Impacts of Nonresident Sportfishing on the Ketchikan Economy. Prepared for: Ketchikan Visitors Bureau

Impacts of Nonresident Sportfishing on the Ketchikan Economy Prepared for: Ketchikan Visitors Bureau February 2010

Impacts of Nonresident Sportfishing on the Ketchikan Economy Prepared for: Ketchikan Visitors Bureau PREPARED BY: Juneau Anchorage February 2010

Table of Contents Key Findings... 1 Introduction and Methodology... 3 Introduction... 3 Methodology... 3 Ketchikan Visitor Market Overview... 5 Visitor Volume and Spending... 5 Visitor Industry Employment and Payroll... 5 Ketchikan Sportfishing Visitor Profile... 6 Nonresident Sportfishing Industry Profile... 8 Guided Sportfishing Industry... 9 Unguided Sportfishing... 13 Sportfishing Industry Direct Employment and Payroll... 13 Direct Spending... 15 Ketchikan Nonresident Sportfishing Spending... 15 Total Direct Spending... 16 Industry Spending Patterns... 18 Prince of Wales Island Nonresident Sportfishing-Related Spending... 19 Economic Impacts... 21 Sportfishing Industry 2009... 23 Appendix... 24 Statewide Harvest Area A and B maps... 24

Key Findings The purpose of this study is to measure the direct and indirect economic impacts of nonresident sportfishing visitors on the Ketchikan economy in 2008. In addition to guided and unguided visitors who fished out of Ketchikan, this study also includes Ketchikan spending and employment impacts from sportfishing-related businesses that operated on Prince of Wales Island (POW), as well as the impacts of POW nonresident sportfishing visitors passing through Ketchikan. Data was gathered from multiple sources including previous McDowell Group studies, Alaska Department of Fish and Game, and a series of interviews with Ketchikan and Prince of Wales Island sportfishing business owner/operators. The Ketchikan nonresident sportfishing industry, while seasonal in nature, is a significant contributor to the Ketchikan economy. Based on the results of this study and a review of the Economic Impacts of the Visitor Industry in Ketchikan, Summer 2006 the study team estimated that nonresident sportfishing-related direct spending accounted for roughly 8 to 10 percent of all visitor industry spending in 2008. 1 Direct spending by the nonresident sportfishing market impacts many Ketchikan business sectors including guided fishing operations, transportation (especially floatplane operations), accommodations, restaurants and lounges, and a variety of retailers including those selling fuel, fishing gear, gifts, souvenirs, and clothing. Statistics show that the industry contracted somewhat from 2007 to 2008, and based on industry interviews, suffered more significant declines in 2009. Owner/operators expressed guarded optimism that business volume would stabilize in 2010, but as of the date of this report, no conclusions could be drawn from reservation volume to date. Key findings from the study are presented below. All figures are for 2008 unless otherwise noted. Size of the Industry Ketchikan hosted an estimated 30,400 nonresident sportfishermen, of which two-thirds used the services of a registered guide. An estimated 3,300 unguided nonresident sportfishermen either stayed at a lodge/resort or rented a boat in Ketchikan. There were 87 sportfishing guide businesses with 141 vessels active in the Ketchikan area and 76 businesses with 184 vessels active on POW. There were nearly 21,000 half-day and 6,700 full-day Ketchikan guided nonresident sportfishing trips. Ketchikan ranks fourth among major saltwater fishing areas around the state based on the number of active vessels in 2008. The Cook Inlet area (Kenai/Homer), Sitka, and Prince of Wales Island are the top three areas. 1 The most recent estimate of the overall impacts of Ketchikan s visitor industry was in Economic Impacts of the Visitor Industry in Ketchikan, Summer 2006, McDowell Group. The rough estimates are based on a comparison of 2006 study results with the results of this study. Impacts of Nonresident Sportfishing on the Ketchikan Economy McDowell Group, Inc. Page 1

Direct Economic Impacts Direct spending in Ketchikan related to the nonresident sportfishing industry was estimated at $15.6 million. Estimated direct spending for guided sportfishing in Ketchikan (combined half-day and full-day) was about $7.3 million and accounted for 46 percent of nonresident sportfish-related spending in Ketchikan. The Ketchikan unguided, nonresident sportfishing sector, which included lodges that feature unguided fishing and businesses that rent boats, accounted for 30 percent of estimated spending at $4.6 million. An additional $3.7 million in Ketchikan spending (24 percent) was generated by POW sportfishing visitors and the businesses that served them. Total direct nonresident sportfishing-related employment was estimated at 340 (mostly seasonal) jobs with direct payroll of $5.2 million. Ketchikan sportfishing industry businesses reported a local hire rate of 87 percent and a local business-related spending rate of 85 percent. POW sportfishing businesses had direct spending of at least $3.5 million in Ketchikan, including $1.1 million for floatplane services, $861,000 for fuel, and $480,000 in payroll. POW sportfishing visitors spent at least $200,000 while passing through Ketchikan on their way to or from their POW guided fishing trips. Total Economic Impacts The total (direct, indirect, and induced) economic impact of nonresident sportfishing was estimated at $20 million. This included direct spending of $15.5 million with nearly $4.5 million in indirect and induced impacts. Included in the total spending impacts was sportfishing industry-related direct payroll of $5.2 million, which resulted in an additional $1.5 million in indirect and induced wages. Total (direct, indirect, and induced) employment was estimated at slightly more than 400 (mostly seasonal) jobs. Impacts of Nonresident Sportfishing on the Ketchikan Economy McDowell Group, Inc. Page 2

Introduction and Methodology Introduction The purpose of this study is to measure the impact of nonresident sportfishing visitors on the Ketchikan economy. Research for this study was conducted in the fourth quarter of 2009, a time when sportfishing industry participants were more available to provide information than during their busy season. The most recent data on license sales and guided sportfishing activity available from the Alaska Department of Fish and Game (ADF&G) was for 2008. Therefore, the primary focus of this study is on the 2008 sportfishing season. To illustrate year-to-year changes, trend data comparing 2007 and 2008 was included where possible. Over the course of the study, it became clear that most sportfishing industry businesses had suffered a decline in visitor volume and revenue from 2008 to 2009 due to difficulties in the national economy, as well as new sportfishing bag limits. Due to the significant shift in the business climate, several questions concerning the 2009 season were included in the sportfishing business owner/operator interviews. A brief review of comments pertaining to the 2009 season is included at the end of this report. In addition to guided and unguided visitors who fished Ketchikan s waters, this study also includes Ketchikan spending and employment impacts from sportfishing-related businesses that operated on Prince of Wales Island (POW) in 2008, as well as the impacts of POW nonresident sportfishing visitors passing through Ketchikan. Methodology Because of the complexity of the sportfishing industry in the Ketchikan area, McDowell Group utilized multiple sources of information in the development of this report. First, previous McDowell Group visitor studies were summarized to establish an overview of the visitor industry in Ketchikan. The most recent studies available were the Alaska Travelers Survey, Ketchikan Visitor Profile, 2006 and 2008, and Economic Impacts of the Visitor Industry in Ketchikan, Summer 2006. The 2008 Ketchikan Visitor Profile included a sample of 230 air visitors who sportfished in the Ketchikan or POW areas. Sources of quantifiable data included ADF&G and the Alaska Department of Labor and Workforce Development (DOLWD). Beginning in 1998, ADF&G required all fresh and saltwater guides to be registered and to collect information via logbooks on sportfishing participation, effort and harvest by clients. The Division of Sport Fish Research and Technical Services compiles the data. Records from fishing license sales in Ketchikan and on POW were acquired from the ADF&G Licensing Division. A review of DOLWD 2007 and 2008 employment data was conducted to assist in estimating employment. The McDowell Group study team conducted telephone interviews with 20 Ketchikan business owner/operators that offered guided and/or unguided sportfishing. They represented a mix of business sizes and types. The operations represented 52 percent of the 141 active charter vessels and a sizable majority of boat rentals in the Ketchikan area in 2008. Impacts of Nonresident Sportfishing on the Ketchikan Economy McDowell Group, Inc. Page 3

Telephone interviews were also conducted with 10 POW sportfishing businesses. The businesses represent 50 charter vessels (27 percent of the POW fleet) that hosted 3,900 guided and 600 unguided nonresident sportfishermen (representing about half of the estimated 9,100 nonresidents who sportfished on POW in 2008). Multipliers used in estimating total economic impacts were derived from a widely used input/output model, IMPLAN 2, along with McDowell Group s project experience and analysis. IMPLAN multipliers were modified, in some cases based on McDowell Group experience in measuring multipliers in Alaska rural and urban economies. 2 Minnesota IMPLAN Group, Inc., IMPLAN Professional version 2.0 Impacts of Nonresident Sportfishing on the Ketchikan Economy McDowell Group, Inc. Page 4

Ketchikan Visitor Market Overview Before describing nonresident sportfishing impacts, the following section presents a brief review of the most recent McDowell Group studies on Ketchikan s visitor industry. This review is intended to provide the reader with a greater context in which to view the nonresident sportfishing industry. Visitor Volume and Spending The vast majority of Ketchikan s visitor industry volume is comprised of cruise ship passengers. According to Cruise Line Agencies of Alaska, Ketchikan received 937,400 cruise passengers in 2009, just slightly below the 2008 total of 941,900. The most recent estimate of Ketchikan air visitors was 34,880 in summer 2006 and ferry visitors were estimated at 15,733 for the same year (these figures do not include business travelers). In summer 2006, per trip visitor spending in Ketchikan was estimated at $159 per person among cruise passengers; $408 per person among air visitors; and $278 per person among ferry passengers. The table below shows total spending by market. In total, visitors spent nearly $150 million in Ketchikan in summer 2006. Ketchikan Visitor Volume and Spending, Summer 2006 Total Volume Total Spending Cruise passengers 780,158 $124.0 million Air visitors 34,880 15.2 million Ferry visitors 15,773 4.4 million Total visitor volume and spending 830,811 $143.6 million Cruise ship crew members 22,323 5.7 million Total visitor/crew volume and spending 853,134 $149.3 million Source: Economic Impacts of the Visitor Industry in Ketchikan, Summer 2006, McDowell Group. Visitor Industry Employment and Payroll The visitor industry accounted for 1,150 direct jobs and a total of 1,500 (direct and indirect) jobs in summer 2006. In terms of payroll, the industry accounted for $40 million in direct payroll and $50 million in total payroll in summer 2006. In the context of the overall economy, these total figures represented 14 percent of all Ketchikan employment, and 12 percent of all Ketchikan payroll in calendar year 2006. Visitor Industry Employment and Labor Income in Ketchikan, Summer 2006 Direct Total % of Ketchikan Total Employment 1 1,150 1,500 14% Labor Income $40 million $50 million 12 Source: Economic Impacts of the Visitor Industry in Ketchikan, Summer 2006, McDowell Group. 1 Annual average employment, which includes full-time and part-time employment. Impacts of Nonresident Sportfishing on the Ketchikan Economy McDowell Group, Inc. Page 5

Ketchikan Sportfishing Visitor Profile In summer 2008 McDowell Group conducted the Alaska Travelers Survey, Ketchikan Visitors Profile which targeted visitors departing via the Ketchikan International Airport. The airport surveys focused on two groups of visitors: sportfishing visitors and other pleasure-related visitors. Sportfishing visitors may have fished in the immediate Ketchikan area or in an outlying area such as Prince of Wales Island. Using statistical sampling procedures to randomly select flights and passengers throughout the season, McDowell Group surveyors intercepted a total of 444 visitors departing Ketchikan by air. The sample included 230 who were traveling primarily for sportfishing and 214 who were traveling for other pleasure-related purposes. (Alaska residents and business-only travelers were excluded from the sample.) The maximum margin of error for the sportfishing sample is ±6.4 percent, at the 95 percent confidence level. Visitors were asked where they lived, their trip purpose, travel party size, household income, and if they overnighted in Ketchikan. Gender was also recorded. The following tables profile Ketchikan s sportfishing visitors. Sportfishing visitors were overwhelmingly from Western states with California and Washington the top two states. International visitors accounted for just 3 percent of sportfishing participants. Ketchikan Sportfishing Air Visitors Origin Origin % of Sportfishing Visitors West 71% California 23 Washington 15 Other Western States 33 South 14 Midwest 8 East 5 International 3 Sportfishing visitors reported an average party size of 4.7 people. Nearly one-quarter of these visitors were traveling in parties of six or more. Party Size Ketchikan Air Visitors % of Sportfishing Visitors One 15% Two 24 Three 10 Four 18 Five 10 Six or more 23 Average party size 4.7 people Impacts of Nonresident Sportfishing on the Ketchikan Economy McDowell Group, Inc. Page 6

Nearly nine out of ten sportfishing visitors were male. The average age was 51 years old. Gender and Age of Sportfishing Party Members Ketchikan Air Visitors % of Sportfishing Visitors Gender Male 87% Female 13 Age Under 18 5% 18 to 34 11 35 to 44 13 45 to 54 26 55 to 64 24 65 to 74 14 75 and over 7 Average age 51.3 years Sportfishing visitors reported high incomes, with 38 percent above $150,000 and another 27 percent falling between $95,000 and $150,000. Household Income Ketchikan Air Visitors % of Sportfishing Visitors Under $65,000 10% $65,001 to $80,000 5 $80,001 to $95,000 5 $95,001 to $110,000 10 $110,001 to $125,000 9 $125,001 to $150,000 8 Over $150,000 38 Don t know 1 Refused 12 Average $130,000 Impacts of Nonresident Sportfishing on the Ketchikan Economy McDowell Group, Inc. Page 7

Nonresident Sportfishing Industry Profile This section profiles Ketchikan s sportfishing industry in terms of types of businesses, market segments, and employment, and visitor participation rates. Business Models There is a diverse variety of business models that comprise the Ketchikan sportfishing industry. The list below provides examples of some of the businesses models typical in the industry. A single owner/operator with one boat who manages reservations and accounting, guides the guests, and cleans the fish. Single owner/operator who runs one boat, but manages multiple boats as one business. A family operation with one spouse or family member who manages the reservations and accounting while the other takes care of the vessel and guiding. Operations that work exclusively or partially through brokers who wholesale fishing trips to cruise passengers and other visitors. Operations that cater almost exclusively to the half-day cruise passenger market, while others offer full-day charters. Operators that may provide only fishing, leaving the visitor responsible for finding their own accommodations and meals. Businesses that offer sportfishing packages that include accommodations, meals, and fish processing. Larger, more complex operations that offer guided or unguided fishing packages that may include accommodations, meals, bait, tackle, fuel and fish processing. Additional activities may include RV park rentals and sundry sales. All of these services are also available individually for visitors who chose to rent their own boats. Businesses that provide services to local residents such as sales of fuel, bait, moorage, meals, and the occasional guided or unguided fishing trip. Markets There are four major market segments that contribute to the impacts of the Ketchikan sportfishing industry: guided sportfishing (fresh and saltwater), unguided sportfishing, POW sportfishing businesses that have staff and make purchases in Ketchikan, and POW sportfishing visitors who pass through Ketchikan. Impacts of Nonresident Sportfishing on the Ketchikan Economy McDowell Group, Inc. Page 8

Guided Sportfishing Industry The following analysis of guided nonresident sportfishermen was extracted from data provided by ADF&G Division of Sport Fish Research and Technical Services. Information concerning businesses, vessels, and trips, is segmented by Statewide Harvest Survey (SWHS) areas. The Ketchikan and Prince of Wales areas (A and B) are further segmented by nonresidents participation and trip length in the next section of this report. 2008 Number of Active Saltwater Businesses, Vessels and Trips by SWHS Area, 2008 SWHS Area Description # of Active Businesses # of Active Vessels # of Trips P Cook Inlet (Kenai/Homer) 223 280 13,332 D Sitka 135 222 11,399 B Prince of Wales Island 76 184 8,086 A Ketchikan 87 141 7,220 Q Kodiak 86 114 3,357 E Juneau 72 112 3,942 J Prince William Sound (Valdez/Cordova) 79 93 2,375 C Kake/Petersburg/Wrangell 45 53 1,333 Of the areas reviewed, Prince of Wales Island and Ketchikan were the third and fourth largest based on the number of active vessels. Ketchikan had half the number of vessels as Cook Inlet area P and about two-thirds the number of vessels active in Sitka area D. Area A Ketchikan is comprised of all Alaska waters in the Ketchikan area, including drainages from Portland Inlet to, but not including, Ernest Sound. Area A also includes Duke, Annette, and Gravina Islands. Area B Prince of Wales Island, includes all Alaska waters and drainages from Cape Chacon to Sumner Strait, and from Clarence Island westward, including Forester Island. Maps of area A and B provided by ADF&G are included in the Appendix of this report. A list of nonresident license sales by vendor was obtained from the ADF&G Licensing Division and was grouped by Ketchikan and POW businesses. These lists were used to estimate the total number of nonresident licenses sold in each area. These estimates were used as a proxy for the total number of nonresident sportfishermen in each area. Even though a few visitors may have purchased multiple licenses, duplicate licenses, or may have purchased their license elsewhere in the state before they arrived in area A or B, this methodology provides a reasonably accurate count of the total number of nonresident sportfishermen. Impacts of Nonresident Sportfishing on the Ketchikan Economy McDowell Group, Inc. Page 9

Saltwater Businesses and Vessels ADF&G data shows there were 87 fishing guide businesses operating 141 boats in the Ketchikan area in 2008. This represented a decline of 4 percent in businesses and 8 percent in vessels from the previous year. POW businesses and boats were relatively stable from 2007 to 2008 with a 1 percent decline in businesses and a 1 percent increase in vessels. Sportfishing Guide Businesses and Vessels 2007-2008 2007 2008 % Change Ketchikan Businesses 91 87-4% Vessels 154 141-8 Prince of Wales Island Businesses 77 76-1% Vessels 182 184 +1 Source: Alaska Department of Fish and Game, Division of Sport Fish Research and Technical Services. Note: The Ketchikan area is defined as Statewide Harvest Area (SWHA) area A, and POW is area B. Counts are based on ports of offloading and are unduplicated. Estimated Nonresident Sportfishing Volume According to ADF&G sportfish license vendor data, there were an estimated 30,400 nonresident licenses sold in Ketchikan and 9,500 sold on POW in 2008. These estimates include all license types as well as guided and unguided fishermen. Using guide logbook data, ADF&G estimates the unduplicated number of nonresident guided sport fishermen was about 20,000 in Ketchikan and about 9,100 on POW in 2008. This data suggests the vast majority of nonresidents who purchased sportfishing licenses on POW fished with a guide, and two-thirds of nonresidents who purchased a license in Ketchikan fished with a guide, in 2008. For further analysis ADF&G logbook data was segmented by guided half-day and full-day saltwater trips, and guided freshwater trips. Ketchikan and POW License Sales and Guided Sportfishermen, 2008 POW Ketchikan Estimated total nonresident license sales 9,500 30,400 Estimated nonresident guided sportfishermen 9,100 20,000 Source: Alaska Department of Fish and Game, Division of Sport Fish Research and Technical Services and Alaska Department of Fish and Game, Licensing Division. Guided Saltwater Fishing Trips HALF-DAY GUIDED TRIPS Half-day Ketchikan guided trips declined by 8 percent between 2007 and 2008, from 5,710 trips to 5,244 trips. The number of nonresidents on those trips declined by 10 percent, from 23,357 to 20,972. There were an average of four guests per trip in 2008. A majority of these half-day trips were taken by cruise visitors. POW half-day trips declined by 10 percent, from 2,769 trips to 2,479 trips. The number of nonresidents on Impacts of Nonresident Sportfishing on the Ketchikan Economy McDowell Group, Inc. Page 10

those trips declined by 12 percent, from 9,801 to 8,596. There were an average of 3.5 guests per trip in 2008. Most of the half-day trips by visitors to POW were likely taken by package visitors on the first or last day of their visit. Guided Nonresident, Half-Day Saltwater Fishing Trips, 2007-2008 Ketchikan area 2007 2008 % Change Half-day trips 5,710 5,244-8% Nonresidents 23,357 20,972-10 Prince of Wales Island Half-day trips 2,769 2,479-10% Nonresidents 9,801 8,596-12 Source: Alaska Department of Fish and Game, Division of Sport Fish Research and Technical Services. The Ketchikan area is defined as Statewide Harvest Area (SWHA) area A, and POW is area B. Counts are based on ports of offloading and are unduplicated. Note: Half-day trips were defined as trips with a duration of less than five hours. Counts are based on ports of offloading and are unduplicated. FULL-DAY GUIDED TRIPS Ketchikan area full-day guided fishing trips declined by 11 percent from 2007 to 2008, from 2,215 to 1,976. There were 11 percent fewer nonresident anglers in 2008. There were 3.2 guests per trip in 2008. Full-day guided trips on POW increased by 3 percent over the same time period, from 5,455 to 5,607. The number of nonresidents on those trips declined by 2 percent, from 20,185 to 19,824. The were an average of 3.5 guests per trip in 2008. Guided Nonresident, Full-Day Saltwater Fishing Trips, 2007-2008 2007 2008 % Change Ketchikan area Full-day trips 2,215 1,976-11% Nonresidents 7,528 6,669-11 Prince of Wales Island Full-day trips 5,455 5,607 +3% Nonresidents 20,185 19,824-2 Source: Alaska Department of Fish and Game, Division of Sport Fish Research and Technical Services. The Ketchikan area is defined as Statewide Harvest Area (SWHA) area A, and POW is area B. Counts are based on ports of offloading and are unduplicated. Note: Full-day trips were defined as trips with a duration of five hours or more. Counts are based on ports of offloading and are unduplicated. Impacts of Nonresident Sportfishing on the Ketchikan Economy McDowell Group, Inc. Page 11

Guided Freshwater Fishing When compared to the volume of guided saltwater trips, the number of guided freshwater trips taken by nonresidents was small. In 2007, 931 nonresidents participated in 251 guided trips. In 2008, the number of trips declined by 31 percent to 173, and participants declined by 41 percent to 548. There were an average of 3.2 guests per trip in 2008. Ketchikan Area Guided Freshwater Fishing, 2007-2008 2007 2008 % change Businesses 6 6 -% Trips 251 173-31 Nonresident participants 931 548-41 Source: Alaska Department of Fish and Game, Division of Sport Fish Research and Technical Services. The number of trips and nonresident visitors participating in local guided freshwater fishing on the Ketchikan road system increased slightly in 2008. The number of fly-out trips declined by 78 percent from 2007 to 2008. Guided fly-out trips are relatively expensive due to the cost of chartering an airplane on top of paying for guide services. One freshwater guide stated that the economy was becoming an issue in 2008 and highend trips were the first to go. Ketchikan Area Guided Freshwater Fishing Trips, 2007-2008 2007 2008 % Change Local trips* 143 149 +5% Fly-out trips 108 24-78 Total trips 251 173-31% Source: Alaska Department of Fish and Game, Division of Sport Fish Research and Technical Services. *Ward Cove Creek, Ward Lake, and White River are all accessible from the Ketchikan road system. Overall, the volume of guided freshwater fishing trips on POW was more than double that reported in area A. While the number of businesses engaging in freshwater fishing on POW increased from 13 to 16 between 2007 and 2008, the number of trips declined 13 percent and the number of nonresident participants declined by 19 percent. There were an average of 2.9 guests per trip in 2008. POW Guided Freshwater Fishing, 2007-2008 2007 2008 % Change Businesses 13 16 +23% Trips 496 433-13 Nonresident participants 1,542 1,250-19 Source: Alaska Department of Fish and Game, Division of Sport Fish Research and Technical Services. Impacts of Nonresident Sportfishing on the Ketchikan Economy McDowell Group, Inc. Page 12

Unguided Sportfishing Quantifying the impacts of all nonresidents who participated in unguided sporfishing in the Ketchikan area is beyond the scope of this study. However, the study team was able to estimate the impacts of two segments of unguided fishermen that contribute significantly to the Ketchikan economy: those who visit lodges and other accommodation providers that feature unguided fishing packages, and those who rent boats for selfguided fishing ( bare-boat rentals). It is likely that these two market segments represent a majority of spending by unguided, nonresident sportfishing. There are typically two types of unguided boats: 14- to 18-foot open skiffs and 20- to 23-foot covered boats with center steering consoles and larger engines. Five Ketchikan area businesses that either rented bare-boats or offered unguided packages were interviewed for this study, including the three largest businesses in this market segment. The study team feels that these interviews represent a sizeable majority of unguided fishing package sales and bare-boat rentals in Ketchikan, and are representative of this segment of the market. In order to preserve the confidentially of individual businesses, this study examines the unguided lodge/package and bare-boat rental segments as a whole. Combined, the business owner/operators interviewed represented a total of 92 unguided boats in 2008 and provided about 1,650 boat-use days to nonresident anglers. For purposes of this study, it is assumed an average of two people per boat; therefore these boat-use days represent an estimated 3,300 nonresident anglers. Unguided sportfishermen spent an average of about 4.5 nights while in Ketchikan. Sportfishing Industry Direct Employment and Payroll Employment There were an estimated 340 direct jobs related to the nonresident sportfishing industry in Ketchikan in 2008. For the most part these jobs were seasonal; they include a mix of part-time and full-time employment. As stated earlier in this report, there are a variety of business types in the sportfishing industry. Some businesses are operated by a single person, while others may also employ staff for administrative support, sales and marketing, meal preparation, housekeeping, maintenance, and fish processing. Due to the complexity of business types and because not every sportfish industry business was interviewed for this study, a ratio was developed to identify the level of employment per vessel for those businesses interviewed. The ratio was based on data from multiple business types and sizes and is considered reasonably representative of the industry as a whole. In 2008, there was an average of 1.7 employees per guided vessel during peak season (May-September). With 141 guided vessels in the Ketchikan area, this results in direct employment of about 240 full-time and part-time people. Based on owner/operator interview data, there were also at least an additional 45 people employed with businesses that cater to unguided fishermen. Impacts of Nonresident Sportfishing on the Ketchikan Economy McDowell Group, Inc. Page 13

There were 20 Ketchikan-based jobs related to POW sportfishing operations in 2008. Several remote POW operations are based out of Ketchikan. These operations employ administrative, sales and marketing, and maintenance personnel. Some staff were based in Ketchikan in the off-season and on POW during the fishing season. Using an estimated average of 15 jobs per million dollars in sales 3 for retail businesses, the study team estimates that total direct retail spending of about $2.5 million 4 by nonresident sportfishing participants accounted for about 35 retail sector jobs in Ketchikan in 2008. Estimated Sportfishing-Related Ketchikan Employment, 2008 Guided sportfishing employment 240 Unguided sportfishing employment 45 POW businesses Ketchikan-based employees 20 Retail sector employment 35 Total 340 Source: Ketchikan and POW business owner/operator interviews and McDowell Group estimates. Note: figures have been rounded During the interviews, business owner/operators were asked about their level of local employment. Owner/operators reported an average Ketchikan resident hire rate of 87 percent. In general, smaller operations reported higher rates of local hire than larger operations. Payroll Businesses owners were asked how much they spent on payroll in 2008. In some cases, the owner s wages are the profit left over at the end of the season rather than a regular paycheck. Payroll averaged about $15,250 per Ketchikan employee (combined average for year-round and seasonal employees). In addition to payroll, many sportfishing industry participants receive significant income in the form of cash tips. The vast majority of employees in this industry work a four to five month season. Wages for those employed in the industry year-round are likely to be much higher. Multiplying employment and average wage results in an estimated payroll of $5.2 million for Ketchikan-based sportfishing industry employees. Estimated Payroll for Ketchikan-Based Employment, 2008 Estimated Employment Average Payroll Estimated Total Payroll 340 $15,250 $5,185,000 Source: Ketchikan and POW business owner/operator interviews and McDowell Group estimates. Note: figures have been rounded 3 IMPLAN estimate. 4 The $2.5 million is the amount of total direct nonresident sportfishing-related spending that was allocated to the retail sector. Impacts of Nonresident Sportfishing on the Ketchikan Economy McDowell Group, Inc. Page 14

Direct Spending Ketchikan Nonresident Sportfishing Spending Data Sources In order to identify nonresident spending related to sportfishing, the study team reviewed several sources of data. An initial review of Ketchikan Gateway Borough (KGB) gross sales and tax collection summary statements yielded inconclusive data. When filing sales tax returns, Ketchikan businesses decide under which North American Industry Classification System (NAICS) code they report sales. There are four categories in the KGB records (transportation marine/charters, fishing lodges, hotels, and retail) related to nonresident spending that are also related to sportfishing. While each of these categories contains sales related to the sportfishing industry, none solely reflects nonresident sportfishing spending. Due to the seasonal nature of Ketchikan s sportfishing industry many businesses participate in different types of activities in the off-season. For example, a company may offer guided sportfishing in the summer and provide snow removal services in the winter. However, sales and taxes collected are filed under one NAICS code, making it difficult to identify sales and taxes related to each business type. Due to confidentiality restrictions, the KGB is unable to reveal gross sales or taxes collected by business, nor provide the names of businesses reporting sales in each category. The study team therefore decided the best methodology to identify direct spending by nonresident sportfishermen was to estimate the number of participants, length of stay, and average expenditures. The next section of this report estimates total Ketchikan area spending related to nonresident sportfishing and summarizes the estimated impacts of each market segment. This report excludes nonresident expenditures for sportfish licenses or King salmon stamps. It is beyond the scope of this project to determine which combination of licenses and King salmon stamps visitors purchased. Nonresident license costs range from $20 to $145 and King salmon stamps from $10 to $100. However, assuming that each of the estimated 30,400 visitors purchased the minimum one day fishing license would indicate license sales of $608,000. Impacts of Nonresident Sportfishing on the Ketchikan Economy McDowell Group, Inc. Page 15

Total Direct Spending Total direct nonresident sportfishing-related spending in Ketchikan is estimated at $15.6 million for 2008. The majority of expenditures ($11.9 million) were made by visitors who sportfished in the Ketchikan area. An additional $3.7 million in Ketchikan spending was generated by POW sportfishing visitors and the businesses that served them. Total Sportfishing-Related Ketchikan Expenditures, 2008 Type of Expenditure Spending Ketchikan sportfishing $11,893,000 POW sportfishing-related 3,732,000 Total $15,632,000 Source: Ketchikan business owner/operator interviews and McDowell Group estimates. Note: figures have been rounded Ketchikan Nonresident Sportfishermen The study team was able to estimate spending for all Ketchikan guided sportfishermen and for a significant portion of unguided fishermen. This study includes only spending related to the days nonresidents actually engaged in sportfishing. An example would be a visitor who spent 14 days in Alaska, seven of the days in Ketchikan. They participated in guided fishing for three full days and one half-day. The estimates in this study would only include spending for the three and one-half days the participant was engaged in sportfishing. In order to protect the confidentially of the businesses that generously provided information for this study, business types have been grouped, and average spending per participant is reflective of the group rather than any specific business type. The table below does not include spending estimates for unguided nonresidents who did not purchase a fishing package or rent a boat. This group would include nonresidents who fished from the shores of lakes, rivers, or the ocean, and those fishing with friends and relatives. While visitors in these two categories may engage in spending for transportation, fishing tackle, bait, accommodations, meals, beverages, gifts, clothing, and souvenirs, the level of overall spending is likely small compared to spending for other market segments. Impacts of Nonresident Sportfishing on the Ketchikan Economy McDowell Group, Inc. Page 16

This analysis estimates that nonresidents who participated in sportfishing in Ketchikan had direct expenditures of at least $11.9 million in 2008. The methodology for estimating spending for each sector is described in the text following the table. Type of Fishing Estimated Nonresident Sportfishing Spending in Ketchikan, 2008 Average Daily Spending per Participant # of Participant Days Estimated Spending % of Estimated Spending Unguided (lodges and bare-boat rentals) $310 14,850 $4,631,000 39% Half-day guided saltwater 170 20,972 3,565,000 30 Full-day guided saltwater 530 6,669 3,535,000 30 Guided freshwater 295 548 162,000 1 Total $11,893,000 100% Source: Ketchikan business owner/operator interviews and McDowell Group estimates. Note: figures have been rounded. UNGUIDED FISHING Unguided fishermen represented the highest percentage of estimated spending for nonresident sportfishing at $4.6 million, 39 percent of total spending. This group includes lodges and resorts that offer unguided sportfishing and operations that rent bare-boats. The average rate of $310 per person, per day reflects spending for accommodations, boats, fuel, tackle, bait, meals, beverages, transportation, gifts, clothing and souvenirs. Estimates were based on two people per room, and per boat. Generally, operators such as lodges that offer unguided fishing provide the boat, fuel, tackle, bait, accommodations, meals, and sometimes fish processing for a package price. Bare-boat rentals generally include normal operating and safety equipment and one tank of fuel. The renter must provide all fishing-related gear (as well as their own accommodations and meals). The estimated 14,850 participation days was derived from an estimated 3,300 fishermen staying an average of 4.5 nights each. HALF-DAY GUIDED SALTWATER FISHING Estimated average spending for cruise and non-cruise half-day fishermen combined was $170 per day. With 20,972 half-day trips in 2008, spending in this category was estimated at nearly $3.6 million. Expenditures for half-day guided fishing trips included cruise passengers who engaged in sportfishing. Spending for this group was limited to the value of the half-day fishing excursion. Other spending by these visitors while in port such as meals, gifts, clothing, souvenirs, tours, and attractions were not included because these expenditures were not directly related to sportfishing. Also included in this category were overnight visitors who chose to take a half-day fishing excursion as well as a significant number of resort/lodge package fishermen who fished at least one half-day as part of a package (their full days are counted in the next category). Per day spending for noncruise half-day fishermen reflects expenditures for accommodations, fishing, meals, beverages, transportation, gifts, clothing, and souvenirs. For reasons of confidentiality, average spending rates for the two groups were combined. This resulted in an estimated average spending per person, per day of $170. Impacts of Nonresident Sportfishing on the Ketchikan Economy McDowell Group, Inc. Page 17

FULL-DAY GUIDED SALTWATER FISHING Based on published rates and interviews conducted for this study, the average rate for a full day of guided sportfishing in 2008 was estimated at about $320 per person. This market segment was estimated to spend approximately $80 per person, per day for accommodations (double occupancy) and an additional $130 per person, per day on meals, beverages, transportation, gifts, clothing, souvenirs, bait, fish boxes, fish processing, and tips. In total, spending was estimated at $530 per person, per day, for full-day fishermen. This estimate was applied to all full-day fishermen whether they were on an all-inclusive package trip or purchased charter fishing separately from accommodations, meals, etc. With 6,669 full-day fishermen, total expenditures for this group are estimated at slightly more than $3.5 million. GUIDED FRESHWATER FISHING Guided freshwater fishing represented a small portion of overall sportfishing-related spending at $162,000. The average daily rate reflects those who fished on guided tours to local streams (on the road system) and those who participated in more expensive fly-out trips. A total of 548 participants (full and half day) spent an average of just under $300 per trip, per day. Industry Spending Patterns Ketchikan-Based Sportfishing Business Expenditures Ketchikan sportfishing-related business owner/operators were asked to estimate the percentage of their total spending on goods, services, and labor that was spent locally. Responses were tallied and weighted based on business size (client volume). Overall, business owner/operators reported that 85 percent of their spending occurred in Ketchikan. Nearly one-third of Ketchikan expenditures were for payroll, 29 percent for boats and equipment, 24 percent for fuel, and 15 percent for other business-related expenses. Ketchikan Sportfishing Business Expenditures by Percentage, 2008 % of Total Expenditures Payroll 32% Boats and equipment 29 Fuel 24 Other spending 15 Total 100% Source: Ketchikan business owner/operator interviews and McDowell Group estimates. Note: figures have been rounded. Impacts of Nonresident Sportfishing on the Ketchikan Economy McDowell Group, Inc. Page 18

Prince of Wales Island Nonresident Sportfishing-Related Spending Telephone interviews were conducted with 10 Prince of Wales Island sportfishing businesses (including the three largest operations on the Island). The businesses represent 50 charter vessels (27 percent of the POW fleet) that hosted 3,900 guided and 600 unguided nonresident sportfishermen in 2008 (representing about half of the estimated 9,100 nonresidents who sportfished on POW that year). The POW owner/operator interviews revealed that POW sportfishing-related spending in Ketchikan totaled nearly $3.8 million in 2008. This report includes only the estimated Ketchikan spending and employment for those POW businesses that were interviewed for this study; therefore, the $3.7 million in spending is a conservative estimate of POW sportfishing-related business spending in Ketchikan. Most of the operations that were not interviewed are small and likely spent more locally (on POW) than larger operations with Ketchikan offices. The most likely items that these smaller businesses would purchase in Ketchikan would include floatplane services, groceries, equipment, and supplies. Total POW Sportfishing-Related Ketchikan Expenditures, 2008 Spending POW businesses $3,533,000 Visitor spending 199,000 Total $3,732,000 Source: POW business owner/operator interviews. Note: figures have been rounded. POW BUSINESS SPENDING IN KETCHIKAN The POW businesses interviewed reported total direct spending in Ketchikan of $3.5 million in 2008. The most significant expenditures were for floatplanes at $1.1 million, followed by fuel at $861,000. Combined, the 10 operations employed approximately 200 people in 2008. About 10 percent were Ketchikan residents who received payroll and benefits valued at nearly $500,000. Other expenditures included goods and services such as groceries, parts and equipment, hardware, tools, tackle, and beverages. POW Sportfishing Businesses Ketchikan Expenditures, 2008 Floatplanes $1,121,000 Fuel 861,000 Payroll 480,000 Other expenditures 1,071,000 Total $3,533,000 Source: POW business owner/operator interviews and McDowell Group estimates. Note: figures have been rounded. Impacts of Nonresident Sportfishing on the Ketchikan Economy McDowell Group, Inc. Page 19

POW SPORTFISHING VISITOR SPENDING IN KETCHIKAN Of the 4,500 nonresident fishermen represented by the business interviews, about 40 percent spent at least one night in Ketchikan either on their way to or from POW. These POW sportfishing visitors spent approximately $200,000 while passing through Ketchikan in 2008. Based on double occupancy, this represented about 900 room nights in Ketchikan in 2008. At an average 2008 summer rate of about $161, these POW visitors had direct spending of about $145,000 for Ketchikan accommodations. It was estimated that this group also spent $30 per person for transportation, meals, beverages, gifts, clothing, and souvenirs while in Ketchikan. Not included in this study are expenditures by POW sportfishermen who passed through Ketchikan International Airport (KIA) but did not spend a night in Ketchikan. It is likely that most of the estimated 9,500 nonresidents who sportfished on POW passed through the airport and made some expenditures while there. POW Sportfishing Visitor Estimated Ketchikan Expenditures, 2008 Average per Person Spending # of Visitors Total Spending Accommodations (double occupancy) $80 1,800 $145,000 Other expenditures 30 1,800 54,000 Total $199,000 Source: POW business owner/operator interviews and McDowell Group estimates. Note: figures have been rounded. Impacts of Nonresident Sportfishing on the Ketchikan Economy McDowell Group, Inc. Page 20

Economic Impacts There are three types of economic impacts from nonresident sportfishing-related spending: Direct impacts: Include nonresident spending for fishing packages, boat rental, tackle, accommodations, meals, beverages, transportation, gifts, clothing and souvenirs. Also included are POW business expenditures in Ketchikan in direct support of nonresident sporfishing on the Island. These include expenditures for fuel, floatplanes, payroll for Ketchikan based staff, groceries, parts, and equipment, as well as other goods and services. Indirect impacts: Jobs and income in businesses providing goods and services to the Ketchikan sportfishing industry. For example, vendors who conduct business with a charter operator in turn buy fuel and other supplies, rent office space, and purchase services from other local providers in support of their day-to-day business operations. This spending creates additional jobs and income in the Ketchikan Gateway Borough. Induced impacts: Jobs and income created as a result of industry employees spending their payroll dollars in the local economy. Indirect and induced economic impacts, often described as multiplier effects, are important components of the overall economic impact of the sportfishing industry in Ketchikan. In general, however, multiplier effects for Alaska are limited, as few goods are actually produced in the state. A model was constructed using IMPLAN multipliers for the following sectors: charter fishing boat operations, hotel/motel, other accommodations, food and drinking establishments, miscellaneous retail businesses, and other amusements and recreation. Multipliers were weighted based on estimated expenditures for each sector. Spending Impacts The total estimated economic impact of nonresident sportfishing-related spending in the Ketchikan Gateway borough was $20 million in 2008, with total estimated seasonal-equivalent employment of slightly more than 400 jobs and total estimated payroll of $6.7 million. Economic Impacts of Nonresident Sportfishing-Related Spending in Ketchikan Gateway Borough, FY 2008 Direct Indirect & Induced Total Impact Employment 340 70 410 Labor income (payroll & benefits) $5,180,000 $1,534,000 $6,714,000 Total spending impact (includes labor income) $15,632,000 $4,446,000 $19,908,000 Source: McDowell Group estimates. Readers are cautioned to keep in mind that the 410 jobs are for the most part seasonal in nature, and the indirect and induced impacts would reflect the seasonal nature of this industry. While the study did not Impacts of Nonresident Sportfishing on the Ketchikan Economy McDowell Group, Inc. Page 21

gather data on seasonal versus year-round employment, it is estimated that perhaps 5 to 15 percent of industry employment is year-round. Estimated Spending on Accommodations The accommodations segment of the visitor industry benefits significantly from the nonresident sportfishing industry. These visitors spent an estimated 23,867 nights in Ketchikan in 2008. Assuming double occupancy, this represents approximately 11,935 room nights. Based on an average 2008 accommodation rate of about $161 for double occupancy, nonresident sportfishing visitors generated an estimated $1.9 million in accommodations revenue. Estimated Sportfishing Visitor Expenditures for Ketchikan Accommodations, 2008 Visitor Type Visitor Nights Room nights* Total Spending Unguided visitors 14,850 7,425 $1,195,000 Full-day guided visitors 7,217 3,610 581,000 POW sportfishing visitors 1,800 900 145,000 Total 23,867 11,935 $1,922,000 Source: Ketchikan business owner/operator interviews and McDowell Group estimates. Note: figures have been rounded. *Based on double occupancy. Taxes Sportfishing-related spending may be subject to the City s 4 percent sales tax, the Borough s 2 percent sales tax, or both. Spending on accommodations may be subject to the City s 3 percent bed tax, the Borough s 4 percent bed tax, or both. It was not possible to calculate precisely total sales and bed tax revenue collected from nonresident sportfishing because some of the spending may have been subject to Borough taxes only, and sales by location is unknown. However, total sales taxes collected from nonresident sportfishermen were likely in the range of one-half million to $1 million and bed taxes collected in the range of $75,000 to $125,000. Ketchikan Sales and Bed Tax Rates, 2008 City Borough Sales tax 6% 2% Bed tax 7 4 Source: Ketchikan Gateway Borough. Impacts of Nonresident Sportfishing on the Ketchikan Economy McDowell Group, Inc. Page 22

Sportfishing Industry 2009 Business owners and operators were asked if their 2009 visitor volume and total revenues were higher, lower, or about the same as 2008. Responses were tallied and weighted based on market share. Ketchikan Nearly all owners reported a decline in client volume in 2009, with an average decline of 19 percent, while revenues were down an average of 15 percent. All but one business reported serving fewer clients in 2009. Ketchikan Sportfishing Business Revenue and Clients, 2009 Avg. % Change 2008 to 2009 Revenue -15% Guests -19 Source: Ketchikan business owner/operator interviews. Those who reported declines were asked what they thought were the main reasons. Almost unanimously owners stated that the severe downturn in the national economy was the most significant factor and that visitor concerns over sportfish bag limits were also a factor. When referring to the difficult economic conditions one owner stated We have had a group of 18 coming to our facility for 10 years; they called and said they just could not afford it in 2009. They are construction workers from California and they stated they were basically unemployed. For the most part, bag limit issues did not affect the unguided nonresident market or the half-day cruise market as much as the full-day guided markets. In general, these businesses reported smaller declines than operations offering full-day guided services. Prince of Wales Island Sportfishing businesses on POW reported much greater declines than Ketchikan businesses. Owners reported an average decline of 30 percent in guests and 32 percent in revenue. As a group, the larger operations on the Island reported greater declines than smaller operations. Owners stated that the severe downturn in the national economy was the most significant factor. According to one lodge operator, Even people who had money were reluctant to spend it in 2009. Owner/operators also stated that visitor concerns over sportfish bag limits had resulted in cancellations. One owner mentioned that he has delayed the opening date of his season because of bag limit issues: I used to open in early June, last year I opened June 24. In early June, my guests can only keep one king, one halibut, and one ling. They just don t see the cost of a package in early June as a value anymore. POW Sportfishing Business Revenue and Clients, 2009 Avg. % Change 2008 to 2009 Revenue -32% Guests -30 Source: POW business owner/operator interviews. Impacts of Nonresident Sportfishing on the Ketchikan Economy McDowell Group, Inc. Page 23