What Will Cuba's Tourism Future Hold?

Photo by David Cogswell

President Obama's recent move to normalize relations with Cuba ends a 50-year diplomatic freeze and opens a path for more U.S. travelers to visit the Caribbean island, located only 90 miles away from Key West, Florida.

Or does it?

Americans are already visiting Cuba in significant numbers. About 170,000 authorized travelers made the trip last year, according to the U.S. Department of Commerce. Their ranks are composed of close relatives of Cubans, academics and people on licensed cultural education programs, who can visit under people-to-people guidelines established during the Clinton Administration.

But the range of permitted travelers will expand under the Obama administration's changes. Henceforth more government officials, journalists, professional researchers, educators, religious officials, performers, humanitarians, emissaries of private foundations, and importers or exporters, will be authorized to travel to Cuba.

Travelers are also expected to have more freedom to create their own itineraries and be able to use U.S. credit cards in the country, which had been barred previously. Currently visitors traveling with the one of the tour operators who provide the lion's share of American travel to Cuba are required to participate in at least four daily "activities" as part of their journey.

Officials say that under the most recent changes all legitimate applications received by the Treasury Department's Office of Foreign Asset Control (OFAC), the body that dispenses licenses to for Cuban travel, will be approved.

Nevertheless the U.S. embargo is still in place and travel to Cuba remains extremely restricted. According to the U.S. State Department website's page on Cuba, "The regulations require that persons subject to U.S. jurisdiction be licensed in order to engage in any travel-related transactions pursuant to travel to, from, and within Cuba. Transactions related to tourist travel are not licensable."

Licenses can be obtained for humanitarian projects, journalism, professional research, religious activities, athletic or performance events and even some importation and exportation. It is under these guidelines that most tour operator-provided, people-to-people travel to Cuba now operates. But although licenses can be obtained for various activities, few are actually granted to travel providers. People-to-people travel must be operated by an operator that has been licensed as a Travel Service Provider. Airlines must be separately licensed as Carrier Service Providers.

The agency warns, "Travelers who fail to comply with Department of the Treasury regulations could face civil penalties and criminal prosecution upon return to the United States."

Furthermore, rules for handling money are very restricted in all cases. The embargo is an economic policy and restricts spending money in Cuba, not actual presence in Cuba. Leisure travelers in search of a whirlwind Caribbean shopping experience would be well advised to look elsewhere.

OFAC officials have said they remain 30 or more days away from formalizing the newly amended rules. Nevertheless, tourism stakeholders are already discussing strategies and preparing their response to the possibility of wider travel to Cuba. Airlines, cruise companies and Caribbean destinations are all attempting to weigh what the changes will bring to their segments.

AIRLINES

Several U.S. airlines already operate flights to Cuba, however the service is virtually all charter-based. American Airlines, Delta and JetBlue all do or have offered charter flights to Cuba sold through Miami-based travel agencies serving the Cuban diaspora and tour operators offering approved cultural exchange trips.

In addition several major foreign airlines, including Virgin Atlantic, LAN and Copa, service Havana.

American Airlines now operates 12 to 14 weekly flights from Miami to Havana, Holguin, Santa Clara and Cienfuegos and from Tampa to Havana and Holguin.

JetBlue Airways started flying Cuba charters in September 2011, flying between Fort Lauderdale and Havana. By 2013, JetBlue has launched flights from Tampa to Havana, and later Santa Clara.

Delta Air Lines offered more than 240 Cuban charters between October 2011 and December 2012, said Anthony Black, a company spokesman. While Delta has no immediate plan to return to Cuba, "having served there through our charter operations the groundwork has been laid for us to possibly serve the market if an opportunity becomes available," said Black.

But they certainly won't be the only airlines to think about Cuba as an emerging market. One huge factor in all of this is not just U.S-to-Cuba direct, but the chance to engage more business in foreign markets for travelers who wish to visit Cuba but are limited in airline selection because of the current embargo.

TOUR OPERATORS

Tour operators have certainly responded positively to President Obama's announcement. One of the largest, Globus, quickly announced it will return to Cuba with three itineraries. Globus operated Cuba tours in 2013 and 2014 and its license for Cuba tours has been renewed through 2015.

Tauck Tours and Abercrombie & Kent have also launched new Cuba tours for 2015.

But no company can ever be sure about what will happen when its license expires, and the people to people licenses have to be renewed every two years. Operators cannot advertise tours for which they have not been issued a license yet. They have to wait until the license is approved to even advertise the tours.

Meanwhile, American tour operators keep taking clients to visit Cuba, and are cautiously optimistic that the tourism trade will continue, in spite of constraints.

CARIBBEAN DESTINATIONS

Caribbean leaders have expressed a combination of joy and nervous anticipation in the wake of President Obama's announcement.

"This change in relationship between the U.S. and Cuba will also come with some challenges," said Beverly Nicholson-Doty, commissioner of tourism for the U.S. Virgin Islands."From an awareness perspective, this announcement will spark renewed interest in the Caribbean region, because there is a curiosity among Americans about Cuba.The opening of Cuba to travelers from the United States may also create increased competition for visitors to the Caribbean. We have to continue to do what we have started to remain competitive - augment our proactive marketing efforts, champion infrastructure enhancements, create appealing attractions, and improve our customer service."

"Cuba's availability will present challenges for the U.S. Virgin Islands. As Cuba is positioned within close proximity of U.S. cities, the destination has inherent advantages," Nicholson-Doty said. "While entrance to Cuba will require American travelers to have a passport, the U.S. Virgin Islands remains an attractive option due to no passport requirement. Furthermore, with English being the primary language of the U.S. Virgin Islands, Americans can be comfortable exploring our islands."

She added, "the U.S. Virgin Islands, along with our Caribbean neighbors, is accustomed to competition for tourism spending from emerging destinations. We understand the need to focus on our short- and long-term strategies to build our industry and will continue to invest in the quality and diversity of our product to ensure we remain top-of-mind among U.S. visitors."

She said Cuba's emergence as a mainstream travel destination will put the spotlight on the Caribbean region as a whole. "The maxim 'a rising tide raises all boats' should hold true," she said.

CRUISE LINES

Some travel industry observers expect cruise lines to be among the first hospitality segments to quickly offer port calls in Cuba. Even Nicholson-Doty said, "We anticipate the cruise itineraries in the Western Caribbean will begin to call on ports in Cuba."

"Cuba is the largest country in the Caribbean, so there are some exciting possibilities," said Roger Frizzell, a Carnival Corp. spokesman. "Some infrastructure for cruising already exists in the country, along with several ports, so it offers great potential." Carnival Corp. CEO Arnold Donald added that "very fuel-efficient" itineraries would result from Cuba's opening since cruise lines would no longer have to sail around the country on the way to other Caribbean islands.

Nevertheless Cuba will face the same challenges posed to other Caribbean destination as it seeks to establish links with mainstream cruise lines. Like some other ports, Cuba currently lacks a modern cruise ship terminal facility capable of accommodating the largest vessels.

Ground tour operators and sites and attractions that will draw cruise-ship vacationers will also need to be established before the country can dominate cruise itineraries.

"There will be investment in ports and infrastructure required over time," said Donald. Frizzell adds that the waters surrounding Havana's port are relatively shallow, which might still preclude calls from the largest ships.

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