The Fairbanks visitor industry had five straight years of record growth prior to the outbreak of the pandemic in early 2020. Among the more serious impacts of the pandemic in comparison between 2020 and 2019:
Explore Fairbanks implemented numerous budget reductions in 2020 as a result of the significant decline in bed tax revenues, to include lay-offs, salary reductions across the board, not filling vacant positions, eliminating all travel and trade shows, and more. What the organization did not cease doing was marketing, albeit of a different nature. The communications department launched a new marketing campaign directed to the local and in-state market to encourage visitation, incorporating COVID-19 safety messaging. The department also launched campaigns aimed at keeping Fairbanks in the minds of domestic consumers as an “inspirational destination” for when they were ready to travel again, which led to record stats in website traffic.
Going back to 2020, Explore Fairbanks applied for and received several grants administered through the local, state and federal level. The chart to the left shows funding received through August 31, 2021. In 2020 the total amount of the funds was $686,250; without those funds, Explore Fairbanks would have had a 51% decrease in funding over 2019; with the funds, the decrease was reduced to 34%. Many of the grants were very specific on what they could be used for and when the funds had to be spent. For example, the DCCED COVID-19 Safety Travel Grant was awarded in June of 2021 and had to be expended by end of August, with the usage limited to advertising and marketing efforts focused on in-state and national travel for the summer season and incorporating COVID-19 safety messaging and vaccination availability. The FNSB Assembly currently has $700,000 in American Rescue Plan Act (ARPA) Funds to be allocated to Explore Fairbanks over a two-year period which will be voted on by the assembly later this month.
2021 has shown signs of recovery even with the loss of cruise, highway and international, thanks to a strong independent domestic leisure market combined with record airlift at the Fairbanks International Airport along with extremely inexpensive air fares. April and May, for instance, had record occupancy rates and hotel/motel bed tax collections, even going back to pre-pandemic years. May through August combined arrivals and departures at the Fairbanks International Airport were only down by 14% over 2019 and up by 218% over 2020. The biggest challenge for 2021 has been labor shortages which have caused many businesses to reduce hours and days of operation as well as turning away customers. Supply chain disruptions, in particular, the rental car shortage due to decreases in manufacturing, have also resulted in challenges that have hindered growth.
For 2022 Explore Fairbanks is forecasting visitation and subsequent hotel/motel bed tax collections to be an estimated 75% of what we saw in 2019. The Cross Gulf of Alaska cruises are anticipated to return, with an estimated 440,000 passengers: up over 430,000 in 2019. Canadian/United States border issues should be resolved by then as well which will result in the return of the highway travelers. International and business travel is not anticipated to return to pre-pandemic levels until 2024 or 2025.
The following are some of the key data indicators that demonstrate the successes of the regional visitor industry in the years leading up to COVID-19.
Hotel/Motel Tax collections had five record-breaking years: The Fairbanks North Star Borough, including the cities of Fairbanks and North Pole, had five consecutive record-breaking years of hotel/motel tax collections from 2015-2019 prior to 2020’s dramatic decrease.
While the lion’s share of hotel/motel tax collections continues to be during the summer period, the growth in collections has been primarily attributable to growth in winter tourism. When analyzing summer and winter bed tax collections from 2008 through 2019, the average growth of the five-month May through September summer period was flat, whereas the seven-month January through April/October through December winter period grew an average of nearly six percent. In 2020 winter bed tax collections exceeded summer for the first time ever, due to a strong start in January & February, a greatly reduced summer, and then seeing the results of a return to travel later in the year.
Fairbanks is above the national average in hotel occupancy: Beginning in 2015, Explore Fairbanks, in collaboration with a number of hotel partners, has gathered standard hotel statistics including average daily rate (ADR), occupancy percentage, and revenue per available room (RevPAR). Our statistics historically account for 84% of properties with 60 or more guest rooms summer and 73% of that inventory in the fall/winter/spring. Since 2015 we have exceeded the national occupancy rate, even in 2020 which was determined to be the worst year on record for the U.S. hotel industry in all three reporting categories.
Airport arrivals and departures grew 19 percent from 2015 through 2019: The following data reflects domestic signature flights as well as international signature (scheduled) and international non-signature (charters); FAI East Ramp numbers are removed from the reporting. These numbers are indicators and not totally reflective of visitation.
Fairbanks leads the way in international travel: According to the Alaska Visitors Statistics Program (AVSP) report for Summer 2016, international travelers (excluding Canada) accounted for 9% of visitors statewide whereas international accounted for 16% in Fairbanks. Furthermore, that 16% of international visitors in Fairbanks represents an increase of 7% from summer 2011. International visitors spend more money in the community on a per person basis than domestic visitors. This higher percentage of international visitors in Fairbanks is primarily due to the successful marketing of and infrastructure development to support the “aurora season” from August 21 through April 21 by Explore Fairbanks and business partners. Recent numbers are not available for winter visitation but the international percentage in Fairbanks would most likely be the highest in the state and a higher percentage of winter leisure visitors as has been reported in previous studies.
Currently, the primary sources of new dollars for Fairbanks’ economy are limited to state and federal government; and a handful of private-sector basic industries, including a gold mine, oil-related support services, and the visitor industry. The visitor industry economic development strategy has worked for the year-round economy of the Fairbanks region. It represents proven economic development that is attainable, measurable, and sustainable. Below are some estimated impacts prior to 2020:
Direct visitor expenditures in winter are historically proportionately higher than summer expenditures:
Hotels are among the top property taxpayers in the Fairbanks North Star Borough: Property tax is a broad-based tax that is fair in the sense that it evenly distributes support of government services across all private-sector segments of the economy. Hotels are significantly represented in the top property taxpayers in the community:
As the chart from the Alaska Department of Labor and Workforce Development shows, the leisure and hospitality industry is one of the largest employers in the Fairbanks North Star Borough, surpassed only by government, trade/transportation/utilities, and education/health services. Employment in the industry was steadily increasing from 2017-2019 before dropping by 19.5% in 2020 and was 40% of all of Fairbanks’ total job loss. Additionally, Fairbanks lost about 300 transportation jobs last year, mainly linked to the tourism industry.
For 2021 the state forecasted a recovery of half of those lost jobs in leisure and hospitality (600) and 200-300 of the lost jobs in transportation. However, one of the most significant challenges for 2021 has not been the lack of available jobs, it has been the lack of employees filling those jobs, which is a national issue as well that is impacting numerous industries. Bringing back that workforce is going to be essential to industry recovery moving forward.
Note: The challenge in quantifying tourism economic data is that the tourism industry contributes into many economic sectors from the obvious such as lodging/accommodations to retail, transportation (air, sightseeing, railroad), food services/drinking places, etc.
Tourism offers unparalleled opportunities for local entrepreneurs to participate in the economic success of a basic industry at the ownership level. The growth in winter and aurora tourism seasons (below) in the Fairbanks region has resulted in a rise in many small businesses, such as dog mushing tours, aurora viewing facilities and photography tours. Explore Fairbanks’ cooperative destination marketing program is currently supported by more than 320 partners that are primarily small businesses. That being said, the number of partners is currently at a level that has not been this low for more than 10 years. Over the course of the last year Explore Fairbanks lost many small business partners due to financial impacts or going out of business altogether. The organization actively worked on providing partners with information and resources for local, state and federal recovery efforts, most recently with the City of Fairbanks to allocate $1.5 million in economic relief to small businesses in the leisure and hospitality industry within the city.
The visitor industry in Alaska is composed of multiple business models with the majority operating year-round, others operate in the summer season only, and some only in aurora season and/or winter season. For Fairbanks and many businesses, this diversification was intentionally strategic. The growth of aurora and winter visitation did not organically happen. The strategy required the investment of human and financial resources in research, marketing and infrastructure development over a long period of time.
Despite these efforts, summer continues to be the lion’s share of visitors and there is a general recognition that more investments are to be made to fully realize year-round sustainability.
Establishing Fairbanks as an aurora destination has been a primary component of Explore Fairbanks’ branding and messaging of the region. For visitor planning purposes the “Aurora Season” is defined as being from August 21 to April 21, crossing from late summer into winter and into early spring. Our location is ideal for northern lights viewing because it is under the “Auroral Oval”—a ring-shaped zone over the far north where aurora activity is concentrated. Additionally, the low precipitation and distance from coastal areas contributes to consistently clear nights. All combined, these variables make the Fairbanks region an outstanding destination for possible aurora viewing, and has been a factor in quantitative successes such as:
Visitors enjoy the same things that residents enjoy. The visitor industry, unlike most basic industries, develops the physical infrastructure used to “manufacture” a visitor experience that can also be enjoyed by and substantially enhance the quality of life of Fairbanks-area residents. Examples are:
The mission of Explore Fairbanks is to be an economic driver in the Fairbanks region by marketing to potential visitors and optimizing the visitor experience.
“Co-opetition” Is the key to destination brand marketing: Cooperation + competition = “co-opetition” meaning businesses that cooperate when it is to their advantage are said to be in co-opetition. “Destination marketing” is the proven method worldwide whereby competing visitor industry businesses coalesce to market the destination brand. A key mechanism for that marketing is through a destination marketing and management organization (DMMO) such as Explore Fairbanks.
We are united in our commitment to the future of destination marketing and management: Explore Fairbanks and business partners have demonstrated a commitment to “optimizing the visitor experience” through destination management. Organizations such as Explore Fairbanks advocate for improvements to the destination which enhance the product. While these improvements are focused on improving a visitors’ experience in the destination, they have a positive impact on local residents too in terms of economic benefit as well as enjoying a more robust menu of products.
Accessibility Explore Fairbanks and the Fairbanks International Airport (FAI) have more than two decades of working together to secure new air service to FAI. Examples of this cooperation are as follows:
Explore Fairbanks has a positive track record with infrastructure projects of this kind. From its inception, Explore Fairbanks was a partner in the development of the Morris Thompson Cultural and Visitors Center. Opened in September 2008, the $30 million center has become a community icon and gathering place for visitors and locals alike.
Explore Fairbanks continues to lead the effort to collaborate with the Fairbanks Arts Association to determine the feasibility of a co-located convention and arts center (CAC) that could create a major new civic asset using the Polaris site and adjacent land in the downtown core. Envisioned could be a purpose-built infrastructure that will enhance quality of life through the performing arts and attract and generate new revenue and advance the Fairbanks region economy by securing new conference and convention business to the community. Explore Fairbanks has commissioned three feasibility studies in the past ten years.
Explore Fairbanks works on other projects that enhance the community and region such as:
An eight percent hotel/motel or “bed” tax imposed on overnight guests is collected by the lodging facilities and remitted to the three government entities: the cities of Fairbanks and North Pole and the Fairbanks North Star Borough (excluding cities).
Note: An increase of hotel/motel taxes at this juncture would essentially kill any future infrastructure project or marketing program that may be planned by the local travel industry. An example of a hotel/motel tax advocated by their local travel industry was the increase of Anchorage’s bed tax from 8% to 12% to fund the Dena’ina Convention Center and the Egan Convention Center.