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Big hotels, cruise ships grab headlines as Cuba's tourist trade slowly recovers
CubaNews / February 2003

By Larry Luxner

Last month, two watershed events gave new hope to Cuba’s tourism industry, which had been suffering since Sept. 11, 2001.

On New Year’s Day, the M/V Sunbird sailed into Havana Bay with a record 1,414 passengers — the largest single load of cruise-ship passengers ever to visit the island. The Sunbird’s arrival came just a few weeks after the visit of another giant cruise ship, the A’Rosa Blu, carrying over 900 passengers.

And on Jan. 21, Fidel Castro — flanked by top tourism officials and TV cameras — inaugurated the 944-room Hotel Playa Pesquero, now Cuba’s biggest hotel. The $100 million, five-building beachfront complex, located in the eastern province of Holguín, is already filling up with visitors from Canada, Germany, Great Britain, France, Italy and Switzerland.

“Our friends from the north are not in this list,” joked Castro, referring to Americans who, since 1963, have been prohibited by their own government from vacationing in Cuba. The day Washington lifts its travel ban, Cuba’s tourism industry could be flooded with a million or more curious Americans in the first year alone. But for now, Cuban hotels and cruise-ship facilities are almost completely dependent on budget travelers from Europe and Canada.

“Put things in perspective,” a Miami-based cruise executive advised CubaNews. “At present, Cuba’s role in the cruise-ship industry is comparable to its role in the hotel business. It’s getting only bargain-seeking European tourists.”

Last year, 1,683,716 visitors flocked to Cuba, according to figures quoted in a Castro speech. That’s a slight drop from the 1,774,541 tourists who came in 2001, generating $1.8 billion in foreign exchange for the troubled Cuban economy.

Tourism officials, while releasing no income figures for 2002, said 1,500 new hotel rooms were constructed last year, bringing the total up to 40,000; another 2,000 will be added in 2003. That gives Cuba the second-largest hotel inventory in the Caribbean, trailing only the Dominican Republic, with 54,000 rooms.

Cuba will get an additional boost later this month, when at least three charter airlines plan to begin direct flights to Cayo Coco, a sandy key along Cuba’s northern shore in an area known as Jardines del Rey.

An international airport operated by Spanish management company AENA opened late last year to receive these wide-body flights, to be operated by Air Canada, Austria’s Lauda Air and Condor, Lufthansa’s charter company.

Upon arrival, tourists can stay at any of 11 luxury hotels — six of them managed by Spain’s Grupo Sol Meliá — that already line the beaches of Cayo Coco and neighboring Cayo Guillermo.

“Twenty years from now these keys could be the premier resort in the Caribbean,” said former CIA spy Philip Agee, now director of a Havana-based travel agency, in a recent interview with Reuters. “These islands go on and on for hundreds of miles and offer a fabulous combination of beach, scenery and wildlife. There is a huge market out there for almost virgin islands like these.”

The direct flights will help Jardines del Rey develop quickly, because tourists won’t have to travel overland from Havana, Varadero or other Cuban airports. Even so, says Reuters, the area’s hotel rooms will probably stay relatively empty until the Americans show up.

“Cayo Coco is a beautiful destination with a number of nice hotels,” said Bernd Herrmann, a Havana-based travel executive. “But some of them were built too quickly and seem too big. I’m not sure they can fill them all in the short run — maybe when the American tourists arrive.”

TOURISM NOW TOP HARD-CURRENCY EARNER

At the moment, Cuba has 240 hotels (including 102 four- and five-star properties), up from only 17 in 1990. Tourism as a whole generates roughly 300,000 direct and indirect jobs (compared to 84,000 in 1990) and in 1996 surpassed sugar to become the No. 1 foreign-exchange earner for Cuba.

Local entities supply now 68% of the Cuban tourist industry’s needs, up from 51% in 1999 and only 12% in 1990. Meanwhile, 23 regularly scheduled airlines and 28 charter airlines connect Cuba with the rest of the world.

But “if tourism is socialist Cuba’s first major brush with globalization, the results have not all been positive,” says Philip Peters, vice-president of the Lexington Institute, a think tank based in Arlington, Va. “

The economic downturn of 2001 and the travel scare that followed the Sept. 11 terrorist attacks combined to stop the growth of Cuban tourism in 2001 and 2002, preventing Cuba from reaching its projected level of two million visitors,” Peters wrote in a 16-page report entitled International Tourism: The New Engine of the Cuban Economy. “Initially, the impact was severe; 10,000 hotel rooms were put out of service, and many support services such as taxis and restaurants were idled.”

But by October 2002, some signs of recovery were evident, with tourist arrivals up 10% over the same month a year ago. And the number of visitors to Cuba jumped 33% last month compared to January 2002.

POST-9/11 STRATEGY IS PAYING OFF

One reason for Cuba’s relative success may be its strategy in the aftermath of Sept. 11. Unlike most Caribbean destinations, which lowered their prices as much as possible, Cuba took a different tack, refusing to lower hotel and all-inclusive rates for fear of undermining the attractiveness of its market.

By the end of 2001, two major hotels were completed in Varadero by French conglomerate Bouygues. In 2002, several more hotels were inaugurated, including the 404-room Sandals Royal Hicacos Resort & Spa in Varadero. This property — managed by Jamaica’s Sandals Royal Resorts and aimed at European and Latin tourists — is a four-star, all-inclusive “couples-only” resort, with occupancy said to be running at 35-40%.

The Playa Pesquero, opened by Castro, was finished in only 22 months using Cuban capital and construction workers, with technical help from Bouygues. It’s being managed by Gaviota S.A., the rapidly growing commercial division of Cuba’s armed forces.

CRUISING TO HAVANA

Another area that seems to be showing some promise is cruise-ship arrivals. Silares S.A., an Italian company operating in a joint venture with the Cuban government, is expanding Havana’s Sierra Maestra cruise-ship terminal to allow up to six ships to berth there simultaneously. The city’s master plan calls for all cargo ships to be eventually diver-ted from Havana to the port of Mariel, so that only cruise ships will sail into Old Havana.

During 2003, Silares expects 120 cruise- ship visits carrying 75,000 passengers, a dramatic increase from the 60 visits and 45,000 passengers last year.

That’s still less than the 100,000 passengers who arrived on 200 stops in 2000, said Gianluca Suprani, the company’s managing director.

But even 100,000 cruise-ship passengers is hardly impressive when compared to the Caribbean’s busiest ports of call. This year, said the Miami cruise-ship executive, Key West will get 1 million cruise visitors, San Juan 1.1 million, St. Thomas 1.9 million, Nassau 2 million and Cozumel 2.2 million.

“There’s nothing we can do until the travel ban is lifted. When something happens, then we’ll gear up a plan,” the official said, asking that neither he nor his company be identified.

Traditionally, Cuba’s main stops for cruise ships have been Havana, Santiago de Cuba and Punta Francés in Isla de la Juventud.

Most of the lines that include Cuba in their itineraries select Havana for overnight stays and even two-day stays. But because of the 1996 Helms-Burton Act, any foreign ship that calls on a Cuban port is banned from U.S. ports for a period of six months.

In an Oct. 31 petition to the United Nations, the Castro government complained that after European Festival Cruise Lines based one of its largest vessels, El Mistral, in Havana for weekly voyages between December 2001 and March 2002, the company “was subjected to enormous pressure to cancel its itinerary, and was forced to include a warning saying “these cruises cannot be offered in the U.S.” in its May-December 2002 promotional materials.’”

Likewise, when Carnival Corp. bought Costa Cruciere, an Italian firm, the company’s $62 million project to repair the Sierra Maestra cruise-ship dock was terminated at the insistence of the U.S. Treasury Department.

“Cuba’s problem is, the cruise industry is controlled by U.S. operators, and there’s only a handful of independent European companies,” said the cruise-ship executive.

“And the company that operates A’Rosa Blu will soon get bought by Carnival, so they will have to stop calling on Havana,” he said. “It’s too bad, because they’re trying hard to find ships that can call there. But ships that meet the qualifications are getting fewer and fewer.”

Yet all that could change overnight.

Once restrictions disappear, an estimated 3.5 million U.S. cruise visitors could be arriving annually on modern vessels operated by Carnival, Royal Caribbean Cruise Lines and P&O Princess, which together control 85% of all cruise traffic to the Caribbean.

Building the necessary infrastructure won’t be easy. Five megacruisers arriving in Havana at the same time would mean 10,000 people demanding ground transportation, restaurants, nightlife and interesting places to visit.

But Peters thinks Cuba can handle it.

“As a destination, Old Havana is getting better and better. Its colonial area is larger than Old San Juan, and it blows Nassau out of the water,” he told CubaNews. “When you bring American cruise-ship passengers to Old Havana, they’ll think they’re in Europe.”

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