On the Brink of Tourism

For decades Cuba has been a popular package destination for budget-minded tourists from Canada and Europe. As the winds of politics change direction in Washington, there's speculation that it's only a matter of time before the island will once again be open to travelers from the U.S. If this comes to pass, can Cuba's hotels, services and infrastructure meet the demands and expectations of U.S. travelers?
 Sol Meliá's Meliá Las Antillas in Cuba "I think we should first determine who is the potential visitor," says Ronen Paldi, president of Y'Alla Tours. "The first and bigger segment will be the resort market." Paldi notes that GoGo and Apple Vacations and other major players in the field will find Cuba interested in joint ventures for building hotels and establishing charter flights.

"The second segment of visitors to Cuba will find it challenging," says Paldi. "These are the Americans who want to experience first-hand the island's history, culture and music. They're going to find that Cuba's infrastructure doesn't exist in quantity and quality." Paldi predicts that Americans are going to expect either a price reduction or an improvement in quality, since Cuba is more expensive than many other Caribbean destinations.

Setting the Stage for Change

Last year, there was a maelstrom of conjecture when Fidel Castro underwent emergency surgery at the age of 79. Fidel temporarily handed over power to his 75-year-old brother Raul, the country's defense minister. Months have gone by without Fidel returning to govern the island (Fidel has called the shots for more than 47 years). There's much speculation in the country and around the world about what steps Cuba will take if Fidel does not return to power.

"With regime change, we'll see simultaneous price reductions and improvements," says Paldi. "Raul was much in favor of adopting the Chinese model of opening the country for business. There are some indications Raul is moving in that direction, since he's replaced key people." Paldi does point to one potential problem: Cuba's growing dependence on Hugo Chavez, Venezuela's Marxist president who is a vocal critic of the United States.

American tourists are currently barred by U.S. law from visiting Cuba. Washington established the travel ban more than four decades ago in an attempt to isolate Castro's communist government. In 2004, the Bush administration carried the restrictions even farther when it reduced Cuban-American visits to their relatives from once every year to once every three years.

Many classic American cars can be found on the streets of Havana, Cuba's capital

Last month, Reps. Charles Rangel (D-NY) and Jeff Flake (R-AZ) introduced HR 654 to Congress, a bill calling for an end to the restrictions on Americans traveling to Cuba. Unlike previous bills addressing the needs of Cuban-American family members to have unrestricted travel to Cuba, HR 654 covers all categories of travel to the island.

The bill would also allow all U.S. agents to compete freely and equally in booking trips to Cuba. The bill reads in part: "The president shall not regulate or prohibit, directly or indirectly, travel to or from Cuba by United States citizens or legal residents, or any of the transactions incident to such traveling."

With the recent elections giving Democrats control of Congress, and the fact that an ailing Fidel Castro appears to be passing power onto his brother, many observers say the bill has great prospects for passing with strong bipartisan support. It has already gained bipartisan co-sponsorship from more than 60 representatives. Passing the bill would signal the beginning of the end of the full embargo, although observers predict strong opposition, as well as the possibility of a presidential veto.

There's a tremendous amount of pent-up demand from U.S. residents to visit Cuba. A December Gallup poll showed that two-thirds of U.S. voters desire normalized U.S.-Cuba relations.

Vintage American cars parked in Havana Square

It is likely that the first visitors to Cuba will be fairly sophisticated tourists who have been wanting to visit the destination for some time. Repeat travelers to the Caribbean have been profiled as "island collectors." Travelers enjoy choosing new islands when they return to the Caribbean, while enthusiastically recommending their previous choices to friends. Cuba has been effectively out of this loop for decades, and it's easy to imagine Caribbean enthusiasts from the U.S. saying, "As soon as it's open to U.S. travelers, I'm going to Cuba."

Carol Pinnel, owner of OR/WA-based Group Journeys, traveled to Cuba two years ago with Y'alla Tours. "We have a lot of interest in Cuba from our clients," says Pinnel. "Many have traveled to Cuba on humanitarian tours and are eager to go back." Although Pinnel would like to recommend small, middle-priced hotels in Havana, she realizes that this wouldn't be the right choice for many of her clients. "In Cuba, you would need to book the deluxe hotels in order to get the services most Americans require, such as air-conditioning, reliable electricity and food service, as well as Internet, which most clients now require when they travel."

In her travels around the island, Pinnel found the roads well paved and with little traffic. "I would recommend that travel agents encourage their Cuba-bound clients to make sure they get out and explore beyond the major tourist areas," says Pinnel. "I especially recommend the city of Trinidad, which has great Colonial architecture and beaches." Pinnel says she found no anti-American sentiment during her visit.

Cuban Hotels and Resorts

Cuba is the biggest island in the Caribbean and just an hour's flight from Miami. Before the Cuban Revolution of 1959, Cuba was somewhat of an adult playground, attracting visitors from the U.S. who enjoyed Havana's nightclubs and surrounding beaches. Havana is still the country's biggest draw, primarily because of its culture, people and atmosphere of a city caught in time, with '50s-era American automobiles cruising past buildings crumbling from neglect.

The resort area of Varadero, 56 miles east of Havana, has more than 16 miles of white-sand beaches and is the second most popular tourist destination in Cuba. In 2005, Varadero had 14,300 rooms, up from 8,000 rooms in 1994.

"Unlike other parts of the island, Varadero has excellent infrastructure, especially in its transfers from the airport to the hotels," says Paldi.

SuperClubs and Sandals have been a presence on the island for years, while recognizable European brands with a strong European market to draw upon have been filling their hotels with Canadians, Italians, Spaniards and Brits.

Spain's Sol Meliá hotel conglomerate has announced the opening of its 24th property in Cuba, and its eighth in Varadero: the five-star, 350-room Meliá Las Antillas. A total renovation of the 397-room Meliá Habana, in the Miramar district, will expand the hotel's Servicio Real executive service to 98 suites on the seventh, eighth and ninth floors. Sol Meliá has a 37 percent market share in Cuba and accounts for 22 percent of the island's 44,000 hotel rooms.

Not everyone thinks Cuba is ready for prime time. A hotel executive speaking off the record says Cuba is years away from delivering a tourism experience at an acceptable level to the mainstream U.S. market "They'll come in a wave once Cuba is opened to the U.S., but the initial word-of-mouth about the infrastructure and service will be negative."

Sandals Habana and Meliá Habana are two of Cuba's top resorts

Reuters estimates 1 million Americans would visit in the first year after Washington ends the travel ban—put in place to isolate Castro's communist government—and that there could be 3 million American tourists visiting Cuba within five years.

Cuba would have to more than double its current capacity of 44,000 hotel rooms to meet the predicted demand. A Florida International University study posits that the number of hotel rooms could increase by more than 90 percent within four years of a democratic transition, and by a further 100 percent four years after that.

Visitor arrivals to Cuba suffered a dip of 3.6 percent in 2006, with many tourists opting for cheaper vacations in the Dominican Republic, Jamaica and Cancun. Higher fuel costs and reported dissatisfaction with service also contributed to the decline. When Cuba opens to U.S. travelers, package tourists choosing purely on price will still flock to those islands offering the best deals.

Cuba is still a loaded issue for many. Travel Agent recently asked an executive at one of the world's largest hotel companies if they had their eye on Cuba, given the new resolutions in front of Congress. The executive dismissed the question out-of-hand, remarking that it wasn't legal, so of course they weren't looking at Cuba.

Another executive with resorts in Cuba backed away from an interview, saying the situation is too delicate at the moment, and that it wouldn't be prudent to comment on the current tourism picture.

"It's actually against the law for us to even have internal discussions about doing business in Cuba," says Kevin Wojciechowski, vice president of sales and marketing for AMResorts. "Once restrictions are lifted, it's certainly a destination we'll be looking at."

Asking Americans

In a survey conducted early this year, 1,005 adults from the U.S. were polled by the Associated Press.

64% say they don't like Fidel Castro.

62% think the United States should re-establish diplomatic relations with Cuba.

48% say the U.S. government should continue its trade embargo against Cuba.

46% would not at all be interested in vacationing in Cuba.

40% would travel there if the ban were lifted.