South Denali Visitor Center Complex

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South Denali Visitor Center Complex Operations PlanPrepared by the University of Alaska Center for Economic DevelopmentPrepared for the Alaska Department of Natural Resources

© Andre Kaeppele

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TABLE OF CONTENTS

I. STATEMENT OF PURPOSE

II. EXECUTIVE SUMMARY

III. BACKGROUND A. Denali State Park and Development B. George Parks Highway and Denali National Park and Preserve C. Alaska Department of Natural Resources D. South Denali Visitor Center Complex

IV. VISITOR MARKET ANALYSIS A. Statewide Visitation and Trends B. Alaska Out-of-State Summer Visitors C. Out-of-State Winter Visitors D. Alaska Resident Tourism to the Mat-Su Borough E. Denali National Park Visitation and Trends

V. LOGISTICS A. Arrival of Visitors B. Functional Considerations C. Interpretation Considerations D. Tram/Bus Considerations E. Visitor Movement Modeling

VI. MARKETING STRATEGIES AND CONSIDERATIONS

A. Marketing Considerations B. Pricing and Packaging C. Service Strategy D. Marketing Strategies

VII. CONSTRUCTION COSTS A. Phase I Costs B. Phase II Costs C. Total Costs D. Other Considerations

VIII. STAFFING COSTS A. Campground Costs B. Visitor Center Costs C. Additional Staff Costs D. Other Considerations

IX. MANAGEMENT A. Governance Structure(s) B. Organizational Alternatives C. Concession Operations

X. FINANCIAL ANALYSIS A. Visitor Projections B. Revenues/Receipts C. Operations Costs

XI. FUNDING SOURCES A. Private and Local Funding

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B. Federal Funding C. Foundation Funding D. Other Sources of Funding

SOURCES OF INFORMATION

APPENDICES A. Tour Operator Interviews B. ECI/Hyer Inc. Capital Renewal Estimates C. Visitation Projections and Methodology D. Interviews

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© Leanna Quirk

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I. STATEMENT OF PURPOSE

The Alaska Department of Natural Resources (DNR), Division of Parks and Outdoor Recreation (Alaska State Parks), sought the assistance of the University of Alaska Center for Economic Development (CED) with preparing an operations plan for the proposed South Denali Visitor Center Complex near Curry Ridge at the southern entrance of Denali State Park. This operations plan is intended to guide the development and operational considerations to strategically plan for staffing, site logistics and annual operational (and thus financial) elements of the development of the proposed visitor center complex.

More specifically, the objective of the operations plan is to identify both short-term and long-term initiatives to ensure effective and efficient operations related to visitor attraction, arrival, routing, accommodation and enhancement of the visitor experience. The development of this plan required a close working and collaborative engagement with staff from the Alaska State Parks to make site and operational decisions.

The South Denali Visitor Center Complex will be operated consistent with the park’s mission statement as outlined in the Denali State Park Management Plan (2006):

Denali State Park shall be managed and developed in a manner compatible with the following goals:

I. Protect the natural and cultural resources of the park and ensure that the park’s resources are maintained to allow for the public’s experience and understanding of the unique natural features that are found in this part of Alaska,

II. In a manner that is compatible with Goal I, provide for a variety of opportunities for visitors to the park to

experience and understand the park’s natural and cultural resources, including viewing Denali. Park facilities shall be designed and developed to support the public use and understanding of the park and its resources and not serve as attractions in and of themselves,

III. In a manner that is compatible with Goals I and II, recognize and accommodate, in so far as reasonable, the diverse needs of different types of visitors to the park.

The 2006 management plan also provided the following statement regarding the general concept for the visitor center:

This destination facility will serve Alaskan and out-of-state travelers, local school groups and package tours. The vision is for a high-quality facility that offers a range of opportunities for learning and recreating. It will provide visitors of various abilities a chance to experience alpine and subarctic tundra environments and opportunities to view Denali and the Alaska Range.

Goals of the South Denali Visitor Center Complex• Welcome and orient visitors to the facilities, services and

recreational/interpretive opportunities in Denali State Park and the surrounding areas.

• Promote visitor appreciation and understanding of the natural, recreational and cultural resources of the area.

∘ Educate and inform visitors about appropriate resource use and encourage appropriate use.

∘ Encourage recreation and safe travel.

• Develop and maintain productive, cordial, mutually beneficial partnerships with a variety of agencies and

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organizations.

• Develop strategies to become financially self-supporting through such avenues as retail sales or partnerships with a non-profit cooperating group.

• Nurture and strengthen existing ties with the community through continued educational outreach in the local school system.

Scope

The main elements presented in this operations plan include:

• An analysis of demographic trends in tourism and recreation that have shaped and defined the visitor-center audience.

• Visitor arrival, logistics and circulation.

• A division of the visitor center audience into target market segments so that marketing and interpretive messages will be customer oriented and efficiently delivered.

• Strategies for marketing, revenue generation, partnerships and monitoring/evaluation.

• Management considerations, including organizational options to optimize visitor experiences and stakeholder involvement.

• Projected operating revenues and expenses through a comprehensive financial analysis based on the outlined components of the operations plan.

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II. Executive SummaryThe proposed South Denali Visitor Center Complex would showcase one of Alaska’s top natural attractions - Mount McKinley (Denali). The complex would bring substantial economic development and infrastructure to upper/northern Mat-Su valley. Besides the complex’s three partners (Alaska State Parks, Denali National Park, Mat-Su Borough), the facility has strong support from Alaska’s visitor industry. This is evidenced by Holland America-Princess Alaska Tour’s $1 million contribution to the project, and Sea Lion Corporation’s subsidiary, United Companies’ (UCI) gift of land adjacent to the complex site.

Together with Denali National Park and Preserve, this complex would offer a world-class destination for visitors, which enhances the destination’s appeal to both domestic and international visitors. Already a significant driver for Alaska’s economy, the visitor industry would have an additional attraction with which to entice the state’s 1 million-plus annual cruise visitors to tour Denali State Park and Denali National Park and Preserve. The complex would have a favorable impact on Interior Alaska as well as other regions by encouraging visitors to extend their stays by participating in land-based tours. The complex would also benefit Alaska residents through additional camping facilities and an extensive trail network.

Our forecasts indicate strong demand for the South Denali Visitor Center Complex, which would drive infrastructure development and create economic opportunities in an area that presently provides few jobs for local residents. The complex would directly employ approximately 25 staff seasonally, and an additional 11 through concession operators. Further, we forecast that the complex would be self-supporting financially, generating an operating surplus following the initial start-up period.

The project has several challenges that must be overcome in order to be successful, foremost of which is securing the remaining necessary funding to complete the project. To date, the project has been appropriated $20.4 million of the estimated total cost of $47.0 million. An extended deferral of this funding jeopardizes the project through construction- and development-related cost increases. Part of this funding could be contributed by additional public and private stakeholders/sources who would then share in the economic opportunities generated by the complex through concession contracts.

Further, operating the visitor center complex will be outside the scope of Alaska State Parks’ traditional purview, which is currently limited to less operations-intensive parks and campgrounds. We encourage contracting with experienced operators and hiring the expertise necessary to build this capacity within Alaska State Parks’ staff, at least through the initial transition period. Finally, fulfilling the world-class interpretative experience envisioned by the complex’s planners will be a key component of the facility’s success.

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III. BackgroundThe South Denali Visitor Center Complex will be a world-class facility located in Denali State Park and accessed from the Parks Highway at milepost 135. It is expected that the visitor center will be jointly managed by Alaska State Parks, the National Park Service (NPS) and the Matanuska-Susitna Borough (MSB). The first phase of the development, construction of a 1.5-mile entrance road, campground, interpretive trail, and trailhead parking area, began in August 2013.

A. DENALI STATE PARK AND DEVELOPMENTEstablished in 1970, Denali State Park is located within one of North America's most spectacular regions. The park's 325,240 acres, almost half the size of Rhode Island, provides a variety of recreational opportunities, ranging from roadside camping to wilderness exploration. The park is located approximately 100 air miles north of Anchorage and is divided roughly in half by the George Parks Highway National Scenic Byway. Situated between the Talkeetna Mountains to the east and the Alaska Range to the west, the landscape includes a wide variety of features, from lowland streams to alpine tundra. Dominating the area are Curry and Kesugi ridges, which together form a 35-mile-long north/south alpine ridge that serves as the backbone of the eastern half of the park.

Since the 1960s there has been a shared vision among public land managers in the South Denali area that the region has potential for greater use and development for visitation. The designation of Denali State Park in 1970 was intended to provide the land base for a significant public tourism facility. The National Park Service received a fiscal year 2004 Congressional appropriation to develop facilities in the South Denali area and as a result the South Denali Implementation Plan and Environmental Impact Statement

(EIS) were developed between 2004 and 2006 and included a comprehensive public involvement process. NPS undertook this effort for several reasons, chief among these was the concern at that time, that future visitation levels would exceed Denali NP’s visitor capacity. In the record of decision for the South Denali Implementation Plan dated 2006, Curry Ridge was identified as the preferred site for a South Denali Visitor Center.

B. GEORGE PARKS HIGHWAY AND DENALI NATIONAL PARK AND PRESERVEThe George Parks Highway (simply referred to as the Parks Highway) is a 362-mile major roadway running through the middle of Denali State Park. The road was first completed in 1971 and received its current name in 1975. The highway is one of the most important trade routes in the state of Alaska because it connects Anchorage with Fairbanks and provides access to Denali National Park and Preserve. The entrance to Denali National Park is located at milepost 237.4 and is 125 miles south of Fairbanks.

Prior to the opening of the Parks Highway in 1971, visitation to Denali National Park and Preserve was fairly minimal. This was largely due to the difficulty in accessing it. In order to reach Denali, visitors would have to either arrive by train or by road via the unimproved Denali Highway. After the opening of the Parks Highway, the number of people who traveled to Denali National Park increased considerably. Within 12 years of opening the road, total annual visitation to the national park was approximately nine times the number that visited the park in the year prior to the opening of the highway.1 The Parks Highway has allowed visitors from all across the world to have increased access to the Denali region of Alaska.

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C. ALASKA DEPARTMENT OF NATURAL RESOURCESThe Alaska Department of Natural Resources (DNR) will serve as the lead organization responsible for the creation and oversight of the South Denali Campground and ultimately the South Denali Visitor Center Complex. The DNR oversees many different divisions dealing with the various resource issues of the state including agriculture, forests, mining, oil and gas, water, state parks and many other areas relevant to Alaska’s resource issues.

Within DNR, the Division of Parks and Outdoor Recreation (Alaska State Parks) will be directly responsible for overseeing the South Denali Visitor Center Complex. Alaska State Parks is responsible for managing Alaska’s 124 recreational units on approximately 3.3 million acres of park land.

D. SOUTH DENALI VISITOR CENTER COMPLEXThe South Denali Visitor Center Complex will be located within a southern section of Denali State Park, adjacent to the Parks Highway at mile marker 135. Talkeetna is approximately 36 miles to the south. The visitor center location is approximately 135 road miles from Anchorage, 112 miles from the entrance to Denali National Park and 227 miles from Fairbanks. Both resident and nonresident visitors seeking opportunities for recreation and campground amenities will enjoy the natural, undisturbed surroundings of the facility.

The region’s three main rivers (Chulitna, Susitna and Talkeetna) are in close proximity. The nearby access to these waterways provides multiple opportunities for boating, fishing, hunting and sightseeing to the park’s visitors. Lake 1787 is accessible via a 2.5-mile hike from the South Denali campground or a 0.5-mile hike from the proposed site of the visitor center. Numerous tour operators within the Denali region offer backpacking, flightseeing and boating tours that will be available to visitor-center and campground guests.

The visitor center and surrounding area will provide guests with an

opportunity to see some of Alaska’s famed wildlife. Denali State Park is home to more than 130 different species of birds, as well as all five species of Pacific salmon. Many large mammals also make their home in Denali State Park, including moose, black bears, grizzly bears and even wolves. Other mammals that can be found inside the park include lynx, coyote, red fox, snowshoe hare and wolverine (among others).

The weather in the park is tempered from continental extremes by the relatively warm ocean waters 100 miles to the south. The Alaska Range to the north protects the park from the dramatic temperature extremes common to Interior Alaska. In summer, temperatures are usually in the 60s with the rare high temperature to 85 degrees Fahrenheit. In mid-summer, almost 21 hours of possible daylight give ample opportunities for recreational activities.

Several key scenic viewpoints and recreational opportunities are already available in Denali State Park. The Denali View South Wayside, adjacent to the South Denali Campground on the Parks Highway and also managed by Alaska State Parks, offers one of the best roadside views of the Alaska Range. The Denali View South Wayside hosts interpretive panels that familiarize visitors with the peaks of the Alaska Range. The paved wayside also has nine drive-in parking spots or temporary “campsites” that offer the chance to wait out the weather. At the north end of the park, Denali View North offers 20 drive-in camping spots and equally gorgeous views. The Lower Troublesome Creek Campground also provides 20 campsites and is located near the Chulitna River. The Byers Lake Campground, located at the foot of Kesugi Ridge, has 73 campsites and is a great place to relax and take in spectacular views of the lake. The Lakeshore Campground is accessible by foot trail and is located across Byers Lake, about two miles from the loop trailhead, and offers six secluded campsites.

The Alaska Veterans Memorial is located at milepost 147.2 of the Parks Highway. The multi-war memorial, the first to recognize

1 National Park Service, Denali National Park Background, http://www.nps.gov/dena/parkmgmt/upload/Background%20Information.pdf

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Alaska’s veterans, honors the Army, Air Force, Navy, Marines and Coast Guard veterans of Alaska.

UAF photo by Todd Paris

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IV. Visitor Market AnalysisThe nationwide recession of 2008-2009, which resulted in high unemployment and the slow recovery, has strongly impacted American’s travel plans. The economy of the U.S., while showing some signs of rebound, was still considered fragile in 2013 and even teetering on another economic cliff. In response, Americans have been saving more aggressively, cutting back on discretionary spending and putting off travel to locations such as Alaska and instead planning “staycations” or forgoing trips and staying at home.

While inflation has been relatively flat, high fuel prices have resulted in declines in highway travel, impacting both business and leisure travel. While fuel prices declined in 2009, this decline was coupled with recessionary pressures and conservative spending on travel. Part of this decline in travel spending may be coming from retirees, who historically exercise more frugality with their expenses during periods of low interest rates. Domestic travel showed some rebound in 2010 and 2011 until rising fuel prices began to constrain and impact highway travel, particularly long-haul recreational vehicles.

A. Statewide Visitation and TrendsDespite the effects of the 2008 recession, the State of Alaska has seen an increase in out-of-state visitor spending since 2008. Out-of-state visitor spending totaled $1.503 billion in 2008-09 and $1.692 billion in 2011-2012 (Economic Impact of Alaska’s Visitor Industry, 2011-12, McDowell). This increase in out-of-state visitor spending has been coupled with a slight drop in the total number of visitors to the state over the same time period. From 2008-09 to 2011-12 the Alaska tourism industry saw a shift in the type of travelers coming to the state. During this period the number of cruise ship visitors decreased by 14% while air visitors increased by a similar figure. This increase in air visitors has helped buoy Alaska’s overall

out-of-state visitor spending due to the average air visitor spending more per capita than the average cruise visitor. In summer 2011, the average cruise passenger spent just $632 in Alaska while the average air visitor spent $1,455. A full breakdown of Alaska visitor volume since 2002-03 can be seen on Figure 4.1 below:

Figure 4.1: Full Year Alaska Visitor Volume, 2002-03 to 2011-12

Source: 2005-2012 data from AVSP V and VI (conducted by McDowell Group); 2002-2004 data from AVSP IV (conducted by Northern Economics, Inc.)

Increases in visitor spending between these two time periods were concentrated in two of Alaska’s regions, Southcentral ($640 million to $756 million) and Interior ($230 million to $300 million) (Economic Impact of Alaska’s Visitor Industry, 2011-12, McDowell). The increased spending in these two regions is a trend that bodes well for the South Denali Visitor Center Complex, due to its location between the two regions. Visitor spending across Alaska’s other three regions (Southwest, Southeast and Far North) remained relatively flat between 2008-09 and 2011-12.

The Alaska tourism market is highly seasonal, and thus it is best to look at the state’s visitor market on a seasonal basis. Given the seasonality of the Alaska tourism industry, we chose to first break

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down the Alaska tourism market by dividing it into seasons: summer and winter. The vast majority of Alaska’s tourists come during the summer, as evidenced by Figure 4.2 below.

Figure 4.2: Alaska Visitor Volume, Full Year 2011-12

Source: AVSP VI Fall/Winter 2011-12 McDowell Group

Once broken down by season, the Alaska tourism market can then be further broken down by traveler type. The summer tourism market can be divided into three distinct categories: air, cruise, and highway/ferry. Winter tourism is its own distinct traveler category, as 94% of winter tourists arrive to the state via domestic air. Each of these tourism segments has its own characteristics that will require the use of a tailored marketing strategy.

B. Alaska Out-of-State Summer VisitorsSummer visitation to Alaska steadily rose year after year to a peak of 1.71 million visitors in 2007. Visitor volumes decreased after 2007

due to the effects of the 2008 recession and repositioning decisions made by major cruise lines. An estimated 1,556,800 out-of-state visitors came to Alaska between May and September 2011. This level of visitation reflects a modest 1.6% increase in travel from the same period in 2010.

Figure 4.3: Alaska Annual Summer Visitor Volume 2002-2011

Source: AVSP V and VI (conducted by McDowell Group); 2002-2004 data from AVSP IV (conducted by Northern Economics, Inc.)

Visitors to Alaska have historically come via air or cruise ship, with highway and ferry visitors coming in a distant third. Of the 1.56 million out-of-state visitors that came to Alaska between May and September 2011, 69,300 were highway/ferry visitors, 604,500 were air visitors, and 883,000 were cruise ship passengers.

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Figure 4.4: Alaska Visitor Volume, Summers 2006-2011, By Transportation Market

Source: McDowell Group, Inc. AVSP VI: Summer 2011

Of the total visitors, 77% were vacation/pleasure travelers, 14% were visiting friends or relatives, 5% were business-only travelers and 4% were travelling both for business and pleasure. The greatest shift in these numbers between 2006 and 2011 was that those traveling for vacation/pleasure declined by 5%, while those travelling to visit friends or relatives increased by 5% (see Figure 4.5).

Types of Summer Visitors

Summer visitors to Alaska can be broken down into three distinct groups depending on the mode of transportation used to enter the state (cruise, air and highway/ferry). Each of these different types of traveler shares certain distinct characteristics. A basic understanding of the demographics and travel patterns of each traveler type can help better inform marketing decisions in order to capitalize on each of these segments.

Figure 4.5: Trip Purpose

Source: McDowell Group, Inc. AVSPV: Summer 2011

Summer Cruise Visitors

Cruise visitors to Alaska represent the largest segment of visitors to the state over the summer months of May – September (see Figure 4.4 on the previous page), and the second-largest segment of visitors to the state over the course of the year. In 2011, 45% of the total yearly visitors to the state of Alaska entered by cruise, second only to air travelers (50%).

The “typical” cruise visitor can be characterized by the following pieces of information:

• More likely to be female (55%)

• Average age of 52.3 years

• Primarily from the West or South U.S. (52%)

• Stay for less time in Alaska than other travelers (8.5 nights on average)

• Average household income of $108,000

One interesting trend within the cruise market is the declining

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number of people who purchase one-way cruises into the state and then leave via a different mode of transportation (overwhelmingly by air). In 2006, the number of people who entered the state via cruise and left using a different mode of transportation was 27%; in 2011, the number had decreased to just 23%. This decline shows that the number of people purchasing round-trip Alaska cruises has increased; meaning cruise visitors may be less likely to take land tours or spend any time traveling independently in Alaska. Visitors who cruise one way frequently add time to their itinerary to explore more communities and regions of the state. Although the decline of travelers with such flexibility has been small, if this trend continues it may impact different areas within the Alaska tourism market.

Cruise visitors generally spend less while in the state compared to other travelers. In 2011 the average cruise visitor spent just $632 within the state of Alaska (not counting their cruise fare), while the average air traveler spent nearly $1,500.

When traveling between communities within Alaska, cruise visitors overwhelmingly traveled via motor coach/bus and by train. This is primarily due to the nature of purchasing a cruise package. Many cruise packages involve private bus tours throughout different areas of the state as well as travel by train between communities. The fact that these modes of transportation are used frequently by cruise travelers and not the general visitor population as a whole can be seen in Table 4.1 right, which indicates the mode of transportation used between communities by transportation market.

Cruise visitors generally spend less time in Alaska compared to other types of travelers. In 2011 the average cruise passenger spent 8.5 nights in the state, a slight increase from the 8.1 night average recorded in 2006. In 2011, 28% of cruise ship visitors spent time in a hotel/motel, while 19% of cruise ship passengers spent time in a lodge. Few cruise passengers went camping while they traveled in Alaska. This makes sense given the structured nature of most cruises. Despite this, cruise passengers nonetheless represent a potentially large source of visitor traffic for a South Denali Visitor Center Complex as well as sources of visitor center revenue via motor coach tours or independent travel following the cruise.

In evaluating the potential market for the South Denali Visitor Center Complex, it is important to examine the specific places cruise passengers visited in addition to their length of stay. In 2011, data sources indicate that 30% of cruise travelers to Alaska spent at least one night inside of Denali National Park, while 29% of cruise travelers spent time visiting the park. The close proximity of these two data sets means that virtually all of the cruise passengers who visit Denali National Park will make an overnight stay in the area. The average length of stay for cruise passengers overnighting in Denali in 2011 was 2.1 days, a slight increase from the 1.9-day average stay recorded in 2006.

To get a better understanding of what motivates Alaska’s cruise travelers we can look at their favorite activities during their vacation. While in Alaska, the most common activities that cruise travelers engage in are the following:

• Shopping (77%)

• Riding the train (57%)

• Cultural Activities (55%)

• City/sightseeing tours (54%)

• Wildlife viewing (53%)

In contrast to air and highway/ferry visitors, cruise travelers are not very concerned with visiting friends or relatives. In 2011 only 3% of

Table 4.1: Transportation Used Between Communities, By Transportation Market, 2011 (%)

Source: McDowell Group 2011 AVSP VI

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cruise travelers visited friends or relatives while in Alaska.

When it came to the pre-trip planning of their Alaska vacation, cruise visitors booked the major pieces of their travel further in advance than other visitors to the state. In 2011, cruise travelers booked their travel an average of 6.6 months in advance of coming to Alaska and first decided to come to the state 9.4 months in advance. Both of these advance planning figures are longer than the combined summer visitor average of 8.6 months. A full breakdown of the pre-trip planning by traveler segment can be seen in Table 4.2 below:

As part of the pre-trip planning process, cruise visitors used the Internet to plan their trip at a rate that was on par with the state’s visitor average. A total of 81% of all cruise visitors used the Internet to plan some portion of their Alaska trip. In addition to using the Internet to research and/or book their travel, cruise travelers were the most likely traveler type to utilize the services of a travel agent. In 2011, 68% of cruise passengers booked their travel through a travel agent. This is markedly higher than both air (17%) and highway/ferry travelers (9%). The primary source

of information for cruise passengers was their cruise line, which bolsters the notion that one of the best ways to market the South Denali Visitor Center Complex to the cruise passenger market is to work with the cruise lines directly. Working directly with the cruise lines will also aid Alaska State Parks in getting tour information in front of potential visitors early enough to ensure inclusion in pre-trip planning and in bookings.

Out-of-State Summer Air Travelers

The second segment of Alaska summer visitors is air travelers. Air travelers to the state of Alaska represent the second-largest segment of summer visitors to the state and the largest segment of overall visitors. In 2011, Alaska had 604,500 summer air visitors, often coming to the state to visit family or friends or enjoy Alaska’s world-class fishing destinations. Air travelers averaged the highest spending of any transportation segment in Alaska. The typical out-of-state air traveler can be characterized by the following attributes:

• 57% male

• 47.7 years old (youngest of all visitor types)

• Low number of retired or semi-retired (28%)

• Primarily from the Western U.S. (52%)

• Most likely group to be visiting family or friends (35%)

• Spent more money than other traveler types ($1,455 per person)

By transportation market, air travelers represent 39% of all summer Alaska visitors. When looking at transportation by exit mode this number increases to 46% of all Alaska visitors. The discrepancy between the two data sets can mainly be attributed to the number of cruise passengers who purchase one-way cruises to Alaska and then exit the state via air.

Once in the state, air travelers are the most likely of any traveler type to use a rental vehicle to move throughout the state. A full

Table 4.2: Trip Planning Timeline by Transportation Market, 2006 and 2011 (%)

Source: McDowell Group, AVSP VI

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third (33%) of air travelers used a rental vehicle, compared to only 4% of cruise travelers and 8% of highway/ferry travelers (although of course highway/ferry travelers are likely to be traveling in their personal vehicles). Also, 25% of all air travelers utilized a personal vehicle as a means of transportation within the state (see Table 2.1). This extremely high figure (compared to just 1% of cruise passengers) can likely be attributed to the higher than average number of air travelers (35%) who are primarily coming to the state to visit family or friends. It is likely that many of these travelers are utilizing the car of a friend or family member living in the area. Air travelers were also the most likely to utilize air travel once inside Alaska. One fifth (20%) of air travelers used air travel within Alaska, compared to just 4% for cruise passengers, and 5% for highway visitors.

The average summer air traveler to Alaska spent 9.8 nights in the state. The most common types of lodging used by air travelers include the following:

• 55% hotel/motel

• 39% private home

• 21% lodge

• 9% campground

The primary destination for air travelers in Alaska was Anchorage, with 74% of all air travelers visiting the city and 61% overnighting in Anchorage. The average length of stay for Anchorage overnight visitors is 4.5 nights. Given the high percentage of air visitors who are using a rental car or personal vehicle and the high percentage of people who are visiting family and friends in the area, the option of a short drive to the South Denali Visitor Center Complex could be quite appealing. The South Denali Visitor Center Complex could be an attractive day-trip option for those overnighting in Anchorage who do not wish to travel all the way to Denali National Park. Given that 21% of air travelers are able to visit the Palmer/Wasilla area, and that even 25% of air travelers make the lengthy trip to Denali National Park, it is likely that the South Denali Visitor Center

Complex could capture a significant portion of the air traveler market. It is also worth noting that the average Denali National Park overnight air traveler spends 2.5 nights in Denali National Park.

Once on the ground, summer air travelers to Alaska engage in a wide range of activities. Many summer air visitors are drawn to Alaska by an urge to visit family/friends or for Alaska’s world-class fishing opportunities. The top six most common activities for summer air travelers include the following:

• Shopping (58%)


• Hiking/nature walks (48%)

• Visit family/friends (45%)

• Fishing (39%)

• Cultural activities (39%)

Air travelers are the least likely traveler group to plan their trip in advance. They make the decision to come to Alaska an average of 6.7 months in advance, which is the shortest length of time of any traveler type. Additionally, air travelers book their travel to the state just 3.5 months prior to their trip, which is also the shortest length of time of any traveler type.

Of all traveler types, air travelers are the most likely to utilize the Internet to research their trip to Alaska; 83% of air visitors used the Internet to research their Alaska trip. The most common sources of information that air travelers used to inform their trip to Alaska were friends/family/coworkers (60%), prior experiences (35%) and brochures (22%). Recognizing these sources of information is important to appropriate expectations for the South Denali Visitor Center Complex as it will likely take some time for the development to become recognized as a tour product, be recommended by others and for travelers to request brochures. In initial years, marketing of the product will require significant effort. Given the high percentage of air travelers who rent vehicles while in Alaska, it would be wise to

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promote the South Denali Visitor Center Complex with employees of RV and auto rental companies. Coverage in Alaska Airlines’ in-flight publication as well as in other Alaska-focused magazines may also prove a low-cost means of getting the word out about the new visitor center. Finally, working closely with visitors bureaus in Mat Su, Anchorage and Fairbanks so front-line visitor center staff are aware of the amenities at the complex; also depending on the promotion budget, consider keyword advertising online to boost visibility with consumers researching an Alaska trip.

Most summer air travelers to Alaska have been to the state before and plan on returning to Alaska again within the next five years. A total of 59% of summer air travelers have been to Alaska before, compared to just 24% of cruise visitors. A significant percentage of air travelers (62%) plan on returning to Alaska within the next five years, compared to just 21% of cruise visitors and 50% of highway/ferry visitors to the state.

Out-of-State Summer Highway/Ferry Travelers

The third segment of Alaska visitor is the highway traveler. Although highway travelers represent a fairly small segment of the overall Alaska visitor volume (4%), they nonetheless represent an important segment for the South Denali Visitor Center Complex. The typical highway/ferry visitor is a mature individual at or near retirement who is making a road trip to Alaska. These visitors have often been to Alaska before, some frequenting the state on many occasions. The “typical” highway/ferry visitor can be characterized by the following:

• 55% male

• Average age 51.8

• Average household income $96,000

• Average spending $1,021 per person in Alaska

• Typically from Canada (36%) or the Western U.S. (27%)

• Have often been to Alaska before (62% repeat visitors)

The highway/ferry segment is especially important to the South Denali Visitor Center Complex due to the high percentage of these travelers who camp while in Alaska. In 2011, nearly half (48%) of all highway/ferry travelers spent at least one night RV/camping at a campground or RV park in Alaska while 14% of highway/ferry travelers spent time wilderness camping during their Alaska vacation. The high proportion of highway/ferry travelers who camp represents a significant potential market for the South Denali Visitor Center Complex. These visitors are attracted by the idea of affordable accommodations adjacent to high-quality tour product. The campground will aid in drawing this market segment to the visitor center.

Highway/ferry travelers to Alaska stay much longer than other travelers to the state. In 2011, highway/ferry travelers stayed an average of 13.2 nights in Alaska. This is considerably longer than both air (9.8 nights) and cruise (8.5 nights) passengers. While highway/ferry passengers are staying longer than other types of passengers, their average length of time spent in the state has decreased considerably since 2006 when they averaged 18.8 nights.

Between 2006 and 2011, the number of highway/ferry travelers who visited Denali National Park decreased, from 46% to 31% .2 A similar trend has been seen in the percentage of highway/ferry travelers who choose to spend a night in Denali National Park. In 2006, 41% of highway/ferry travelers spent a night in Denali while only 28% of visitors chose to overnight in Denali in 2011. For highway/ferry travelers who spent the night at Denali National Park, the average length of stay was 2.6 nights, a slight increase from the 2.4 night average recorded in 2006.

The most common activities for highway/ferry travelers to Alaska include the following:

• Shopping (63%)

• Camping (51%)

2 This trend is likely due to the relatively high cost associated with this mode of transportation relative to air or cruise travel.

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• Cultural Activities (46%)

• Wildlife Viewing (41%)

• Hiking/Nature Walks (34%)

Highway/ferry travelers usually decide to come to Alaska farther in advance than other travelers to the state. In 2011, the average highway/ferry traveler to Alaska decided to take their trip 12.7 months in advance. This is nearly double the length of time compared to air travelers (6.7 months). A summary of this data can be seen on Table 4.2. Highway/ferry users were also the least likely of all Alaska visitors to use the Internet for either planning or booking their trip. The vast majority of highway/ferry travelers (90%) did not utilize the services of a travel agent when planning their trip.

Instead, highway/ferry travelers relied on the following to inform their trip planning:

• Prior experiences (43%)

• Friends/family/co-workers (34%)

• Brochures (34%)

• Milepost (33%)

Given the sources of information used in travel decision making by highway/ferry travelers, it would be wise to promote the South Denali Visitor Center Complex in publications such as Alaska Magazine, the Milepost, Woodalls Campground Directory and travel guides like Bell’s Alaska Travel Guide, Mobil and Fodor’s and local convention and visitor bureau brochures, among others, as these are some of the most common reference pieces by highway/ferry visitors to Alaska.

Highway/ferry travelers primarily originate from Canada (36%) and the Western U.S. (27%). They have the smallest average party size of any type of summer traveler to the state (2.2 per party). Highway/ferry travelers are more likely to be male (55%) and are the most

likely traveler type to identify themselves as being retired or semi-retired (53%). Highway/ferry travelers have the lowest average household income of any traveler type to the state at $96,000 per year.

Highway/ferry travelers were the most likely traveler type to have visited Alaska before. Only 38% of highway/ferry travelers were making their first trip to Alaska, compared to 41% for air travelers and 76% for cruise visitors. Among visitors who have already been to Alaska, highway/ferry travelers had far and away the highest number of average previous visits to the state. The average repeat highway/ferry traveler had made 19.8 trips to Alaska, a figure skewed by the large number of Yukon residents who make frequent trips back and forth between Alaska and Canada. When Yukon residents are left out of the survey results, the average number of trips for the highway/ferry traveler decreases to just 5.2. Nonetheless, Yukon residents who frequently make trips into Alaska still represent a key market segment for the South Denali Visitor Center Complex and should not be completely discounted from the survey results.

C. Out-of-State Winter VisitorsThe state of Alaska offers a wide variety of winter attractions for out-of-state visitors. Alaska is world renowned for its excellent northern lights viewing and outdoor recreational opportunities. Alaska offers terrific downhill and cross-country skiing opportunities as well as numerous other attractions. Winter visitors also come to the state for the famous Iditarod Trail Sled Dog Race. Despite Alaska’s numerous winter attractions, the vast majority of out-of-state visitors come to Alaska either for business or for visiting family/friends.

• Typical out-of-state winter visitors to Alaska are:

• Predominately male (57%)

• Fairly affluent (average household income $108,000)

• 47.8 years old

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• Visiting the state for business or to see family/friends

• Not visiting the state for the first time

• Do not plan their trip far in advance

While the bulk of Alaska’s winter tourism market comes from in-state visitors, out-of-state visitors also represent a substantial market segment. Between October 2011 and April 2012, Alaska had an estimated 266,800 out-of-state tourists. The vast majority (94%) of these tourists were domestic air travelers (by exit mode). This represented a 9% increase in visitors from the same period in 2010-2011 (see Figure 4.6).

One key difference between Alaska’s summer and winter out-of-state tourists is trip purpose. The overwhelming majority of summer tourists come to the state for vacation/pleasure, followed by those visiting family and friends (see Figure 4.5). These numbers are dramatically different among winter tourists. Two different trip purpose segments dominate winter tourism to Alaska: those visiting the state on business and those visiting friends/relatives. Only 13% of all winter visitors to the state come for vacation/pleasure. The most common reason for visiting Alaska in the winter is the opportunity for northern lights viewing. A full breakdown of winter

tourists by trip purpose can be seen in Figure 4.7 below:

Winter visitors to Alaska participate in a wide variety of activities. Given the high proportion that visit the state on business or visiting friends/relatives it makes sense that outdoor activities do not rank very high on the list of top visitor activities. The following are the top five winter activities for visitors:

• Shopping (55%)

• Business (51%)

• Visiting friends/relatives (47%)


• Hiking/nature walks (15%)

Fall/winter travelers to Alaska spent an average of $920 per person on their Alaska trip, not including transportation to or from the state. Vacation/pleasure visitors recorded the highest average spending of all winter tourists at $1,491 per person. Total winter spending in 2011-12 was $249 million, 14% of the yearly out-of-

Figure 4.6: Alaska Visitor Volume, Fall/Winter 2002-03 to 2011-12

Source: 2005-2011 data from AVSP V; AVSP VI

Figure 4.7: Alaska Winter Visitors by Trip Purpose

Source: AVSP VI Winter 2011-12 McDowell Group

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state visitor spending market.

Out-of-state winter visitors to Alaska are primarily from the Western U.S. (62%), with an additional 16% coming from the Southern U.S. The average winter visitor in Alaska spent 10.5 nights in the state, which is a full day longer than the average length of stay for summer visitors (9.2 nights). The most common types of winter lodging for those coming to the state were hotel/motel (56%) and private home (41%). Only 2% of winter visitors chose to stay in a campground/RV park or in a wilderness campsite. The high percentage of visitors staying in a private home can be attributed to the large number of winter visitors who come to the state to visit family or friends. A total of 84% of those visiting family or friends stayed in a private home while in Alaska.

Most winter visitors to the state (74%) have been to Alaska before. The average number of trips for repeat visitors to the state is 4.4. This number is increased significantly by the large percentage of people who are visiting the state to see family or friends, as the average number of trips to the state for this segment is 7.7.

Winter visitors to Alaska don’t plan their trips as far in advance as summer visitors. The average winter visitor to Alaska first decided to take their trip just 2.9 months in advance (compared to 8.6 months for summer visitors). Winter visitors booked their travel to the state an average of just 1.7 months in advance of their trip (compared to 5.4 months for summer visitors). These pre-trip planning times are attributable to the fact that a large proportion of winter visitors are coming to the state for business or for visiting family/friends. These two market segments both typically have much shorter trip planning timelines than those visiting for vacation/pleasure.

The average party size among winter travelers is smaller than their summer counterparts. The average party size is just 1.4. This is likely due to the number of individuals traveling to the state on business, as well as the number of individuals who are returning to the state to visit their family and friends.

While the out-of-state winter tourism market is likely fairly Photo courtesy of Denali State Park

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insignificant for the South Denali Visitor Center Complex, it is nonetheless important due to the overall scarcity of winter tourists. The primary revenue source for the South Denali Visitor Center Complex’s winter operations will likely be in-state residents, but out-of-state visitors will still play an important role in wintertime operations, and in many cases will be brought to the site by the in-state family and friends they are staying with.

D. Alaska Resident Tourism to the Mat-Su BoroughAn additional market segment for the South Denali Visitor Center Complex is the many Alaska residents who travel to the Matanuska-Susitna Borough annually. The South Denali Visitor Center Complex will be one of the main destinations/attractions near the Mat-Su Borough. In evaluating the number of Alaska residents who may visit the center each year, it will be instructive to study the numbers who currently visit the Mat-Su Borough. With the current economic climate, the importance of local visitor markets should not be underestimated. Having a strong local tourism market can help the South Denali Visitor Center Complex be successful even in a tough economy.

Alaska residents who travel to the Mat-Su Borough participate in a wide variety of activities, including visiting friends/family, visiting attractions (Hatcher Pass, Musk Ox Farm) and fishing. Fall/winter visitors to the borough are primarily young residents from Anchorage who are interested in outdoor activities such as snow machining, skiing or visiting friends and family (Mat-Su Visitor Impact Study, Alaska Village Initiatives).

In evaluating the potential in-state visitor market to the South Denali Visitor Center Complex, we primarily looked at three data sources. One was the 1998 Mat-Su Visitor Impact Study by Alaska Village Initiatives, which provided estimates on the number of Alaska residents who visited the Mat-Su region each year. The Mat-Su Visitor Impact Study surveyed Alaska residents to better understand their travel behaviors. While this study is dated, it provides some useful information in depicting Mat-Su visitor

numbers and behavior. A 2nd study was the Alaska Travel Industry Association’s Alaska Resident In-State Pleasure Travel Study Report. The study was conducted by GMA Research Corporation and was based on a survey of 1,100 Alaska residents. Lastly, the Mat-Su Borough Tourism Infrastructure Study by the McDowell Group (2008) provided valuable insights in the timing of visitor volumes to the Mat-Su Borough.

According to the Mat-Su Borough Tourism Infrastructure Needs Study (McDowell 2008), the bulk of the Mat-Su Borough’s tourism occurs during the summer months. In fact, 90% of out-of-state visitor tourism to the Mat-Su occurs in summer months while 59% of resident in-state tourism occurs during the summer months. The more even distribution of in-state tourism to the Mat-Su between summer and winter months (41% of in-state Mat-Su tourism occurs during wintertime) makes the in-state resident market a critical market segment for the South Denali Visitor Center Complex during the winter.

Promoting the South Denali Visitor Center Complex to Alaskans will be a key contributor to its success. The 1998 Alaska Village Initiatives study found that 40% of residents escorted visitors on their trips in Alaska, which means in-state visitors can play a powerful role in spreading awareness of the complex among out-of-state visitors.

There is reason to believe that the market for in-state visitors to the South Denali Visitor Center Complex is quite substantial. The 1998 Alaska Village Initiatives study indicated that 75% of respondents from Anchorage, Fairbanks and Kenai/Soldotna visited the Mat-Su Borough during the summer, and 82% said that they would have traveled to the Mat-Su had there been good enough reason to do so.

In estimating the total number of Alaska residents that traveled to the Mat-Su borough for 2010 we looked at the most recently available population data from the U.S. Census and multiplied that by the visitation rates provided in the Alaska Village Initiatives study (see Figure 4.3 and Figure 4.4).

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Most in-state residents who travel to the Mat-Su Borough will not just go once per year, but will return to the borough regularly. The average number of trips to the Mat-Su Borough by residents in the fall/winter season is 10, while the summer average is six trips. These numbers were multiplied by the seasonal visitation rates to get the following totals (see Figure 4.5).

Anecdotally, park staff has observed an upward trend of winter snowmobile use within Denali State Park. Mid- to late-winter weekends often find most available plowed parking along the Parks Highway full of vehicles from Trappers Creek north. The majority of use is along the Chulitna River corridor or the Alaska Range foothills to the west. A winter snowmobile parking area and trails to the north and west will likely result in a significant increase in recreational use in the vicinity of the South Denali Visitor Center Complex.

While the total number of in-state visitors is much smaller than the number of out-of-state visitors, Alaska residents can potentially make up one of the largest market segments to the South Denali Visitor Center Complex because the average Alaskan visits the Mat-Su Borough so frequently. The Mat-Su Borough’s close proximity to Anchorage and the Kenai Peninsula makes it a popular choice for in-state residents looking for a weekend getaway year round. It is also worth noting that these numbers may even increase if the South Denali Visitor Center Complex is effectively marketed.

E. Denali National Park Visitation and TrendsDenali National Park and Preserve has extensive survey data from people who access the park. Although Denali National Park and Preserve visitors are not necessarily the same target market as that of the South Denali Visitor Center Complex, they can nonetheless provide a fairly representative snapshot of a potential South Denali market segment. In July of 2011, the national park conducted a thorough survey of park visitors that provides a wealth of information about visitor trends within Denali.

Since 2000, the number of people who visit Denali National Park

and Preserve annually has seen some fluctuation. Most of this fluctuation correlates fairly well to other economic indicators. It makes sense that the Denali visitor numbers experience declines during tough economic times, especially due to Alaska’s remote location and the high cost of travelling to Alaska from the Lower 48. According to the Summer 2011 study by Denali National Park, only 10% of the park’s annual visitors were Alaska residents. This leaves the park primarily dependent on out-of-state visitors. Therefore, when the broader U.S. economy experiences turmoil, Denali National Park and Preserve will also see its numbers falter. A depiction of annual visitor data since 2000 can be seen in Figure 4.8 (page 19).

The Denali National Park survey paints the following picture of the park’s average visitor:

• Over 50 years old (60% of visitors)

• Traveling in a group (94% of visitors)

• Traveling with family (66% of visitors)

• Making their first trip to Denali (80% of visitors)

Table 4.3: Estimated Alaska Resident Visitation Fall/Winter 2009-10

Table 4.4: Estimated Alaska Resident Visitation Summer 2010

Table 4.5: Estimated Number of Alaska Resident Trips to Mat-Su Borough 2010

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• Spent an average of 1.9 days within Denali

Visitors to Denali primarily come from California (12%), Alaska (10%) and Texas (6%). Denali National Park is also popular with residents of Washington state (3%) and people from the Midwest/Great Lakes region. Canadians are the most frequent international visitors to Denali National Park.

Pre-Trip Planning

The national-park survey also included a lot of data regarding the trip-planning patterns of Denali National Park visitors. This can help provide insight into what sources of information park visitors go to when researching a visit to Denali National Park. As one would expect when making a once-in-a-lifetime vacation to Alaska, the vast majority of Denali visitors (90%) sought out some sort of information about the park prior to their visit. The most common sources of information before visiting Denali were:

• Friends/relatives/word of mouth (59%)

• Maps/brochures/travel guides/tour books (58%)

• Park website (52%)

• Package tours (37%)

The marketing strategy for the South Denali Visitor Center Complex can be informed by this research. It will clearly be important to have a well maintained website with all the information visitors need based on the high percentage of people who use this source of information. Well-designed brochures and listings in the proper tour books and travel guides will also be essential.

Visitor Ages and Group Size

Denali survey data shows that the vast majority of visitors to Denali National Park travel as part of a group. Only 4% of visitors are making the trip alone, while 77% of groups consisted of between two and four people. Nearly two-thirds (66%) of the groups visiting Denali are family groups, while an additional 19% are visiting the park with friends.

The majority of park visitors are older, often above the age of 50. A full breakdown of the ages of Denali National Park visitors can be seen on Figure 4.9 on the following page.

Getting to Denali

One of things that is apparent about visitors to Denali National Park is that they overwhelmingly view the park itself as a destination. Among park visitors who were not residents of the Denali area (from Nenana to Talkeetna), the primary reason for visiting the region was to see the park. In total, 83% of these visitors cited Denali National Park as their primary reason for visiting this area. This demonstrates that Denali National Park is not simply something that people stop to do while passing by, but rather that it is seen as a destination point.

Visitors to the Talkeetna area or the entrance area to Denali (from Healy to Cantwell) use a variety of transportation modes. The most common forms of transportation used include train (36%), private vehicle (28%), motor coach (26%) and rental vehicle (23%). From a transportation perspective, this allows Denali visitors to be broken down into two primary subgroups, those who are traveling as part of a tour (train and motor coach) and those who are traveling

Figure 4.8: Denali National Park and Preserve (Annual Visitors)

Source: Denali National Park and Preserve (Park Statistics)

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independently (private vehicle and rental vehicle). These two types of visitors will require different marketing strategies in order to get them to visit the South Denali Visitor Center Complex. The tour travelers will require coordination and work with the large tour operators, while appealing to the independent travelers will require more traditional marketing efforts (such as brochures and website content). South Denali’s close proximity to Anchorage and Talkeetna may enable it to capture both those traveling by vehicle and those traveling as part of a tour group.

Once Inside the Park

A significant amount of information is also available on park visitors once they are inside of Denali National Park. Once inside the park, visitors are fairly evenly split on whether or not they choose to stay longer than one day. Slightly more than half of Denali National Park visitors (60%) decide to stay longer than one day. The average length of stay for those who stay less than 24 hours is 9.3 hours. For those staying in the park longer than 24 hours the average length of stay was 2.9 days. The overall average length of stay for all visitor groups was 1.9 days.

Inside the park, visitors partake in a wide array of activities. Many of these activities cater to those who want to take in the spectacular scenery and wildlife that Denali National Park has to offer. Among the most popular park activities are the following:

• Viewing scenery (88%)

• Viewing wildlife (80%)

• Riding a park road bus (77%)

• Experiencing wilderness (57%)

• Photography/painting/drawing (48%)

• Hiking on trails (47%)

Accommodations During Stay

A useful piece of information regarding those who visit Denali National Park and Preserve is accommodations used while in the park. Of those who visited Denali National Park, 85% stayed overnight in the local area (from Nenana to Talkeetna). Of those who made an overnight stay, 36% stayed inside the park. The average number of nights spent inside the park was 2.7. The average number of nights stayed by those in the Denali area (but not inside the park) was also 2.7. Figure 4.10 illustrates the number of nights spent by visitors inside the park as well as those who chose to stay outside the park but in the Denali area.

For visitors choosing to stay within the park, the most common types of accommodations used were RV camping in a developed campground (33%), staying in Kantishna-area lodges/cabins (30%), tent camping in a developed campground (28%) and backcountry camping (13%). These numbers are considerably different when compared to those who stayed outside the park but in the Denali area. The vast majority (84%) of these visitors stayed in a lodge, motel or condo. An additional 11% chose to RV camp in a developed campground, while only 3% chose to tent camp in a developed campground. The substantial difference between the

Figure 4.9: Denali National Park Visitors by Age

Source: Denali National Park and Preserve

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number of people choosing to tent camp inside Denali but not the surrounding area can be attributed to a number of factors, including that there aren’t many tent camping facilities outside of the park, and very few RV sites. Other factors could be the access to scenery and nature and the appeal of being able to say you camped in Denali National Park. The figures are also driven by the relative lack of non-camping options within Denali National Park. All of these factors help explain the lodging choices made both within Denali National Park and the surrounding area.

Regardless of the visitor type, it is important to recognize that guests – and not just those under 30 – are changing the way trip decisions and planning happen. Guests plan their visits online, using travel resources such as State of Alaska and National Park Service websites and other sources to find interactive maps, watch videos of the trails they will hike, listen to podcasts about the wildlife they will encounter and study online exhibits on the history of the place. Today’s guests expect this level of information and may disregard travel destinations that don’t provide this level of information.

Figure 4.10: # of Nights Spent by Visitors Both in the Park and in the Area

Source: Denali National Park and Preserve

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V. Logistics

Overview

There are logistics considerations on two levels at South Denali: visitors traveling to the site, and visitors transiting from the welcome hub to the visitor center. These are important issues to study and discuss. During peak visitation months (June to August) it is anticipated that up to 2,000 daily visitors will need to be accommodated at the South Denali Visitor Center Complex. During the shoulder months of May and September, a slightly reduced volume is anticipated, but not much – the lead-in period to the season and its closing period are much shorter and less extreme than they used to be. The logistics of moving visitors from the welcome hub to the visitor center will be best managed if visitors arrive somewhat evenly throughout the day. Once on site there will be ample activities to engage visitors for as little as an hour and up to several days or longer. The following discussion addresses these considerations as well as the interpretive experience that visitors will need to receive at South Denali.

The difference between transportation and logistics requires a brief discussion to aid understanding of this section. Transportation, in its most basic sense, concerns the movement of people and goods between locations – between the “welcome hub” and the visitor center, for example. Logistics is the art and science of managing the flow of people and goods in a world where efficient planning and operations can be challenged with the inconveniences of reality. The logistics of moving hundreds of thousands of demographically diverse visitors to a remote attraction while taking into consideration weather, wildlife, security, health emergencies, shelter, refreshments and comfort, to name a few, is a great leap beyond simple transportation. Yet every day, the travel industry makes it look simple. The South Denali Master Interpretative Plan

(2009) envisioned using wheeled trams to shuttle guests from a transportation/welcome hub to a visitors’ center – a blending of logistics with an interpretative experience.

A. Arrival of VisitorsThe proposed location of the visitor center on Curry Ridge presents unique challenges and opportunities for the movement of visitors from the highway corridor to the visitor center. Curry Ridge has been identified as the optimal location due to its panoramic vistas of Denali and the Alaska Range. Visitors will arrive via the Parks Highway by bus or private vehicle. It will be crucial to provide a practical yet memorable method of moving these visitors from the lower transportation/welcome hub to the upper-area visitor center.

The use of wheeled trams or buses is intended to engage the visitor by introducing and explaining the wilderness experience to those who may not have such knowledge or choose not to walk the 3.7 miles from the welcome hub to the visitor center. The use of an intra-complex transportation system will create a transition point for the guest and opportunity to shift into site engagement. Allowing tour-operator buses to transit to the visitor center is both an advantage and challenge/hindrance. The use of a bus will limit the movement of guests and the potential for liability, as many of the site’s guests will arrive via motor coach and be able to move through the site on the same vehicle. The use of trams/buses in this context is a key “supply chain” component and critical decision point for Alaska State Parks.

Visitor flow to the South Denali Visitor Center Complex will come from many sources and directions. We predict that this will contribute to a fairly smooth flow of visitors to and from the visitor center. This prediction is based on the following observations:

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there are approximately 900 existing hotel rooms within 40 miles of the South Denali Visitor Center Complex, 35% of which are located at the Princess McKinley Wilderness Lodge located less than three miles from the proposed visitor center complex. Another 75 to 100 rooms will be available at a hotel that is planned for the neighboring private development immediately north of the entrance to the South Denali Visitor Center Complex. There will also be 53 onsite camping facilities – RV, cabins and walk in sites – providing overnight accommodations for another 100-plus visitors. Further, the location of the South Denali Visitor Center Complex at just 135 miles from Anchorage will make this facility an easy day trip from Anchorage, as well as a midway stop on the way to Denali National Park from Anchorage. Finally, visitors will flow from the north as well as the south along the Parks Highway during their visit to Alaska. Combined, all these factors strongly suggest that visitation will occur over an extended period within each day based on diversity of visitors’ agendas, destinations and north/south flows. This mitigates the concern held by some that most of the daily visitation to South Denali Visitor Center Complex could occur during a fairly compressed period in the middle of the day by large tour operators offering day trips from Anchorage, or stopping at the facilities en route to Denali National Park.

B. Functional ConsiderationsThe purpose of the welcome hub at South Denali Visitor Center Complex is threefold: first, a welcoming facility providing visitor orientation, information and inspiration for the adventure of visiting Denali State Park; second, a staging point for visitors to shift between modes of transportation in order to get to the top of Curry Ridge and to the visitor center; third, a fee collection point for independent travelers. Ancillary to these considerations, the hub was

also envisioned to provide housing for the onsite ranger and provide visitors traveling in the winter months an easily accessible safety point that could provide emergency services or temporary shelter.

Once onsite, the movement of visitors between the highway corridor and the visitor center can occur several ways: buses, trams or hiking/walking. The key consideration for selection of an intra-complex transportation system is to preserve the interpretive experience that South Denali Visitor Center Complex planners envisioned. The South Denali Visitor Center Interpretive Master Plan established a vision for the use of shuttle trams to integrate transportation and the interpretative experience. The transportation hub will function as a transition point from viewing the landscape from high-speed vehicles to a slower, more immersive experience. Accordingly, it was envisioned that a quiet and efficient shuttle tram would transport visitors 3.7 miles up to the visitor center from the base or transportation hub. In the case of tram usage at the South Denali Visitor Center Complex, transportation is a misnomer. A tram/bus system, whether operated by the state or a contractor, should be deployed as both a visitor engagement and education opportunity.

C. Interpretation ConsiderationsAn important consideration is the visitors’ first point of contact as well as how to establish a gateway to the park. It is critical that guests don’t just receive a ride to the visitor center but are also provided with information about where to go and what to do during their visit. Today, visitors have access to much of that information long before they set foot in the park via the Internet. Leading visitor attractions engage the guest from the first point of contact and then provide that next level of interpretation as the guest moves through

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the destination.

The traditional visitor center is a large building where guests walk in and are greeted by static exhibits and maybe a film. But today’s guests often travel in intergenerational groups, with different expectations and technological sophistication. Travelers today expect the traditional interpretive displays to incorporate interactive experiences, and are comfortable using computers, smart phones, tablets and other digital technologies. As Alaska State Parks plans for the welcome hub and creating a “wow” moment that will draw visitors into Denali State Park, it should do so with these technologies and tools in mind. For example, guests armed with smartphones could stop at a small kiosk at a welcome station, scan a barcode and listen to a podcast about the site, or look at photos, watch a movie or even play a game that helps them understand the significance of the Denali State Park and the greater Denali region.

The bus/tram should be an integral part of the interpretive presentation of the area. It has the potential to significantly impact how the tour industry operates on site, transforming the welcome hub from a parking area to an experience unto itself. A tram will make the South Denali experience truly different from other parks and public lands in the region. Bus use versus tram use will be a major influence on the expectations, experiences and memories of guests and thus will impact the communities, organizations and visitor agencies that help send guests to the attraction. If a tram is used, it will be crucial to educate tour companies about its role in the overall South Denali visitor experience. Likewise, Alaska State Parks must understand and provide a reason that engages guests with the tram or first point of contact beyond transportation – if it doesn’t, additional costs for a tram are not recommended and would be difficult to justify. Alaska State Parks should not miss an opportunity to positively introduce the total experience through a first point of contact that strongly enhances the actual visitor experience.

These logistical and technological considerations must be foremost in the planning of the total visitor experience. The reservation system should be efficient, easy and seamless given the need for the

ongoing movement of visitors. Visitors should immediately perceive that they are in a special place and experience a transformation via site design and technology that transports them physically and spiritually from the busy highway corridor to the soothing natural beauty that surrounds them, leading to a spectacular crescendo of Mount McKinley and the grandeur of the Alaska Range. The stark reality is that Alaska State Parks’ budget may not allow for new infrastructure in the future and a tram is not likely to be developed unless a private concessionaire makes the investment. If a tram or other transition point is simply too cost prohibitive then technology should be leveraged to enable the guest to become fully immersed in the experience.

D. Tram/Bus ConsiderationsFrom a logistics perspective, the connection between the transportation/welcome hub and the visitor center is essential to keeping visitors on schedule – whether they are traveling by motor coach or independent vehicle – while simultaneously avoiding long waiting lines. From an interpretive perspective, the tram ride as envisioned will create a break from the mode of travel by which guests arrive while serving as a transition that will slow the guest down and have them directly interfacing with the outdoors through a multisensory experience. A quiet and efficient intra-complex transportation system will greatly enhance the aesthetic quality of the visitor’s experience. If a tram is not possible, alternatives as previously discussed can be deployed to establish a similar feel and create the desired “wow.” The important part is that whichever mode is used, guests are engaged in the South Denali experience immediately upon arrival. The leveraging of technology as discussed above may ultimately prove to be a lower-cost alternative to a tram while providing similar desired attributes.

While this optimization of the visitor experience is still a prime objective and desire, funding constraints have resulted in the need to rethink areas that may be phased in as visitor volume allows, and/or ultimately treated as concession opportunities. The risks and costs associated with building and maintaining a transportation

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hub for the purposes outlined earlier in this report may be too great at this phase of the site’s development. The transportation hub was identified as a significant cost center that could be scaled back significantly or eliminated in initial phases in order to keep the entire project moving forward. Several pros and cons of this scaled-back approach were explored with the help of travel-industry stakeholders to determine whether the impacts on the project would be too significant. Alternatives to addressing transportation and interpretive needs while not damaging the visitor experience were explored. It was determined that a transportation hub and, more importantly, a tram/shuttle system, can be implemented during a later phase of development once visitation is well established and/or a concessioner steps forward to operate the tram. This strategy is particularly attractive if technology is leveraged to create the “wow” experience and point of transition to the visitor center.

In the near term, conversations with numerous industry experts support allowing motor coaches to drive directly to the visitor center, drop visitors off for a predetermined amount of time and return to pick them up. A concession will be provided to move independent travelers from the hub parking lot to the visitor center. While this decision may frustrate some, it is still believed that primary interpretive objectives can be achieved through the media options discussed earlier in the interpretative considerations section. Health and safety issues will be addressed through a smaller development that will include a maintenance shop/ranger office facility.

Logistics Assumptions

Figure 5.1 on page 27 provides a summary of the key assumptions that underlie our modeling/analysis of the movement of visitors within the South Denali Visitor Center Complex. This data comes from the South Denali Visitor Center Interpretative Master Plan, interviews with experts, and Trams International (tram manufacturer, Operational Cost Estimate Proposal, Feb, 18, 2009).

E. Visitor Movement ModelingThe model shown in Figure 5.2 depicts the potential importance of experience management to the success of the visitor tram concept at the proposed South Denali Visitor Center Complex.

It is important to note that any movement of guests through the South Denali property by any mode – tram, motor coach, auto, bicycle or pedestrian – will act as a capacity constraint on the flow of visitors. As such, the maximum amount of guests at the visitor center for emergency planning purposes may constrain the number of guests in the system. Additionally, the ability to evacuate guests from the visitor center may impact emergency planning methodology.

System Cycling

A bus/tram traveling 8-12 miles per hour will take between 18 and 19 minutes to move the 3.7 miles between the visitor center and transportation hub. The 8-12-miles-per-hour speed parameter appears to be viable provided that limited to no slowdowns occur for wildlife viewing, environmental sensing or safety precautions. Tram speeds of less than 8 miles per hour may seem too slow

Figure 5.2: The South Denali Tram Model

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Tram Characteristics » Purchase of 3 Trams International Model 6000 trams with advanced diesel technology engines at a cost of approximately $145,430 each plus shipping (2011 Dollars).

» Purchase of 3 Trams International Model 2105 trailers to accompany the trams at a cost of approximately $49,000 each plus shipping (2011 Dollars).

» Each tram and trailer combination offers a maximum of 53 seats including two wheel chair passengers.

» Annual scheduled maintenance expenses of $500 per tram.

» Tram fuel efficiency in similar terrain equals 6 MPG

» Scheduled maintenance can be performed outside of scheduled operations

» Daily vehicle pre-inspections and post-inspections can be accomplished outside of scheduled transportation operations

» Operator communication, training, and employment requirements can be accomplished outside of scheduled operations

» Average travel speeds that facilitate the desired experience of between 8-12 mph can be maintained consistently during periods of operations

» Well maintained vehicles can expect a seven-year useful life

» Units have been in operation at Denali NP by Princess Tours and have proven to be an efficient and reliable mode of transportation over short distances

Route to Visitor Center » Maximum road grade of 6-8%

» Expected road distance of 3.7 miles

» Sequential passenger embarkation and debarkation to facilitate a 5-minute stop time

» Adequate staffing is available to provide for safe operation of equipment and performance of duties within reasonable and/or legal operation requirements

» Tram road allows for tram passing (if required) and vehicle clearance (passing opposite direction traffic) to allow for maximum flow

» Road from the transportation hub (shuttle station) to the visitor center is capable of supporting motor coach traffic for emergency evacuation from the visitor center

» Motor coach operators and vehicles are available for visitor center emergency evacuation

» Motor coach passengers are limited to 50 per tram to allow three seats for guides and visitor-center employee shuttling

» The demand into the visitor center will equal the flow out of the visitor center

Figure 5.1: Key Assumptions

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for passengers. Tram speeds in excess of 12 miles per hour may change what is intended to be a wilderness experience into mere transportation, thus prompting some visitors to question why they’re on the tram at all.3 At an average of 10 miles per hour, it is expected to take 22.5 minutes to drive 3.7 miles. Allowing a very conservative 5 minutes for loading and offloading, 3 minutes on each end of the trip, increases round trip cycle time to 61 minutes per tram. For practical purposes, including experience management, one can expect a one hour cycle time. The cycle time may be expressed as:

Using a 60-minute cycle as described – three trams or upwards of six trams per hour – could be used during peak visitation. Planning to use all three vehicles simultaneously on the same schedule is not recommended and should be limited to emergency operations only. Planning to operate all vehicles without a spare tractor tram will eventually lead to breakdowns and degrade the visitor experience.

When trams are run on a “conveyor-type” schedule, operators cannot recapture normal delays that inevitable occur. Additionally, those inevitable delays, however small, tend to compound throughout the day. This might degrade the visitor experience. As such, operating without planned excess and controllable capacity

will leave operators without the ability to compensate for both the common frictions encountered in transportation operations and the difficulties found in a remote, wilderness environment.

Due to this bias toward conservatism in the planning process, it is recommended that two trams operating on 30-minute legs will offer a reasonable expectation of uninterrupted service to the visitor. The conservative nature of this recommendation may additionally reduce operator labor requirements. Each tram/trailer combination with 50 seats for visitors and three seats for employees operating on a 30-minute leg or one-hour cycle correlates to a planned maximum flow of 100 visitors per hour. With both trams running at capacity 14 hours per day in the summer, this means a maximum of 1400 tram seats per day will be available during peak season. Capacity may be increased for short periods of time by use of a third tram, but if extended use of a three-tram cycle is desired then it is advisable to purchase four trams or recognize that additional maintenance on the three trams will be required.

Maintenance Facilities

Tram maintenance facilities are not currently part of the proposed South Denali Visitor Center Complex construction plans. While included in the initial planning and design layout, construction of a maintenance facility for trams was deferred until visitation is sufficient to attract a concessioner to operate the trams. When that occurs, it is proposed that the concessioner build tram-maintenance facilities, either on site or nearby. Depending on when this occurs there are several possible operations scenarios and each of these would include maintenance facilities to be provided by the contractor. Proper care of transportation equipment for use in a remote, arctic environment is required, but is currently outside of the scope of our report. The section on construction costs provides an estimate for the cost of this facility.

Figure 5.3: Sample Tram Cycle

3 One can test this assumption by driving for an extended period, say 4 miles, with their windows down.

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VI. Marketing Strategies and Considerations

The task of the Alaska visitor industry as a whole is to attract new and repeat visitors to Alaska and provide a high quality experience that meets and exceeds expectations established in its marketing. The South Denali Visitor Center Complex’s challenge will be no different, both in terms of maintaining the quality of the initial product and in continuing to develop the product as the South Denali Visitor Center Complex matures. Further, the South Denali Visitor Center Complex must effectively market to several segments of potential visitors, including residents and nonresidents. The South Denali Visitor Center Complex will be able to capitalize on the brand equity that has been established by the statewide tourism marketing that already occurs. However, in order to achieve desired market penetration, the South Denali Visitor Center Complex and the park itself must have its own identity and generate awareness among visitors. Following is a brief discussion of recommended marketing strategies. Ultimately a more comprehensive and timely marketing plan will be warranted to guide specific expenditures and actions.

A. Marketing ConsiderationsAlaska State Parks will need to think and operate like a private business in its approach to promoting the South Denali Visitor Center Complex. We know through other state research that the general public tends to hold state parks in high regard, but they often don’t recognize the difference between state and other parks. Potential customers will need to be actively engaged and educated on Denali State Park and the South Denali Visitor Center Complex as well as what makes it different from Denali National Park. These efforts should avoid presenting the Denali National Park and Denali State Park as competitive offerings, but rather as complimentary

destinations that each warrants a stop. Once visitors make the decision to visit the state park, the marketing campaign will need to keep the South Denali Visitor Center Complex top-of-mind with customers and potential customers.

A strong marketing strategy is only possible with adequate budget and staffing. Conservative industry standards for allocating marketing budgets as a percentage of gross revenues are 5 to 10 percent. South Denali Visitor Center Complex customers will expect tailored communications that speak to their specific needs. Alaska State Parks will need to dedicate resources to marketing and will need to make strategic decisions regarding placement of limited marketing dollars to ensure they are maximized. We have not included additional staffing positions or costs for these activities since Alaska State Parks already engages in these activities. What we recommend is a dedicated increment to support a marketing strategy for South Denali Visitor Center Complex. Marketing will be most critical the year prior to the grand opening of the visitor center since visitors plan their trips months in advance. A portion of the MatSu bed tax revenues may be a source for funding these marketing efforts.

The initial marketing strategy for the South Denali Visitor Center Complex should be to work with cruise-tour operators to ensure their existing Parks Highway packages incorporate at least a stop, if not an extended visit, to the visitor center. At this level, marketing will focus more on outreach to tour package developers as opposed to individual visitors, and will rely largely on competitive pricing and demonstrated high and consistent quality. Compared to other forms of marketing, appealing to cruise ship operators is a relatively low-cost marketing strategy that can yield incredibly high returns.

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In 2011, Alaska had 883,000 cruise visitors, the largest segment of out-of-state summer travelers to Alaska. Research indicates that the interests of cruise passengers align well with the offerings of the South Denali Visitor Center Complex. Among the top five activities for cruise passengers in Alaska are shopping, cultural activities and wildlife viewing, all of which will be offered at the South Denali Visitor Center Complex. Conveying these attributes to cruise ship operators will be important to a successful marketing effort. The following marketing strategies have been developed with this audience in mind. It will also be important to consider how the visitor center product compares with other tour-operator offerings so that the visitor center product can be differentiated and a high value for the tour product established. It is important to remember that tour operators have a variety of tour products to choose from and they are seeking high quality tour experiences at the lowest cost in order to enhance their own revenues.

In addition to personal selling to cruise tour operators, several other marketing methods will be required to reach other visitor segments. The South Denali Visitor Center Complex will also want to market the facility to out-of-state air and highway visitors, as well as Alaska residents. Maintaining a long-term customer base of Alaska residents will require the visitor center to provide a superior experience and customer service. This will help ensure positive word of mouth, which is one of the most important factors in the tourism decisions of Alaskans. Nonresident highway and air visitors will require a more traditional marketing approach, including development of collateral materials (i.e. brochures and rack cards) and print advertising. The comprehensive marketing mix will also need to include:

• Special events and promotions

• Attendance at tradeshows

• Direct mail

• E-newsletters

• Social media

• Online ads

The South Denali Visitor Center Complex will reach its audience most effectively by building on established local and statewide visitor campaigns. On a local level, chambers of commerce as well as convention and visitors bureaus will need to be kept well aware of the visitor center. For example coordination efforts with the Mat/Su Valley Gateway Visitor Center would be an example of utilizing local resources. On a statewide level, the Alaska Travel Industry Association (ATIA) and the State of Alaska Department of Commerce, Community and Economic Development are responsible for promoting Alaska as a destination. It will be important to connect with all of these entities to leverage and maximize marketing and awareness.

Brand Identity

A critical first step in the marketing effort is to establish an impactful and easily recognizable brand for the South Denali Visitor Center Complex. Creating a strong brand identity typically requires a significant marketing investment, as well as a system-wide agreement to adhere to the brand once it is established. While Alaska State Parks and the Department of Natural Resources are

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well branded, the South Denali Visitor Center Complex will benefit from development of its own brand as well as standards for all communications that clearly and effectively convey the overall themes and values of the South Denali Visitor Center Complex. An important first step is establishment of a logo for the destination. It is important that the logo be thoughtfully developed. Alaska State Parks should hire a professional graphic designer to assist with this effort. The logo for the South Denali Visitor Center Complex should be quickly identifiable, stand out from the visual identities of other state and national parks, and be effective in a variety of media – from small-size advertising, brochures and guidebooks to large, on-site signage and merchandise.

At each step in the development of the themes, messages, logos, materials and signage, it is critical that the South Denali Visitor Center Complex test its concepts prior to investing money in implementation. It is extremely important that any branding be developed with the market in mind. Development must be market-driven if long-term success is to be achieved. Additionally, the thematic thread must be chosen early in the visitor center’s development, and used consistently throughout its interpretive displays, exhibits and programs, as well as in its marketing. Features that may differentiate the visitor center product are natural experiences, first class facilities and location or proximity. A professionally guided branding process will assist in identifying the brand attributes that will best resonate with visitors.

B. Pricing and PackagingAlaska State Parks, as a government agency, has a number of considerations that ultimately influence the final pricing strategy. Further, the development of the South Denali Visitor Center is years away, so many factors both economic and competitive will influence the final pricing structure as well. It is anticipated that Alaska State Parks will charge a nominal fee for visitor center access, as well as fees for facility rental, food and perhaps outdoor-equipment rental. Some of these services may ultimately be provided through park concession agreements. Similarly, tour

operators may ultimately negotiate a flat yearly fee or discounted per head fee. All final pricing will be dependent on market conditions at the time of the visitor center opening, and how visitation increases as the facility matures over time. It should be recognized that pricing is a critical factor in purchase decisions.

C. Service StrategyService is recognized as critical to the success of the South Denali Visitor Center Complex. Visitors may be willing to make an initial visit to South Denali, but will only return or recommend the facility if their experience is pleasant, welcoming, safe and of high value. All of the South Denali Visitor Center Complex facilities and services need to be well maintained, and staff needs to have exceptional customer service skills. It should be recognized that word-of-mouth referrals are the visitor center’s most effective and least costly advertising.

Key service delivery elements include:

• Welcoming environment – customer orientation is essential

• Adequate signage, brochures and interpretation

∘ Brochures, signage and interpretation that have a consistent feel and brand as well as communicate clearly any desired messaging

∘ Expectations and flow of visitors is clear and easily understood

∘ Site and trail flow easy to follow

• Consistent availability of product and promised services

∘ Site and grounds (particularly trails) adequately developed and maintained to accommodate guest accessibility and limit wandering off trails

∘ Entry and exit for vehicles well-developed, incorporating a well-groomed and easily traveled road and adequate

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accommodations for buses and RVs

∘ Food consistently available and of high-quality

• Consistent hours of operation

∘ Convenient to visitor schedules

∘ Always maintained as published

• Customer communication channels are clear

∘ Clear procedures for taking in and managing customer concerns established

Garnering positive word of mouth will be an essential marketing outcome. In order to successfully attract the number of visitors necessary to support the costs of operation, the visitor center will need to become a “must-do” – an experience providing high value for the time and cost invested by guests. Visitors who have a positive experience will share their feelings with tour operators, other package tour guests, and with other potential visitors to the site.

Positive word of mouth will be especially important in attracting and retaining Alaska residents as customers of the South Denali Visitor Center. Alaska residents take an estimated 1.6 million trips to the Mat-Su Borough each summer and another 1.8 million trips during fall and winter months.4 In order for the South Denali Visitor Center Complex to be successful in the long-term, the facility must meet the service needs that Alaska residents require. Satisfying Alaskans would provide a consistent, recurring customer base each year. Having a strong in-state customer base can become especially important during tough economic times when out-of-state visitation decreases.

Additionally, out-of-state customers will often consult friends and relatives who live in Alaska when deciding where to go during an Alaska trip. If in-state customers have a positive experience at the visitor center, they will likely recommend it to visitors from outside the state or even accompany them for another visit.

D. Marketing StrategiesChoosing a tour product tends to involve five steps: identification of and addressing travel needs, information gathering, evaluation of alternatives, making a choice, and then post-purchase processing and communications. In developing a proper advertising strategy for the South Denali Visitor Center Complex, the importance of targeting specific market segments and fully understanding the process employed in making a decision cannot be understated.

General Visitor Trends

According to findings from MMGY Global’ s 2013 Portrait of American Travelers study, YouTube is becoming increasingly important in trip decision making. Social media platforms also contribute strongly to the commentary and resource base contributing to a travel decision. The study takes an in-depth look at the current travel climate, habits, preferences and intentions of travelers. Some of other key findings include:

• Millennials, otherwise known as Generation Y, are the new up-and-coming niche market, eager to try new experiences and, unlike the previous generation, do not want to do the same thing twice. Millennials are increasingly turning to travel professionals for travel advice. They have better things to do and they want value, so they will pay for the service.

• Traditionalists, those aged 68 and above, take the longest trips because many of them are retired and they have more time. They also spend more on all aspects of travel.

• A full two-thirds of travelers now have some kind of smartphone, and 31% own a smartphone as well as a tablet. Social media is a growing force in promoting travel, whether it's a hotel's channel on YouTube or a traveler's personal photo album on Facebook.

4 Numbers derived using information obtained from the Mat-Su Visitor Impact Study by Alaska Village Initiatives in 1998

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These characteristics underline the importance of creating video messaging via YouTube and fully using social media platforms as low-cost means of getting messaging to all audiences.

No single marketing campaign will effectively reach all of the desired markets; therefore, a separate strategy should be developed for each market segment. Promotional strategies for package tour visitors and independent visitor markets are listed below:

1. Package Tour Visitors

Package tour visitors represent a large potential market if solid relationships are established with commercial operators. Package tour visitors pay travel agents or tour companies in advance for some or all of their trip components. The itineraries of package tour visitors are controlled largely by less than a half-dozen large package tour companies. Reaching these companies, and understanding their clientele, is critical for successful marketing of the South Denali Visitor Center Complex.

Promotional strategies for package-tour operators include relationship building, personal selling and public relations.

The vast majority of successful tour promotion is developed through conscious, deliberate and ongoing relationship-building efforts. Promoters of the South Denali Visitor Center Complex must develop relationships with and gain the support of the tour operators that deliver package tour visitors to the Parks Highway area (i.e. Princess Tours, Premier Alaska, etc.). Alaska State Parks already has strong relationships with these tour operators, but just the same it will take time—potentially a full operating season or two—to fully establish awareness among operators and a solid reputation for the South Denali Visitor Center Complex. Additionally, conversations with tour operators indicate that they won’t incorporate the South Denali stop on their itineraries until the visitor center is established and proves itself to be priced well, reliable, engaging and of value to customers.

Ongoing and planned public relations activities should occur to establish a presence for the South Denali Visitor Center Complex.

For instance, as the visitor center is being developed, local interest story opportunities should be shared with media outlets, and outreach to national travel writers – both consumer and trade – should be conducted to promote the impending opening of the center.

• Promotional strategies for package tour visitors follow:

• Website

• Advertising within cruising guides and brochures

• Outreach to websites like cruisecritic.com and participation in its traveler forums

Establishing a presence on the Internet to provide valuable information to visitors is essential. A professional website is expected and necessary. Even visitors making package decisions are known to review the various elements of the tour online prior to making a purchase decision. In fact, a full 81% of cruise visitors use the Internet to plan at least some portion of their Alaska vacation.5

Package tour visitors are exposed to a wide variety of print media. A rack card that includes an engaging product description is useful for tour operators to give to clients to provide information regarding land tour options.

2. Independent Visitors

Promotional strategies for independent tour visitors follow:

• Collateral (brochure)

• Online (website, banner ads, social communities)

• Print advertising (magazines/newspaper/directories/maps)

• Radio and TV advertising

• Bus wraps

5 AVSP VI – Summer, McDowell Group 2011

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• Events

• Airport

• Retail

• Mobile marketing devices

Marketing in print media is effective when it appears in the publications most widely read by the target audience. Community-specific newspapers along the highway may be picked up and read by highway travelers. Likewise, product descriptions and advertisements should be placed in The Milepost and in niche publications such as those serving RV users. Data indicates that targeted print advertising can be incredibly effective in reaching independent highway travelers. In 2011, 34% of highway travelers utilized brochures in making their travel decisions, while an additional 33% used The Milepost in their decision-making process.

Brochures, notices, flyers and rack cards should be posted on bulletin/informational boards at targeted locations such as community stores, gas stations, post offices and other popular establishments within the communities along the Parks, Richardson and Alaska highways as well as the Tok Cutoff. However, on these often-cluttered bulletin and informational boards, advertising must be eye-catching, and its placement must be monitored and maintained.

3. Independent-Package Visitors

Independent-package visitors typically arrange their basic trip independently, although part of their Alaska experience includes packaged sightseeing tours in state. As such, the independent-package segment is a hybrid of the independent and package-tour market segments, and can be reached using the strategies listed above. Of significant importance, though, is the fact that the purchasing practices of this segment are heavily influenced by a handful of major tour companies. Again, the challenge will be to attract the attention of those few tour operators interested in selling the South Denali Visitor Center Complex. One potentially effective

strategy for the visitor center would be to approach tour operators with the idea that offering the South Denali Visitor Center Complex in their packages could serve as a way to differentiate themselves from the competition. The marketing activities outlined above are consistent with attracting and keeping this market segment and should be used in a comprehensive strategy to attract the independent-package travel market.

4. Cross Marketing with Denali National Park

There are numerous opportunities for joint and cross marketing with the National Park Service. Collaboration activities might include coordinated marketing and promotion activities with benefits accruing to both parks. Each Park offers unique experiences for visitors that could be communicated to visitors. In addition, bundled admission and integrated tours within both parks are another possibility. There are likely significant efficiencies and cost savings from these collaborations.

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VII. Construction Costs

Originally, construction of the South Denali Visitor Center Complex was to be completed in one phase. A lack of full funding, however, necessitated a new development plan in which certain components of the South Denali Visitor Center Complex would be constructed in phases. In the first phase, the campground, a ranger station, an access road and parking lots, and a limited-scope trail system will be designed and constructed. As funding allows, public-use cabins and more trails will be constructed. The final phase entails the design and construction of the visitor center, the transportation/welcome hub, a maintenance building, a caretaker’s cabin, an extension of the access road and additional parking lots. The logic behind this development approach is that revenue from the campground and cabins will substantially cover the operating costs of the first phase. Therefore, the timeframe for the construction of the main attractions of the visitor center is somewhat dependent upon the demonstrated success of the campground.

Another modification to the original development plan changed the location of the facility’s main access road. The State of Alaska received a land donation from United Companies Incorporated (UCI), whose primary shareholder is the Native-owned and operated Sea Lion Corporation. This land donation provides improved access to the South Denali Campground with better road alignment and gentler grades. Of the 160-acre parcel, UCI donated approximately 104 acres and retained the remainder for future complimentary development.

A. Phase I CostsConstruction costs for Phase I of the South Denali Visitor Center

Complex are included in Table 7.1 below. The figures include an assumed 15% cost for construction administration and 15% cost for design engineering services. The largest cost component for Phase I is a 1.5-mile access road and turn lanes from the Parks Highway. The access road connects to the campground, with RV sites, cabins and walk-in camping sites, and a trail system that includes paved, gravel, and unsurfaced paths. A total cost of approximately $7.6 million is projected for this phase. Projected and actual costs may vary due to economic factors such as material or labor costs. Competing construction projects and various market-based factors may also affect the final cost.

Construction activities associated with Phase I are expected to begin in the summer of 2013 with a completion goal of late 2014. When completed, the campground facilities will be operational and open for business. The costs associated with Phase I do not include the initial start-up expenditures or costs associated with an online reservation system.

B. Phase II CostsThe estimated construction costs associated with Phase II of the

Table 7.1: Phase I Construction Costs

Source: South Denali Visitor Center Engineer’s Estimate 16 October 2013

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project are presented in Table 7.2 below. The figures include an assumed 15% cost for construction administration and 15% cost for design engineering services. These cost estimates are dated and, with the planned construction start-up date unknown, actual construction costs may increase significantly over time due to the same factors outlined above, such as increases in labor or materials costs. The largest cost component of this phase is the visitor center building, which is estimated at about $19.25 million. The visitor center includes 15,000 total building square feet and an addition 10,000 square feet of exterior landscaping. The shuttle station/welcome hub and upper portion of the access road (3.7 miles) make up the next two largest cost components at about $6.3 and $5.2 million, respectively. Trails surrounding the visitor center and the day use area are estimated at $1.76 million. An additional 2,000-square-foot maintenance building is also included at just over $1.1 million along with an $800,000, 1,500-square-foot caretakers’ cabin with water and septic. Parking and circulation costs of $789,000 cover 15,000 square feet and include lighting.

C. Total CostsTable 7.3 below shows the total projected cost of both Phase I and II for the South Denali Visitor Center Complex project. The total estimated cost is just over $41 million* with the majority of the cost coming in the second phase.

D. Other ConsiderationsAlthough the figures presented here are accurate, they do rely on a variety of assumptions regarding design and layout that may require revision given new thinking and ultimate changes in visitor center design and logistical site decisions. For example, construction estimates assumed most visitors would arrive at the shuttle station/welcome hub first, and then transit to the visitor center. If major tour operators are allowed to drive visitors directly to the upper visitor center a large number of visitors will arrive directly at the upper visitor center, additional restroom facilities may be required as opposed to everyone stopping at the shuttle station/transportation first. Further, having visitors travel directly to the visitor center may warrant investments in technology-driven interpretive videos and

Table 7.2: Phase II Construction Costs

Source: South Denali Visitor Center Engineer’s Estimate 16 October 2013

6 The total cost figures from Phase I and Phase II access road components differ by a total of $1,500 due to rounding in the engineer’s estimate.

Table 7.3: Total Construction Costs

Source: South Denali Visitor Center Complex Engineer’s Estimate 18 July 2012

* The electrical extension cost estimate, $5.36 million, is excluded from these project estimates.

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information instead of making investments in static interpretive displays at what was once going to be the transportation/welcome hub.

This analysis also omits the capital cost associated with the proposed trams. Due to funding restrictions, the tram system will not be implemented in the ramp-up period when operations first commence at the visitor center. During this time, tour operators will drive their buses directly to the visitor center to pick up and drop off guests. Alaska State Parks will contract with a concession operator for a bus to shuttle independent and resident visitors between the transportation/welcome hub and the visitor center. It is envisioned that once visitation volume has reached a level that proves the tram system feasible, it will be permanently employed and all visitor center guests will use the transportation hub. Alaska State Parks is most interested in the tram being developed as a concession opportunity at this time. Costs associated with three trams are estimated at a cost of $194,4007 each or $583,300 total. Ultimately, achieving this vision of having a tram will require a concessionaire coming forward that believes in the business opportunity.

7 This cost estimate is based on a manufacturer’s estimate dated March 2011

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VIII. Staffing Costs

A large proportion of the recurring operation costs will be staff salaries and benefits. Figure 8.1 on the following page shows expected staffing needs for the South Denali campground and visitor center in Phase II. These staffing plans omit new resource positions (specialist for fire, soil, etc) under the assumption that these needs would be filled by existing Anchorage-based staff that serves a number of parks. The number of staffers required in each position and the cost of those positions are shown for each column. Positions are also delineated by whether they are seasonal or full-time.

With few exceptions, it is projected that most of the complex’s staffing would be seasonal. If the visitor center extended operations into the winter period, most if not all of the positions indicated as seasonal would need to become full-time positions.

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Figure 8.1: Anticipated Staff and Costs for South Denali Visitor Center Complex

Source – South Denali Campground Business Plan; Feasibility Study for the Proposed South Denali Visitor Center

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A. Campground CostsThe campground is expected to require a staff of 13, with three year-round and 10 seasonal employees. The majority of this staff will be dedicating to maintaining the campground’s trail system. Janitorial and groundskeeper services will represent a large proportion of the campground’s additional staff. The total cost of employment for the campground will be approximately $344,700 annually. This is about $119,600 more than what is spent on staff for all of Denali State Park currently.

Figure 8.2 shows the organization of staff to manage the Phase I campground.

B. Visitor Center CostsThe visitor center will employ a total staff of 27, comprised of five year-round staffers and 22 seasonal staffers. One third of the staff will be working on a volunteer basis in various capacities such as information aide or trail tour guide. Three National Park Service employees and a Matanuska-Susitna Borough employee will also share the work responsibilities with Alaska State Parks staff. A private company operating under a concessions contract with Alaska State Parks will provide food and beverage workers, tram operators and a tram mechanic. Their wages are estimated for this analysis. The total staffing costs for the visitor center will be approximately $500,947 annually.

The tram staff is listed separately in the table because, as stated in the previous chapter, this service may not be immediately available when the visitor center opens for business. When implemented, up to four tram operators and one tram mechanic will be employed for five months of the summer season. The additional annual staffing cost associated with tram service will be approximately $70,348.

Figure 8.2 shows the organization of staff within the Phase II visitor center.

Figure 8.2: Campground Staff Organization Chart

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Figure 8.3: Visitor Center Complex Staff Organization Chart

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C. Additional Staff CostsAs a new facility, unanticipated challenges may require additional or different staff as needs arise or change. Administrators and planners should maintain a certain amount of flexibility as the project materializes and matures. Accordingly, projected additional staffing levels were compared to staffing at Denali National Park as discussed in the next section. If visitation increases above 200,000 visitors per summer then additional support staffing for janitorial, interpretative and ranger positions may be necessary.

D. Other ConsiderationsThe projected staffing totals and costs represent the lower bound of staffing costs required for operations at projected visitation levels. They likely will need to increase according to the change in usage of the facilities once they are operational and gain significant visitation levels. The need for increased staff in certain roles is likely to rise faster than the need for others. This may include staff responsible for park maintenance and janitorial services, leading interpretive tours or hosting and directing new arrivals. One factor that may influence the need for higher interpretative and ranger staffing levels is the usage of contractor tour operators to guide small groups. This model has been used at Denali National Park for several seasons and has been both very popular and effective.

The staff levels of Denali National Park are used as a comparable for the South Denali Visitor Complex due to their numerous similarities, including environmental amenities, visitor demographics, services and location. It should be noted, however, that the state and national parks have very different missions. The National Park Service focuses on preservation, which leads to policies aimed at limiting usage. Alaska State Parks focuses on access to outdoor recreation opportunities and on conservation, which generates policies designed for managed best usage. Also, Denali National Park has the responsibility of wildlife preservation. At Denali State Park, management of fish and wildlife is the purview of the Alaska Department of Fish & Game. Therefore, the divergent missions between these two parks may result in substantial differences with

respect to staffing levels.

Finally, these cost estimates do not include snow removal for the main access road, as it has not yet been decided whether the visitor center will be open through the winter. This would add significant costs in terms of staffing as well as capital and maintenance. Comparable roadway snow removal and maintenance at Denali National Park required the employment of an additional equipment operators and laborers. This would cost at least $161,0008 annually plus the cost of snow removal equipment. This estimate also assumes that administrative duties will be undertaken by existing Alaska State Parks employees. This issue will be analyzed in greater detail within the management chapter of this document.

8 Winter Road Plowing Environmental Assessment (NPS 2013). Denali NP has significantly less average snow fall than Denali State Park receives in the area of the visitor center, thus this estimated snow removal cost should be considered a lower bound on the actual annual costs.

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© Tim Appenheimer

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IX. Management

The management and operation of the South Denali Visitor Center Complex will be especially challenging because Alaska State Parks does not have any comparable facilities in either scope or scale, and South Denali involves two other partners: the National Park Service and the Mat-Su Borough. In addition, the visitor industry is also a major stakeholder since its leadership has contributed substantial effort toward creation of the visitor center. Thus the management of the visitor center will present an especially large challenge in linking and aligning the various needs of each of these entities.

Our analysis identifies key functional areas that must be performed either by Alaska State Parks personnel or through a concession contractor. These functional areas include: stakeholder input and strategic direction, general operation of the visitor center and related facilities, and maintenance of the facilities.

Under any of the proposed organizational scenarios, the South Denali Visitor Center Complex will require management and administrative capacity beyond what is within scope of the park’s current staff. The park’s ranger will be required to take on more management and operational duties. We suggest providing transitional support and training for this position. Some of the operational functions of the visitor center can be contracted out to private entities to perform. But exercise of this option requires additional staffing to provide contractor oversight and monitoring to ensure quality standards are met and contractors are performing as required.

A. Governance Structure(s)The South Denali Visitor Center Complex has several major

stakeholders that should have input into the strategic direction and operation of the facilities. Presently Alaska State Parks has a memorandum of understanding (MOU) with these stakeholders that formally acknowledges a partnership to cooperatively develop the South Denali Visitor Center Complex as a world-class facility. The relevant terms of the MOU are presented in the box below.

Responsibilities It is agreed that the agencies signatory to this agreement will assist in the planning, consultation, coordination, and implementation of efforts associated with the development of a visitor center in Denali State Park.

RecognitionInformational materials referencing the proposed visitor center project designed and posted by Alaska State Parks will acknowledge the cooperative partnership between Alaska State Parks, NPS, and MSB. This acknowledgement will be coordinated between Alaska State Parks, NPS, and MSB, and may include use of agency logos, and/or agency contact information.

As visitor center funding is secured and development begins, it will be important to create and formalize a governance structure that will represent all of the partners’ interests in the visitor center along with those of the Alaska visitor industry and other stakeholders. This organizational structure can take many forms but must fulfill the essential role of providing strategic direction and oversight of visitor center operations that reflects the partners’ interests.

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B. Organizational Alternatives As mentioned above, the South Denali Visitor Center Complex can be organized and operated via a number of alternative structures. These alternatives are briefly presented and discussed below:

Separate Entity Organized as a Quasi-Government Entity

This organizational approach would allow the South Denali Visitor Center Complex to operate independent of Alaska State Parks, with its own governing board consisting of partner and stakeholder representatives. This would require legislative approval, but would provide autonomy to operate the visitor center complex according to the strategic direction set by its governing board and management. Operations would be internally funded from retained receipts and revenues. Operating and/or capital grants could provide supplemental funding during the start-up period or if unusual or unexpected events occur that available working capital is insufficient to absorb. A key advantage of this organizational structure is that the entity would be more responsive to stakeholders, including the visitor industry, by operating as a self-funded, sustainable and independent operation.

Enterprise Fund

Organizing as an enterprise fund would also require legislative approval and would confer all of the operational advantages identified above. In creating this organizational structure, the legislature could exempt the entity from certain administrative code requirements like annual operating budgetary approval. The ability

to retain receipts and operating margins is a significant advantage for the operation of the South Denali Visitor Center Complex. Operating decisions, capital maintenance and expansion would be determined by the governing board. The entity could have the latitude to enter into joint marketing/promotion activities.

Subsumed Under Alaska State Parks

The default operational entity would be to have South Denali Visitor Center Complex subsumed by Alaska State Parks. Operating and capital decisions would be made internally by the administration– as is the case for existing South Denali operations – subject to legislative approval. Revenues and other receipts would go to the State general fund, and funds for operating and capital expenditures requested annually through the budgeting process. An advisory group could be created to represent the project’s partners and other stakeholders. This group of advisors would provide strategic direction and function as advocates for the South Denali Visitor Center Complex, but it would not have legal and fiduciary responsibilities typical to a board of directors.

C. Memoranda of Agreement Between South Denali Visitor Center Complex PartnersRegardless of how the visitor center complex is organized it will be important to develop a long-term operating agreement with the National Park Service and the Mat-Su Borough that will define the roles and responsibilities of each partner. This agreement should outline the governance and operating structure of the visitor center, how funding and operating margins will be shared, and importantly, how disputes between the parties will be resolved.

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D. Concession OperationsAs discussed previously, there are a number of visitor center operations that could be contracted out to the private sector, including visitor center management and operations, tram/bus operation and maintenance, the bookstore, and food service. There are benefits and costs associated with contracting these operational components out to private operators. The follow discussion identifies and discusses these issues.

At one extreme it is possible to contract out the entire South Denali Visitor Center Complex to a contractor. At Denali National Park, a single contractor – Doyon ARAMARK Joint Venture (Doyon/ARA) – manages some of the park’s operations including visitor tours/passenger bus services, campground facilities and food service. The bookstore is operated under a separate contract with Alaska Geographic. This arrangement allows the NPS to focus on the interpretative aspect of Denali National Park and public safety while Doyon/ARA performs all of the operational activities in exchange for a percentage of Denali National Park receipts. This arrangement appears to work quite well for the NPS chiefly because Doyon/ARA has an incentive to provide whatever resources are necessary to support park operations without having to secure funding through the federal government’s budgeting and appropriations process. This frees Denali National Park to provide a consistent, high-quality visitor experience unencumbered by budgeting dynamics.

The downside of this arrangement is the NPS must maintain a Quality Assurance (QA) staff group to ensure that the contractor performs under all the terms of the concession contract, which is a substantial task. Further, Doyon/ARA receives significant compensation for providing its services to the NPS. Finally, the number of concession operators with the expertise and capacity to provide these services to Denali National Park is very small, numbering just a handful of companies. So even if it was desirable to pursue having a single large concession contractor operate the visitor center it is not certain that a contractor would be available

and interested.

However, engaging in concession contracts for specific operating components of the visitor center would be an attractive prospect for several reasons:

As is the case in Denali National Park, it may provide a source of construction funding for some ancillary facilities;

1. Contractors can be selected based on their ability to provide specialized or unique facilities and services that Alaska State Parks does not have in house;

2. Contracts are scalable, providing the flexibility to increase or decrease staffing as necessary to meet changes in visitor volume/demand;

3. Contracts can provide a more stable level of funding for visitor center operations, which provides a consistently high-level experience to meet visitor expectations.

The primary disadvantages of using concession operators, as mentioned previously, is the higher net cost to Alaska State Parks – revenues minus expenses – under contracted services because the private party must incur similar costs, take on operating risks and earn a profit. Thus in-house operations may represent additional revenue opportunities that should be thoroughly explored.

Analysis of Specific Concession Components

Several proposed visitor center functions appear well suited for outsourcing under concession contracts to private parties: food and beverage, gift shop and bookstore, and tram operations and maintenance. Alaska State Parks already has significant experience and capacity for operating the planned campground and public-use cabins. The other components are either outside of Alaska State Parks’ purview, or have been traditionally operated by private parties.

The gift and bookstore concession could be sourced to an outside operator. For example, currently Friends of State Parks

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operates the book stores at Independence Mine State Historical Site and the Alaska Veterans’ Memorial in Denali State Park. Alaska Geographic has extensive operations at virtually all of the major national parks in Alaska. Under this arrangement staffing and inventory management would be entirely the responsibility of the concessionaire. A food and beverage concession is also recommended for the visitor center, similar to the bookstore operation with all staffing and inventory the responsibility of the private contractor. Alaska State Parks could receive either a flat amount, a percentage, or a combination of the revenues or profits realized. A percentage of gross revenues were assumed for all financial projections presented separately in this report .

The proposed tram operation, as mentioned earlier, will be phased into the visitor center complex operations after visitor volumes have been established for the full visitor center. Operation of the tram system by a private contractor would provide a number of significant benefits to Alaska State Parks. Operation and maintenance is outside of Alaska State Parks’ expertise. Further, the trams will require regular maintenance and these facilities are not currently part of the Phase II build out of the visitor center. There are at least two possible contractors that would have a comparative advantage for building a maintenance facility and operating the trams. Both Princess Lodge and the adjacent hotel development would have space and capacity to perform these services for the visitor center complex. Other private contractors could also secure land and construct facilities near the visitor center complex.

If Alaska State Parks decides to engage concession operators for any or all of these services, projected staffing needs will need to be modified to include at least a part-time position to manage these activities and ensure satisfactory performance by the contractors.

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X. Financial Analysis

The financial analysis for the South Denali Visitor Center Complex projects operation costs and revenues for five years, with Year 1 representing the first full year of operation. This analysis provides operation costs and revenues for the visitor center only. Additional revenues and costs associated with the campground are not included as they have been prepared separately.

A. Visitor ProjectionsVisitor projections are the most important component underlying this financial analysis because they drive the projected revenues and some of the projected costs. The projection models in this plan are similar to those used in the Feasibility Study for the Proposed South Denali Visitor Center (March 2011), which was consistent with established methodology followed in other feasibility studies (Gramann, 2003). To project visitation flow to the South Denali Visitor Center Complex, four qualitatively similar facilities within Alaska were selected and the visitor statistics from 2012 used to construct a composite weighting of visitor traffic. These four centers include Denali National Park and Preserve (front country), Wrangell-St. Elias National Park and Preserve, Glacier Bay National Park and Preserve and Kenai Fjords National Park. All are located in areas of Alaska with high tourist traffic and facilities offering wildlife viewing and spectacular scenery.

Annual visitation data was collected for 2009 through 2012 for each site. Visitation to the front country at Denali National Park offers what is arguably the closest possible comparable experience to that at the proposed South Denali Visitor Center Complex.13 For this reason, a double weighting of Denali National Park visitor counts was employed in constructing the composite average for calendar

year 2012. This composite projection forms the basis for the base year visitor projections used throughout this analysis. See Appendix C for details on forecast methodology and projected annual visitations.

As noted in the feasibility study for this site and the visitor section of this report, visitation levels are highly dependent on the national economy. The projections used for this analysis are based on recovering visitor traffic trends since the decline experienced in 2009. If the economic climate worsens, similar to that in 2008, the projected visitation for the proposed visitor center may be too optimistic. A more detailed discussion of the physical movement of visitors both to and from the visitor center is included in the logistics section.

The visitor projections for the first two years of operation (Year 1 and Year 2 in Figure 10.1) do not represent the full number projected in the visitation forecast. Instead, the visitor count for Year 1 is 50% and for Year 2 is 75% of the visitor projections for those two years. This is a conservative approach to estimating visitation numbers for the proposed center in the first two years, or start-up phase of operation.

B. Revenues/Receipts This section presents the modeling and assumptions used to project the proposed visitor center’s revenues. The revenue projections are largely driven by forecasted visitor levels. Besides visitor entrance fees, revenue projections include food, bookstore, and independent

13 The facilities and infrastructure at the proposed site are far less extensive than those at Denali National Park.

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tour operator concession receipts. A majority of the forecasted revenue is generated through admission receipts assumed to be similar to the $10 entrance fee charged at Denali National Park in 2012.14 Based on the projected visitor counts at $10 per person, we predict total admission receipts starting in Year 3 of at least $3.5 million annually. The first two years of operation are assumed to have lower than projected visitor numbers (50% in Year 1 and 75% in Year 2) to account for changes to package tours and any delays in marketing and linking the site to established transportation services. Fees will be collected at the vehicle entrance ensuring all visitors will incur the fee. Either a contract operator or kiosk will administer ticket sales.

The forecasted revenue from entrance fees is projected to account for 83% of total revenue by Year 5 of operation. The other sources of revenue considered in this analysis are concessionaire contracts, bookstore sales and tour operator commissions.

Most services at Denali National Park are provided to visitors through an exclusive concessionaire contract with Doyon/ARA. This contract operator provides food services, tour bus operations, manages the various campgrounds and other incidental services. For our study we assume similar visitor spending levels and base our forecasts using actual 2010 expenditures data.15 During 2010, a typical visitor spent an average of $5.28 each on food items (this amount excludes bus ticket fees, bookstore purchases, and camping fees). Using this amount and assuming a similar concessionaire contract arrangement at the South Denali Visitor Center Complex, which at the national park is 15.4% of gross receipts, the prediction for South Denali is annual revenues from food service operations under $225,000 during the first two years and at least $300,000

thereafter. Similar to projections for visitor entrance fees, these receipts are expected to grow on a yearly basis at the current 1.5% price index rate. Staffing costs are also assumed to increase at 1.5%.

This analysis assumes the visitor bookstore at the proposed center will be operated under a concession contract similar to the terms Alaska Geographic currently has with its other park operations and will generate sales comparable to those at Denali National Park. Alaska Geographic currently operates stores at 12 other park visitor facilities. Approximately 50% of the net receipts are shared with the park under these operating agreements. Based on actual receipts for Denali National Park16 adjusted for differential visitor volumes, receipts of approximately $102,600 are projected for Year 1. The predicted bookstore receipts increase each year based on increasing projected visitor counts and general price level changes.

The forecasts for campground and independent tour operator receipts are intertwined with a key assumption regarding occupancy rates for the proposed campground facilities. The campground at South Denali will have 53 sites (RV, cabins & tent sites). We assume a similar annual occupancy rate as Denali National Park, which was 85% during the 2010 season.17 We further assume that only campers will engage in independent tour excursions. This assumption is

14 This analysis assumes all visitors pay the $10 fee. In actual practice the entrance fee may be reduced or waived for seniors, families, season pass or golden pass holders and others. Application of these considerations does not impact the conclusions of this study. 15 We are grateful to the National Park Service for sharing this proprietary data with us. 16 Data provided by Alaska Geographic.17 We thank Denali National Park for sharing this data with us. Camping fees are assumed to be identical to Denali National Park.

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based on the expectation that most of the visitors to South Denali will already be part of an organized tour package. Accordingly, these visitors will arrange tours with these independent operators before arriving at South Denali.

Independent tour receipts are based on the assumption that every camper will undertake one tour per day. Data provided by Princess Tours, which operates the Mt. McKinley Princess Wilderness Lodge just three miles from the proposed South Denali Visitor Center Complex, suggest all guests participate in at least one tour each day and these tours range in cost from $69 to more than $300 each. This analysis assumes an average margin from these tour operators of just $25, a conservative estimate given the possible volume of independent visitors that may stop at the South Denali Visitor Center Complex. Forecasting these receipts out to Year 5, we only assume an increase due to general price increases not increases in visitation volumes (this assumes only campers will participate and this number is fixed at 53 spaces over the entire forecast period).

It is important to note that all forecasted revenues are predicated primarily on summer operations of comparable facilities.18 Winter revenues are not considered, which makes this forecast conservative with respect to off-season operations. A number of possible shoulder- and off-season activities could be incorporated into the facility’s final business plan. These might include winter camping and hosting of retreats and conferences.

C. Operations Costs Forecasting the proposed facility’s operation costs was challenging. Other than the front-country center at Denali National Park, there aren’t many comparable facilities in Alaska, and the Denali facility operates only during the summer season.19 The proposed South Denali Visitor Center Complex is located in a relatively more remote area. It will have highway access but will still be more than 100 miles from any large city. As discussed more fully in the management section, the proposed facility will be operated under an agreement with the National Park Service and the Matanuska-Susitna Borough.

By far the largest recurring cost of the proposed visitor center will be the annual operation and maintenance (O&M) cost, which represents more than 39% of the total annual operation expenses in Year 5. The cost used for this analysis was taken from a report prepared by ECI/Hyer Inc. in December 2012.20 The O&M costs include items such as heating fuel, electricity, janitorial costs and grounds keeping. These costs are expected to be consistent from year to year once adjusted for inflation.21 The next highest cost in Year 5 is for capital renewal, or 34% of total annual expenses, also estimated from the report by ECI/Hyer Inc. Capital renewal costs include items like roof replacements, road resurfacing, major HVAC renewal and flooring replacement. These costs do not begin until seven to 10 years after construction is complete, are cyclical and will vary significantly from year to year. The costs are included from Year 5 in this analysis because ECI/Hyer Inc. has expressed the cost estimate as an annual expense, assuming full renewal in 50 years. As noted in the 2011 feasibility study for the proposed site, if Alaska State Parks used an asset management plan to maintain complex facilities this asset management plan approach would likely have a lower cost than the projected need for a capital renewal fund. The high estimate is used in this financial analysis primarily as a reminder of the large capital renewal costs and management demands that must be accounted for as soon as the construction period and initial years of operation are over.

Visitor center staffing is a close third at approximately $784,242, or 34% of total costs in Year 5. A schedule of expected staff is

18 For this study, summer season is defined identical to the time period used by the Department of Commerce, Community and Economic Development’s Alaska Visitor Statistics Program from May 1 to September 30. 19 This period is defined as May 1 to September 30. See note 5 for additional information about how this period is defined. 20 ECI/Hyer Inc. offered three methods for calculating O&M costs. The cost used in this analysis is from method three, which itemized elements in the project expected to generate O&M costs and factored in costs for renewal and maintenance staffing for each of these items.21 The ECI/Hyer Inc. report assumes a winter shutdown of the visitor center and partial shutdown of most other facilities in the visitor center. This figure will need to be revised should changes in the season for the visitor center be considered.

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presented in Figure 8.1 in the staffing costs section. Some of these positions would be transferred from the National Park Service visitor center in Talkeetna or possibly from existing positions in Denali State Park.22 These positions and associated salaries include employee benefits and taxes. The annual forecasts assume wage increases equal to predicted price level changes (1.5%).

While most services are expected to be functional at Year 1, the visitor projections used for these two years are estimated at 50% of possible visitor flow in Year 1 and 75% of possible visitor flow in Year 2. With the projected annual operation costs for Years 1 and 2 estimated assuming full operation and full visitor flow, the costs are estimated at the highest range of possible cost.

As a final note, the proposed shuttle or tram operations are included in the financial analysis table only to show potential cost. The cost of the tram operation is not factored into the overall projected surplus of the visitor center. As noted in the logistics section, the envisioned tram system would be phased in until after the visitor center is built and sustained tourist traffic is established. Until a tram system is operational, visitors will be bused in from the transportation/welcome hub. The projected cost of the system involves four units operating continuously during the peak summer visitor season and at a reduced schedule during slower periods. Shuttles will take 30 minutes to complete a round trip between the transportation hub and the visitor center, which includes loading and unloading of passengers. Operations costs include fuel and regular maintenance expenses.

22 The projected cost of staffing assumes four seasonal positions (NPS Biological Technician, Interpretation Ranger and Visitor Use Assistant) and one year-round position (Mat-Su Upper Valley Planner), which are not covered by Alaska State Parks. If certain staff positions are to be covered by Alaska State Parks, this estimate will need to be revised.

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Figure 10.1: South Denali Visitor Center Financial Analysis

Visitor #s = The visitor projections from the feasibility study were based on visitation numbers from four comparable parks: Denali National Park (front country), Wrangell-St. Elias National Park, Begich Boggs, and Kenai Fjords National Park. The visitation data from Begich Boggs Visitor Center were found to be problematic due to variations from year to year in season length and open dates. Due to data limitations with the Begich Boggs Visitor Center a substitute park, Glacier Bay National Park, was used for the visitor projections in this study. The visitor projections for Year 1 and Year 2 have been reduced by 50% and 75% of the projected visitor flow to account for ramp-up.

Year 1 = the assumed initial year of operations, CPI = 1.5% annually over the entire period.

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© Larry Anderson

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XI. Funding Sources

Several types of funds are available to the Division of Natural Resources in pursuit of site development beyond state dollars. Given current pressures on the state budget, it is recognized that a more comprehensive and collaborative funding plan may be necessary.

A. PRIVATE AND LOCAL FUNDINGIt is assumed that the South Denali campground will not pursue any form of debt capital. It still may be worthwhile to explore a partnership arrangement with a private sector entity that will ultimately benefit from the campground and visitor center development.

Private sources of equity capital may include Alaska Native organizations and large operators in the Alaska visitor industry:

• Alaska Native Organizations – Alaska Native organizations, particularly ANCSA regional corporations, are potential private sources of equity capital. Terms and conditions for an entity investment would be negotiated on an individual basis.

• Alaska Tour Operators – Large tour operators such as Holland America- Princess Alaska may consider making an equity capital investment. Terms and conditions for an entity investment would be negotiated on an individual basis.

B. FEDERAL FUNDINGThere are numerous sources of federal grants. All of these sources are highly competitive and will likely require matching funding,

as well as a plan for long-term project sustainability. Given the potential for significant economic development impact, federal matching grants may be a strategy to leverage additional state dollars. Included below are some potential sources of federal grant funding.

Economic Development Administration (EDA)

Provides grants for non-profit or tribal-development projects that will create jobs within a community. These grants are highly competitive and are often driven by the number of jobs the investment will bring to a community. Additionally, matching funds are often required. As a rule of thumb, for each $100,000 of grant investment, 10 private sector jobs must be developed.

Office of Community Service Grants Program

This agency provides grants and other services to states, communities and agencies to assist with capacity building. They are interested in providing job-training opportunities for low-income individuals.

C. FOUNDATION FUNDINGAlaska Fund for the Future c/o Alaska Conservation Foundation 411 West Fifth Avenue, Suite 402 Anchorage, AK 99501 Phone: 907-276-1917, Fax: 907-276-4145 Email: [email protected] http://www.akcf.org/grants/alaska_fund.htm

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Grant Range: $1,000 - $10,000; Total Giving: Not Available

Eligibility Requirements: Nonprofit organizations, individuals, communities and other entities

Areas of Interest: Alaska Fund for the Future (AFF) is a donor-advised fund of the Alaska Conservation Foundation. It is the founding premise of AFF that out-of-state resources (both financial and human), working with the Alaska Conservation Foundation, can provide critical support for the preservation, protection, and enhancement of the Last Frontier.

The mission of the Alaska Fund for the Future “is to promote awareness and understanding of Alaska and support the preservation of Alaska's natural environment, diverse human cultures, and local economy--the three pillars on which Alaska's future must be built.”

D. OTHER SOURCES OF FUNDINGNational Park Service: Save America's Treasures Grants Heritage Preservation Services, Suite 330 800 North Capitol Street NW Washington, DC 20002 Phone: 202-343-9570 Email: [email protected] http://www2.cr.nps.gov/treasures/

Grant Range: $50,000 - $1,000,000; Average Grant: $249,000; Total Giving: Not Available

Eligibility Requirements: Non-profit organizations, selected federal

agencies, state and local government units and federally recognized Indian tribes

Areas of Interest: Save America's Treasures Grants, administered by the National Park Service in partnership with the National Endowment for the Arts, are provided to preserve cultural heritage. Grants are available for preservation and/or conservation work on nationally significant intellectual and cultural artifacts and nationally significant historic structures and sites. Intellectual and cultural artifacts include collections, documents, monuments and works of art. Historic structures and sites include historic districts, buildings, structures and objects.

The grants require a dollar-for-dollar non-federal match. The minimum grant request for collections projects is $50,000 federal share; the minimum grant request for historic property projects is $250,000 federal share. The maximum grant request for all projects is $1 million federal share. In 2001, the average award was $249,000. This grant opportunity is likely a stretch for the development of a campground but may prove a resource to develop interpretative displays at the campground.

Friends of State Parks, Mat-Su 1150 S. Colony Way Palmer, Alaska 99645 Phone: 907-745-3757

Areas of Interest: Friends of State Parks, Mat-Su’s stated focus areas are watershed protection, farmland conservation, parks, trails and open spaces, appropriate access, natural resource development, infrastructure and transportation, and residential and commercial

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development.

Their mission is “to actively engage Mat-Su residents and other Alaskans in the conservation, restoration, enhancement, and stewardship of our region’s most valuable resources—our unique communities and natural assets.”

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Photo courtesy of Denali State Park

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Sources of Information

Alaska Village Initiatives. (2008). Mat-Su Visitor Impact Study. Anchorage: Mat-Su Convention & Visitors Bureau.

The Center for Economic Development at the University of Alaska Anchorage. (2011). Feasibility Study for the Proposed South Denali Visitor Center. Anchorage: State of Alaska, Department of Natural Resources, Division of Parks and Outdoor Recreation.

GMA Research. (2008). Alaska Resident In-State Pleasure Travel Study Report. Bellevue: Alaska Travel Industry Association.

Institute of Social and Economic Research at the University of Alaska Anchorage. (2008). Economic Impacts of the South Denali Implementation Program. Anchorage: U.S. Department of the Interior, National Park Service.

McDowell Group. (2008). Matanuska-Susitna Borough Tourism Infrastructure Needs Study. Juneau: Matanuska-Susitna Borough.

McDowell Group. (2010). Alaska Visitor Statistics Program V Interim Visitor Volume Report Summer 2009. Juneau: State of Alaska Department of Commerce, Community and Economic Development Division of Economic Development.

McDowell Group. (2010). Economic Impact of Alaska's Visitor Industry. Juneau: State of Alaska Department of Commerce, Community and Economic Development, Office of Economic Development.

McDowell Group. (2011). Alaska Visitor Statistics Program VI Interim Visitor Volume Report Summer 2010. Juneau: State of Alaska Department of Commerce, Community and Economic Development Division of Economic Development.

Northern Economics Inc. (2002). Alaska Visitor Arrivals and Visitor Profile. Anchorage: State of Alaska Department of Commerce, Community and Economic Development Division of Economic Development.

Schmeeckle Reserve Interpreters. (2009). South Denali Visitor Center Complex Interpretive Master Plan. Stevens Point: State of Alaska, Department of Natural Resources, Division of Parks and Outdoor Recreation.

State of Alaska, Department of Natural Resources, Division of Parks and Outdoor Recreation. (2009). Statewide Comprehensive Outdoor Recreation Plan. Anchorage.

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Appendices

A. Tour Operator InterviewsThe University of Alaska Center for Economic Development tasked two research technicians to contact tour operators that work within the Denali National Park, Denali State Park and the areas surrounding the two parks. Collectively, the tour operators provide hiking/backpacking tours, educational walking tours, camping tours, fishing tours, air tours, kayaking/river-rafting tours, river sightseeing tours and accommodations. The key informant interviews were conducted via phone. The interviews took roughly 30 minutes to complete. Those that participated in the key informant interviews were very accommodating and interested in providing their feedback and opinions. The interviews focused on gaining insight into the tour operators’ customer profile: were they independent, or cruise line package visitors. We also asked whether tour operators operated year round or seasonally to gauge the number of visitors that might consider visiting the South Denali Visitor Center Complex in winter months. Thirdly, we asked operators how interested they are in seeing the South Denali Visitor Center Complex built, and if built, if they would be interested in including tour offerings. Small, medium and large tour operators were interviewed. Operators ranged in size from serving 100 to 60,000 visitors per year. In drawing conclusions from the interviews, we weighted the results against the number of visitors a tour operator serves to the total number of visitors of the operators interviewed. These are approximations and include subjective interpretations of the results. These

interviews provided very useful information about visitors to the region. Seventeen tour operators were interviewed, including some of the largest serving the South Denali area. We feel the interviews provided solid feedback that is representative of the broader tour operator sector serving the South Denali area. Many of those interviewed have been operating in this region for many years and have a good understanding of the interests and needs of their clients.

Narrative of the Findings from the Interviews

Tour operators unanimously supported the South Denali Visitor Center Complex. They did caution that its construction should have a minimal disturbance to the location’s natural environment. Many also thought the visitor complex should offer dining services, and have enough facilities to serve the projected visitor volumes. The majority of the tour operators’ businesses were limited to the summer peak season from mid-May to mid-September. They thought that the South Denali Visitor Center Complex would not receive much traffic during the off-peak season, and it would not make sense from a cost standpoint to have it open during the winter season. They also stated that the visitor center should be self-supporting on the fees that it generates. The majority of the tour operators believed that their clients would have an interest in visiting the South Denali Visitor Center Complex, and they would spend an average of 2 to 3 hours at the site. The interviews indicated that independent visitors made up approximately 60 percent of tour operators’ visitors, and 40 percent came from a cruise line package tour. Smaller tour operators

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had a larger proportion of independent visitors. The two largest tour operators interviewed were Mahay’s Jet Boat Adventures and Talkeetna Air Taxi. Mahay’s handles 20,000 visitors annually and its proportion of independent to cruise-line package tour visitors was 60-40. Talkeetna Air Taxi handles 60,000 visitors annually with 70-30 independent to cruise-line package tour ratio. K-2 Aviation, a more moderate-sized operator, handles approximately 5,000-10,000 visitors annually with an even split between independent and cruise-line package tour visitors. The percentage of international visitors averaged approximately 10 percent of the total visitors of the interviewed tour operators.

B. ECI/Hyer Inc. Capital Renewal Estimates

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C. Visitation Projections and MethodologyTo project visitation to the South Denali Visitor Center Complex, 2012 visitor statistics were used to construct a composite weighting of visitor traffic from four qualitatively similar facilities within Alaska: Denali National Park (front country), Wrangell-St. Elias National Park, Glacier Bay National Park and Kenai Fjords National Park. Because Denali National Park’s location and characteristics are most similar to the proposed South Denali Visitor Center, the its visitation statistics are weighted twice as heavily as the other inputs to generate the weighted composite. The visitation projections start in the expected first year of visitor center operations, 2016, and increase by an assumed 3% annually.

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D. Interviews

Individual

Anatasia, Christie

Biessel, Wayne A.

Burch, Scott

Charpentier, Mark

Griffin, David W.

Leclair, Claire

Ludwig, Brook

Miranda, Rys

Przylski, Kathleen

Shira, Christy

Smeck, Woody

Smith, Eric

Tomeo, David

Valentine, Miriam

Zell, Teresa C.

Position/Affiliation

Acting Chief of Interpretation, Denali National Park & Preserve

Park Superintendent Mat-Su/Copper Basin Area, Alaska State Parks

Concessions Specialist, Denali National Park & Preserve

Concessions Specialist, Denali National Park & Preserve

Project Coordinator, Alaska State Parks

Division Operations Manager, Alaska State Parks

Park Superintendent Northern Region, Alaska State Parks

Chief, Design and Construction, Alaska State Parks

Administrative Officer, Denali National Park & Preserve

Director of Administration, Alaska Geographic Inc.

Deputy Superintendent, Yosemite National Park

Chief of Maintenance, Denali National Park & Preserve

Program Director Murrie Science & Learning Center, Alaska Geographic

Park Planner, Denali National Park & Preserve

Administrative Officer I, Alaska State Parks

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© Anne Aleshire

Documents

South Denali Visitor Center Complex