ANCHORAGE (Reuters) — Poor economic conditions are squeezing the cruise business in Alaska, a mainstay for the state's seasonal tourism business, hurting leading ship operators Carnival Corp & Plc and Royal Caribbean Cruises Ltd.

Cruise lines have had to slash prices to fill berths this year, and three companies plan to remove vessels from Alaska waters in 2010, in search of more profitable destinations.

"The model for cruise lines is you discount the ticket prices until you fill the ships," said John Binkley, President of the Alaska Cruise Association, in a telephone interview Monday.

Total cruise traffic — which normally accounts for 60 percent of the tourists who come to Alaska — will likely be the same this year as last, when a little over 1 million passengers sailed through the state, said Binkley. But only because of drastically reduced fares.

Cruise lines have slashed Alaska prices 40 percent, Ralph Samuels, Holland America's vice President for external affairs, said in a speech to the Anchorage Chamber of Commerce, Monday. Holland America is operated by Carnival, the world's No. 1 cruise line company.

That compares with price cuts of 12 percent to 15 percent for Caribbean cruise packages, "which is now our competition," Samuels said. "It's become tougher to sell Alaska to the market," he said.

Holland America and other lines are also experimenting with new itineraries, planning stops next year in non-traditional cruise destinations like Anchorage, Kodiak and Homer, Samuels said.

Holland America is one of three companies planning to relocate a ship from Alaska to more lucrative destinations. Royal Caribbean, the world's No. 2 cruise line, and Norwegian Cruise Line have also said they each plan to move one ship from Alaska next year.

Royal Caribbean did not return calls for a comment.

The removal of those three large ships will mean at least 142,000 fewer passengers travelling on Alaska cruises next year, Binkley said.

With profit margins reduced in Alaska, companies have decided to move some ships "to where they're going to get the best rate of return for their shareholders".

In all, Alaska Cruise Association members currently have 28 large cruise ships plying Alaska waters this year.

About 10 years ago, Alaska held 10 percent of the world's cruise market share, but now holds only about five percent market share, said a representative of Princess Cruises, also owned by Carnival.

Alaska's high business cost is the biggest challenge, according to industry officials.

Samuels, a former state legislator, put some blame on a $50-per-passenger head tax established by a sweeping 2006 citizen initiative that imposed new levies, fees and environmental regulations on the industry.

"I would hope that the legislature and the administration would start a debate on the economics of the head tax and tourism in general," he said.