Last updated: 06:17 PM ET, Wed April 23 2014

Banking Issues Can't Stop American Demand For Cuban Travel

Destination & Tourism David Cogswell April 23, 2014

Banking Issues Can't Stop American Demand For Cuban Travel

PHOTO: Americans are rushing to see Cuba before ongoing social and economic changes sweep away the old Cuba. (Photo by David Cogswell)

Although the Cuban Interests Section has not yet been able to secure a new bank for its U.S. business, the Cuban travel industry continues to boom. Tour operators say the banking issues have not and will not halt the ongoing procession of American travelers to Cuba and that banking issues will be resolved before they hamper tourism.

The Cuban Interests Section in Washington D.C., which handles consular serves in the U.S., lost its banking services in the U.S. on March 1 when M&T Bank, which had been providing banking services, terminated its account.

The bank had given notice in November of 2013, but in spite of efforts by all stakeholders, the issue has not yet been resolved. The U.S. regulations based on the 50-year embargo are more difficult than most banks want to deal with. Insiders, however, say that a solution will be provided soon because it is in the interest of all stakeholders, including the U.S. State Department as well as the Cuban government, for Cuba to have banking services in the U.S.

Until then tour operators say they have secured their visas in advance and there are no reports of any disruptions of travel to Cuba, which continues to be a boom market.

“Cuba has no interest in slowing the flow of Americans; quite the contrary,” said Bob Drumm, president of General Tours. “Although the immediate visa issuance conundrum is not yet resolved, the Cubans are working on an alternative with vigor. We still expect a resolution soon and are about to release dates for departures through July 2015.”

Meanwhile a half century of embargo has created what may be the most colossal pent-up demand in travel industry history.

“Americans are traveling to Cuba in record numbers this April,” said Drumm, “which is the best gauge of the future.  The interest in seeing Cuba now, as it changes more rapidly than at any time since 1959, is broadening.  Positive word-of-mouth is very strong and there is no reason not to expect growth in the months ahead, from our point of view.”

Those most familiar with Cuba say the changes happening in Cuba, as it opens up its economic policies to allow more free market participation of Cuban citizens, are happening at breathtaking speed, making it ever more pressing to see Cuba now before the island changes far from what it has been in recent years.

Bob Drumm, whose company General Tours took Americans to the Soviet Union in the 1950s, says the rapid social change now taking place in Cuba is itself a huge attraction.

“Much like the surge in business to Russia during Perestroika in the late '80s, social change is exciting to see and to feel in Cuba,” said Drumm. “This change is gathering speed and is encouraging bookings into the future despite the visa murkiness at present.”

License Renewal Time

Most of the tour operators’ people to people licenses are expiring during 2014, and the U.S. Office of Foreign Assets Control is working feverishly to process renewals as well as first-time applications under regulations that were relaxed in 2011.

The tour operator licenses can now be renewed for two years, up from one year prior to changes made in 2013. The renewals will take  place on a rolling basis throughout the year and no tour operator has yet reported any hang-ups.

Tom Popper, president of Insight Cuba, told Travel Pulse, “OFAC has a tremendous workload of applications to process. But there are no indications of denials. OFAC evaluates the operators case by case and scrutinizes each one. It’s incumbent on each company to follow all the rules and regulations meticulously. It’s an arduous process, but there is nothing politically happening that I am aware of to cause problems.”

In regard to the banking issues, everyone involved seems sure that the problems will be solved before they lead to disruptions in travel. “Everyone is working diligently to resolve the problem,” said Popper. “It’s in no one’s interest for the problem not to be resolved, including all the stakeholders, the U.S. State Department and the Cuban government.”

Tour operators continue to watch with cautious optimism, while demand continues to grow.

“International Expeditions is fortunate to have had our license renewed for two years during the last renewal process, so our people-to-people programs can operate through June of 2015,” said Steve Cox, executive director of International Expeditions. “We are, of course, watching the newest round of renewals with interest as it typically is a roadmap for how other companies can expect the process to move.”

IE has its visas in order through June and expects the issues to be resolved soon. Abercrombie & Kent also reports that it has its visas in place and expects banking issues to be resolved before it becomes a problem.

Releasing Pent-Up Demand

“A&K’s Cuba: People-to-People program has received overwhelmingly positive response from our guests who have visited over the course of the past year,” said Keith Baron, senior vice president of Abercrombie & Kent. “They have consistently shared that their experiences were completely engaging, entirely authentic and particularly meaningful given the nature of the educational exchange. We hope to be able to continue to offer these types of memorable experiences to guests well into the future as there appears to be continuing and expanding interest from U.S. travelers.”

“The problems just underscore how special and unique travel to Cuba is,” said Popper. “It’s never easy. It has come and gone before. But the long-term outlook is incredibly bright. We are seeing growth in the industry that other destinations would love to see. People are coming back telling of amazing experiences.”

The demand for Cuba may set a new standard for the expression “pent-up demand.”

“People want to see Cuba,” said Popper. “They have lived their whole lives hearing about it in one capacity or another, from the Bay of Pigs to Lucille Ball and Desi Arnaz. There are such historical and cultural ties between the countries.”

Insight Cuba saw a 15 percent increase in its first quarter business, its best growth ever, and is seeing bookings in April running 20-30 percent over the same time in 2013.

Making it even more interesting and more pressing to visit is the fact that reforms are taking place more rapidly in Cuba than at any time since the revolution was new in 1959.

“It’s all changing,” said Popper. “The stance of the U.S. is changing. Cuba is changing by leaps and bounds. It’s an exciting time when history unfolds before your very eyes. The Cuban government has made more changes to social and economic policies since probably the revolution. They are allowing more income opportunities for individuals. We see it on the ground, people working with paladors, new cottage industries emerging. When a palador opens, they are hiring employees, buying from suppliers. It’s amazing.”

The Cubans, according to Popper, are also displaying a pent-up entrepreneurialism.

“The thing that is so amazing, so genius, is that the Cubans have great entrepreneurial spirit,” said Popper. “They are seizing opportunities and the government is allowing it. Change happens. There is more hustle and bustle, more food vendors and paladors. Everyone has a cell phone, they are texting. There’s more opportunity for people.”

Meanwhile, stand by for news on the banking front.