Cuba Journal

Growing Pains in Cuba’s Tourism Sector

Recent media reports have reached premature conclusions that adjustments in Cuba’s tourism sector are a sign of failure for the island nation’s future as a major travel destination for Americans.

What’s wrong with this conclusion is that it misses a nuanced understanding of the forces at work in Cuba and also the narrowness of the time period under consideration.  At a human level, it misses aspects of economic transition and the fragile social implications of people discovering the economic power of their own inner resources – perhaps for the first time in generations.

ROX jewelry artisan in Havana. Image by Cuba Journal

The contemporary imagination seems to have a short memory when it comes to making sense of a new market undergoing price discovery where previously a top-heavy command and control system decided every aspect of economic activity.

Yes, in some cases, prices have risen 400% or more for certain hyper-central tourism activities in Old Havana. This is what happens when the world’s largest economy re-engages with one of the world’s smallest and the measurement period is in months.

Very little of Cuba’s travel offerings are available online (only the most expensive), so if you’re a reporter opining on what’s happening on the ground in Cuba from a shiny tower thousands of miles away, you’re likely to miss some of the finer details.

On a superficial level, consumers can easily avoid high prices. Investing a few minutes to insert a little adventure and discovery into your Cuba travel plans can yield a lot of money savings and memory making (many affluent travelers prefer this aspect of travel). Tour operators are probably your best option today.

What’s more important in Cuba is that key parts of the economy are becoming responsive to supply and demand – and the Cubans themselves are becoming a lot more responsible for their own future.

Image by Cuba Journal

Adjustments in Cuba’s Tourism Sector

As is pointed out in a recent Bloomberg article about Americans traveling to Cuba, travel prices have moderated recently – meaning the market is finding equilibrium. What’s the alternative? Prices fixed by bureaucrats?

Cuba’s hotel development pipeline is responding by adding much need rooms to inventory with the most vigorous shovel-ready projects targeting the luxury segment. Simple reasoning illustrates that airlines require a few months of planning prior to expansion while the hotel industry’s planning requires years. Thus, there is a temporary imbalance.

One recent and telling example of Cuba’s responsiveness to economic constraints occurred in the construction of the super-luxury Kempinski Hotel in Old Havana. Behind schedule and aching to absorb demand in the luxury hotel segment, the Cuban government permitted French construction firm Bouygues Bâtiment International, part of the French company Bouygues Construction, to temporarily skirt its own labor practices and import skilled labor from India to get the project completed.

There was a lot of debate about this employment practice – especially since Cuba itself has many skilled laborers – but the result is a completed project. Modest examples of this type of outcome are far more likely to influence Cuba’s government to consider reforms than the 50+ years of failed attempts to control and isolate Cuba’s government.

The Cuban People

Not only has the Cuban government permitted a long list of cuentapropistas (sole proprietors), but Raul Castro himself has publicly acknowledged the need to update Cuba’s economic system. In Cuba today, seizing opportunity by individuals motivated to visualize a future made possible through hard work and determination is likely to impact Cuba’s development more than the old school policy of, for example, building giant hotels that export profits for decades after they are completed.

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This policy change towards individual responsibility has yielded results that are neither contrary to the Cuban government nor perfectly aligned with the U.S government. It’s about Cubans contributing to their own future, and it’s a phenomenon happening elsewhere under labels like startups, artisanal economy and the broader concept in the world of the “shared economy” where there is a collaborative exchange of ideas, resources and outcomes.

Yurixa Martin Fernandez. A mother of two and masseuse in Cuba taking advantage of the surge in tourism. Image by Cuba Journal

Airbnb, the world’s leading room-rental marketplace, is the most striking example of ways in which Cubans are integrating with the global economy and finding success. In a traditional sense, Airbnb’s economic impact is relatively simple to measure. What’s different about Airbnb in Cuba is the social impact. Every dollar collected by a Cuban through Airbnb is also a deposit in the bank of that person’s emotional stability – a link to a brighter future and one that will likely involve technology.

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What is such a simple concept – renting a room – contains transformative potential by exposing homeowners to a phenomenon that is rare in countries undergoing transition: the prompt seizure of economic opportunity. Inevitably, competition will drive homeowners to invest in their houses using local skilled laborers, and employment will grow in diverse sectors as homeowners spend profits locally. Clearly, for the Cuban people, this is a better outcome for average Cubans than relying solely on traditional development through massive hotel construction projects.

And for tourists in search of an authentic Cuban experience, the appeal of staying in someone’s renovated private home is exactly the kind of genuine cultural immersion they are craving. This is the same genuine cultural immersion that $100 billion of debt-fueled development could not buy in Puerto Rico.

Last year, Airbnb announced that Cuba was its fastest growing country in the history of its platform.

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Discovering one’s inner resources and then acting on it is not about being counter-revolutionary or capitalists but comes closer to just letting human nature find expression under conditions of scarcity. In fact, much of humanity’s greatest artistic and economic achievements came about because of scarcity – and Cuba’s vibrant music, art and cultural scenes are a testament to this phenomenon.

Right now, perhaps for the first time in 50+ years, more than 500,000 Cubans have an emotional and financial investment in taking control of their future through self-direction as cuentapropistas, including Airbnb hosts. This is social and economic transition at work – and is also what is being missed by the media by drawing overblown conclusions based on short-term airline schedule adjustments.

More striking is that this result is surfacing after just a few months of U.S. engagement and a just few years of reforms implemented by Raul Castro himself. Imagine what could happen in the next five years if the present dynamics are permitted to expand.

Some argue the U.S. should suspend engagement with Cuba and, because of our differences, revert to our previous control and isolation polices. But comparing Cuba’s progress to conditions in Saudi Arabia, a key U.S. ally, point to a deep contradiction in this line of thinking. The theocratic absolute monarchy controlled by the yoke of the Saud family carries out mass executions of dissidents, beheads drug dealers, systematically subjugates women and has supported and funded extremist groups like al-Qaida and ISIS.

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Furthermore, our most important economic ally, communist China, has already capitalized on many of the key development opportunities in Cuba in a variety of sectors from infrastructure to tourism.

Florida Center paladar (private restaurant) in Santa Clara, Cuba
Growing Pains in Cuba’s Tourism Sector was last modified: March 31st, 2017 by