There is no other major destination in the world with visibility on 500% growth in travel and tourism other than Cuba.
A recent IMF working paper, “Revisiting the Potential Impact to the Rest of the Caribbean from Opening US-Cuba Tourism”, suggests, “the apprehension of the Caribbean tourism industry towards a change in US travel policy to Cuba is understandable, but likely unwarranted.” This conclusion (and others) is based on the results of a “gravity model” simulation using the following equation:
Cuba’s potential for astounding growth is a direct result of its being largely sidelined from the U.S. market for decades, a situation that has never occurred before on a national level. The resulting preservation of its culture and natural resources is what you can call travel gold, in part, because of its attractiveness to a segment of affluent travelers seeking authentic experiences. The impact on the Caribbean will be significant but in ways the industry may not be anticipating.
The truth is that Cuba is what the travel industry would love to be if it could.
It makes a difference that Cuba is the largest island in the Caribbean, has the largest bio-preserve in the Caribbean, has by far the lushest diving sites in the Caribbean and has more history, art, cigars, rum, dancing, singing and architecture than the rest of the Caribbean combined.
Yet there is another deeper layer to consider about Cuba’s future as a force in travel that defies most traditional planning models and expectations. On one level, the IMF working paper ignores the changes that technology is having on the travel industry – and the fact that the past may not apply to the future.
On another level, the IMF’s paper seems to treat the travel industry as a monolith that can be explained by comparing high level statistics published by governments. In this case, what’s missing is the important distinction between tourists (mass market) and travelers (niche). Cuba’s regional impact is not likely to materialize in terms of huge shifts in the flow of tourists but rather in the profit margins associated with affluent travelers’ desire to experience authentic culture and unspoiled natural environments. Even when margins aren’t a large factor, traveling to Cuba often involves something closer to “experiential travel” that is hard to find elsewhere in the Caribbean and is in high demand.
Add the rare phenomenon of reverse nostalgia to the Cuba equation and things start to get big.
One little known fact about Cuba that is easily overlooked until you visit the island nation is the virtual absence of modern commercial advertising. In fact, Havana is one of the few remaining major cities in the world where garish advertising does not frame the view of every street corner. The same applies to all of Cuba’s urban environments and rural landscapes. This feature alone has the power to subtly shift affluent travelers’ spending patterns.
Tourists vs Travelers
Tourists in the mass market category are characterized by low margin, fixed price travel lasting less than a week (and often only one day) whereas travelers in a niche category tend to spend more and stay longer and seek out memory-making experiences involving authentic culture or some form of adventure travel.
Last year, more than 20 million Americans traveled to Mexico. In the same period, about 600,000 American traveled to Cuba. But if you exclude Cuban-Americans (who are typically not tourists staying in hotels and going on tours), only about half of the 600,000 can be classified as tourists.
Cuba received more than 4 million visitors last year, making it the second most traveled island in the Caribbean after the Dominican Republic. Many of these visitors to Cuba were non-U.S. (Canada being the largest single country of origin) and were concentrated behind the all-inclusive walls of resorts in places like Veradero.
With a whole new group of Americans entering Cuba, demand for luxury hotel rooms, diving trips, cultural tours and art buying has surged.
It is no mistake that the Cuba’s hotel construction pipeline (new construction and renovation) contains many luxury offerings for business and leisure.
A New Path for Economic Development
Traditionally, a country like Cuba would embark on a plan to develop giant hotels and port terminals to attract mass tourism. But there are significant problems with this type of economic development that are both financial and cultural. The Dominican Republic has capitalized on mass tourism with remarkable success as measured by its top line growth rate, yet Puerto Rico’s $100 billion+ debt-fueled spending binge has been a failure, leaving the island in a self-described “death spiral” and the trauma of bankruptcy despite its desirable Caribbean locale.
The big projects required to transform an economy towards mass tourism tend to be highly developmental during construction, yet after completion the employment base that once attracted skilled laborers transitions to lower-paid, non-skilled service jobs like waiters and maids. And the profits generated locally are almost always exported outside the host country.
This type of development has a potential social impact in that it preserves the cultural boundaries that separate first world primacy over third world depravity in structured environments designed to meet the financial interests of the providers of capital. The human, cultural side becomes secondary, and a “vinyl” sameness spreads across every venue. Local art, cuisine and culture are too often replaced with chain restaurants, strip mall-style ports and Chinese-made kitschy souvenirs.
Getting to scale in mass tourism infrastructure is typically funded through long-term institutional credits. International financial institutions (IFI’s) like the World Bank and the Inter-American Development Bank were created do this type of lending on a country level, among other things like providing economic development advice.
Hidden deep in the complex U.S. embargo against Cuba, specifically the Helms Burton Act, there exists an explicit prohibition against IFI’s lending to Cuba. The law requires the U.S. to withdraw financial support to any IFI doing business with Cuba.
Without significant external credits, Cuba’s growth plans for its vital tourism sector have to be accomplished mainly with meager internal savings and the “scrappiness” of its people. Luckily, Cubans are incredibly inventive and creative.
While the Chinese are active in Cuba, there has yet to be any massive push for investment in the travel and tourism sector.
The Future for Cuba & Airbnb
When former U.S. President Obama visited Cuba in 2016, Airbnb’s CEO, Brian Chesky, accompanied the entourage of business leaders and entrepreneurs aboard Air Force One.
There was an entrepreneurial event in Cuba where Chesky’s membership as a Presidential Ambassador for Global Entrepreneurship (PAGE) helped insert the company into Cuba’s existing program for casas particulares (Cuba’s legal provision for room rentals in private homes).
The results were immediate. Last year, according to Chesky’s public statements, “Cuba is the fastest-growing country on Airbnb ever in the history of our platform.”
Today, the company has more than 15,000 listings in Cuba – equivalent to the inventory of dozens of hotels that would have taken years to build. With the U.S. embargo cutting off the possibility for large-scale infrastructure development, Airbnb’s web-enabled platform is emerging as a vital tool for powering growth in Cuba’s tourism sector.
Expanding on its plans to re-invent travel, the company has embarked on a new program called Experiences. The idea is to facilitate deep engagement between hosts and travelers in such areas as sports, nature, social impact, entertainment, food and arts.
The Cuba Journal spoke with Jordi Torres, Airbnb’s Regional Director – LATAM, who said about the Experiences program, “Since we launched, Havana has been the market with the most bookings and demand.”
Without the traditional large-scale infrastructure projects to support the scaling up of Cuba’s tourism sector, Airbnb has, virtually overnight, filled a void by supplying rooms where hotel demand far outstripped supply. In the process, the company’s lower-cost, higher experiential way to create memories for travelers and hosts in Cuba is not only likely to impact the entire Caribbean but potentially the whole nature of travel everywhere.