Andres Oppenheimer

Andres Oppenheimer: U.S.-Cuba thaw may rock Caribbean tourism

Tourists look at posters for sale in Havana, on December 18, 2014. A series of measures that US President Barck Obama announced could boost economic exchanges as the United States and Cuba move to restore diplomatic relations.
Tourists look at posters for sale in Havana, on December 18, 2014. A series of measures that US President Barck Obama announced could boost economic exchanges as the United States and Cuba move to restore diplomatic relations. AFP/Getty Images

One of the big questions following President Barack Obama’s decision to significantly expand U.S. tourism to Cuba will be how much it will affect other Caribbean tourism destinations such as the Dominican Republic, Jamaica or Cancun. Independent experts say Cancun will be among the most hurt.

According to a 2011 International Monetary Fund study called “The Vacation Is Over: Implications for the Caribbean of Opening U.S.–Cuba Tourism,” by former senior IMF economist Rafael Romeu, “the opening of Cuba to U.S. tourism would represent a seismic shift in the Caribbean’s tourism industry.”

The study said that a blanket lifting of the U.S. embargo on travel to the island — it has not happened yet, and is not likely to happen in the short run — would result in 3.5 million to 5 million U.S. tourists to Cuba a year.

As for the rest of the Caribbean, there would be winners and losers. Overall, the net effect would be an increase of up to 4 percent in total tourism to Caribbean destinations, because Cuba’s hotels would not have enough rooms to absorb the massive influx of Americans, and tourists from Europe, Canada and Latin America would most likely seek other destinations, the study said.

Earlier this week, I called Romeu and asked him about the possible impact of Obama’s new policy to relax travel restrictions, while the overall U.S. travel embargo — it can only be lifted by the U.S. Congress — remains in place.

Romeu, who has since left the IMF and now is president of Devtech, an economic analysis firm, said his conclusions remain the same, although the “seismic shift” he predicted in the study will be much more gradual in nature.

Currently, there are up to 650,000 U.S. visitors to Cuba a year, of which more than 550,000 are Cuban-Americans who travel under family visit visas. Under Obama’s new exceptions to the travel embargo, the number of non-Cuban American U.S. visitors may triple to about 300,000 over the next three or four years, he estimates.

But, rather than a disaster for other Caribbean destinations, Romeu says there will be a spill-over effect that will benefit several Caribbean destinations.

“Once Americans start going to Cuba en masse, many of the one million Canadians who travel to Cuba every year will seek other Caribbean destinations, because Cuba will have capacity constraints and prices will go up,” Romeu told me.

Among the big winners will be the Dominican Republic and other countries that have long catered to Canadian and European tourists.

“If you are an Italian and you won’t go to Cuba because it has become too expensive or you didn’t find an hotel room, you will probably go to the Dominican Republic, or other places that haven’t been invaded by U.S. tourists,” Romeu said.

Among the biggest losers will be Cancun, Aruba and the U.S. Virgin Islands, which attract mostly U.S. visitors, Romeu said. “If they don’t diversify, or lower their prices, they will get hurt,” he said.

The World Tourism Organization (WTO) shares the view that that, overall, the influx of U.S. tourists to Cuba will be a plus for the Caribbean.

Carlos Vogeler, head of the WTO’s Americas department, told me that “Cuba’s full entry into the game can strengthen the Caribbean’s position as a tourism destination in the global context. We have seen in similar cases in the past that the entry of a new competitor helps a market grow.”

Obama’s new policy comes at a good time for the Caribbean, he said. After several years of moderate growth, international tourism to Caribbean destinations will grow 6 percent this year, above the world average of 4 percent.

My opinion: Obama’s measures to relax travel restrictions to Cuba may be a blessing in disguise for Caribbean countries and Mexico.

An overnight lifting of the travel embargo would have produced an avalanche of U.S. tourists to Cuba that would have crippled Cancun and other Caribbean tourism resorts. But since the flow of U.S. tourists to Cuba will grow gradually, they will have time to prepare themselves for the new reality.

The question is whether they will diversify their clienteles or re-invent themselves as something more than sun and beach destinations, for instance building up adventure tourism or medical tourism industries. While Cuba’s opening will be gradual, they would make a big mistake by not start preparing for it now.