Starts and Stops in Cuba’s Tourism Industry

By Katheryn Felipe  (Progreso Semanal)

HAVANA TIMES — In the face of Cuba’s financial deficit and after the economy opened itself up to self-employment in 2016 and several non-agricultural cooperatives being approved in 2012, tourism has been one of the sectors that has promoted Cuba’s economic expansion the most and it has remained one of the top sources of fresh hard currency.

Even though the losses caused by Hurricane Irma were less than what had been anticipated, Cuba has already received approximately 3.6 million visitors this year, by the end of September, over half a million more than in the same period in 2016.

It was first President Raul Castro and then the Tourism Minister Manuel Marrero, who claimed that all “[state-run] tourism installations” would be up and running for the peak season, in mid-November. Economist Jose Luis Perello also believes that the industry will have all of its “tourist attractions” at destinations ready. There’s only one month left.

But now, on top of all of this, the media drama that surrounds the alleged sonic “attacks” that several US diplomats and one Canadian suffered has begun to have repercussions that go beyond political symbolism and bravado.

The mysterious episode has rather become an excuse for the US Department of State to withdraw a part of its diplomatic personnel in Havana and to demand that a good number of Cuban officials at the Embassy in Washington be withdrawn in turn, which holds up the process of issuing visas and other consular services to travelers in both countries greatly.

The US government has also issued a travel warning to its citizens saying that Cuba isn’t a safe place for them.

All of this adds to the disaster-filled landscape Irma left behind. However, it isn’t the only thing if we want to consider a complete recovery. In the face of this situation, the private sector’s participation will also be decisive in keeping up the level of services that international visitors can enjoy. [No mention was made by Castro of any assistance to private businesses damaged by the hurricane, only the ones owned completely or in part by the Cuban military.]

With around ten non-agricultural cooperatives, about 1800 restaurants and 22,214 rental rooms nationwide, what’s called “self-employment” (since there is no legal figure for small and medium businesses) plays a big role in food and lodging of guests. In the first semester of 2017, a year which should end with around 4,700,000 visitors, the private sector has given accommodation to 30% of travelers who came to Cuba. Even so, handing out new licenses for independent work within this sector continues to be suspended.

Perello explains that these arrivals demand the presence of the private sector because it is providing an accommodation capacity which, if grouped together into a chain, would be the second largest hotel firm in the country in terms of number of rooms, after the military’s Gaviota. This noteworthy fact adds a new perspective as to why new licenses for private workers were suspended.

On the other hand, growth rates of tourists arriving in Cuba and the development of hotel and alternative accommodation infrastructure nationwide that have been planned by state authorities allow them to project that the number of foreign visitors in 2030 could exceed 10 million, without including another 5 million passengers who visit on cruises. This would transform Cuba into Latin America and the Caribbean’s second tourist destination, only preceded by Mexico.

Understood by the Cuban government to be a “strategic” sector, tourism, which today rakes in approximately 3 billion USD, could bring in more than 10 billion, which would make up double of what all of the island’s exports generate in revenue, according to a study by the Latin America Initiative at Brookings.

The same study exposes the ambivalent vision the government has had with regard to tourism for decades, a sector it has turned to “half-heartedly in times of crisis”, and maintains that private home rentals “are unusually efficient drivers of growth”, “that mobilize savings and channel them towards productive activity.”

In Perello’s words, the leading role of the private sector is due to the “need of ensuring accommodation, restoration and leisure facilities, that meet the demands of growing influxes of visitors who come in search for something other than beach tourism, which the state-led sector has taken on with trouble – due to time and resources.”

From 2013 onwards, state-led hotel firms, companies and agencies in the tourism sectors were directly connected with the private sector, but an IPS report states that Resolution No. 28, issued on May 24th 2017 by the Tourism Services Business Group, “has stopped the signing of any new agreements between its bodies with the private sector of the economy until further notice because of “shortcomings that were detected.”

However, last June, the general director of Development, Investments and Business at the Tourism Ministry, Jose Daniel Alonso, admitted to the press that only “a revision of some issues that have to do with contracts and approvals is being carried out.”

The official then stated “that there wasn’t any disapproval of private services within the tourism sector” and he mentioned “the extremely important role” this plays, especially in marketing and building projects across the archipelago.

The Ministry of Labor and Social Security’s Resolution No. 22, which suspended permits to work in about 30 different areas, until the “self-employment fine-tuning process is completed”, came into effect on August 1st this year. The list includes licenses for private renters of rooms and apartments and accommodation promoters.

Although experts agree that the private sector needs to be better organized and controlled, they defend the need to put all forms of management on the same level playing ground and to give independent workers greater liberties to do business with state-run companies.

Economist Omar Everleny Perez points out in his book “SMEs in Cuba: utopia or necessary reality?”, that it is fitting “that the private sector, which is emerging, can become a dense fabric of small and medium size enterprises in the medium-term,” opening up current accounts and managing payment methods used in banks.

In the economist’s point of view, this would reduce operation costs and the risk of accumulating too much cash. Plus, the private sector’s connections with the state-owned business sector and institutions would be financially viable and facilitate the control of legalities and interrelations and the formation of value chains within the private sector and cooperatives.

Perello also puts his money on the connection between independent workers and the public tourism sector. The expert highlights that private accommodation allowed the government to dig a chunk out of the lodging deficit because up until late June this year, the state-led sector had 67,770 rooms for tourists, but only 89.9% (60,900) were available.

At that time, 19 foreign hotel firms were managing 41,079 rooms, plus “the high number of travelers staying in private home rentals showed that its level of bookings were well above the business system,” Perello points out.

Jorge Fernando de Armas, a young man who owns a house in Matanzas, is thinking there are still many differences and that greater equality between the state-led and private tourism sectors could be reached. What the visitors seek in his house is “personalized attention, interaction with a Cuban family, their traditions, culture and lifestyle.” This, without dismissing the financial aspect, as prices and conditions are directly negotiated with owners.

With many limits still on their businesses, private renters, who have existed in Cuba since 1997, are the self-employed who contribute the most to the State with their taxes. Before and after Irma, the private sector’s support has been a lot more than “some small complement” in Cuba’s tourism industry.