How Airlines & Hotels Will Benefit From Cuban Tourism

How Airlines & Hotels Will Benefit From Cuban Tourism
By Vanessa Page AAA |

For many Americans, the word Cuba conjures up ideas of Guantanamo Bay,
embargoes, and economic sanctions. For older generations, Cuba might
elicit memories of the Bay of Pigs Invasion, the Cuban Missile Crisis,
or even the Cuban Revolution.

Going back further, Cuba can be thought of as a hedonistic paradise
where rich Americans would party and socialize during Prohibition. Since
1960 though, Cuba has been strictly off-limits for the few Americans who
want to visit. The country became diplomatically and economically close
with the USSR and enjoyed subsidies until the Soviet Union collapsed in
1991.

Cuba, faced with growing debts and the loss of an enormous ally, began
to look for other ways to make money. The solution, as it was with many
Caribbean nations, was to open the doors to tourism. Soon, Cuba began
receiving a large number of tourists, mostly from Canada.

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In 2008, Fidel Castro, the man who led the Cubans to revolution, stepped
down as president, and his brother, Raul, began to ease the country
towards capitalism. With the implementation of the 2011 economic
reforms, Cubans are free to profit from certain jobs, to rent rooms
privately, and to buy and sell real estate. For months, President Obama
spoke with President Castro about normalizing relations between the two
nations. In late 2014 the presidents agreed to a long-term strategy, and
in April 2015, President Obama removed Cuba from the "State Sponsor of
Terrorism" list.

Although travel to Cuba is still officially frowned upon, American
travelers and tour companies are taking the potential fines and
penalties for disobeying the sanction with a grain of salt.

LET'S VISIT CUBA, EH!
Canadians and Europeans are regular visitors to Cuba and have come to
enjoy the authenticity of a country untouched by American capitalism.
When walking the streets of Cuba, 60-year-old cars roll by, people are
repair things rather than buy them new, and no one seems to be keeping
up with the Joneses. This is in stark contrast to Cancun where, after
lying on the beach, a tourist can walk five minutes to a local Wal-Mart
(WMT), grabbing a Starbucks (SBUX) latte on the way.

When the media started announcing that Americans could soon visit Cuba,
Canadians jumped into action and began booking trips to experience Cuba
"one last time" before it becomes overrun by American businesses and the
beaches of Varadero become indistinguishable from those of Key West. For
airlines and hotels, now booked solid three months in advance, this
change in American policy is good for business.


HOME SWEET HOME
For Cuban-Americans who risked their lives and left their families for a
chance to live in America, the new attitude towards Cuba is excellent
news. For Cuban-Americans wanting to visit their long-lost relatives and
experience their native culture, eased travel restrictions mean that a
trip to Cuba will be merely a short flight away. For small airlines,
there's ample opportunity for inexpensive "shuttle" flights to and from
the island and Florida. For the national carriers, the potential for
daily Havana flights from cities with a high Cuban minority might be too
lucrative to pass up.

In addition, Cuban-Americans are now allowed to remit up to $2,000 per
quarter (up from $500), and all Americans will no longer have daily
spending limits on their bank and credit cards. With an increase in
trade opportunities, Americans will be allowed to return home with up to
$400 of Cuba's famed cigars and, with the export of technologies, Cubans
will (eventually) have better and more reliable access to the internet.

THE AMERICANS ARE COMING!
For an average American, there's an air of mystery about Cuba. While
some people may have seen photos or heard about a Canadian friend's
trip, for the most part, the island is enveloped in secrecy and rumors
that the country is stuck in a time warp.

Like the Canadians and Europeans, Americans will be drawn to the
authenticity of Cuba and will flock to experience it before the mom and
pop shops are driven out of town by big box retailers. In fact, the
Cuban government estimates that 1.5 million American tourists will visit
the country annually once their country allows them to.

In 2010, Americans accounted for only 2.5% of Cuba's 2.5 million
visitors. Since the announcement to ease travel restrictions, some tour
operators are seeing bookings jump by 250%, and again, Americans still
don't have full authority from the government to travel to Cuba and the
airlines and hotels are still not officially advertising for or
traveling to Cuba. Once the border is fully open, Americans will pour
into the country.

WHERE WILL WE STAY?
A problem that is frequently discussed is the crumbling tourism
infrastructure in Cuba. The country is currently expanding the Havana
airport and existing hotel operators are, presumably, following suit.
But, with deep pockets and a reputation for quality, it's the big
players in the hotel world, including Hilton (HLT), Marriott (MAR),
InterContinental (IHG), and Accor, who will be looking for investment
opportunities on Cuba's white sandy beaches.

With Caribbean resorts and airlines working in tandem, it won't be long
before package deals are advertised in the Sunday paper and the new
hotels complain about AirBnB taking away their revenue. Add on the Cuban
casa particular (informal B&Bs) and suddenly there's a lot of options
for travelers: high-end, all-inclusive resorts, mid-range B&Bs and, who
knows, perhaps a youth hostel will open up to cater to backpackers.

THE BOTTOM LINE
The ease on travel restrictions is bittersweet. Americans are thrilled
with the idea of visiting a previously taboo country, while Canadians
are wondering what will happen to their beloved tourist destination that
consistently offered cheap last-minute vacation packages and resorts
catering to French-speaking guests.

Basic economics tells us that, when demand for a product or service
increases, the price goes up. With an economic shock like a huge new
market of consumers, prices can increase substantially. While this is
great news for the airlines looking to expand into Cuba, and for hotels
looking at the cash cow that is a major tourist attraction lacking
quality hotels, for consumers, Cuba no longer screams "great deal."

Source: How Airlines & Hotels Will Benefit From Cuban Tourism
(WMT,SBUX,HLT,MAR,IHG) -
http://www.investopedia.com/articles/investing/061215/how-airlines-hotels-will-benefit-cuban-tourism.asp?partner=mediafed