Monday, June 21, 2010

Cuba Travel: A Boom in the Making, or Just Hype?

Talk has been building over the past year about the possibilities of an end to the current U.S. travel embargo to Cuba.

Last year, the Obama Administration eased travel restrictions for Cuban Americans who have family on the island nation.

And since then, bills have been put before Congress that would seek to eliminate the travel ban for the rest of Americans.

Many proponents argue that it’s the right thing to do, for both moral and economic reasons.

Putting aside the political side of the debate, let’s look at the economic impact of such a decision. Some groups say that lifting the embargo would result in a boom in travel to Cuba, and would be a big benefit to the island’s economy.

But would the end of travel restrictions really result in countless planeloads full of Americans heading to the island’s beaches?

A new study by Boyd Group International casts serious doubts on that assumption.

Current Situation

At present, 95 percent of all “Visiting Family and Relatives” air travel from the U.S. departs from Miami. That should come as no surprise, given the fact that in the U.S., the Cuban community is heavily concentrated in South Florida.

(Los Angeles and New York are the only two other U.S. cities with authorized air service to Cuba.)

U.S. visitors to the island numbered 250,000 in 2009, up from 170,000 in 2008. It’s estimated that 300,000 U.S. residents could visit this year.

But that’s still a small portion of the overall visitors to Cuba, which numbered 2.4 million in 2009, according to Cuban tourism officials. Canada was the biggest source of travelers, accounting for approximately 900,000 of those visits.


But for all the talk of Cuba becoming the next big Caribbean beach resort destination, that’s still a long way from reality, according to the Boyd Group study.

“When toilet tissue is in short supply, it’s not a vacation option,” writes Mike Boyd, head of the aviation consulting company.

“At the risk of being like the schoolyard bully who tells little kids that there’s no Santa Claus, here’s a wet splash of cold reality: the whole Cuba thing is hype,” he adds.

He highlights the lack of infrastructure on the island, and points out that the Cuban people themselves live at a subsistence level.

“The Castro regime doesn’t want big time foreign investment, and can’t afford it, anyway. Want to take a bike trip across the Island? Bring your own food – the restaurants are pretty skimpy and there’s not a supermarkets to drop into. Want water sports? Not recommended. The Cuban authorities get real antsy when they see people heading out into the surf.”

Beyond Tourism

While tourism is one of the focuses in the discussion about ending the Cuba embargo, another aspect to be considered is that of trade.

American companies and agricultural producers may be looking at the island as a new market, but again, with the population living at a level that does not allow them even to afford consumer goods like cell phones, expecting to find a market of 11 million people ready to buy U.S. goods is not realistic.

And besides, as Boyd stresses, this is a U.S. embargo, not a global embargo. The Cubans can already import wheat from Canada and Australia. And China already manufactures every consumer product imaginable.

“The reason that Cuba is short of just about everything is that they are short of money, not the ability to trade internationally,” says Boyd. “Anything that the U.S. might sell them, they can already get elsewhere in the world. They don’t buy much because for the last fifty years the Castro regime has trashed out the Cuban economy.”

The end of the ban?

So, could the embargo soon be coming to an end? If history is any indication, don’t expect any movement in that direction – at least not yet.

Legislation to end the embargo has been before Congress before, just as it is now. Previous bills have gone nowhere. And this being an election year, any significant moves are unlikely, at least not before November’s Congressional elections.

Looking at things just from the economic/tourism angle, could the Boyd Group be correct in their analysis?

Is the talk of Americans traveling en masse Cuba nothing more than hype?

The Cuban government says construction will begin this year on nine new hotels.

But how much more infrastructure must be built before the island would be able to accommodate a big influx of travelers?

Given the fact that Congress has kept the embargo in place for 48 years, perhaps Cuba will have some time to continue building before the great wave of U.S. visitors arrives.

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