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Cuba, seeing 2007 foreign arrivals drop, pours cash into tourism infrastructure
CubaNews / October 2007

By Larry Luxner

Canadian and European tourists keep flocking to Cuba — though the island is clearly beginning to lose some of its luster compared to cheaper Caribbean destinations.

For Americans, however, the communist island still holds enormous forbidden-fruit appeal. The Bush administration has taken drastic efforts to punish U.S. citizens and travel companies that violate Washington’s 45-year-old embargo against Cuba — a policy that itself is increasingly being called into question by at least one Democratic presidential candidate and dozens of lawmakers of both parties.

Last year, 2.2 million tourists visited Cuba, down from 2.3 million in 2005. The 3.6% dip in arrivals was the first drop since 9/11, when tourism arrivals fell throughout the Caribbean.

Cuban officials attributed the poor showing to a relatively warm winter in Europe and other factors such as the U.S. embargo, which forced one cruise-ship operator to cancel its Cuba stopovers when it was taken over by a U.S. company.

But European and Canadian tour operators complain that Cuba just can’t compete against Cancún or the Dominican Republic — especially since 2005, when the Castro regime revalued the Cuban peso by 8%.

“The problem is that Cuba has become an expensive destination,” said Philip Peters, vice-president of the Lexington Institute and a veteran Cuba-watcher. “The exchange rate they use for the euro, and especially for the dollar — and the fees for exchanging money — have all combined to raise the cost of tourism in Cuba, and I think it’s starting to pinch them.”

Peters, who has written several reports on the island’s tourism industry, pointed out that “Cuba is competing against places that have better service and more reasonable prices, and they’re going to have to deal with that. The novelty begins to wear off at some point, and where they really get hurt is on return visits.”

In 2006, tourism generated $2.4 billion and was still Cuba’s top source of foreign exchange, though in 2007 nickel exports will likely exceed tourism in importance.

The government hasn’t said how many tourists have visited Cuba so far this year, but Tourism Minister Manuel Marrero told the state newspaper Opciones that “in 2007, for the fourth consecutive year, the number will be greater than 2 million visitors.”

According to Cuba’s National Statistics Office, hard-currency revenues from tourism have totaled $12 billion over the last six years.

The country’s hotel capacity increased from 39,264 rooms in 2001 to just over 48,000 last year. During that period, more than 80 million overnight stays were reported — including 15.6 million in 2006 alone — and the average hotel occupany rate was 60.7%.

The largest sources of tourism, in descending order, are now Canada, Great Britain, Spain, Italy, Germany, France and Mexico.

Cruise-ship visits have been negligible, however. Several years ago, the Cuban government cancelled a joint venture with an Italian firm to operate a cruise-ship terminal in Habana Vieja, claiming that cruise passengers’ expenditures while in port didn’t justify the expense of attracting such big ships.

As a result, relatively few cruise vessels call on Cuba — and even fewer will be coming this year, following Miami-based Royal Carib-bean Cruise Lines’ late 2006 takeover of Pullmantur Cruises.

Spain’s Pullmantur had operated the 376-cabin Holiday Dream ship, a regular visitor to Havana. Those visits came to an abrupt halt after the RCCL acquisition. The Cuban government claims 230 local jobs and millions of dollars in revenues were lost because an estimated 12,375 tourists were prevented from visiting the island.

Faced with increasing competition from nearby Caribbean vacation destinations, Cuba announced plans in mid-May to spend $185 million to improve tourist facilities.

The bulk of that money, $162 million, will be earmarked for improving 200 non-hotel facilities such as golf courses, marinas, yacht clubs and theme parks.

The remaining $23 million will go to build 50 boutique inns around the island — in addition to 10 already under construction — and to improve Cuban highways and airports.

In Holguín, Frank País International Airport has doubled capacity and can now handle 1,200 passengers an hour. Airport director David Benitez said this increase in capcity will prevent congestion during peak season, October to March. Heriberto Prieto, first vice-president of Cuba’s Civil Aviation Institute, said nearly a dozen new Ilyushin planes were being added to the island’s passenger fleet.

Peters said the Castro regime is starting to deal with other concerns as well.

“They’re not doing anything about the exchange rate, but foreign airlines were complaining that landing and customs fees, and jet-fuel costs, were way out of line with the rest of the Caribbean, so the Cubans ad-dressed all those problems,” he said.

“Cuban tourism officials recognize that if they want to get to the next level in tourism, they need to diversify Cuba as a destination,” he said. “They already have the sun-and-sand package tours. Now they must build more golf courses, fix up the hotels and improving the shopping experience.”

Peters added: “They’ve been talking about this for a long time. But when it comes to investment in Cuba, it’s only serious when you see actual dollars being spent and ground being broken.”

One example of this is the Monte Barreto hotel project in Havana’s upscale Miramar suburb. For years, Leisure Canada Inc. has been talking about the project, though now, the Vancouver-based company says construction will finally begin in December on Phase I, which envisions 280 rooms.

It’s the first of three phases that will build out to 737 all-suite units, says J.J. Jennex, Leisure Canada’s director of investor relations.

“We are also moving forward at Jibacoa, where master planning of the 5.5-sq-km property remains ongoing,” Jennex said in an email to CubaNews. “We currently envision five phases with the first phase highlighted by a golf course and a commercial village center. Master planning at Jibacoa will take place throughout the early part of 2008.”

Another place where money is being spent is Finca Vigia, Ernest Hemingway’s estate southeast of Havana. The deteriorating house, where Hemingway lived from 1939 to 1960, was placed on the U.S. National Trust for Historic Preservation’s list of most endangered places in 2005.

Work on the restoration probably won’t be finished until late 2009 — held up in part by efforts to build a garage to house the novelist’s long-lost 1955 Chevrolet convertible.

Tourism numbers won’t really take off, however, until the United States permits its citizens to visit Cuba once again.

The Castro regime claims as many as five million Americans would visit the island annually if the travel ban were lifted — which is exactly what Sen. Chris Dodd (D-CT), contender for the 2008 Democratic presidential nomination, wants to do.

Sen. Barack Obama (D-IL) doesn’t go that far, supporting only travel to Cuba by Cuban-Americans who have family there. Most other Democratic candidates for president — and all the Republicans — support keeping current U.S. travel restrictions in place until the Castro regime falls.

Cuban Foreign Minister Felipe Pérez Roque said Sept. 18 that 85,000 Americans of Cuban origin visited Cuba in 2003 but that the number dropped to 37,000 last year after the Bush administration tightened travel restrictions in 2004. He said 59,000 other U.S. visitors flaunted the embargo and visited last year, down from 115,000 in 2003.

Yet Americans who fly to Cuba without permission are taking big chances — as are the companies that help them get there.

In August, the U.S. Treasury Department’s Office of Foreign Assets Control fined online travel company Travelocity $182,750 for booking 1,458 Cuba trips between 1998 and 2004. This marked the first time the U.S. government has penalized a major online travel service for violating the embargo.

Travelocity spokesman Joel Frey told Reuters the company had unwittingly booked trips to Cuba due to technical problems and had not applied for a license.

“The trips to Cuba were unintentionally permitted to be booked by consumers online because of some technical failures several years ago,” Frey said in a statement. “In no way did the company intend to allow bookings for trips to Cuba. The company has fully cooperated with OFAC and implemented corrective measures.”

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