Warning signs from US on Cuba
Published: Sunday | July 4, 2010
Dennis Morrison, Contributor
Caribbean tourist destinations which have benefited from the decades-long ban on United States citizens travelling to Cuba, should take as a serious warning, the vote, last Wednesday, by a committee of the United States House of Representatives to reverse these restrictions. The vote by the Agriculture Committee on a bill which covered restrictions on travel and the sale of American commodities could be the first step towards Congressional approval of the lifting of what is the most enduring trade embargo in modern history.
Though there has been talk of such a move for some time, the strong, pro-embargo, Cuban-American lobby has managed to stall efforts in the US Congress to ease travel restrictions and were supported by the threat of a presidential veto under President George W. Bush. Relying on the stalemate to keep competition from Cuba at bay, Caribbean policymakers and the industry in the region have yet to lay out a plan of action to manage the consequences of a post-embargo era, giving lip service instead, while carrying on business as usual.
The proposed Travel Restriction Reform and Export Enhancement Act, which must still pass the Foreign Affairs and Financial Services Committees before being voted on by the full House of Representatives and then by the Senate - a tall order - is being pushed as part of the drive to boost US exports. The bill is supported by several powerful business and farming groups, including the US Chamber of Commerce, and has attracted some Republican support. It comes after the Obama administration lifted travel restrictions last year, on Cuban-Americans with family members in Cuba.
Playground for US tourists
Prior to the trade and travel embargo which was imposed in 1962 and '63 in the aftermath of the Cuban missile crisis, Cuba had been the playground for US tourists and was by far the largest recipient of American visitors to the region. Jamaica was a major beneficiary of the diversion of the tourist traffic, experiencing rapid growth after 1963, while other destinations such as the Dominican Republic, Cancún, and The Bahamas also surged. These destinations, together with Puerto Rico, The US Virgin Islands, The Cayman Islands, Bermuda and Belize, today attract the bulk of US visitors to the region.
The results of various studies of the likely impact on the Caribbean of the lifting of the US travel ban suggest that Cuba's tourist arrivals would surge to full capacity at the expense of other Caribbean destinations. The low travel costs from the US is seen as one of the major factors that would spur the shift in visitor traffic, but the effect of short-run supply constraints in Cuba's tourist industry is less clear. According to an International Monetary Fund (IMF) Working Paper published in July 2008 [Vacation Over: Implications for the Caribbean of Opening US-Cuba Tourism], it is likely that pressure on Cuba's capacity would lead to a shift in tourist traffic from European and other developed countries to neighbouring Caribbean countries.
It also pointed to the possibility, depending on the timing or pace of Cuba-US tourism liberalisation, that Cuba could seek to hold on to non-US visitors even while preparing to attract increased US arrivals. Neighbouring tourist destinations, especially the ones that are heavily dependent on the US [like Jamaica] would lose the most if they are not prepared for the change. Because of the scope for increased US tourists to Cuba and the possibility that non-US tourists would be redirected to neighbouring countries, the study anticipates that total Caribbean arrivals could increase by up to 11 per cent.
Apart from Puerto Rico and The US Virgin Islands, the most heavily dependent Caribbean destinations on the US and the most vulnerable should the legislation to lift the travel ban be passed include, The Bahamas, The Cayman Islands, Cancún, Bermuda, Jamaica and Belize. The Bahamas has the highest level of dependence, with 80.5 per cent of their stopover visitors in 2008 coming from the United States. The Cayman Islands was slightly less at 79.3 per cent, and Cancún at 77.6 per cent.
Of the big players, the Dominican Republic would be by far the least vulnerable, as it has a highly diversified tourism market with only 27.4 per cent of its stopover visitors in 2008 coming from the US. Europeans accounted for 34 per cent, Canadians 16 per cent, and others 26 per cent. Antigua, Barbados, and St Lucia also have highly diversified markets with dependence on the US at less than 40 per cent in each case.
Jamaica, with 65 per cent, would be highly exposed. While Jamaica has reduced its dependence on the US market from over 70 per cent in recent years by doubling Canada's share of our visitor arrivals to 15.9 per cent in 2009, we have hardly moved the needle in Europe. This will require a broadening of our marketing activities and deepening of the partnerships with European investors that have entered the local tourist industry since 2001.
An early lifting of the US travel ban may not happen, but we should be anticipating change. Success in managing the increased competition that would accompany such a move will require accelerated improvements in Jamaica's tourism product. These must cover accommodation, but more important will be those things that contribute to positive visitor experience - public order, attractions that showcase our cultural heritage and natural assets, world-class entertainment, and so. These are the aspects of visitor experience that will give Cuba an edge when the lifting of the restrictions begins.
Dennis Morrison is an economist. Feedback may be sent to email@example.com.
It is not necessary for the travel and trade bill to go to two other committees (Foreign Affairs and Financial Services). The chairmen, Howard Berman and Barney Frank, support the legislation and can waive mark-up by their committees.
The whole House could vote in July and the Senate as early as September, or after the mid-term US elections in November.
Limits on Cuban tourism infrastructure capacity could make joint destination travel an attractive option for Jamaican resorts and the airline.