The Coronavirus Pandemic of 2020 has been a gut-punch to Alaska’s tourism industry. The industry was expecting another record year, and now… ugh. On the other hand, no one believes Alaska tourism is dead for good. In fact, many believe that 2021 could be a very strong year. So let’s take our minds off this summer, look into our hazy crystal ball and try to see what the future holds for Alaska tourism in 2021 and beyond.
Hotels
The easiest place to start is hotels. According to a recent industry forecast, the national hotel demand will fall 51% in 2020, but grow 82% in 2021! It appears Anchorage, at least, will have additional capacity by then. Construction has already begun on a slick new $16 million, 146-bed tech-heavy Aloft hotel at the corner of 36th & C (see the ADN Article here). Venture North has been active in the development of a $60 million, 178-unit Indigo Suites downtown on the site of the old bus depot (ADN Article here.) These new properties should open their doors in 2021, so this year’s miserable season doesn’t affect them.
A fascinating aspect of the Indigo Hotel project is its modular construction. The Canadian company making the modules, Stack Modular, has an impressive resume of completed projects. Of particular interest to Alaska is the 102 unit Aqsarniit Hotel and Conference Center shipped by Stack to Iqaluit (an Inupiat city on Baffin Island) complete with the furnishings inside. The project shows how using modules can overcome the high costs, short construction season, and limited labor availability in much of Alaska. This method could help build high-quality hotels in any part of Alaska with access to a dock and create significant new tourism destinations.
Cruise lines
The industry had forecast 29.5 million cruise passengers in 2020, 1.5 million of those going to Alaska (a new record, as usual). They believe 2021 will now surpass the 2020 forecast and are estimating 32 million passengers. If Alaska’s market share stays the same, that would mean over 1.6 million cruise visitors in 2021. A big question is how many small tourism businesses that depend on cruise traffic will be able to survive until then. Smart creditors know they need to work with their clients to get them through this rough patch, and Alaskans tend to pull together in a crisis. So we believe many will make it through, especially if locals get out there and support them. There will inevitably be some failures and pain, but new opportunities as well for those that survive.
A position of strength
Its easy in the middle of a crisis to overlook how good things have been, and will be in the future. Tourism accounts for ~$4-$5 billion in economic activity in a typical year, pays $1.5 billion in wages, and supports 1 job in 10 in the state. Alaska has also been experiencing a surge in winter tourism. Statewide, winter tourism has grown 33% over the last decade. Winter tourism is powerful because businesses don’t have to make a whole year’s revenue in just a few short months.
Tourism’s outlook is very bright, and the timing may now be perfect for smart investments in the sector. If you are looking to sell or buy companies, or raise private equity, you will find no better partner than the Venture North Group. Our expertise in the world of Alaskan M&A, business marketing and capital raising is unparalleled. Drop us a line and tell us how we can help you.
