Self-imposed tax may provide more advertising for the tourism industry

Apr 5, 2018

Homer Spit.
Credit Photo KBBI Database

State spending on tourism marketing has been slashed roughly 80 percent in recent years. But the Alaska Travel Industry Association thinks there’s a way to boost the amount of dollars spent advertising Alaska as a destination. It wants to create a Tourism District Industry, which would allow the industry to charge tourism-related businesses a tax that would go towards marketing. The CEO of the association pitched the idea last week in Homer. But the idea may be a tough sell for some in one of the state’s top destinations.

Sarah Leonard is the CEO of the Alaska Travel Industry Association, or ATIA. After her presentation in Homer last week, she said the state spent about $16 million on tourism marketing back in 2013.  This year, that number is closer to $3 million.

“When you put Alaska in context of all the 50 states, we are just above the state of Delaware in terms of state tourism investment in marketing,” Leonard said.

To put money back into tourism marketing, the ATIA is supporting House Bill 383 and Senate Bill 110. The bills would give tourism industry sectors, such as hotels, tour operations and restaurants, the ability to charge themselves an assessment, which is equivalent to a self-imposed tax.

If the bills passed, industry sectors could vote on whether or not to tax themselves up to 2 percent.  

“In that process the industry business could vote no, but if there is a successful vote, those businesses that have been identified as potentially being assessed then would have to pay the assessment by the state statute,” Leonard said. “So there is no opt out.”


Businesses could also vote again to increase, decrease or stop the assessment altogether. If a sector approved a tax, they would also select representatives to handle the funds collected.


“Industries would select candidates that are representative of those payers. So it could be a hotel owner in Homer if they have been identified as a business that would be a potential payer,” Leonard said. “It could be a restaurant owner from Anchorage.”


She adds if bills pass, the association would increase its marketing in places such as the U.K., Germany, Japan and China. It would also increase its advertisements of individual regions such as the Kenai Peninsula.


But not everyone thinks it’s the best idea. Jon Faulkner owns Land’s End Hotel in Homer, and he said broad advertising pitches are not beneficial for the city.


“We don't want to be marketed in the same way that you know certainly Anchorage, but even take a small city like, Talkeetna. We're just different,” Faulkner said.


Faulkner doesn’t think the ATIA’s advertising would be any different than what the state is currently doing, which he said is also ineffective. For Faulkner, it all comes down to his underlying philosophy.

“I can market my business better than the government can,” Faulkner explained.


Executive Director of the Homer Chamber of Commerce Debbie Speakman said she understands how business owners like Faulkner feel about the potential of a self-imposed tax.


“It’s the force factor, they would be required to either pay or pass this tax along to their customers, and they wouldn't necessarily have a voice in how it's used and that doesn't empower them,” Speakman said.  


Speakman said the chamber does not have an official opinion on the topic. The chamber does think there should be more money going to the statewide marketing, but it isn’t sure if a self-imposed tax is the way to go about it.


Others say more statewide and regional advertising will directly benefit Homer. Owner of Homer Ocean Charters Roark Brown said if businesses ban together, they can do a lot more than they can individually.


“Many methods of advertising that are just not affordable on a small scale basis are proven effective, but is just not feasible,” Brown added.


If a tax was implemented, businesses would have the choice to pay it out of their bottom line, or pass it onto customers, which Brown said won’t scare them away.


“Certainly the money's going to bring in far more people than it would ever, ever turn away because of it,” he argued.


Brown emphasized that the bills passing through the Legislature just gives the tourism industry the ability to vote on whether to tax itself.


“Without this legislation in place, nothing can happen. So we're kind of dead in the water,” he said.


Both of the House and Senate finance committees are working through the bills, but dates for further discussion have not yet been set.