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Reaching for tourism revenues: increasingly, native-owned enterprises are venturing into the visitor industry.

Slowly and relatively recently, Alaska's Native regional and village corporations have started investigating tourism, the state's third largest industry. Those venturing into the tourism arena are finding the road to profitability long and sometimes meandering.

Ten years ago, the visitor industry was a source of suspicion and anxiety to most Native corporations. Many shareholders, generally mistrusting outsiders, feared an influx of tourists would spark competition for fish and game, threatening the foundation of local subsistence livelihoods without returning sufficient value to compensate for the material and cultural loss.

Lack of information about how tourism functions and preoccupation with other threats and opportunities also contributed to indifference toward the visitor industry.

Now, all that has changed. Although investment in the state's visitor infrastructure by Native corporations and individuals still represents only a fraction of the industry overall, tourism is a hot topic in Native corporation board rooms and in Bush communities throughout Alaska.

The visitor industry has become a major concern of Cape Fox Corp., a village corporation that operates a cultural tour in the Native community of Saxman and recently opened a hotel in nearby Ketchikan. According to Bridget Sears, manager of the corporation's tour division, Cape Fox's entry into the visitor industry reflects the conviction that preserving culture and generating tourist dollars can be compatible.

"Tourists have pulled the community together and given them something to work for, something for the future. It is partially the livelihood of the village," Sears explains. "They have thousands of people every month during the season who are interested in who they are. It meshes very well."

The hotel, managed by Westmark Hotels, opened last fall. About the Saxman tour, begun about four years ago, Sears says, "We're still working out the bugs. It's struggling, but it will mature." She adds that although Cape Fox discovered that profitability in tourism can be elusive, she is optimistic about future returns from the industry.

Perhaps spurred in part by the initial Native entries into tourism, interest in the industry has grown rapidly among Native peoples in recent years. In response to a flood of inquiries, the Community Enterprise Development Corp., a rural economic development agency long involved in fisheries cooperatives and Bush retail stores, created a new subsidiary in 1987 to focus on the industry's opportunities. Called Alaska Village Tours, the firm was charged with helping rural people develop tourism enterprises suited to local needs and expectations.

"We had to start from the ground up," says Ann Campbell, president of Alaska Village Tours. "A lot of people were calling in -- individuals, councils, corporations. One of the most common questions was, 'Should we get involved in this? What would be a product that would make sense for us out here? Is that something we could do?'"

Campbell notes the interest in tourism continues to build. "Communities that even three years ago were not interested in talking about it are now at least willing to look at it," she adds.

According to Campbell, the aim of Alaska Village Tours is to provide assessment, marketing and management assistance, as well as training, to help develop local visitor industry opportunities. She says one of the company's biggest challenges is clearing up some common misconceptions about tourism, including exaggerated assumptions that luring visitors provides a quick fix to economic woes.

To address such issues, tourism has become a frequent centerpiece of seminars and workshops on rural economic development. In recent years, several new rural visitor developments have emerged, some showing promise; others have quickly derailed on sharp learning curves. Many more enterprises are being considered, with studies and plans funded by state grant programs.

The increased availability of tourism information helped to influence the philosophical turnaround. A frequent message at the seminars is that local people can indeed control the numbers of visitors to their communities and the tourists' activities. Rural residents are discovering means to tailor tourism development to the level of local ability, interest and public support.

Nudged by Need. But while the ability to assert local control may be allaying fears that hordes of outside visitors might overrun tiny villages, observers agree that the increased interest in tourism opportunities is driven largely by severe economic distress in rural areas. Ironically, while Native regional and village corporations are assumed by some to be the economic engines of Bush tourism -- and indeed do operate the half-dozen or so viable attractions -- most projects currently under study are being pursued by village councils or rural municipalities.

Prior to the recent state recession, many Bush communities relied heavily on state revenue-sharing monies to sustain economies dominated by public-sector employment. Revenue sharing and other municipal grants allowed rural communities to expand services and related payrolls through the mid-1980s.

As state oil revenues declined, so did state support for municipalities and unincorporated communities. Now, in these post-recession days, local budgets are lean vestiges of their former prosperity. As one grant writer notes, with service costs ever on the rise and unemployment chronically high, communities are strapped for funds.

"Desperation, that's the bottom line. They're desperate for new sources of funds to run city hall," says the grant writer, who requested anonymity.

A couple of remaining, highly competitive grant programs that fund economic development through community enterprises continue to help communities investigate visitor industry opportunities. But village corporations -- conservative stewards of their land claims entitlements and, in many cases, leaner and wiser from investment adventures in other arenas -- have been slow to embrace tourism opportunities.

Fishing lodges are one option investigated by several corporations. Because village corporations already own prime local real estate, lodges seem to be logical choices for tourism ventures. But experiences to date have been discouraging, with the enterprises typically encountering problems similar to those faced by other rural tourist developments.

While tourism now is widely discussed in rural communities, managers of the few Native-owned operations currently offering visitor attractions or facilities say anyone thinking of getting into the business should study their attempts. An early entry in the rural tourism market was NANA Regional Corp., based in Kotzebue. Soon after passage of the Alaska Native Claims Settlement Act in 1971, NANA developed the Museum of the Arctic as both a vehicle for cultural preservation and a source of local employment.

While the museum is now operated by a non-profit organization, NANA continues as a patron and has since developed other tourism initiatives. The regional corporation currently operates hotels and ground tour operations in Kotzebue and Prudhoe Bay.

Tom Dow, vice president of NANA Development Corp., admits that developing a viable tourist enterprise has not been easy. "It's been tough sledding. If NANA were not as interested in employment for shareholders as we are in profit, we might not be in it," says Dow. "We're approaching profitability at this time, but we're not quite there."

Dow indicates that NANA's Tour Arctic company may break even next year. And that's following nearly two decades of trial-and-error development.

Dow and other observers note that the existing Native-owned operations -- such as the tour/hotel complex run by the St. Paul village corporation, Cape Fox's hotel and NANA's ventures -- derive much of their economic potential from being successors to attractions previously operated by companies outside the community or from being strategically situated for visitor traffic.

NANA's decision to venture into the travel industry was prompted in part by a lack of other more obvious or lucrative development opportunities in the region. Dow notes that the corporation's options were a little more limited in the pre-Red Dog Mine days.

Cultural Control. He says one plus for the corporation's tourism business was a fairly high level of local acceptance for the idea of hosting visitors. Much of that acceptance can be attributed to familiarity with longstanding tour activities operated by airlines serving the region. In fact, because of a high level of cultural pride and awareness, some NANA shareholders were eager to wrest control of the cultural showcase from outsiders.

"There wasn't the kind of resistance to unknown impacts (you encounter in other areas)," says Dow. "We decided if there was already a tour, we would participate in it and how the culture was presented, and participate in the employment."

Dow says the presentation of Native culture is highly appealing to visitors from outside Alaska, but it has to be done right. "It's got to be authentic in this day and age, or the visitors won't buy it," he explains. "The mainstream visitors to Alaska are increasingly sophisticated. They are affluent, well-educated and well-traveled. They've seen other cultures, and they want to come in contact with real Alaska Native culture."

While authenticity is important to local people, too, the challenge in doing it right is cost. Dow and others point out that the cost of running an attraction, coupled with the perception that Alaska is pretty far from everywhere -- and rural Alaska even farther -- pose substantial barriers to new tourist developments.

"Just the cost of getting it done is astronomical up here," says Ann Campbell of Alaska Village Tours. "It's not insurmountable, but it is a problem."

In fact, cost and naivete are a dangerous combination for any Native corporation, community or individual seeking to start a tourism venture. Dow notes that many Alaskans, Native and non-Native alike, who jump on the visitor industry bandwagon without careful research and planning may find themselves holding on for dear life if the ride starts getting bumpy.

He points out that many would-be tourist entrepreneurs are highly enthusiastic about their proposed attractions, but don't spend the time or money to understand their potential markets and analyze the competition. "I agree Alaska is a great place to visit, but that's not to be confused with market research," says Dow.

"I love visiting the Arctic, so I'm sold on it. But I don't confuse my enthusiasm with the little old lady in Toledo who has to part with $3,000 just to get here."

Dow says even in the most favorable circumstances, Native communities and corporations need to be careful about analyzing their tourism prospects. Citing the example of the bird-watching tour now run by Tanadgusiex (TDX) Corp. of St. Paul Island in the Pribilofs, Dow says, "The market is moving toward them, with eco-tourism. Yet they're sitting at 600 to 700 visitors a year. And they're probably not going to double that. That's where they peak out. It's just a thin market."

According to Mike Froehlich, vice president of finance for TDX, 710 customers took the St. Paul tour during the 1991 season. "This year especially, it's going to be real profitable for us. It's starting to show a real return," he says. Froehlich notes that next year's bookings are ahead of last year's pace.

Interest by TDX's marketing partner, Reeve Aleutian Airways, also is on the rise, he adds. "They're showing a lot more interest in it than when we first came to them."

The village corporation took over a declining Outside-owned operation in 1988. Froehlich attributes TDX's success in turning the venture around to price-cutting to make the tour more competitive with comparable products around the state.

"I think that's had a major effect. Plus tourism is up all over," he says. But Froehlich notes that the business has required substantial upfront investment, especially in marketing the tour.

He says TDX will continue to target the specialized bird-watching market. The corporation is focusing on doing more general advertising and on increasing the tour's visibility in the Anchorage market to attract the growing number of independent travelers who buy tours after they arrive in the state. He credits the latter strategy with generating "at least 125 extra people in June and July from the local market (Anchorage)."

Another important tool used by TDX to boost sales is surveying clients about their impressions of the tour, which allows the corporation to improve its product. "For the most part, they're real happy with the guides and the tour buses. With each year you do it, you get a little better at it," Froehlich says.

Community Benefit. He notes that tourism has proven a "nice fit" for St. Paul. Jobs became scarce when fur sealing operations were shut down, and employment through the tour operation was viewed by shareholders as being at least as important as profit.

With a fishing season that runs primarily from fall to spring, the bird tours have provided a badly needed economic boost. "It's pretty important. St. Paul isn't very diversified. You either do something in fishing, or you do something in tourism," Froehlich points out.

Another village corporation seeking to capitalize on the state's overall tourism growth -- currently pegged at 3 percent per year -- is Eklutna Inc. The historic village of Eklutna has long been a curiosity to Alaskans and non-resident visitors. But Eklutna has found that even proximity of its attractions to Anchorage is no guarantee of immediate success.

Eklutna's attractions are a museum, a traditional cemetery and a distinctive Russian Orthodox Church. They were opened to the public in 1990.

"We're in it for the money," says Debbie Fullenwider, president of Eklutna. "When you're in it to make it profitable, it costs a great deal of money. You've got to do a study of what your costs are and get a projection of what you're going to make. It takes time, like any other business. We feel it may take four to five years to be profitable."

Realizing it had a limited understanding of the intricacies of tourism, Eklutna got some help in preparing its assessment of the attraction. "We didn't have the expertise, so we hired it," Fullenwider says.

She notes that an important lesson for those thinking of entering tourism is to grasp the notion that selling the product means more than just advertising; it involves a host of efforts to generate customers, including cultivating allies. "The large tour companies have control of tourism, through the packages they sell. If you can't break in with them, you are cutting yourself off from visitors. It has to be really worked to get them to bring the buses in. It's called marketing," says Fullenwider.

Like the NANA operation in Kotzebue, Eklutna Village Historical Park is intended not only to generate revenue but to be a showcase for the local culture -- Tanaina Athabascan, in this case. It also was intended to take greater local control of the casual traffic that had for years been tramping village pathways but leaving nothing in return.

Fullenwider says not many shareholders are interested in working for the project because of more lucrative opportunities elsewhere and the frustration of coping with a demanding public. But she says those involved in the project are reaping rewards beyond their paycheck.

"We've got a couple of shareholders that have changed their whole lives. It's given them self-confidence and pride in their culture and community. It's been an eye-opener for me to see," Fullenwider says.

In Alaska's Interior, the theme of linking tourism with cultural pride also is being closely examined. Sandy Juneby is an employment analyst for the Tanana Chiefs Conference, a nonprofit regional Native association based in Fairbanks, and has surveyed villages in the region about their interest in tourism.

"Some villages are looking at this as a clean industry. They're looking more closely at what they have to offer; it's a means of positive self-identification. Then there are those that just aren't ready for the intrusion," Juneby says.

Like others, Juneby notes the current trend is for Native communities and individual entrepreneurs, rather than corporations, to be examining tourism opportunities. She suggests that some corporate boards may feel the unproven tourism option is too risky.

"It's in such early stages," Juneby explains. "They can't afford to take a chance. Right now the margins are just too thin. Some of the corporations will work closely with their councils, others do not."

Juneby feels that another barrier to getting involved in tourism is the perception by some people that domination by tour companies effectively precludes meaningful local control. "If one of the big tour companies comes in, then they really do lose control. Then the money really doesn't stay in the community," she says.

Juneby cites the example of Northern Inua, a Native dance and athletics program. While the program continues to employ Native youth as performers, Juneby contends that the demonstrations have lost some authenticity and the Native organizers have lost some creative control since a tour company became involved in marketing the performances to its clients visiting Fairbanks.

Spending Impact. She points out that in many communities, the need for new sources of cash is so great that tourism doesn't have to provide a lot of revenue or employment to make a difference. "Right now, money doesn't turn over more than once. It's in and out. It's a circular kind of thing," she says. Getting a tourist dollar to turn over just one more time can make a big difference, Juneby adds.

Alaska Village Tours' Campbell says, "In rural Alaska, the creation of a few jobs, the importation of relatively few dollars, can have an important impact on local economies. We are here to help rural operators meet industry standards and to help industry understand that the seriousness, commitment and success of rural operators cannot be measured only by typical standards of capitalization and profitability."

Campbell suggests that tourism potential in rural areas needs to be measured by a realistic yardstick. "There's almost no spot in Alaska that doesn't have special interest appeal," she explains.

"There are many communities with good or better potential in every area of the state. But the question is: Can they access the marketing dollars and do they have the human resources to carry out a tourism project? Unfortunately, those questions are never answered unless somebody stands up and tries."

BBNC's Tough Tourism Lessons

Some of the hard lessons about how to succeed in the visitor industry are much the same in town as they are in the Bush. One notable example of an enterprise whose managers have struggled to master the art of tourism is the Anchorage Hilton Hotel, owned by Bristol Bay Native Corp.

The regional corporation bought the hotel in 1977 and, after a decade of disappointing operations, put the property up for sale. James Hart, president of BBNC, says lack of sale prospects prompted the corporation to develop an aggressive restructuring plan to salvage the operation.

"Fortunately, through that period, we couldn't get anyone to make an offer. If we had, we would have taken an offer at 50 percent of what we would take now," Hart says. "We're most pleased with the hotel as an investment at this moment, but it was a threatening situation."

Hart credits the turnaround to cooperation from lenders and Hilton, as well as to "severe streamlining in our corporate headquarters." The plan has succeeded so well, he says, that the hotel will be able to rely on good summer performance to weather an anticipated lean season this winter.

"The lesson that I've learned personally is that an investment opportunity has to be looked at very carefully on its individual merit, and what requires the hardest look is season length," Hart notes.

"The bank expects you to make debt service all year long; they don't suspend it in winter. You've got to make all your money in a short period." Hart notes the same logic applies to investing in fishing lodges or bed-and-breakfast operations.

"One ought to have the financial strength to absorb an outcome that falls fairly short of the pro forma," Hart adds.
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No portion of this article can be reproduced without the express written permission from the copyright holder.
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Title Annotation:includes related article
Author:Richardson, Jeffrey
Publication:Alaska Business Monthly
Article Type:Industry Overview
Date:Nov 1, 1991
Previous Article:ANCSA corporations: a 1990 portrait.
Next Article:To the water's edge: repeal of the worldwide unitary tax.

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