What will happen if the US lifts Cuba Travel Restrictions and what can Americans expect?
Cuba is ill prepared for US tourism despite the island being 90 miles from its southern most shores. The massive influx of US tourists would bring with it massive problems for the Cuban authorities and government unless a coordinated effort was implemented. This may already be taking place behind the scenes. Below are a few of the issues that will sooner rather than later need to be addressed:
Tourist Accommodations
In Cuba´s three high seasons of: summer, winter (Christmas/New years) and Easter, rooms at most hotels are fully booked even today. Visiting tourists from Europe, Canada and the rest of the world occupy to capacity the hotels in most areas of the island. As a quick history lesson, basically, it is only since the early 90´s that Cuba began building hotels for foreign tourists, preferring previously to modernize those hotels built in the pre-Castro era. New hotels have been built largely through joint ventures with entities from the countries where the tourists were likely to originate. This has caused a gradual increase in rooms in line with the increasing tourism volumes from each world region or individual country. Sol Melia, for example, has built hotels for the Canadian and European markets, some even built from the get go with European power sockets and 220 Volt requirements. If the US market is to be embraced, would these operators be forced by the Cuban parties in these joint ventures to provide room availability to visiting Americans? As a direct result would they abandon the very markets that have allowed their growth? Will Canadian tourists be traded for Americans in order to appease the Cuban governments desire to show the world that the “US has arrived”? This may sound underhand but is not uncommon. For instance, when the US began selling food to Cuba in 2005 Cuba simply canceled orders with some of its oldest suppliers from Canada and Europe in order to craft a political message that trade was recommencing with the US.
Private Accommodations
Back in the 90´s and, before the arrival of heavy foreign investment in its tourism infrastructure, the government handed out 1000´s of permits allowing Cuban´s to rent out rooms at their properties to foreign visitors. After the democratization of the Soviet Union (Cuba´s main trading ally) Cuba simply wanted/needed more tourists to prop up the ailing economy. Cuban families applied for licenses and agreed to pay, via written affidavit, upwards of 256 CUC (about 300 USD) per month, or 20 times the average Cuban salary, to rent out each room at their homes. Therefore, 3 rooms being an astronomical (in Cuban terms) 900 USD per month. These monies were payable whether the owner had clients or not, posing the threat of massive debt if the owner was unsuccessful in his attempts to rent. This brought with it owners who would request the said permit only for the high season months, a move quickly countered by the authorities via new laws, written over night, to prohibit the reapplication for licenses within a 6 month period if the applicant had previously had a license. The result of this was many budding entrepreneurs simply stopped renting while others continued without a license. To counter this, yet another law was introduced essentially allowing the state to confiscate any property used to “illegally” accommodate foreign nationals (Illegal being without the said license). No exception was made for those with foreign nationals as family or where a foreign national was married to a Cuban national. Basically, the couple would be unable to stay at the spouses own property or risk losing the home if found out. Therefore, the once thriving private house (casa particular) suffered heavily. Finally, once state built accommodations which matched (now the late 90´s) the arriving tourists, licenses were revoked, discontinued or heavily penalized to the point where this type of accommodation, that once house 10s of thousands, has all but vanished.
Yachts, Cruises
This could be one way to allow Americans to see Cuba without the burdens associated with accommodating them. The biggest problem with this is that the past President, Fidel Castro, considered Cruise tourists as vagabonds coming ashore commenting in Jan 2008 “these are floating hotels leaving behind rubbish, empty cans and paper” but little income. This all but stamped out this type of tourism. Even the 2005 approved joint venture to upgrade the Havana cruise terminal began but was abruptly stopped at just three berths in 2007. A similar joint venture signed to upgrade Havana´s second deepest port, Mariel, was also finally never allowed, instead being tied up in autocratic red tape. Small marinas for private yachts and motorboats are also very few and far between and would be at capacity (on the north coast) with less than a thousand vessels from the US but most already are half full with non US vessels.
Visas and Flight restrictions
Currently tourist visas are sold (about 23 USD each) in blank form to Tour operators, airlines and Travel providers in volume and are completed by the said agents for their clients. Basically, anyone can get one and there are no restrictions on who has them to enter the island. Cuba could introduce tourist visas for Americans similar to those required by all foreign visitors.
These visas could be LIMITED for the US and, to counteract crossover (non US visas being sent to the US) those currently available, which have no nationality restrictions, be abolished and new ones created to cater for Americans and Non Americans. This would be one way of limiting visitors but, as mentioned earlier, very, very few Americans would be able to visit Cuba because of the physical absence of accommodation for them. Flight restrictions, where Cuba would limit landing rights to US planes, coupled with the said visa requirements would almost certainly be introduced, limiting the American arrivals significantly.
Credit and debit cards, Travelers Checks
Those Americans accustomed to using their credit cards to make purchases while on vacation will have a nasty surprise in Cuba. US credit cards do not work on the island. Due to the embargo, US banks are forbidden from allowing transactions to take place in Cuba. Cuba´s clearing for credit card payments does not allow US cards to be used as no contact can be achieved between the card holder’s bank and Cuba´s billing system. Travelers checks issued by US banks will also be useless in Cuba. Therefore US visitors will need to travel with all of their vacation monies in cash.
Building New Hotels
Such a move will almost certainly be what US developers are dreaming of. Nevertheless, the lifting of travel restrictions does not imply the lifting of the economic embargo, the embargo being the limiting factor here because US companies would still be prohibited from investing in Cuba. Creative ways of circumventing the embargo will be found by the some entrepreneurial Americans but, these will be limited to risk takers rather than the bigger players. Cuba itself will begin to court non US partners to build new hotels based upon the promise of increased tourism from the US but, the investment process in Cuba is especially complicated and all joint ventures must be signed by the council of ministers. There is no joint venture that has taken less than 1 year to approve while most take several years. Add this to the time to bring the new accommodations to fruition (habitable rooms) and you are looking at a 4 year window of time to increase just a few thousand more hotel rooms.
Communication, Cell Phones and Internet
Visiting Americans will notice one important thing when they arrive in Cuba. No cell phone coverage and no available roaming to choose from. Most US phones will not work in Cuba even with a Cuban GSM sim installed due to differences in frequencies. Cuba installed European systems for its cell phone coverage provided by a Spanish company which is not compatible with almost all US carriers. Some triband US phones will work (if liberated) with a Cuban sim card but this would mean paying 65 USD, filling out contracts for a line. Roaming cannot exist due to the Cuban Embargo limitations and the fact that NO US mobile carriers have termination agreements (needed to allow the exchange of monies in roaming scenarios) with Cuba and, creating them could be impossible or at best extremely difficult because, it would mean that the US carrier send money to the Cuban government for the use of its network as a result of calls made by visiting US Citizens. A situation nightmare for the operators because, more than once, money owed to Cuba for fixed line phone calls has been embargoed by US courts to pay settlements in law suits filed in the US against Cuban companies or, in some cases, the state.
Internet – About 5% of all Cuban hotels offer hotspot WIFI. Others offer a few machines near the lobby in a type of Internet Café. Less than 1% of Cuban hotel rooms offer internet. Americans will find it very difficult to access the internet as a result of this.
GPRS/3G
There is neither GPRS nor 3G connection available in Cuba. There are unconfirmed reports that high level officials and the military have access to GPRS but, I have never seen even a signal in Cuba on any frequencies. Therefore Blackberry´s and other GPRS/3G powered devices will not work in Cuba at all.
Buying Real Estate
No foreign national can buy real estate in Cuba. A law exists based upon the Law 77 for foreign (1995) investment to allow the building and subsequent sale of Real Estate condos to foreigners but, only around 30 buildings or 1200 condos were ever built and all were sold. Some resales may exist but these will be a handful at most. No projects of this type have been approved since 2002, being a clear signal from the Cuban government that they have no intention of allowing ongoing investment in this sector. Furthermore, existing Cuban property is not available for sale. In fact no law exists to allow Cuban´s to sell to each other, this being replaced by a barter system called a “permuta” where growing families can exchange their smaller house for a bigger one when older people no longer require the larger home they have. No money is supposed to exchange hands in these transfers and is formally prohibited. Property could therefore be purchased but no title deed is feasible plus, once authorities discover the sale took place (IE you live at your home) the property is confiscated under existing local law.
Car Rental
Car rental in Cuba is very difficult to obtain and vehicles are often substandard simply because of the roads on the island. It is not uncommon to find cars of 3-4 years old with over 80K miles for rent. Cuba has opted for “one destination tourism” in places like Varadero, Holguin and the islands of Cayo Coco and Cayo Largo, specifically offering little or no car rental in these locations. The current fleet of vehicles is already stretched to capacity in Havana and Santiago. Issues would also probably arise with US insurance companies refusing to offer cover in Cuba due to repatriation costs and the problems related to paying for medical care on the island in the event of a claim. The embargo would essentially prohibit such payments as it stands today.
Travel insurance
Claims made against an insurance company would probably work if the policy holder was looking for a refund of costs incurred and paid by the policy holder. Bigger problems would arise in repatriation and hospitalization cases because it would be extremely difficult for US insurance companies to pay Cuban government owned hospitals (all are) due to the embargo.
So?
So to recap, millions of Americans will want to visit Cuba but will be unable to. Estimates indicate that Cuba could handle about an extra 2 million tourists (total: 4 million) per year based upon current infrastructure but ONLY by filling empty beds in low season months. High season (4-5 months per year) is already fully booked and has been for several years. Cuba will probably trade about half of its current tourism for American tourism meaning that availability in its mainstay markets (Canada, UK, Europe) built up since mid 90´s, will be reduced significantly. Cuba will be unable to move up market on pricing because clients from non US markets will be unable to pay the excessive pricing plus, Cuba has little if any properties that could be marketed at higher prices than today´s, these being already high compared to other Caribbean destinations who generally offer more higher standard accommodation than Cuba´s extensive range of 2 and 3 star properties and lower amounts of 4-5 star properties.
It’s therefore obvious that lifting Cuban travel limitations for Americans is the way to go on a political standpoint, the antiquated motives for the ban now being outdated. The world has moved on since the proliferation of communism, the angst of the cold war and feuding neighbors. The only point here is that even with the travel ban lifted the embargo plus technical and physical limitations will still exist for many years to come, meaning the numbers of Americans visiting Cuba will still be very few. Don´t pack your luggage just yet!
