Alaska businesses look for relief to make it through another dry tourism season | Alaska Insight
Lori Townsend: Alaska communities and businesses have worked hard to try to stay open and keep people employed during the past year of pandemic-related economic pain. But tourism businesses have been hit especially hard. Unknown: "2019 was our best year as a company, and 2020 was down there among the worst." Lori Townsend: How deeply will another summer season of tourism loss affect the rest of Alaska's economy? Will federal aid be enough to prevent business closures? We'll discuss the economic forecast tonight on Alaska Insight.
2019 was a record year for Chinese and Mandarin language tourists in Alaska, with roughly 10,000 travelers coming to the state, according to industry estimates. But almost no Chinese visitors arrived in 2020. Alaska Public Media's Jeff Chen spoke with an Anchorage based tour company that caters to Mandarin speaking travelers and Alaska to see how they've managed to hang on. Unknown: Glen Hemingson, with Skylar Travel says their company saw a 97% decrease in income from 2019 to 2020. 2019 was our best year as a company and 2020 was down there. Among the worst. Like many businesses, the paycheck protection program and other state and municipal grants helped a little but it hasn't been enough. Unfortunately, we have had significant layoffs and
furloughs, not only among our year-round administrative staff and sales staff, but especially amongst our guides. When the pandemic first hit Alaska, Skylar Travel pivoted their business to help with mask and supply distribution. And for now, they do have limited options for visitors with an emphasis on outdoor activities. We really hope that we'll see a fair number of visitors particularly from the lower 48 states this year, and then followed by a rapid increase in visitors from across the Pacific in 2022. But due to the large impact of COVID in China, Hemingson thinks Chinese tourism in Alaska may rebound a little slower.
Our typical visitor maybe a little more cautious in coming to Alaska and long distance international travel. As vaccinations become more widely available, tourism operators are hopeful that numbers could improve over the course of the season. In Anchorage, I'm Jeff Chen. Lori Townsend: Joining me this evening to discuss the outlook for Alaska's upcoming visitor season is Mouhcine Guettabi, associate professor of Economics with the Institute of Social and Economic Research or ISER. And also Nils Andreassen is here. Nils is the executive director of the Alaska Municipal League.
Welcome to both of you. Unknown: Thank you for having me. Lori Townsend: Yes. Thanks so much for being here. So the video that we saw just now, Skylar Travel, 97% decrease in travelers just unfathomable to think about how a business could survive that. Nils, Congressman Young introduced legislation
just this week on Wednesday that aims to allow large cruise ships to return to Alaska this summer. This is in response to Canada extending the prohibition on cruises under the Passenger Vessel Services Act. That law requires large foreign flag cruise ships to stop in Canada when traveling between Washington and Alaska. But Congressman Young's bill, the Alaska Tourism Recovery Act, would create a temporary workaround, would only apply during Canada's prohibition that runs through February 2022. What do you, what can you tell us about this, if anything? I know it was just introduced, but have you been in contact with Congressman Young's office or other members of the delegation seeking help with this? Unknown: Yeah, thanks. We know that the entire congressional
delegation is very focused on Alaska's tourism industry and especially at this point on our cruise ship season or lack thereof. We're really appreciative of Congressman Young's step in the right direction. The waiver or the workaround necessary for the Passenger Vessel Service Act is one step in the right direction. The other step is we need CDC guidance for how cruise ships can operate safely this season? Lori Townsend: Mm hmm. How optimistic are you about this legislation? Especially in light of what you just said, the CDC has some pretty strict guidelines Do you think this can work out? Unknown: I have to hope so. Mostly because I know our
communities are really hoping that we can address this issue in front of us and quickly, and time is of the essence so that we can plan effectively for even a limited season. I think beyond this bill, Congress has its attention focused on recovery at this point. Alaska has its attention focused on recovery. And I am very hopeful that those efforts are successful. Lori Townsend: And we'll talk more about the recovery in a bit. But if it is successful, when you think about how
businesses will need to ramp up, resupply, hire people, some people have left the state and with businesses being stretched so much for cash, what are you hearing about how tough it may be to sort of gear up quickly to meet demand, if there is a workaround that's presented in cruzes can come in? Unknown: We have a really good supportive infrastructure with all of our port communities. Our local governments are paying a lot of attention right now to how they can support their business community, and including, you know, all that planning and preparedness that can go into, you know, whatever kind of season Alaska has. So I am glad that we've got that supportive infrastructure in place. And I know that across Alaska, our local governments are working pretty closely with their businesses, with their business associations, to put in place the pieces necessary for the season. Lori Townsend: All right, well, that's good to hear. Mouhcine, I want to turn to you. Now, as you've noted, Alaska is the most
seasonal state in the nation. The Alaska Travel Alliance says one in 10 jobs here is tied to tourism. Flush that out what being at the top for seasonal visitors means for a state's economy, especially in a year like we've just had. Unknown: Yeah, when when I say Alaska is the most seasonal state in the country, that translates into hard numbers. In July of 2019, there were about 15% more jobs than there were in January. And most other states do see some increase in the number of of jobs during the summer, but not nearly as much as Alaska does. So that means that there is there are new jobs
that are created, there is money, new money that's been spent largely through the infusion of of tourists and tourism dollars. The fact that we've missed out on a season in 2020 means a lot of businesses that typically get most of their revenues in those three months, are now basically using savings using money from PPP programs. And as you've noted, some have already had to make the hardest decision to close. And so when when you have a seasonal economy, that means you have a lot of businesses that either sprout up as a result of that influx of passengers an influx of dollars, or you have an expansion in terms of employment. The big questions
going forward, are how many businesses are going to be able to hang on if we end up having basically two straight seasons of anemic tourism numbers? And so that's why assistance, both the federal and state level, is so important. Lori Townsend: Well, let's talk about that President Biden wants $1.9 trillion in his relief package. Republicans and some Democrats say it's too much. There's been criticism that
money from previous relief bills hasn't all been spent yet. You said in an earlier interview that you think big spending is needed. So make the case for why you think this level of relief is required right now? Unknown: Yeah, I think that the the risk from doing too little far outweighs the risk from doing too much, as far as I'm concerned. And treasury Secretary Yellen agrees with this assessment in that there is still a lot of pain in the labor market. We still have millions of people at the national level that are unemployed, we still have thousands that are unemployed at the state level, and there are pockets of the economy that are still incredibly weak. This does not
mean that the federal government has not been generous and has not tackled this problem appropriately. But the worst that can happen if we overheat the economy is that wages are going to go up and maybe we have inflation, but the Federal Reserve is really well positioned to deal with those issues if they were to arise. If on the other hand, we do too little, we now have people that are unemployed for multiple years, there are a lot of negative consequences from having long term unemployed individuals. That means they
have a much harder time getting back to the labor force, we may end up seeing a lot of foreclosures, a lot of evictions, a lot of social problems that arise from having a weak economy for a very long time. And as you noted at the beginning, for a state like Alaska that is very heavily seasonal, and has had an oil industry that's also struggled, it's very hard to see where organic growth comes from. Therefore, I am of the opinion that we should be as aggressive as possible to stabilize economic activity and ensure that there is an infrastructure that there are businesses that still exist, hopefully on the other side of this pandemic. So when tourism comes back, when oil prices stabilize, we actually have jobs, we have employees, we have people that remain in Alaska, and we are in a position to take advantage of the recovery. Lori Townsend: If the federal relief package prevails at the level that it is, is passed and implemented, what then is needed on the state side? The governor wants $5,000 dividends. You have
noted that there is an opportunity cost to drawing down the main permanent fund corpus, but there's also an opportunity cost if businesses fail and people are unemployed. You were just talking about this. So do you think that we need that combination, both this $1.9 trillion on the federal side, but also these large dividends on the state side right now? Unknown: I think that there needs to be, so so the state needs to figure out what level of aid can be coupled with the federal package. I know that there are legislators that are waiting to understand what's gonna happen at the federal level before deciding what needs to be done at the state level.
But I absolutely do think that the $1.9 trillion, while big, does not target Alaska particularly well. There are communities that are going to have much, much lower tax revenues than anticipated. Again, there are some 20,000 people that are unemployed. And so, I think figuring out the right amount of money targeted properly, and coupling that with the federal aid is going to be necessary. Alaska is one of the few states that's in a position to potentially stabilize its economy and ensure that it puts itself in the right position.
When again, economic activity resumes, this does not mean that the dividends are the absolute best way to do it, you can certainly do that. And some of those dividends are going to go towards people that need the most. But you can also target the money by saying it's only going to go to people that make less than a certain amount of money, or or a lot of the money is going to go to communities that are hurting the most, or there are industries that are struggling the most, or we're going to make money available for the businesses that are potentially on the brink of closing. So there are a lot of packages that could be constructed. But I remain very confident in the fact that there needs to be some state component to this aid.
Lori Townsend: Alright, so it's a two part approach. Nils, I want to turn back to you. Mouhcine was talking about targeted relief. And along those lines, your thoughts about federal and state relief. You've also said that you'd like to see more targeted help. The Small Business Administration says the
PPP program will now make 60% more funding available to businesses with fewer than 10 employees. The funding is up 30% for rural businesses and money going through community development, development, financial institutions and minority institutions will increase by 40%. Is this what you think is needed to help businesses here? Is that a more targeted approach in the way that you were looking for as far as how to be most effective in helping Alaska communities. Unknown: Alaska's communities have experienced this pandemic very differently. And the impacts have been so variable, not just on the business side or for residents, but for local governments. And when it comes to targeting aid, I think we have to take into account where impact has been greatest. And so
the programs that that you mentioned, all targeted by business type, I can point to a list of communities that range in their loss revenues from anywhere from 0% to 90%. And many who were 30 to 40 to 60%. impacted by economic crisis this last year. So I think it needs to be, you know, not just by business type, it needs to be not just by population, which is the federal formula at this point. But it really needs to be targeted, targeted to where relief is most necessary. And so
where there's been the most greatest amount of lost revenue, not just for businesses, but for local governments and states. And I'll just mention really quickly that the other variable here is timing. It's one thing to look back at losses. But we also need to be thinking about how aid impacts us moving forward. Federal Aid could come really quickly now. State aid could come later in the year, including a PFD this fall. Lori Townsend: And when you talk about how quickly that relief needs to come, how easy would it be to make those determinations that you were just describing that looking at the businesses that have the greatest need? Are those numbers enough easily available, that that could quickly be sorted out so that that aid could be deployed rapidly to those who are struggling the most? Unknown: At this point, yes. I think if it comes through the
local level, especially the experience now through the cares act, where almost $250 million was deployed by local governments into, as economic support for businesses and residents. Many of these local governments now have grant programs in place that evaluated need. And I think we could see many of those were stood up in less than 30 days. They're active at this point. They're they're functional and and I think could actually be applied as in partnership with either state or federal relief.
Lori Townsend: 32 republican mayors, among 425 mayor's overall across the country have urged the passage of the current covid 19 relief package that the President has proposed. They sent a letter through the U.S. Conference of Mayors to Congress. Do you know of mayors here who may have signed on to this? Unknown: I don't know. I haven't reviewed that list. I know that we did push that out to our members and let them know about it. I will say that Mayor Pat Branson and City of Kodiak just
met this week with treasury or the Janet Yellen, and advocated for Alaska's needs in relation to this relief. Lori Townsend: Oh, that's great. He was part of that group of, of smaller communities that she met with the mayor. So that's, that's great to hear. Setting aside the concern about visitors this summer. What are you hearing about business closures
over the last six months, if you have, from AML members? How much has federal relief help possibly stave off some of that? You had noted before that communities said we can probably survive one year like this, but surviving two is going to be difficult, if not impossible. Unknown: AML members remain really concerned about the health of their economies. We have seen kind of promising data from the Alaska Small Business Development Center, that points to how the aid over the last year has come out in kind of stages from federal to state to local. That's been really
helpful. It sounds like so that same approach, and even though that wasn't planned at all, that same approach could apply for this calendar year. It's really going to depend on how well the tourist season bounces back. And that's, that's where we're gonna continue to see the most impact for Alaska's communities.
Lori Townsend: Sure, yes, makes sense. Some businesses figured out ways to pivot to other ways of making money during this last year of little to no tourism. Let's hear from one in Southeast Alaska. While some Ketchikan businesses have been left
treading water until cruise tourists return, others are using time to refocus and diversify. And as Eric Stone reports for member station KRBD that includes looking online to fill the gaps. Unknown: The Soho Coho is a Ketchikan landmark. It's the gallery for legendary artist Ray Troll and some other local artists. And it's a destination unto itself. It's perched on historic Creek Street overlooking a salmon bearing stream. Ray's wife Michelle Troll runs the gallery and she
says that in a normal year, the gallery relies on cruise ship tourists from about May through September. We get a lot more foot traffic. We're open seven days a week. We have at least two people on staff eight hours a day. But COVID-19 abruptly ended that.
when the pandemic hit, we immediately more or less shut our brick and mortar walk-in foot traffic store. But we were able to keep our web store up and operating in the same space. She says with the store closed from March until June and then running at reduced capacity, she and her staff have had a lot more time to devote to selling things like Ray Troll's iconic t shirts and hoodies online. What we decided to do was to start marketing the fact that we have a web store to our existing customers.
She created an email list, something she hadn't done before. She started sending promotions to the gallery's past customers offering discounts on some items, and it's paid off to an extent. Our web business has increased, not enough to make up for the loss of the walk-in cruise ship summer traffic, but definitely you know, enough that it may it helped us get through these different times. But even with the extra revenue from online customers, she's worried they may have to move away from Creek Street if tourists don't return until next year. Even so, Michelle Troll says she's lucky and she says she's doing her best to help other local businesses get through what could be a 29 month gap without cruise ships.
I know there are so many small businesses that really are struggling and are going to really struggle, especially with the news that there isn't going to be a cruise ship season. So I just, I feel for all of them. But she's confident Ketchikan as a whole will pull through, even if the economy looks a little different on the other side of the crisis. For Alaska Public Media, I'm Eric Stone in Ketchikan. Lori Townsend: Alright, so Mouhcine, I want to turn back to you you. You've stated that you don't really have good data on
how many businesses may have closed in the past year. But you did note that it's hit every sector of the state and that businesses will be losing out on nearly three years of income. So tell us more about how what this could mean for employment recovery and how long that could take. Unknown: Yeah, I mean, hearing that 29 month number is staggering, right? And so any business irrespective of how healthy it is pre-shock cannot survive, if you were to tell them that they were going to miss out on 29 months of revenues or the equivalent of 29 months of revenues. And that's
why aid is so important. The the the the economic shock, the labor market shock has been absolutely tremendous. When you look at the job losses, they've literally hit every single sector, the only sector where we had seen a little bit of growth, partially because of the census was federal government and the numbers were very, very small, we're starting to see a little bit of a recovery. Health care, for example, is now nearing
pre-pandemic levels. But we're still seeing, you know, a little more than 20,000 people that are unemployed, or that employment levels are 20,000 below the previous year. And so it's it's a, it's a labor market weakness that's been sustained. We we really have not seen any momentum, even though it seems like cases are going down, people are getting vaccinated. And that's because the engines of growth have been hit really hard, right. And so we've spent the last 20 minutes talking about tourism, oil and gas has lost a lot of jobs, professional and business services has lost a lot of jobs, retail has lost a lot of jobs. And so you can go sector by sector and say, again,
the question that I always pose is, where does this growth come from? And what will Alaska look like, you know, on the back end of this pandemic? And the thing that worries me is absent this significant aid, it could potentially look very different, because irrespective of how prepared a business may have been missing out on this long of a period of time, without revenues can potentially cripple many, many your business and your correct data poor. But it doesn't take a great forecaster to tell you that if you miss out on two years of revenues, you're going to have fewer businesses. Lori Townsend: Nils, I want to e d with you. What are you h
aring from AML members about r duced tax revenue and how t at's going to affect their b dgets for this coming year? If y u could just condense that to a out 30 seconds or so that w uld be great. Their worries f r their budgets. Unknown: It's not looking good Lori, and I know that you know i not looking good at the loca government level isn't going t displace the the worry and fea that Alaskans who are losin businesses or losing busines are feeling, but I think it s important to know that t e federal government has partne s at the state and local level a d getting relief too and and oth rs Alaskans have partners at he state and local level to h lp provide relief and I can o ly hope that we can see t at effectively implemented in th se months to co Lori Townsend: Alright, thank you so much Nils Andreassen and Mouhcine Guettabi for being with us this evening. That's it for t is edition of Alaska Insight. Be sure to tune in daily to y ur local public radio station or Alaska Morning News and Ala ka News Nightly every weeknight. Be part of important conversati ns happening on Talk of Alaska e ery Tuesday morning and visit our website, alaskapublic.org or breaking news and reports f om across the state. We'll be b ck next Friday. Thanks for join
ng us this evening. I'm Lor Townsend. Good night