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Weekly UpdatesEach year, hundreds of thousands of dollars are spent encouraging people from out of state to visit Alaska. Its largest city, Anchorage, is often a main attraction, offering visitors the chance to enjoy a taste of the frontier life while still enjoying all of the amenities a big city has to offer. It is especially important, then, that these visitors be made comfortable while enjoying their business or pleasure trip-and that means having the proper accommodations.
In 2005, the Alaska Industrial Development and Export Authority (AIDEA) contracted with Kennedy & Mohn, P.S. of Seattle to put together a hotel market analysis for the cities of Anchorage and Fairbanks. That report, released in October of 2005, was designed to reflect the current economic conditions and performance data for each market, and to project future lodging market conditions. Though a baseline report had been prepared a year earlier in June 2004, the Authority was surprised to see a number of positive changes since the first report's inception.
Too MANY HOTELS?
"We decided to conduct the first hotel market study because we felt that room supply and demand was way out of kilter," explained Jim McMillan, AIDEA's deputy director of credit and business development. "It was just a gut feeling, but we believed that there was a high supply of rooms and a low demand. And since we get a lot of requests through our credit programs to participate in the financing of new hotels, we wanted to get a better feel for the market."
A TURNAROUND
When the 2004 report came back, AIDEA's concerns were realized. "At the time, the interpretation of the results showed that the supply was strong, but the demand was weak, so we put a moratorium on hotel financing," said McMillan. "But this year's report showed something different-it showed that both markets were doing better than originally projected. So now we are back in the hotel financing business."
This turn of events can be credited to a number of factors, including the timing of the original study, and the lingering effects of the Sept. 11 terrorist attacks. The 2004 study, which was created from interviews with state and local officials, hotel owners, managers and developers, and a variety of direct and indirect participants in the tourism industry, was finished in June of 2004, before that year's visitor season was completed.
"One thing we learned was that the timing of the study is very important," said McMillan. "That first year, we were inundated with requests for hotel financing, so we had to respond quickly. But that meant that the report didn't measure the full effect of the revenue market for that visitor season. The 2005 study was completed much later in the year.
"The timing of the first study was also close enough to the fallout of 9/11 that it picked up the slow down and drop off of visitors," he added. "To a great extent, that market has come back, but the first study reflected the tail end of that drop in demand."
A 'RESILIENT' MARKET
According to McMillan, the new report surprised both AIDEA and Michael Mohn, MAI, the consultant who undertook the study for Kennedy & Mohn, P.S., a hotel brokerage, consulting and appraisal firm. "One of his comments to us was that he was impressed with just how resilient the Anchorage market is," said McMillan. "In his conclusion, he predicted that the Anchorage market would continue to grow-and that if certain events, such as the building of the natural gas pipeline were to happen, the city would see a real spurt both in the building of new hotels and in the demand for rooms."
In the report, Mohn estimated that Anchorage's hotel market would see a 4.8 percent average annual increase in demand from 2006 to 2010. Occupancy rates in the mid-scale hotel market were predicted to improve to approximately 75 percent, before falling to 73 percent in 2007 and 2008 as more new hotel rooms enter the market. Occupancy rates in the upscale market were predicted to improve in 2006 to 66 percent, falling to 65 percent in 2007.
GOOD YEAR AHEAD
According to Laura Tanis, public relations manager for the Alaska Convention and Visitors Bureau (ACVB), 2006 is already shaping up to be a very good year for the Anchorage hotel market. "Hotel occupancy rates for the first three months of 2006 have surpassed rates for the first three months of 2005," she said. "According to numbers we just got back from Smith Travel Research, in March the hotel occupancy rate was 62.2 percent; that's a 10.5 percent increase over March of last year."
March is usually a big month for Anchorage, with events including the Fur Rendezvous, the Tour of Anchorage, and the Iditarod Trail Sled Dog Race's ceremonial start taking place in the city. But some big events are also on the horizon for this summer in Anchorage, including the National Veterans Wheelchair Games, which will take place from July 3 to July 11. "We're expecting about 1,000 delegates, which includes 600 athletes and their families," said Tanis. The estimated economic impact (EEI) of this event is estimated to be more than $970,000.
MILLION VISITORS IN ANCHORAGE
"According to reports from our members, they are definitely seeing a higher volume of traffic coming through, with more people spending more time in Anchorage," agreed Bruce Bustamante, president and CEO, Anchorage Convention and Visitors Bureau. "We're anticipating at least a 5 percent increase in visitors over last summer-we expect to have more than 1 million people come to Anchorage this season."
"Though there are factors that we can't control, like the economy, it seems that this year people feel comfortable traveling and spending money on vacations, which certainly bodes well for us," he added.
THE FUTURE
Currently, Anchorage has about 8,100 hotel rooms, with roughly 3,500 located in the downtown core area. This number has grown from about 4,700 in 1992, and is expected to increase even more as the number of visitors to Anchorage continues to grow.
"With the construction of the new convention center, we're expecting even more visitors to come to Anchorage in the future," said Bustamante of the 215,000-square-foot building, estimated to open in 2008. "The new facility will triple the amount of meeting space available, which will allow us to pursue not only larger conventions, but multiple conventions for the same time period. We'll be able to have 2,000 delegates at one facility while hosting 1,000 delegates at our other facility. We've never had the ability to do that in the past."
CRUISE SHIP IMPACTS
Still, an increase in tourism numbers does not always result in an increase in hotel occupancy rates, according to McMillan. "Though I am hearing that the potential visitor count is up for this year, there is not always a direct correlation between visitor counts and room nights, especially if the majority of visitors come in on cruise ships," he said.
"Princess Cruises, for example, is looking at putting in its own properties outside of Anchorage, which has the potential to create a drop in demand for lodging nights here," he continued. "When a company is vertically integrated like that, they sometimes bypass Anchorage to put people into their own properties."
Currently, Princess is expanding its Denali Princess Hotel and its McKinley Princess Lodge, located near Talkeetna. When completed, the Denali Princess will have a total of 651 rooms, and the Princess Lodge will have 460 rooms. Holland America also is building a $20 million, 135-room lodge in Denali National Park, with the possibility of expanding by another 135 rooms in a second phase.
Bustamante believes that even with the addition of hotel rooms outside Anchorage, travelers coming to Alaska will still want to experience the big city. "Whether traveling by air or cruise ship, people going to Denali seldom go there without spending at least some time in Anchorage," he said. "Hopefully, as the Denali Park inventory increases, our visitor numbers will grow as well."
All-in-all, it looks like 2006 will be a very good year for those who want to explore the Last Frontier, and those who want to make sure that their stay is something special. Whether traveling to Alaska's largest city on vacation, on business or just passing through, Anchorage's visitors are sure to appreciate all of the amenities-and the superior accommodations-that the city has to offer.
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