president and CEO of the Alaska Travel Industry Association worries cuts to the state's marketing budget will have an adverse effect on overall visitor traffic to Alaska. Funding for tourism marketing stood at $1.5 million in fiscal year 2017, down from $18.7 million in 2013.

"Alaska is riding a wave of strong marketing campaigns from the past few years," Leonard said. "This year, with severely reduced dollars for tourism promotion, it will be challenging to keep Alaska top of mind for travelers."

But there are some positive signs for growth in Alaska's cruise market. With cruise companies building bigger and bigger ships, the Port of Juneau Cruise Ship Terminal Project recently installed a new dock that accepts ultra-large marine vessels.

The dock went into operation this tourist season. A second is set to be completed by 2017.