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What’s Behind Cuba’s Recent Report of Rapid Tourism Revenue Growth

In the first six months of 2016, revenues from tourism in Cuba rose 15% compared with the same period last year, according to Cuban government data.

The number of visitors from the U.S. soared around 80%, though from a low base. The total number of visitors to Cuba was up 11.8%.

Cuba’s National Statistics Office data showed tourism income rose to $1.2 billion in the same period, offsetting significant declines in service exports from healthcare and other professional workers sent overseas by the Cuban government.

While Canadians still make up the largest single group of tourists to the island nation, Americans came in third place after Cubans living abroad (mostly in the U.S) over the same period.

Until very recently, there were more visitors from Germany, Italy, France and Britain than from the U.S.

These numbers do not reflect the full force of the changes to the new, expanded airlines routes negotiated between the U.S. and Cuba last year. By the end of this calendar year, there will be about 110 direct, scheduled daily flights from the U.S. to Cuba, a massive increase over the number of flights under the previous charter service arrangement.

The impact of these new flights will be to further inflate travel and tourism’s contribution to Cuba’s cash flow and foreign exchange earnings – not the mention the secondary, positive cultural engagement that occurs on encounters between travelers and locals.

Hotel Saratoga Havana Boutique Hotel
Front Desk, Hotel Saratoga, Havana, Cuba

Low Hotel Occupancy

In an unusual twist, the official Cuban hotel occupancy rate remained below 50%. Experts suggest this could be because the state is failing to renovate hotels and is instead building new ones, while private bed and breakfast’s (casa particulares) thrive.

In fact, Airbnb has reported significant strength in its business in Cuba, propelling the island nation to the top ranks of its global country growth rates.

What is such a simple concept – renting a room – contains transformative potential by exposing the Cuban homeowner to a rare phenomenon in low-income countries: the prompt seizure of economic opportunity. Inevitably, competition will drive homeowners to invest in their houses using local skilled laborers; employment will grow in diverse sectors as homeowners spend profits locally rather than the investors in a traditional hotel project collecting profits in a Cayman Islands-based LP.

The low national occupancy rate belies a starker contrast with what’s happening in the Havana hotel market. Cuba’s capital city is experiencing very low occupancy rates and rising RevPar as demand soars beyond supply, especially in the luxury category.

Citing improved relations between Cuba and the US, Meliá Hotels recently reported impressive 2015 financial performance from its Cuba revenue base of $435.4 million.

The company reported 5.7 million overnight stays in 2015, with an average occupancy of more than 70%. Its Cuba hotel operation is managing hotel assets under contract with local hotels owners, a group of three military-affiliated Cuban entities: Gran Caribe Hotel Group, Gaviota SA Tourism Group Corporation and International Trade and Tourism Cubanacan SA.

Melia Hotels in Cuba

Here is Cuba’s Q1 2016 hotel pipeline.

Florida Center bed and breakfast and inn in Santa Clara, Cuba
Travelers fill the restaurant at the Florida Center bed and breakfast and restaurant. Santa Clara, Cuba. Image by Cuba Journal.
What’s Behind Cuba’s Recent Report of Rapid Tourism Revenue Growth was last modified: November 27th, 2016 by Simons Chase