The Alaska cruise season kicked off last week, and while folks at the Port of Seattle are expecting another robust year, officials at Port Metro Vancouver are bracing for major declines in passengers and revenues due to increased taxes imposed by the state of Alaska.
The Alaska legislature passed a $46 per passenger tax in 2007 in response to a voter referendum. The state tax - combined with increased taxes at some individual Alaska ports - can total as much a $61 per passenger.
The combined taxes have increased the operating costs of cruise lines that are already feeling the effects of the recession and causing them to pull ships out of the Alaska market and redeploy them to more lucrative markets. Because cruise lines make deployment decisions several years in advance, the impact of the taxes on seaports is first being felt this year.
Five of the 15 cruise ships that originated in Vancouver last year have been redeployed for a total loss of 70 sailings through the port, says Greg Wirtz, trade development manager for Port Metro Vancouver. The vessel decline will translate into the loss of a third of Vancouver's cruise passengers, with head counts projected at about 600,000 this year as compared to 900,000 in 2009.
"Alaska sneezed and Vancouver caught a cold," Wirtz said.
The economic impact of the passenger tax is staggering. Losses to the port, airport, hotels, restaurants, shops and vessel suppliers are expected to reach $330 million, or about a fourth of the $1.4 billion that the cruise industry generated for the region last year.
The port's losses are expected to exceed $3.3 million, based on an $11 per head passenger tax. In addition, some 1,360 full-time equivalent jobs are expected to be lost in both the maritime and hospitality industries.
Across the border in Seattle, port officials have not yet felt the pain yet. The Port of Seattle is projecting 223 cruises with 858,000 passengers this year, representing a slight increase in vessel calls but a slight decrease in passengers from 2009 when the port hosted a record 875,433 passengers.
Port officials say that last year's passenger count was inflated by vessel diversions from Mexico during the H1N1 virus scare. This year, the Port of Seattle will host one additional ship from Holland America Line, which has added a new 14-day Alaska cruise to its Seattle rotation.
Next year, however, Seattle is slated to lose two ships as a result of the Alaska taxes. Seattle officials say they are conducting a "robust marketing effort" to replace the lost business.
Despite the fallout from the Alaska taxes, the negative impact may be short-lived. Last month, the Alaska legislature voted to reduce the state's passenger tax in an attempt to lure cruise vessels back into the state. That new state tax, combined with individual port taxes, will total only $34.50 -a 25 percent reduction from the current taxes.
Some cruise lines already are discussing a return to the popular Alaska market beginning in 2012.
"I know Holland America Line will be looking carefully at its 2012 and beyond itineraries in light of the news, and I feel certain the rest of the industry will be doing so, too," said Stein Kruse, president and CEO.
Vancouver should begin to recover from the taxes in 2011, when Disney Cruise Line will begin calls at the port and Crystal Cruises will return to Vancouver after a five-year absence. Wirtz says the combined new business should grow Vancouver's volumes by about 20 percent - not quite replacing the 30 percent loss due to the Alaska taxes.
- The Cunningham Report
