Industry sees great opportunity in re-establishing relations with Cuba

President Obama’s announcement on Dec. 17 that the U.S. would re-establish diplomatic relations with Cuba and relax some current travel restrictions raised the hopes of U.S. hotel companies, airlines and cruise lines that have long awaited an opportunity to enter the Cuba market.

Obama’s policy changes would not end the ban on recreational travel to Cuba by U.S. citizens; pure tourism, as opposed to educational exchanges, remains off limits for now. Americans still will not be able to legally hop on a plane to Havana, lounge on a Cuban beach or spend time at an all-inclusive property in the resort area of Varadero.

Those restrictions probably will remain in place until the Cuba trade embargo, in place since 1960, is removed. But that will require action by the U.S. Congress, where the leaders of the incoming Republican majority last week vowed to fight even normalization of relations with Cuba, much less resumption of trade.

“We believe there is no greater way for Americans to break down barriers than through their unimpeded travel.” — Travel Leaders Group CEO Barry Liben

Even so, the Cuba announcement surprised and delighted tour operators and travel sellers, all of whom said the news boded well for the future of travel.

“We believe there is no greater way for Americans to break down barriers than through their unimpeded travel,” Travel Leaders Group CEO Barry Liben said.

At the same time, however, several industry leaders cautioned that Cuba’s lack of adequate infrastructure and hotel room inventory could pose serious challenges to tourism there.

Moreover, while the U.S. travel industry clearly sensed great potential in a newly reopened Cuba last week, the implication for island nations in the wider Caribbean region remains unclear.

In 2013, Cuba tourism numbers totaled 2.8 million, overshadowed by the 4.6 million posted by the Dominican Republic but higher than the visitor totals for the Bahamas, Jamaica and Puerto Rico.

Through September of this year, Cuba visitors numbered 2.2 million, up 3.7% over the same period last year. Those figures included approximately 170,000 authorized travelers from the U.S., according to the

Department of Commerce, among them museum and special-interest groups and mainstream travelers on people-to-people programs.

Reinstated in 2011, the people-to-people programs enable U.S. citizens to participate in educational activities that promote contact with Cubans in various walks of life.

Under the revised travel policy, general licenses will continue to be available for authorized travel to Cuba in 12 categories, from humanitarian and religious groups to professional researchers and athletic competitors, provided that the arrangements are handled by licensed Travel Service Providers authorized by the U.S. Treasury Department’s Office of Foreign Asset Control (OFAC), which oversees all travel to Cuba.

Regulations governing the people-to-people category will continue to require a separate license.

In his speech announcing the re-establishment of diplomatic relations with Cuba, which were severed in 1961, Obama reiterated that he believed in the power of the people-to-people programs.

However, people-to-people operators expressed hope that the license for those products, which currently requires a lengthy reapplication process every year or two, will be folded into the general license category.

“We devote months to preparing the forms to reapply for the license each time it comes up for renewal,” said Tom Popper, president of Insight Cuba.

For its part, OFAC “expects to issue its regulatory amendments in the coming weeks,” according to a statement on its website. “None of the announced changes takes effect until the new regulations are issued.”

Some of the changes announced by Obama mean that Americans who travel legally to Cuba will be able to use credit and debit cards in the country, email their friends back home and bring back $400 in souvenirs, including up to $100 in alcohol and cigars.

Peggy Goldman, president of Friendly Planet Travel, predicted, “With new rules that are sure to come in the next weeks, there will be many more opportunities and less restrictions regarding how Americans are able to travel to Cuba.”

More relaxed rules, she said, will permit Friendly Planet and other companies offering people-to-people programs greater latitude to offer a wider variety of itineraries.

Still, she added, “If the changes are as sweeping as President Obama suggested in his speech, we will be busy adding hotel rooms and new travel programs to our menu of offerings.”

Michael Goren, president of Group IST, a company that recently launched weekly departures on a people-to-people program that explores Cuba via mega-yacht, said he happened to have been standing near the port in Old Havana when church bells began to peal throughout the city during a speech by Raul Castro on Dec. 11 simultaneous to Obama’s announcement.

“People were excited, crying and confused, wondering what it will mean for them,” Goren said.

He said that the Havana he was standing in “feels like a time capsule. If people want to see the country as it is right now, this is the time to come.”

Goldman echoed that sentiment.

“In time, this island in a time bubble will becoming something else,” she predicted. “We expect that many people will want to see it before those changes occur.”

In fact, people-to-people operators reported a huge surge in phone and online inquiries last week regarding Cuba travel.

“Lots of calls today, but we are miles away from having real clarity on what this means for the people-to-people program,” said Greg Geronemus, president of SmarTours, which will launch its 11-day tour in April.

Ronen Paldi, president of Ya’lla Tours USA, called the announcement “great news” but urged caution.

He questioned how Cuba would handle the possible flow of many more Americans, given the hotel situation, and wondered if airlines would open service from gateways other than Miami.

Abercrombie & Kent USA President Phil Otterson said the operator looked forward to an expansion of opportunities under the people-to-people journeys, and Tauck’s Katharine Bonner, the vice president who oversees its Cuba program, said the operator stands ready to embrace the opportunities that Obama’s announcement represents.

On the other hand, airline analyst Bob Mann cautioned not to expect any significant changes soon for general tourism to Cuba.

“U.S. carriers, including American and American Eagle, have been operating scheduled charters to Havana for more than a decade, whose passengers require a U.S. Treasury permit to travel,” Mann said.

Cuba has six international airports, of which those in Havana and Varadero are the most frequently used by scheduled carriers.

Mike Boyd, president of Boyd Aviation International, said the argument for air travel is that U.S. companies “are champing at the bit to get in there, but so are companies from other countries, and the Cubans haven’t let them.”

U.S. cruise lines currently cannot call in Cuba, and it does not appear that will change anytime soon.

“We’ve got to assess all the implications and what that would mean for the cruise line before Cuba could be added as a destination,” said CLIA CEO Christine Duffy.

Roger Blum, a consultant with Cruise & Port Advisors in Miami, agreed.

“It’s still a long process,” he said. “I can’t imagine any cruise line itinerary planners changing itineraries yet.”

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