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Cuba: Tourist markets spark busines in re-emerging Havana
Travel Markets Insider / October 2001

By Larry Luxner

HAVANA -- Eric Montelongo stands amid his collection of well-worn books and magazines, hoping a customer will wander past on this searing hot late-summer day.

Here, displayed on rickety wooden racks and tables, one can find everything from "Registro Social de La Habana 1950" to "El Diario de Ché en Bolivia." There's also a stack of old National Geographics for $3 each, and a copy of Fidel Castro's "History Will Absolve Me" right next to "Depression" by Walter Jung.

On this particularly oppressive afternoon, however, no one's buying.

"We wish there were more Americans here, especially Cuban-Americans," says Montelongo. "They spend more than anyone else, and they don't bargain."

A few stalls down from Montelongo is Antonio Yero Villegas. The 38-year-old habanero proudly displays his "licencia para trabajar por cuenta propia," which gives him permission to sell, among other things, papier maché 1957 Cadillacs and 1936 Habano trucks for $6 each.

Villegas and Montelongo are among 300 or so vendors at the Feria de Malecón, a large open-air market located on 1ra Avenida, between D and E streets in the Vedado section of Havana -- and just down the street from the U.S. Interests Section and the adjacent Anti-Imperialist Plaza.

The market, officially known as Atarraya, has been in existence since 1994, around the time Cuba legalized use of the U.S. dollar. In the beginning, stalls were set up on a large grassy area, but four years ago, the area was paved in anticipation of a tourist influx. The market is open every day except Wednesday, and attracts a horde of European tourists staying at nearby hotels such as the Riviera and the Meliá Cohiba.

Havana has three such tourist markets. In addition to the Feria de Malecón, there's also Parque de 23 (along La Rampa, right behind the Hotel Habana Libre) and the Feria de la Catedral in Old Havana, right near the cruise-ship docks.

Although tightly regulated by the government, these markets are one of the few places in Cuba where tourists can truly interact with locals in any kind of commercial setting. And the tourists keep coming -- despite Washington's 42-year-old ban against U.S. travel to the island and Cuba's well-earned reputation for poor hotel service, crumbling infrastructure and monotonous food.

Cuban officials say nearly two million tourists will visit Cuba this year. Of that total, cruise ships will bring up to 100,000 of those visitors, a 23% increase over the 82,000 who arrived via cruise ship last year. Some 300 cruise ships are scheduled to dock somewhere in Cuba during 2001, most of them at the cruise-ship terminal in Havana. The Castro government is also modernizing the southern port of Casilda, in Sancti Spiritus province, to receive cruise ships for day trips.

According to the business newsletter CubaNews, that kind of preparation will help Cuba compete with other Caribbean islands that already cater to cruise-ship tourists.

"The cruise-ship sector appears to be the fastest-growing segment of the tourism industry at this point, as growth rates for other groups have slowed considerably over the past couple of years," says the Washington-based monthly. "However, cruise-ship tourists spend far less money than most other tourists. They tend to stay in Cuba for only a day or so, rarely stay at hotels and eat most meals on board. Their major purchases usually are souvenirs, drinks and lunch."

If the U.S. embargo against travel to Cuba were lifted, cruise-ship arrivals would jump dramatically, since 90% of the Caribbean cruising industry caters to American tourists, and Miami is one of the world's largest cruise-ship ports.

But that seems unlikely as long as President Fidel Castro remains in power. In late July, the House of Representatives voted 240-186 to lift long-standing restrictions on Americans traveling to the Caribbean island. The House passed a similar bill last year, but it died in the Senate. In practice, some 20,000 to 30,000 Americans visit Cuba annually -- most of them illegally -- but they're increasingly facing fines and even the threat of prison terms as the Bush administration gets tough with tourists who attempt to circumvent the embargo via third countries like Mexico, the Bahamas and Jamaica.

So for now, vendors at the Feria de Malecón and other informal outlets must content themselves with Spaniards, Italians, Germans, Canadians and Argentines that make up the bulk of Cuba's 1.5 million or so annual visitors.

Like nearly all other shopping outlets in Cuba, the Feria de Malecón accepts only dollars, but prices are generally low, and tourists can find a vast assortment of cheap souvenirs here, including baseball bats for $2, hand-painted wooden domino sets for $12 and even live birds for $5 each. Also for sale are papier maché dolls, wood carvings, Ché Guevarra T-shirts, cigar-smoking puppets, scale-model Cubana planes, musical instruments made out of Coke cans and any number of beads and trinkets.

Along the Malecón itself, a dozen or so artists spread their work over the sidewalk, adding a bright splash of color to an otherwise drab city. Some of these paintings are downright tacky -- one common variation is to paint a 1957 Plymouth parked in front of the Bodeguita del Medio bar in Old Havana and call it art -- though others are real masterpieces.

One of the better artists, 30-year-old Yenima Cruz Rodríguez, is here morning until night selling her intricately painted scenes of market women with baskets of fruit and vegetables on their heads. Most of her paintings are in the $15-25 range, a fraction of what similar works of art would cost in Puerto Rico, the Dominican Republic or Jamaica.

"Some days I don't sell anything," says the aspiring artist. "Other days, I might sell 10 paintings. At least I make enough to live on."

Rodríguez says she has to pay $159 in monthly taxes to the Cuban government, regardless of how much she sells. She also pays a daily fee of 45 pesos (about $2.15) for every day she occupies her space at the market.

At the Old Havana market -- by far the largest and most interesting of the three in Cuba's capital city -- between 450 and 500 vendors exhibits their wares in a vast area that operates Wednesdays, Thursdays, Fridays and Saturdays, from 8 a.m. to 6 p.m.

One of them is 21-year-old Katya Martínez, who sells colored necklaces and beads. Like many others here, she works on commission, which is technically illegal since under Cuban law, the cuenta propistas may not employ assistants or helpers.

"The artist is a young guy, same age as me," she says. "He has to make the ceramic pieces, send them to be burned in a kiln. Afterwards he paints them and assembles the pieces together. He pays me 10% on everything I sell. On an average day, I sell $30, so I keep $3."

Martínez, whose husband works in a government warehouse, says each necklace costs $2-3, and that her best customers are Italians, French, Germans, Mexicans and Spaniards. "The Americans like to look, but they don't buy," she says, adding that "from this we don't get rich, but we can live on it because we know how to budget our money."

Next to her is Danis Sotolongo, a 32-year-old doctor who sells hammocks and embroidered goods. Like Martínez, she also works on a 10% commission, but she also makes little girls' dresses on the side, and gets to keep 100% of the proceeds of those sales.

Sotolongo, who got married in 1989 and graduated from college in 1993, earned 520 pesos a month (around $25) from her job as a doctor. She quit and came here because, she says, "otherwise I wouldn't be able to make it."

Sotolongo is hardly alone.

"Many people have left their state jobs because they can do better in the informal economy," says a Western diplomat here, noting that today, approximately 150,000 Cubans are self-employed, down from over 200,000 cuenta propistas only five years ago.

"Part of it is that some of them have gone out of business. Others have gone underground because the inspections and fines were onerous," said the diplomat, who asked not to be identified. "These things are tolerated, but not encouraged. The government tightly controls such activities. Today, if you try to apply for a license, it would be quite difficult to get one."

The U.S. Interests Section, not far from the Feria de Malecón, is Washington's equivalent of an embassy in Cuba. It knows all too well about government regulations.

In addition to 50 or so Americans, between 250 and 300 Cubans (many of them presumed to be Communist spies) work at the Interests Section. "We have to hire them through state agencies," said an official there, adding that "the Cubans won't even let us have a cafeteria."

The same rules that prevent street artists like Rodríguez and hammock sellers like Sotolongo from making more money extend to upscale tourist shops and boutiques that also compete for the tourist dollar.

A perfect example is the Nassau-based John Bull Group, which opened its first Cuban store in Varadero seven years ago. Last December, the chain inaugurated a 104-square-meter outlet in Havana's Centro Comercio Comodoro. But it doesn't plan to expand any further for the time being.

"It's difficult working here because your hands are so tied," said Mike Russell, foreign operations manager at John Bull, which has 20 outlets in the Bahamas -- specifically Nassau, Paradise Island, Abaco and Eleuthra.

"Everything has to go through the Cuban government," Russell told Travel Markets Insider. "In the Bahamas, we operate our business pretty much how we want to, but here, we're not able to do the things we want. For instance, we can't have any interaction with the staff like giving them incentives to make them want to go out and be true salespersons and sell until they can't sell anymore. That's a hindrance. We put the merchandise there and staff get paid whether they sell or they don't."

Another thing that irks Russell is Havana's constantly changing customs laws.

"Customs has taken more control of the country, and from what I understand, they're starting to tighten up on regulations and make sure everything is done by the book," he said. "They keep changing the rules and regulations to try to get back on track."

John Bull is in Cuba thanks to a joint venture with Universal, a division of Cuban state tourism agency Cubanacan. Universal operates the two stores and provides the employees, while John Bull, through exclusive contracts, stocks the outlets with gold and silver jewelry, Colombian leather goods, and watches by Rado, Gucci, TAG Heuer and Citizen that start at $60 and go as high as $400.

The Havana store is located in a large shopping mall at the intersection of Calle 84 and Tercera Avenida, across the street from the Miramar Trade Center, an 18-story office complex being financed by Israeli investors and scheduled for completion in 2006. Besides the Comodoro, nearby hotels include the Meliá Habana, the Neptuno, the Tritón, the Panorama and the Novotel Miramar.

But John Bull attracts not only tourists; most of its patrons, in fact, are foreign diplomats and local Cubans with access to dollars.

"Business is growing every month as people find out about us," Russell said. "This whole area is being developed with hotels and trade centers. It's becoming a real center of activity."

Russell, who declined to specify how much his company has invested in Cuba, said his only real competition is Coral Negro, a Cuban entity that sells watches and jewelry. But that chain sells Seikos and Swatches, and "they're not in the same ball park as us," he says.

"We do have a concession for perfume, but we found after a few years that it really wasn't worth continuing. If we had four or five outlets, maybe it would be worthwhile," he said. "We have to see how things go. It's been a long battle up to this point. We're just fine-tuning now. Hopefully tourism will increase enough to where they have the money to come shop with us."

Russell isn't the only one betting on an influx of well-heeled visitors.

The Cuban government -- aware that it faces increasing competition from other Caribbean destinations such as Barbados, the Dominican Republic and the Bahamas -- recently inaugurated a beautiful new, air-conditioned passenger terminal at Havana's José Martí International Airport. The Canadian-built terminal, complete with giant potted palm trees, glass elevators, immaculate new duty-free shops and car-rental kiosks, is a welcome change from what was there before; in many respects it's nicer than the airports that serve Montego Bay, Jamaica, or San Juan, Puerto Rico.

In Old Havana, 19th-century colonial buildings have been renovated and freshly painted, with new signs pointing the way to the most important tourist attractions. Vintage Buicks, Chevys and Oldsmobiles dating from the 1950s now share the streets with yellow Coco Taxis -- odd-looking, three-wheeled, vehicles with Italian motors and Cuban-built bodies that transport tourists around the city for $12 or less. And no less than half a dozen car-rental agencies vie for tourists' business, whereas 10 years ago there was only one, Havanautos.

But most importantly, hotel construction has been exploding all over the island. One hotel chain alone, Spain's Grupo Sol Meliá, has 20 properties throughout Cuba, and plans to add three more in coming months.

According to government statistics, the number of tourist-caliber hotel rooms jumped from 12,900 in 1990 to just under 35,300 last year. Of that total, about 65% -- or around 23,000 rooms -- are in four and five-star facilities. By year's end, Cuba hopes to boost the total number of tourist-class hotel rooms to 40,000.

Currently, 50 out of Cuba's 227 major hotels are under foreign management. The Cuban government, through Cubanacan and a number of other state-owned companies, owns 31,410 rooms, or 89% of the total, while ownership of the remaining 3,880 rooms is shared on a 50-50 basis with foreign partners.

Yet now, reports CubaNews, the government says it'll no longer build and manage large luxury hotels by itself, "a recognition that previous efforts to do so have been inefficient and marked by projects that many tourists felt did not meet their standards."

The newsletter quotes Tourism Ministry officials as saying that in the future, all new large hotels will be built and managed in partnership with foreign companies. At present, Cuban-managed properties are far less popular than foreign-managed hotels because they are poorly maintained and tend to have worse service and fewer amenities.

One of the island's newest and splashiest hotels is the 690-room El Senador on Cayo Coco, along Cuba's north-central coast. The five-star property, which cost around $66 million to build, will be jointly managed by Cubanacan and a Canadian group known as TMSA. The property covers 74 acres and is partially built over a lagoon on the shores of Cayo Coco. It has 3,280 feet of private beaches and boasts over 70 cabanas linked by floating bridges. And Varadero is chock-full of luxury hotels, with new ones seeming to rise every day.

In Havana, the undisputed king of new properties is the Meliá Cohiba, a 22-story, five-star luxury hotel with 342 double rooms, 39 junior suites, 61 suites and 20 senior suites. All rooms feature satellite TV with pay-per-view channels, direct-dial phone and Internet access, minibar, safety deposit box, 24-hour room service and spectacular views of the Atlantic Ocean.

Completed five years ago, the Meliá Cohiba is the crown jewel of Sol Meliá's Cuban properties. Rooms range from $165 for a single to $215 for a double. Despite persistent attempts to reach them, key officials of the Meliá chain were never available for interviews -- undoubtedly a consequence of the U.S. trade embargo and threats by Washington to impose penalties against Meliá officials for having invested in "confiscated" property.

Meanwhile, older hotels still flourish, such as the venerable Hotel Nacional, where rates are comparable to that of the Meliá Cohiba, and the somewhat seedy 215-room Capri in Havana's Vedado section, which offers single rooms for $52 a night, and double rooms for $64 a night.

In addition, private accommodations flourish throughout key tourist areas, with enterprising young men and women often passing out business cards to foreigners who might need a place for the night but can't afford the Nacional or even the Caprí.

Isis García, a 55-year-old Havana woman, recently moved out of her apartment so she could rent it out to tourists for $30 a night.

Her fourth-floor walkup (the elevator rarely works) is located in an eight-story building at Infante and Humboldt streets, and is certainly nothing to brag about. The apartment, which dates from the early 1950s, has no air-conditioning, no reliable hot-water supply and a kitchen about the size of the average American bathroom. On the other hand, it does have a working telephone, and it's within walking distance of the Hotel Nacional and the shops and nightclubs along La Rampa, Havana's main drag.

"This is a very touristy area," says García. "A lot of people rent clandestinely and don't pay taxes to the state. Everything they get, they pocket. But you run a lot of risk if you proceed that way. It's better for the tourist if you go by the book."

García, who visits the apartment once a week to clean it up for her next tenants, normally pays a 5-10% commission to friends "who have connections with tourists, or Internet connections" that bring her clients. Despite the taxes she has to pay, García says renting out her apartment has allowed her to save a little money for her retirement.

"It's not going to make you rich unless you live in Miramar and own a four or five-bedroom house," she says, adding that "I've owned this apartment all my life, and I will until I die."

To some Cuba-watchers, the mere fact that people like García are allowed to rent out their apartments might be evidence enough that things are changing. Even such limited private enterprise would have been unthinkable in the 1980s, before the fall of Cuba's chief benefactor, the Soviet Union.

But not everybody is lucky enough to own an apartment that tourists would want to rent, or fortunate enough to have relatives in Miami who send money regularly. So in effect, a kind of apartheid has taken hold in Cuba, polarizing society between those with dollars and those without. And as long as the 75-year-old Castro is alive and in power, little is likely to change -- either in Havana or in Washington.

"Cuban officials will tell you things have stabilized because of the minimal reforms of the mid-90s, and because of tourism and legalization of the dollar," said the foreign diplomat. "If you have access to dollars, your life is better. If you don't, life is no better and in fact could be worse, because prices have gone up."

Danis Sotolongo, the hammock salesgirl at the Feria de la Catedral tourist market, would surely agree.

She claims that most of her fellow vendors are university graduates like herself who speak English or another foreign language, while the people they work on commission for are generally not educated.

"When everything changed in 1990, the professionals had to look for something else to do in order to survive," she said.

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