By David Jessop:
The announcement in mid-December by President Obama and President Castro
that Cuba and the US are moving to normalise relations has resulted in
speculation about what this may mean for the Caribbean’s tourism sector.
For the most part what has been said and written has failed to
understand the nature or complexity of what the US president has
proposed, the process involved, or the fact that Cuba has revealed very
little about what its detailed response will be.
That said, the news of a changed US-Cuba relationship is of course
welcome, long overdue and begins to end the US imposed isolation of a
Caribbean nation. It involves the full restoration of diplomatic
relations by both sides and includes a range of measures for which the
US president does not need the approval of Congress.
Although the US president made clear that, when it comes to US
travellers, more US citizens will be able to visit Cuba under what is
expected to be looser licensing arrangements, he was not freeing all
individual US travel to Cuba.
Instead, the implication is that the granting of licences to travel in
12 identified US Treasury permitted areas* will be made easier. He also
said that US credit and debit cards will be permitted for use by
travellers to Cuba, US companies will be able to improve infrastructure
linking the US and Cuba for commercial telecommunications and internet
services, and according to a fact sheet accompanying his statement,
foreign vessels will be able to enter the United States “after engaging
in certain humanitarian trade with Cuba”.
Sometime in the coming weeks the new US Treasury regulations on Cuba
will be published, which will spell out how these and other aspects of
the new US travel regime will work. However, the present consensus in
the US travel industry is that in future a general licensing system will
enable tour operators to develop programmes within identified
categories such as educational activities and US citizens will then be
able to freely buy and travel within such packages on the basis they are
giving the US government their word they are not simply engaging in
tourism.
How this will work in practice and the extent to which current draconian
US rules on the use of currency, or whether Cuba has the facilities or
is geared up to receive many more visitors on this basis, remains to be
seen.
Of more fundamental importance, although not directly related to
tourism, was the announcement that President Obama was authorising his
Secretary of State, John Kerry, to review, based on the facts, Cuba’s US
designation as a state sponsor of terrorism. A change in this area
would not only enable companies in the tourism sector, but in every
other sector as well to be able to freely move funds in US dollars,
invest, trade, book hotels or flights on airline websites on US servers,
and much more.
The increasingly tough interpretation by the US Treasury in the last few
years of regulations that flow from this designation has severely
constrained all third country trade and services including from the
Caribbean, as many companies and international banks have withdrawn from
the Cuban market in order not to face huge fines in relation to the
transfer of funds.
What happens next in practical terms may be slow and uncertain. However,
it is clear that President Obama has initiated a process that he thinks
will be sustainable beyond any Democrat administration. Although not
spelt out, it would seem that he calculates that, in the case of Cuba,
freer US travel and the weight of US corporate interest may force an
unstoppable economic opening that a Republican dominated House and
Senate or any future Republican president will not wish to turn back.
For his part, President Castro has made clear that Cuba will work with
the US to improve relations but that that his country’s principal focus
will be on an improved economic relationship and functional
co-operation.
What this means is that, while US tourism (or more precisely the number
of non Cuban-American US visitors travelling to Cuba) will remain
constrained for the time being, there could be a quite sudden opening in
between two to four years time, but only if that is what Cuba wants.
In this context, the most likely changes in the short term related to
tourism are increasing pressure on the number of hotel rooms in Havana
and popular destinations, and an upward trend in Cuba’s presently low
room rates; increased investment in the hotel sector by foreign
companies particularly in conjunction with military controlled tourism
companies; pressure from US legacy carriers to fly scheduled services to
Cuba out of the US; the increased attraction of sailboats into the
newly completed marinas that Cuba has been constructing; an increasing
number of calls by non-US cruise ships and perhaps, in time, US cruise
ships if they home port in Cuba; and the rapid diversification and
decentralisation of Cuba’s already significant tourism product.
Speaking recently in Barbados about the opportunity, the Caribbean
Tourism Organisation’s secretary general, Hugh Riley, said that,
contrary to the fears in some parts of the region, the strengthening of
Cuba as a Caribbean tourism destination was good news, as it would
attract more visitors into the region and could prove a gold mine for
those willing to capitalise on it. The region, he said, needed to view
normalised relations from an entrepreneurial point-of-view to determine
how it could strike partnerships that would allow it to benefit.
The figures amplify Mr Riley’s point. While overall visitor arrivals
totalled 2.8 million in 2013 – the spend was US$2.3 billion – Cuban
official statistics record that only 92,000 US citizens visited Cuba
that year; a figure that does not include another 350,000 to 400,000
Cuban Americans who visit annually, as Cuba does not consider them as
visitors.
President Castro and President Obama both noted that the agreement to
normalise relations would be challenging and take time. The announcement
of an improved US-Cuba relationship is therefore best regarded in
tourism terms as the starting gun for all Caribbean tourism interests to
consider how, over time, they will respond to increasing competition
for the US market.
*These are family visits; official business of the US government,
foreign governments, and certain intergovernmental organizations;
journalistic activity; professional research and professional meetings;
educational activities; religious activities; public performances,
clinics, workshops, athletic and other competitions, and exhibitions;
support for the Cuban people; humanitarian projects; activities of
private foundations or research or educational institutes; exportation,
importation, or transmission of information or information materials;
and certain export transactions guidelines.
January 10, 2015
Caribbeannewsnow