Alsaka sinks cruise stock

[C 2 C]

Alaska voters just made life tougher for the cruiselines.

 

 

Cruise Operators Face Alaska Initiative

By MICHELLE CHAPMAN AP Business Writer

© 2006 The Associated Press

NEW YORK — Shares of Carnival Corp. and Royal Caribbean Cruises Ltd., the world's two largest cruise operators, lost steam this week following the passage of an Alaska ballot initiative that includes new taxes which threaten to cut into onboard revenue and lower earnings.

Ballot Initiative 2, which was approved by state voters and is expected to be implemented next year, will result in a $50 per passenger head tax that will raise government taxes and fees paid by passengers taking Alaskan cruises.

A gaming tax will also be charged on any gambling that occurs in state waters, with a state corporate income tax incurred for cruise lines operating ships in Alaska.

 

Other measures include cruise lines disclosing profits on shore excursions and revealing sales earned from shoreside businesses.

Both Carnival and Royal Caribbean said they were disappointed by the initiative's passage.

"We believe this will inhibit the future growth and expansion of Alaska's tourism business," Carnival Chairman and Chief Executive Micky Arison said in a statement Thursday.

"Unfortunately it makes Alaska a more expensive vacation destination for our guests," Royal Caribbean spokesman Michael Sheehan said, noting that local businesses may also be impacted by the move.

Carnival said it is unclear what impact the head tax will have on its Alaskan business, but predicted that the games and income taxes may lower its 2007 earnings by about 3 cents per share. Sheehan said Royal Caribbean is still reviewing how its earnings may be impacted.

Anticipating the passage, Goldman Sachs analyst Steven Kent said in a client note issued Sunday that the initiative likely would not impact Carnival and Royal Caribbean's results too much due to strong Alaska demand, generally higher income level passengers and the uniqueness factor of the trips allowing them to "pass the head tax cost on while continuing to drive prices."

Kent sees the initiative having a "modest financial impact" on the companies by lowering onboard revenue, possibly reducing earnings by 3 cents per share for Carnival and 5 cents per share for Royal Caribbean.

Additionally, lawsuits which would delay the measure's enactment are likely, he said, as not every Alaskan port will benefit from the head tax. For example, Juneau and Ketchikan's current head taxes are more than what they would get through the initiative. There are also concerns about the legality of taxing gaming sales in international waters, Kent explained.

Analyst David W. Anders of Merrill Lynch said in a Wednesday client note that Alaskan cruises make up about 8 percent of Carnival's total fleet capacity and 10 percent of its earnings. The voyages comprise roughly 7 percent of Royal Caribbean's capacity and generate 9 percent of its earnings.

Shares of Carnival fell 8 cents to $38.87 in midday trading on the New York Stock Exchange, while Royal Caribbean shares edged up 19 cents to $32.84. Carnival shares finished Thursday at $38.95, down 2 percent for the week, while Royal Caribbean shares lost 4.9 percent during the week to close Thursday at $32.65.

[reklawr]

This is bad news but I suspect the cruise lines will pass any increase in costs directly through to the customer.

As the article says it will take some time for these taxes to become law as they will be challenged in the courts.

I don't think this will prevent the cruise lines from filling every cabin to Alaska.

I know when we're ready to go to Alaska an additional $50 per person will not deter us.

[TeaBag]

We have never cruised to Alaska and this new tax makes it less likely that we will ever go there. :(

[ocngypz]

$50.00 tax for a 7 night sailing....... that's less than the cost of one martini per day...

 

Alaska sailings are not exactly a "budget" destination like the Caribbean. Overall prices were higher this year than last... and ships have been sailing full.

[Keith1010]

In the end, the tax will likely not make a difference. The cruise lines will pass along this tax and those who want to sail to Alaska will sail there.

 

Talk about taxes. Look at the taxes that you pay across the United States for stays in Hotels. In many cities these taxes have been raised over the past several years to pay the cost of new stadiums. The percentage is staggering yet hotel occupancy has been on the rise.

 

Keith

[C 2 C]

I'm not concerned so much about the tax portion as the intrusion into the operations of the ship. The implication is that Alaska wants a fee not just for every cruise passenger who enters their state but also a portion of every drink served, every gambling dollar, every excursion taken, every spa treatment. Just imagine the uproar that will result when every foreign country, from the Caribbean to Europe and Asia, when (if) they apply the same laws for travelling in their countries. The cruiselines will have to raise their prices more to offset these new "partners" in the cruise business.

[ocngypz]

I'm not concerned so much about the tax portion as the intrusion into the operations of the ship. The implication is that Alaska wants a fee not just for every cruise passenger who enters their state but also a portion of every drink served, every gambling dollar, every excursion taken, every spa treatment. Just imagine the uproar that will result when every foreign country, from the Caribbean to Europe and Asia, when (if) they apply the same laws for travelling in their countries. The cruiselines will have to raise their prices more to offset these new "partners" in the cruise business.

 

 

Spain already collects 16% VAT .

 

Well, the cruiselines could just shut down the casinos on Alaska sailings.. and that would be the end of that.

 

It is within states' rights to control what happens in it's own waters. If it wishes to pursue a foreign corporation deriving income from within it's own boundaries, sobeit.

[greeneg]

Every time that I see States/Local Governments/etc. go this route, I wonder if there is, in fact, a point at which this sort of thing really does become self defeating in the sense that it drives people away rather than raise revenues.

We have recently seem a number of rental car, hotel tax increases here in Charlotte to pay for a Basketball Arena, NASCAR museum, and there really doesn't seem to have been a major impact. YET!

 

Still, I have to think that there has to be an end point where this particular Goose will cease to lay "Golden Eggs" and I think that Alaska may well be the case in point. Given the recent and anticipated increases in Cruise Fares due to fuel costs, it may well be that this additional bite, small as it may seem to be in comparison with the total cost of a cruise, could be the "tipping" point which makes people look elsewhere to spend their vacation dollars. Time will tell on that one but it should be interesting to watch.

 

Currently ( before a tax increase) it would seem that prices for a CC class cabin are about $225-250 pp/day for the Alaska run. We'll have to watch prices over the next few months to see what they do. I would not be surprised to see shorter cruises become more the rule as this tends to make the overall cost of the vacation less.....or at least appear to be so.

 

My own personal opinion is that those are not "bargin rates" and I would perhaps think twice before booking. Admittedly, we prefer longer cruises and have done Alaska, so it's perhaps less of an issue for us, but I do think that it will be interesting to follow what the overall effect will be.

 

I guess I am just curious about where the tipping point actually is and will be interest to see what other people think.

[Bradiego]

I am going on an Alaska cruise on Summit (14 nights) next September and this is definitely not going to change anything. I own stock in RCL and am a little upset about the recent decline in their stock, but I know it will come back up. I've heard how beautiful Alaska is and for me this trip is a once in a lifetime opportunity.

 

I just really hope they use the tax money to do what they say they are going to do with it.

[ocngypz]

Every time that I see States/Local Governments/etc. go this route, I wonder if there is, in fact, a point at which this sort of thing really does become self defeating in the sense that it drives people away rather than raise revenues.

We have recently seem a number of rental car, hotel tax increases here in Charlotte to pay for a Basketball Arena, NASCAR museum, and there really doesn't seem to have been a major impact. YET!

 

Still, I have to think that there has to be an end point where this particular Goose will cease to lay "Golden Eggs" and I think that Alaska may well be the case in point. Given the recent and anticipated increases in Cruise Fares due to fuel costs, it may well be that this additional bite, small as it may seem to be in comparison with the total cost of a cruise, could be the "tipping" point which makes people look elsewhere to spend their vacation dollars. Time will tell on that one but it should be interesting to watch.

 

Currently ( before a tax increase) it would seem that prices for a CC class cabin are about $225-250 pp/day for the Alaska run. We'll have to watch prices over the next few months to see what they do. I would not be surprised to see shorter cruises become more the rule as this tends to make the overall cost of the vacation less.....or at least appear to be so.

 

My own personal opinion is that those are not "bargin rates" and I would perhaps think twice before booking. Admittedly, we prefer longer cruises and have done Alaska, so it's perhaps less of an issue for us, but I do think that it will be interesting to follow what the overall effect will be.

 

I guess I am just curious about where the tipping point actually is and will be interest to see what other people think.

 

 

The ships never sail empty (except right after 9/11). And if you've ever lived in a seasonal tourist mecca where you pay taxes through the nose to support the dedicated tourism infrastructure, you'd understand how infuriating it can be have the cost of so many projects passed along in your tax bill to support something you don't use.

 

There are more people living in the smallest state in the Union than the largest state in the Union. The cost of living in Alaska is higher than the US average, wages lower.

 

Where else would the money come from?

[chily3]

When we went to Alaska last September and we talked with lots of private busness owners about the cuise ships. Most of them kind of like to see the ships. These business are not featured, mentioned or "recomended" by the cruise lines as they have not "subscribed". Which means they have not paid the fees etc. I think most of the locals want less cruise ships and less hoards of people, that is why they voted for this. As only a few make money off the ships. An exception is the Icy Point Indians as they are in total control of which ships can come there.

 

Will the $50.00 stop us no as there is so much more to see. Closing the casinos is a great idea as it is hard to hold breath through there. We usually just go though a deck higher to get away from all of it.

[C 2 C]

Where else would the money come from?

 

Their oil?

Their own work?

The welfare state should not exist on the back of taxes paid by others. They need another bridge to nowhere?

If they can't afford it they should not be there. Let 'em criuise:rolleyes:

Tourism through the cruiselines already provide many jobs that otherwise would not exist.

[ocngypz]

Their oil?

Their own work?

The welfare state should not exist on the back of taxes paid by others. They need another bridge to nowhere?

If they can't afford it they should not be there. Let 'em criuise:rolleyes:

Tourism through the cruiselines already provide many jobs that otherwise would not exist.

 

 

Their oil? Nope.....you can thank the tree huggers for that. The days of the fat oil revenue checks are long gone.

 

Most employees in Alaska during May-Sept are employed by the cruiselines on seasonal contracts. There are some locals such as school teachers who have summers off who drive the coaches. Some local kids working at the attractions when they are off from school. The majority of retail locations in the state are either corporately owned, or if in private ownership... out of state ownership.

 

You know how many independent visitors to Denali don't stop and purchase their park permits! Cheap so-and-so's.

[richkinkade]

Actually, Alaska ranks towards the top in personal incomes. (Somewhere around 12th to 16th, depending upon what you measure). What Alaska ranks last in, at 6.4%, is state and local tax burden as a percentage of income. Alaskans evidently don't like paying taxes.

http://money.cnn.com/pf/features/lists/taxesbystate2005/index.html

[ocngypz]

Actually, Alaska ranks towards the top in personal incomes. (Somewhere around 12th to 16th, depending upon what you measure). What Alaska ranks last in, at 6.4%, is state and local tax burden as a percentage of income. Alaskans evidently don't like paying taxes.

http://money.cnn.com/pf/features/lists/taxesbystate2005/index.html

 

Once upon a time they didn't pay at all .. the state paid them from oil revenue.

 

Salaries are high, but they don't get you far. Starting salaries for teachers in the interior are $70,000+, housing included. Great if you don't mind -50 degree weather in the winter. Houses that you would want to live in START in the $300,000's. Also many $$$$ people claim Alaska as their residence BECAUSE of the low tax burden. Oil people have been doing that for years. Most of the time you can find them sunning themselves in their So. Cal homes!

[Andy]

Hi Everyone !

 

Much of the conversation has been about the $ 50.00 increase. I totally agree that it would not stop most of us from sailing Alaska. The bigger issue is, there are some other items involved like a 33% tax of the Casino proceeds, and a tax other onboard revenues such as shore excursions. This is the part that concerns me the most.

 

What gives Alaska the right to become the Cruise Lines instant partner ? Last I checked, Alaska didnt spend Mega Millions to build Cruise Ships, the Cruise lines did. Also, if this is allowed, they will probably will want access to the Cruise lines books and sales records. Why should they be entitled to any of that information ? If they want it, let them buy 51% of the Company, as the rest of us would need to.

 

I know one comment was made to simply close the Casinos. While that is an option, it would be a VERY costly one for the Cruise Lines, and one I am sure they would not care to do.

 

Instead of thinking about it being a $ 50.00 item, there is a lot more at stake. It sets a very bad precedent. If this comes to reality, what prevents other ports and regions to try and do the same thing ? If I was running a Cruise Line, I would rather pull all my ships out of there, and redeploy them elsewhere. I think that would get their attention, and they might reconsider this unusual plan.

 

The good news is, much legal action is anticipated. It will probably be a while before any of it comes to reality. Hopefully, this measure will be trimmed back, to something everyone can live with.

[greeneg]

Hi Andy. Kind of what I was thinking also. I guess that if your politicians can't/won't raise taxes to generate needed local revenue, then this is what you try to do: tax your visitors.

 

Of course this does create the possiblity of cutting off your nose to spite your face, so to speak.

 

Thats what I was implying when I said that this particular goose only has so many eggs that it can lay.

 

Lots of local examples, particularly here in Charlotte, where our gutless wonder local politicians simply will not face reality and make some hard choices.

 

No free lunches anymore, tell that to the people who fix your roads.....not!!

[beauxdammit]

When BW and I lived in rural Colorado, the town loved to see the tourists come in. We hated to see them leave if they still had a dime in their pockets. Soundsl like Alaska is adopting the same outlook.

[bravemom]

i don't forsee any line pulling out of alaska over this. it's too popular a destination and people will pay whatever the rate the lines ask. heck, as of last november disney was still negotiating for ports there-and despite no on-board casinos and a well enforced 'we'll put you off at the next port if you break our rules' practice those trips will be like their limited west coast sailings and sell out within the first few hours of public announcement at double or triple the cost any other line currently charges.

 

as far as alaska suffering if the lines do pull out-beyond the sales tax they get from the buisnesses that operate in ports there will be little impact on employment rates (the bulk of the port stores close as soon as the season is over and all the college kids from oregon and washington that are massivly recruited on campus to staff the stores, the restaurants, the excursions...will all go home), rental housing costs may decrease/become more available (much of the rental properties in port towns are owned by out of staters who won't rent traditional terms to locals when they can hold off and rent to the college kids and make more in a few months than they would all year). the little port towns won't see their populations quadruple during the season from the seasonal workers who drain their public services (i worked for social services for years and can attest that regions that for one reason or another get 'seasonal' influxes of people (be it for jobs, better weather or escapeism) see a corresponding increase in service applications/usage-we used to be able to predict to the week when our offices would experience double the applications-it was when the out of area folks arrived to report to work for the 'tourist season'. we used to joke that it did'nt matter that the people were getting lousy wages because they made out big time using our county funded medical and dental services to get their treatment free so they would'nt have to pay out of pocket for the rest of the year). in some ways the state may end up ahead.

 

i grew up in a tourist region and left as an adult. i grew tired of paying high taxes that for the most part went to funding tourist pursuits and never seemed to be around for local needs. the big 'room occupancy' tax the hotels had to turn over to the local government (10% back in the early 80's-god knows how high now)-got rolled right back into international ad campaigns, lobbying to convert more open space to building more hotels, and subsidising privatly owned tourist venues).

[duckman715]

Let's see now - no income tax, no sales tax, every man woman and child receives a check from the government each and every year for somewhere between $800 - $1,000. Poor destitute state. Alaska already charges port taxes and fees based upon the number of passengers and length of ship. Why not push the envelope and see just how much folks are willing to pay to come buy authentic Alaskan crafts made in China and see a glacier.

They can charge whatever they want as far as I'm concerned. The market will determine if their objectives are realized. We are in that group which need to plan and budget for vacation cruises in advance and price does become a factor in the decision making process so for us the increases will influence