CubaNews / May 2012
By Larry Luxner
For years, the conventional wisdom was that an eventual end to the U.S. embargo against Cuba would open the floodgates for millions of curious Americans dying to visit the once-forbidden island — while the rest of the Caribbean would, at least initially, suffer a sharp downturn in U.S. tourist arrivals.
After all, before the 1959 revolution that brought Fidel Castro to power, Cuba and Haiti were the region’s top destinations. Back then, relatively few Americans vacationed in Puerto Rico, Aruba or the Dominican Republic.
But times have changed, and these days, tourism officials throughout the Caribbean don’t seem the least bit worried about the so-called “Cuba threat.”
In fact, the word Cuba was barely uttered during the course of the 16th annual Caribbean Hotel and Tourism Investment Conference in San Juan, Puerto Rico. Of much more urgent concern to delegates at the Apr. 24-26 meeting was a punishing U.K. airline passenger tax that has dramatically boosted the cost of air travel between Great Britain and its former Caribbean colonies — and the lingering effects of the global economic slowdown that have hurt member countries from Barbados to Belize.
Yet just about every tourism authority interviewed at the San Juan conference told CubaNews that an end to the U.S. travel ban would only help their islands.
“Forget the competitiveness issue. We have an island called Cuba just north of us that will open up in democratic fashion,” said Josef Forstmayr, president of the 50-year-old Caribbean Hotel & Tourism Association, which speaks for 725 hotels and 375 other allied members.
“Cuban consumers have been behind the fence for so long that they’re just dying to get out,” said Forstmayr, an Austrian who’s also managing director of Jamaica’s Round Hill Hotel and Villas. “This is a starved market. The sooner we can create air links for them to travel, the better. There will be enormous opportunities for inter-regional investment.”
Hugh Riley, secretary-general of the Barbados-based Caribbean Tourism Organi-zation, said he’s not worried at all about Cuba as a potential rival.
“We sell diversity. The fact that Cuba will become an even greater magnet to draw more visitors into the Caribbean is something we all welcome,” Riley told us. “Cuba will also be a source of visitation around the Caribbean.
“It’s a two-way street, and Cuban people no doubt are as keen to get out an experience the rest of the Carib-bean as the world is to experience Cuba once things change,” he said.
Some 190 people attended the CHTA’s San Juan event, though not a single Cuban official was among them — nor were any invited.
That’s a consequence of the current state of U.S.-Cuba relations, which Forstmayr said has “deeply disappointed” him.
“If you remember in the ‘90s, you had a real opportunity to open up to Cuba under President Clinton. We were all investing in it. We built bridges to Cuba and brought them in as members of CHTA. But then the political realities changed, and it all fell apart,” he said.
“There’s a general feeling that once Cuba develops alongside systems of Western-style democracies — which will eventually happen — this is going to be our most important driving force for tourism development in the entire region. There will be some initial competitive advantage and some diminishing of arrivals into some of our islands. Cuba is so geographically dominant, yet acts as a barrier between North America and South America. Just imagine when it’s open.”
Alec Sanguinetty, director-general of the Miami-based CHTA, quipped that Cuba is already open — just not for Americans.
“Cuba already has major markets in Europe, Canada and South America, so we have to keep this in context,” he said. “It’s not new to tourism, so we don’t see this as having a major impact because [our member countries] have known for some time that the day will come when U.S. citizens will be allowed to visit. They’ve been preparing for it.”
Besides, he pointed out, “the initial movement will be Cuban-Americans returning from South Florida. With the infrastructure that is there now, the capacity to manage that influx will leave very little room for true visitors going to Cuba for a tourism experience.”
The undisputed leader in Caribbean tourism is the Dominican Republic, with 4.3 million tourist arrivals last year. Cuba, by comparison, received 2.7 million visitors.
Tourism is now a crucial source of foreign exchange for both countries; in Cuba’s case, it brought in more than $2 billion last year.
Enrique de Marchena Kaluche, managing partner of the DMK law firm in Santo Domingo, is ex-chairman of the Caribbean Hotel & Tourism Association as well as the Tourism Association of the Dominican Republic.
Speaking at the San Juan conference, he said roughly 1.3 million tourists visited his country during the first three months of 2012, a 7.9% jump from the year-ago period.
During that time, arrivals from Canada rose 3.7%, from the United States 13.2% and from South America a whopping 22.9%.
D.R. hotel occupancy now stands at 85.6%, and the country has just over 65,000 rooms, more than any other Caribbean destination (Cuba, by comparison, has 56,705 rooms).
Kaluche credits effective marketing and promotion for the dramatic increase.
“Five or six years ago, we had a promotion budget of about $15 million, which was nothing. Today it exceeds $50 million,” he said. “We’ve diversified our markets and products.”
North Americans account for about 60% of all tourist arrivals to the Dominican Republic, but Western Europe’s percentage is declining as new markets emerge.
In 2005, the country received 7,500 Brazilians, rising last year to 28,000. Likewise, only 14,200 Russians visited the D.R. in 2005. By last year, that number had jumped to 125,000. That’s a 58% increase from even 2010 figures.
“That gives you an idea how the market mix is changing,” he said.
Russians today represent 3.3% of all visitors to Dominican shores. Punta Cana International Airport, the country’s largest, now receives 12 weekly flights from Russia on Boeing 747s; nine are handled by Transaero, and three by Aeroflot.
The Dominican government operates tourism offices in both Moscow and St. Petersburg, and is promoting Puerto Plata and Samaná in addition to Punta Cana as major destinations for Russian tourists, who tend to spend more than the average visitor on excursions, luxury items and souvenirs.
Carlos Vogeler, regional director for the Americas at the World Tourism Organization, said that for the first time in history, one billion people will cross international borders as tourists this year.
Germany is currently the top international outbound market, followed by the United States and China.
“Seven destinations — Dominican Republic, Puerto Rico, Cuba, Jamaica, Bahamas, Aruba and Barbados — constitute 75% of all arrivals to the Caribbean, but there’s a high dependency on markets such as the U.S., Canada and Europe,” he said. “These are precisely the markets that have suffered during the recent financial crisis.”
No Caribbean destination depends more on the U.S. mainland market than Puerto Rico. Nicole Rodríguez, chief marketing officer at the Puerto Rico Tourism Co., said more than 90% of all visitors to her island are American citizens who don’t need passports to fly there because it’s a U.S. commonwealth and has been since 1952.
But still, she said Puerto Rico needs to diversify, and urgently.
“We know Latin America is a tremendous opportunity for us, for one thing, because we speak the same language,” she said.
“Right now, we can’t do any marketing efforts without having direct air access. How-ever, for the past two or three years, we’ve been in negotiations, and we trust that by the end of this year we’ll be able to announce new air routes to Mexico, Brazil, Argentina, Colombia and Chile.”
Adam Sacks, president of Tourism Economics Inc. and an expert on Caribbean tourism trends: “Brazil will achieve visa waiver status with the U.S. in the next two years. If we can get reciprocity, it’s going to open up the Caribbean market even further. The demographics are very strong.”
In 2009, Brazilians spent $11 billion on outbound tourism, said Vogeler. Lifted by 7.5% GDP growth in 2010 — the country’s best performance since the 1980s —that figure more than doubled to $21.2 billion last year.
Those impressive numbers aren’t lost on tiny Barbados. A British colony until 1966, the English-speaking island of 290,000 inhabitants depends more on U.K. tourism than any other jurisdiction in the Caribbean.
In 2008, British visitors accounted for 38.7% of the 567,700 tourists who visited Barbados that year, though by 2010 that share had fallen by 17.7% to 181,054 visitors (or 34%) — a drop largely blamed on a controversial air passenger tax imposed by London that’s added up to £83 ($130) per ticket in economy class.
That’s when Barbados tourism officials decided it was time to look elsewhere.
“Brazil recently surpassed the U.K. as the world’s sixth-largest economy, so Barbados — recognizing the fact that Brazil is a dynamic, emerging nation — decided to go into that market two years ago,” said Colin Jordan, director of business development at Mango Bay Hotel and president of the Barbados Hotel and Tourism Association.
In June 2010, Brazilian low-cost carrier Gol kicked off weekly service between São Paulo and Bridgetown’s Grantley Adams International Airport. That has eliminated the need for Brazilian vacationers to transit Miami — and has also slashed several hours of flying time in the process.
“The numbers so far from Brazil have not been tremendous. We only have one flight a week coming out of São Paulo,” said Jordan. “But the private sector has determined that we need to get together and develop that market to spread our risks.”
Cuba is also receiving record numbers of both South Americans and Russians. Last year, 76,500 shivering Russians left their country to vacation in Cuba — generally at all-inclusive resorts in Varadero — more than double the number who visited in 2009. Argentines, meanwhile, are poised to edge out British and Spanish visitors as the No. 4 source of tourism to Cuba after Canadians and U.S.-based Cuban exiles.
As of Mar. 15, some 29,000 Argentines had visited Cuba so far this year, up a staggering 40% compared to the same period in 2011, according to Ministry of Tourism statistics.
Other leading South American markets for Cuba — which received a total of 2.7 million tourists last year — are, in descending order of growth, Chile, Brazil, Peru and Paraguay.
Is Puerto Rico worried about an eventual opening of U.S. tourism to Cuba? Hardly, says PRTC’s Rodríguez.
“Cuba has been under communist rule for so many years that people will want to go. But I don’t think it’ll be a threat to Puerto Rico specifically, because it will take so much time for them to develop the country,” she told CubaNews. “Remember also that we have the advantage of no U.S. passports required.”
William Jonckheer, senior vice-president of the CTO and president of the Curaçao Chamber of Commerce, said he’s not particularly worried either.
“I think Cuba might become competition for the mega-destinations of the Caribbean such as the Dominican Republic and Jamaica, but it’s going to take Cuba 15 to 20 years to get up to par to where the rest of the Caribbean is now,” he said. “A lot of people will visit Cuba at the beginning, but in the short term is it not going to hurt the Caribbean.”
And if recent history is any guide, Cubans could one day stay in smaller, cheaper hotels across the region — much as adventure-seeking tourists from the former Soviet bloc have boosted tourism from Spain to Switzerland.
“Look at Eastern Europe and when it opened. The Russians are now creating winter seasons in the Alps that never existed before. The Alps are all full of Russians. They’ve filled up all the resorts,” said the CHTA’s Forstmayr. “There is no Caribbean people that doesn’t love to travel, and the Cuban consumer is going to be ferocious. To me, that’s the biggest opportunity of all.”