Power cuts and shortages of basic items plague the Communist-ruled island’s vital sector
by Ed Augustin (in Havana) (Financial Times)
A swashbuckling history, vintage cars, Caribbean beaches and one of the safest destinations in the Americas: in theory, Cuba’s tourism industry should be booming.
Yet annual visitor numbers to the Communist-ruled island nation have almost halved in six years, falling from 4.7mn in 2017 to 2.4mn last year. And since an electricity grid failure caused four days of nationwide blackouts last month, tour operators said they have had significant cancellations from worried tourists with bookings in the high season, which stretches from November through March.
“While there will always be food and water for tourists with dollars in their pockets, we can’t guarantee that the lights will be on, so we have to advise customers to bring rechargeable torches, fans and power banks,” said Gareth Johnson, founder of Young Pioneer Tours.
Tourism is Cuba’s third-biggest source of scarce foreign exchange and one of the mainstays of an economy that has been strangled by a US trade embargo in place for more than six decades and a new wave of powerful sanctions imposed since 2017.
Last year tourism brought in $1.3bn out of total hard currency earnings of $8.4bn, well behind the $4.4bn that Cuba earned from exporting its state employees, mainly doctors, on contract to friendly countries.
European and US tour companies said regular power cuts resulting from a lack of money to import oil were just part of a web of logistical problems making it increasingly difficult to operate on the island.
Record-breaking outward migration has eviscerated skilled labour in the tourism sector, while a shambolic, cratering economy has left tour operators scrambling to find accommodation that can offer constant running water, petrol for transport and basic ingredients for tourists’ food and drinks. They said state hotels were often forbidden to buy from the private sector and forced instead to buy from poorly stocked state suppliers.
“The first thing people ask for when they arrive is a mojito — but often the hotels can’t even serve that as they don’t have any Cuban mint,” said one European tour operator, speaking on condition of anonymity.
The struggles of hospitality operators form a stark contrast with the high point of Cuban tourism seven years ago, which followed on from the normalisation of Cuban-US relations under President Obama. After cruise ships and commercial flights were restored between the two nations for the first time in more than half a century, a deluge of American tourists flooded the long-forbidden island.
Airbnb obtained a licence to operate in 2015, Marriott opened its first hotel the following year, and the capital Havana became so popular that it was hard to find a room. But then the first Trump administration, under pressure from the Cuban-American lobby to take a tougher approach, in 2017 scrapped the Obama thaw and shut off access to the US market. Americans were prohibited from staying in hotels linked to the Cuban military, flights were pared back and cruise ships were banned.
A broader wave of sanctions brought further pain for the tourism industry, much of which is controlled by the Cuban military holding company GAESA. Trump’s activation of part of a 1996 law on Cuba enabled Americans to sue foreign firms for using property they had owned before it was nationalised by the Cuban government in the 1960s.
This riskier legal environment scorched hundreds of millions of dollars in foreign investment that had been slated for tourist infrastructure, said people familiar with the situation, and allowed Cuban-Americans to sue Florida-based cruise lines for more than $400mn for having used docks in Havana. That case was finally dismissed by a US appeals court last month.
In 2022, under the Biden administration, visa-free travel to the US was rescinded for people from dozens of countries, including every country in the EU, who had visited Cuba.
“At least 40 per cent of the tourists that get in touch with me decide not to come after they discover that they can’t travel to the US on the visa waiver programme if they come to Cuba,” said Lucy Davies, director of Cubania Travel.
American and European tour operators said the cascade of sanctions had snarled up businesses. One, who asked to remain anonymous, said the Treasury Department had seized more than $200,000 in payments and they were sent for tourist services following one of Trump’s new measures in 2019. Another has had multiple accounts with European banks and fintech groups frozen since 2020 and said that since their main business account was frozen this month, they have struggled to pay staff salaries.
Another tour operator said that in order to get around restrictions on sending money to the island, in effect “all of us have become money launderers”.
Visitors are not happy either. A tour guide leader from the US on a brief stay at one of the capital’s newer hotels after a recent hurricane said “there was no water the whole night . . . then the water came on again briefly this morning. But I missed my window to get a shower.”
That was not the only problem: “The locks on doors to rooms don’t work and the air conditioning doesn’t work properly,” he said.
At the same time, other countries in the Caribbean are gaining market share. The Dominican Republic welcomed more than 10 million tourists for the first time last year, four times as many as Cuba. Puerto Rico and Jamaica have also recovered strongly since the pandemic.
Paolo Spadoni, a political economist at Augusta University, said tourism in Cuba had “flourished” until the Covid-19 outbreak, but it was facing “a lost decade”.
“Cuba’s tourism recovery in the post-Covid era is one of the worst in the entire Caribbean region,” he added.
If Cuban-American senator Marco Rubio is confirmed by Congress as the next US secretary of state, the island’s faltering tourism sector is likely to face greater threats. Rubio claims to have
“directly designed” the first Trump measures against the island.
“From a business perspective it’s much more lucrative, and much less hassle, to work in other parts of the world — even Mogadishu!” said the director of one European tour company. “It’s only a personal love for Cuba that keeps us bringing visitors to the island.”
https://www.ft.com/content/75c830f8-0906-4365-88ba-ba7a7fdf0108