By LARRY SMITH
BACK in 2006, most analysts believed little would change in the immediate aftermath of Fidel Castro’s departure as Cuba’s pre-eminent leader.
At the time, Castro had just stepped down as president due to failing health, ceding power temporarily to his younger brother, Raul, the armed forces chief. Two years later, he made his resignation permanent.
Two years after that, I visited Havana and had this to say: “As the largest island in the Caribbean, Cuba has mountain ranges, fertile plains and valleys and a 2,300-mile coastline with deep harbours, coral islands and miles of beaches. Cuba also offers a proud history and culture blending Spanish and African influences.”
And Havana - with a population of more than two million - is the Caribbean’s major metropolis, as well as Cuba’s greatest attraction. In 2010, Cuba already received a million more stopover visitors than the Bahamas. It now has over 60,000 hotel rooms (compared to under 15,000 here) and thousands more are said to be on the way.
At the time of my Havana visit, the competitive threat to Bahamian tourism from the inevitable opening of Cuba to the closed United States travel market was still years in the future. But those portentous changes are now much closer to reality.
Fidel Castro took control of Cuba in 1959 after an armed revolt against a military dictatorship. One of his first acts was to shut down casinos, brothels and hotels, many of which were owned by American organised crime figures. When foreign businesses were nationalised, the US imposed trade restrictions. And in 1962, the embargo was formalised, preventing most Americans from visiting an island which is less than 100 miles from Florida. Those international tourists who did come were segregated from the general population.
Cuba settled into a defiant role as a member of the communist bloc. But after the collapse of the Soviet Union in the early 1990s, Castro allowed limited reforms to encourage tourism and earn hard currency. The Clinton administration eased travel restrictions, but they were reinforced by the Bush administration in the 2000s.
In 2010, Raul Castro embarked on a long-term reform of the country’s political and economic system. And analysts say Cuba looks much different today than it did in 2006, when Fidel stepped down.
An article in the US magazine, Foreign Affairs, says: “the emerging Cuba might best be characterised as a public-private hybrid in which multiple forms of production, property ownership and investment, in addition to a slimmer welfare state and greater personal freedom, will co-exist with military-run state companies in strategic sectors of the economy and continued one-party rule.”
Since the election of Barack Obama and the start of Raul’s reform process, relations between Cuba and the US have improved. A few months after he assumed office in 2009, Obama began rolling back the Bush-era sanctions. And last December, he opened up travel to Cuba as much as his executive authority would allow. Today, travel service providers can arrange trips to Cuba for US citizens without a government licence - but only if the travel conforms with restrictions in current law. General tourism remains banned under the embargo.
A bipartisan group of legislators is pushing for passage of a Freedom to Travel to Cuba Act in the US Congress, but the law is stuck in committee and not expected to be enacted. A full lifting of the embargo will probably have to wait until after the 2017 presidential election.
The American Society of Travel Agents strongly supports normalisation of relations with Cuba, estimating that at least two million more Americans would visit the island by 2017 if restrictions were lifted. Last year, about half a million US residents visited Cuba, mostly Cuban-Americans visiting family.
The key point for us to keep in mind is that, even in its present run-down condition, Cuba manages to earn some $2.5 billion a year from three million visitors, and it is seeking to double those numbers. Despite an inefficient, government-operated and expensive product, the island has a lot to offer. It is a competitive threat that we should not ignore.
Former Bahamas tourism minister Vincent Vanderpool-Wallace, who is now a private consultant and board member of the Caribbean Hotel and Tourism Association (CHTA), recently helped draft a position paper for the organisation on Cuba’s competitive threat. The CHTA is a regional federation of 32 national hotel associations with more than 600 member hotels and over 300 allied members. According to its president, Emil Lee, of St Maarten, the organisation is not opposed to the lifting of the US embargo, because it would “eliminate a significant barrier to regional co-operation.”
But in its position paper the CHTA warned that the opening of Cuba to the huge US travel market would be “the biggest and most disruptive pebble to be dropped into the Caribbean pool in 50 years.” In fact, most analysts conclude that the impact on Caribbean tourism will be “unprecedented”.
The CHTA document also sounded a hopeful note that “the coming Cuban disruption just might be the tonic (we) need to build the kind of strategic approaches to tourism development that will yield sustainable results”.
As far as The Bahamas is concerned, the impact will be four-fold.
First, Cuba will siphon off visitors who have up to now travelled impulsively to The Bahamas from Florida. This market has traditionally provided over 20 per cent of Bahamian visitor arrivals.
Second, the opening of Cuba can be expected to have an immediate impact on the cruise industry, which has been lobbying Caribbean destinations like The Bahamas to develop new products and experiences beyond the traditional sun, sand, sea and t-shirts. “The likelihood that cruise lines will drop some existing ports to accommodate Cuba visits is real and the proximity of Cuba to the US … can easily impact itineraries to near markets such as The Bahamas,” the CHTA document says.
Third, the airline industry’s willingness to absorb low fares and passenger volumes in order to build routes and market share in Cuba could be disastrous for the region, the CHTA warned, “especially if it also results in US carriers shifting aircraft to new Cuba routes upon the lifting of the embargo.”
And finally, the opening of Cuba will also impact the investment outlook for the region. It is likely to have a chilling effect on investment flows as investors take a wait-and-see position on the opportunities that Cuba may present. But much will depend on the enabling policies of the Cuban government in attracting US capital.
“The fact that Cuba saw over $800m in hotel-related investments in 2013 is a sobering thought,” the CHTA position paper said. “The Caribbean and its industry will find itself not only competing for American tourists but also for investment dollars.”
According to CHTA chief executive Frank Comito (a former director of the Bahamas Hotel and Tourism Association), “If we continue to operate business as usual, and we all draw from the same pie and Cuba is in the equation ... there will be serious economic and employment consequences.”
So what does the CHTA recommend? Principally, it urges the creation of a Caribbean Basin Tourism Initiative to help boost investment in regional tourism development. The initiative would promote policy and technical support for the region, in partnership with private sector entities.
“We’ve developed a draft framework for a regional public-private sector tourism action agenda which would embody some of these elements, but that is still being vetted,” Comito told me. “We’ve advanced the Caribbean Basin Initiative concept as a starting point for collaboration to define together what the actual elements would be.”
Among the items that will be reviewed are the removal of visa and travel barriers within the region, the reduction of high air travel-related taxes and fees, speeding up visitor clearance and processing times and supporting a more co-operative approach among industry stakeholders.
And the CHTA says “we need to look at those factors which have contributed to Cuba’s success – product diversity, infusing culture and history into the visitor experience, investments in education and training, competitive pricing, and lower operating costs. We need policies and practices which drive business, and do not drive away business.
“The CHTA believes that by working together, heads of government with heads of industry, hundreds of thousands of tourism-related jobs and hundreds of tourism-related businesses can be created. The indirect impact which tourism has on our broader economies cannot be understated.”
It was more than a quarter of a century ago when the Berlin Wall came down, in one of the most disruptive events of our lifetime for many countries. Some improvements happened immediately, but others took time, effort and resources to become evident. “We can only hope that the fall of the US embargo and the consequential great Cuban disruption will be as good for the countries of the Caribbean,” the CHTA position paper said.
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