Now That Cuba Is Open, Americans Aren't Going
Last year they couldn't wait to see Havana. This year airlines cut
service. What happened?
by Justin Bachman
February 17, 2017, 9:45 AM GMT+1
America, did you miss the travel industry's memo declaring Cuba the
hottest new destination?
Apparently. Service to the long-time U.S. foe began in September, but
after just five months the largest carrier to the island, American
Airlines Group Inc., cut daily flights by 25 percent and switched to
smaller jets on some routes. Meanwhile, Silver Airways Corp. reduced
weekly flights to six Cuban cities and JetBlue Airways Corp. downsized
its planes so as to match lower-than-expected demand.
"It's going to take a really, really long time for [Cuba] to become a
Caribbean destination that's as popular as some of the other ones,"
Andrew Levy, the chief financial officer for United Continental Holdings
Inc., told Bloomberg News in November.
While the rest of the Caribbean is hopping with the U.S. winter break
crowd, Cuba has some unique problems. The big one is that airlines, with
no real idea about demand, were overly ambitious when they jousted for
the limited routes allowed by U.S. regulators. With a mandate for only
110 daily U.S. flights—20 into Havana, the most popular destination—the
carriers tumbled over each other last year to get a piece of the pie,
leaving the island oversubscribed.
The air rush into Cuba "wasn't based on demand but speculation. They had
no history to look at," said Karen Esposito, general manager of Cuba
Travel Network, which specializes in tours to the island. Now they do.
Silver Airways described additional obstacles, pointing to the
complications accompanying U.S. travel arrangements to Cuba, along with
too much capacity from larger carriers. Still, spokeswoman Misty
Pinson said, the Fort Lauderdale, Fla.-based airline "is optimistic
about the future growth potential in Cuba."
Former President Barack Obama announced an opening of relations with
Cuba in December 2014, calling previous U.S. policy, which sought to
isolate the communist government, a failure.
Despite Obama's efforts to spur U.S. engagement with the country,
including a state visit in March, the 54-year-old U.S. embargo remains
in place. The law prohibits tourism to the island by Americans and makes
financial transactions burdensome.
Today, most people traveling to Cuba individually classify themselves as
participants in "people-to-people" exchanges, one of the dozen
categories authorizing travel under U.S. Treasury regulations.
The policy thaw led to an immediate surge by "early adopters" who wanted
to see the tropical island, said Tom Popper, president of Insight Cuba,
a tour operator in New Rochelle, N.Y. "The number of passengers we were
sending tripled in very short order, and it lasted all of 2015 and most
of 2016," he said. "And much of that was just the extraordinary level of
awareness" of the Cuba policy changes.
But with liberalization has come a painful lesson in capitalism—for
tourists, anyway. The new interest in Cuba led to rapid price inflation
(as much as 400 percent) for state-run hotels, taxis, and other traveler
services—before any U.S. commercial flights had begun. Some rooms now
cost as much as $650 per night, serving as a major deterrent to
Americans hunting for novel warm-weather destinations.
Even the costs of classic car rides and dinners at popular paladares,
private restaurants run by families, have in some cases tripled, Insight
Cuba says. Prices have begun to moderate this year for the first time
since 2014, the company said this week. But beyond the high prices lie
additional difficulties for U.S. tourists.
Pounds of Dollars
"The airlines are also competing with limited hotel availability,"
Popper said. And "you cannot pay for a room with a U.S. credit card, so
you have to actually bring the cash. You're going to be carrying around
$2,500 to $3,000 in cash just to pay for the hotel room. And then you
need to carry more cash to pay for other things you want to do."
Cuba-curious Americans must also compete for winter lodging with
sun-seekers from Canada and the U.K., who face no bureaucratic hurdles
in booking their holiday.
The average round-trip airfare from the U.S. to Cuba did drop from $399
in September 2016 to $310 last month, according to data from Airlines
Reporting Corp. That compares with an average of $486 for Cancun, the
top Caribbean destination for U.S. travelers. But still, there are few
Yankees heading to Havana.
Some may be worried that a trip would fall under a murky area of the
U.S. law, unsure how much latitude is afforded by "people-to-people
exchanges," or cowed by the well-publicized aggressiveness of U.S.
customs employees of late. No one wants to worry about that sort of
thing while sipping an umbrella-adorned cocktail.
Barring a radical policy change by the new administration, such concerns
are probably unwarranted, Cuba travel experts said, adding that the
traveler counts this year are likely to top 2016. Said Popper: "There's
nobody from the federal government standing on the beach in Cuba."
That may not be reassuring enough for the airlines, though. They're not
pushing Cuba as a leisure destination because of the legal
uncertainties, said Michael Zuccato, general manager of Cuba Travel
Services, a Los Angeles-area company that offers visa assistance and
other traveler aid for customers of four carriers that serve Cuba. While
airlines bear no liability if customers fib about the real reason
they're visiting Cuba, in-house lawyers may not want to push their luck.
"Because of the U.S. restrictions," Zuccato said, "you really don't see
any advertising from the airlines promoting Cuba."
Source: Now That Cuba Is Open, Americans Aren't Going - Bloomberg -