Puede leer aquí la versión en español de este artículo.

This article is part of the series La Letra de Temas 2020. Postpandemia: ¿hacia dónde?

When the COVID-19 curve reached a new peak, Temas-Catalejo asked a group of researchers to examine Cuba’s present status and prospects for the rest of the year. We requested them to make a detailed diagnosis and scrutinize the pandemic, its significance from the clinical and public health viewpoints, as well as its subjective socioeconomic, political and international effects and probable future.

This series is not focused on the mountains of figures, reported facts, statements and reports currently flooding the media, nor on the countless wishes and requests sent to and scanned by the government which abound in the social networks. It’s intended instead to evaluate the country’s present and future so that we can see it better, like a path between politics and its circumstances.

As it’s usual in Catalejo, La Letra de Temas 2020 is more open to other analyses than to other opinions.

People’s poor knowledge of the concept of tourism prevents them from recognizing it as a social phenomenon, rather than just another sector of the economy. Indeed, around 50% of international travel and an indefinite percent of domestic travel are ascribed to the said sector, which accounts for all travelers regardless of whether they are tourists or not. These astronomical figures amount to more than 10% of the world’s GDP, and in several tourism-dependent countries, such as some Caribbean islands or Spain in Europe, they stand as the main economic resource, a fact revealed by the pandemic in all its crude reality.

In the last few years, the drops in revenues for other services and the sustained reduction of the export trade has forced Cuba into the above-mentioned group.  sOur tourism industry has been stumbling since last decade. There was a temporary boom during President Obama’s second term, as he lifted the Cuba travel ban on U.S. residents and allowed the resumption of regular flights and cruises into our country. Everything changed when Trump took office: no cruises, no regular flights to 9 of Cuba’s 10 international airports, and more restrictions on U.S. citizen travel.

This juncture in U.S.-Cuba relations notwithstanding, the downward trend in hotel occupancy rates (38% in 2019), per capita tourist income, tourists per day, and ranking on the list of regional destinations became a regular feature. As Miguel Alejandro Figueras first pointed out in 2013, there were various reasons for this trend (Figueras, 2013).

External causes:

• The aggressive development of new tourist destinations (Turkey, Morocco, Tunisia, Egypt);
• The resurgence of traditional destinations in the former Yugoslavia and Eastern Europe;
• The rise in prices of plane tickets as the price of jet fuel tripled.

Other external factors are the growing competition in our region, from Costa Rica to the Dominican Republic, marked by more and better offers, better products, and better marketing, especially through promotion. Add to this the European campaigns against aviation because of its negative ecological impact, which encourages short air travel or, preferably, the use of alternative means of transportation, such as trains.

Internal causes (Figueras, 2013):

• Insufficient aggressiveness and systematic monitoring through market studies of key factors in the major emitting countries;
• Drop in the quality level of the available offer;
• Poor condition of a large number of facilities;
• Concentration of investments on all-inclusive facilities, which facilitates a better use of their potential and promotes the advantages of good beaches and climate but works in detriment of other tourist options;
• Deficient use of the multiple cultural and other attractions that city tourism provides.  

Nearly all of these internal causes are related to the offer, distorted to the point that we neglected city tourism, not only with respect to the construction of new hotels—which only picked up speed when Trump was already President—but also its significance in terms of destination and leisure pursuit.

The Cuban tourism product is also below par when it comes to sustainability indexes such as the use of renewable energy and environmentally friendlier technologies across the economy and society, despite the opportunities that the system provides for economic development based on environmental protection.

Even if the product is the first and most important variable in marketing, that is, of an industry’s economic management, there is also the matter of promotion, distribution and prices.

By 2005 we had already taken the wrong step when we drastically reduced the budgets for co-marketing in our main markets. The outcome was immediately noticeable in the tourism flow, something I witnessed as Director of Grupo Havanatur’s two tour operators in Canada. Although these policies were eventually mended , we are still feeling the effects of such fluctuations in the promotion of a destination.

According to estimates, around 60% of all marketing is in the hands of foreign hotel chains that also control a similar percentage of the accommodation available in the relevant destinations. Such a high degree of dependence leaves little or no room for Cuban enterprises to do any marketing or even to offer tourism services online to the rest of the world. That’s because of our technological disadvantage, which affects the approach to and way of using these resources by the tourism industry leaders in terms of their cultural limitations, and its impact on Cuban business management.

As for prices, the Ministry of Tourism (MINTUR) is the central authority that establishes the minimum levels, which allows our enterprises some leeway in pricing. However, this centralized decision-making proved to be counterproductive when we hiked our prices beginning in 2015 to meet the boom of the U.S. market, especially to the detriment of the European outbound tourism market.

After COVID-19: a new era for tourism?

Tourism’s importance for and role in the world economy decreased drastically. The most optimistic predictions foresee a total recovery by 2023. As stated before, the prevailing trend before the pandemic was the search for more experiences and minimum ecological impact, reinforced today by COVID-19’s psychological and practical effects.

The pandemic has and will hit some of the tourism industries that I mentioned earlier harder than others. The main cruise lines will pay a heavy price for their poor sense of responsibility toward human life, something that they are allegedly showing even today in their attempts to restart operations (Skift, July 27, 2020)

With their offer of plane seats reduced to less than 10%, aviation is facing problems verging on the insurmountable. Several airlines have resumed over 70% of their regular flights this summer, but only at 40%-50% of their 2019 capacity (Hosteltur, July 1, 2020), and whether they can keep up, given the fresh outbreaks in some destinations and the low number of people willing to travel, remains to be seen. Bookings in Europe to travel within the continent are down to 50%-70% compared to 2019, albeit that’s not the case of the trips taken, considering that they are easy to cancel and because of the new outbreaks and closures forced by the pandemic, as happened in Barcelona (Skift, July 24, 2020)

It’s necessary to understand that, as a means of public transportation, regular aviation must organize its service, select air routes to operate, and set the number of seats expected to meet the demand at a level which is at least above the break-even point or likely to reach it. Since it is a means of regular public transportation, the airline must maintain this offer for a year, even if it must reduce the number of flights or seats for a given route.

The situation for short and mid-distance trips is a lot worse than for the long ones: more uncertainty and likelihood of contagion. The regular airline companies, both traditional and low-cost, are already operating most skyways in Europe.

Tour operations involve charter flights offered for sale, but also including a service package that includes with at least accommodation and airport transfers in/out. They are responsible for a sizable part of the world’s air routes, what I call “an air route’s natural cycle”. In order to expand their market, the tour operators seize opportunities to organize peak-season weekly flights from a potential source of outbound tourists, be it a city or a region, to a given tourist destination. At first they will lose money, but if it is a worthwhile, potentially marketable destination, a new air route will be born and business will thrive. But then their operation will attract attention from the regular airlines, which as soon as possible will try and eventually manage to penetrate the said route. This process has gained speed with the emergence of a new business model known as “low cost” whose prices and flexible plans for short- and medium-distance flights have turned it into the fastest-growing and -spreading route of choice.

Such is the situation regarding Cuba’s sun-and-beach destinations that prevails in almost all European markets, as well as in Canada, where we still depend on foreign tour operators. The flow of tourists from the main Canadian markets has always prevented the said low-cost airlines from entering those destinations, a sign of their lack of sufficient appeal, non-hotel attractions and experiences to guarantee full customer satisfaction.

This is not the case of Havana, a city destination always brimming with all kinds of travelers, not all of whom are tourists. The resumption of regular flights to Havana is contingent on the pandemic and on whether both the Cuban capital city and the relevant foreign city are or can be in condition to restart airline operations. It seems that only the appearance of a COVID-19 vaccine will suffice for that purpose.

The impact of the pandemic on the Cuban economy will not be lower than in other tourism-dependent countries, even in the best-case scenario, i.e. a change of government in the United States in January 2021.

The promotion of reforms announced by the Cuban government can pave the way for a radical change in the country’s economic structure as we boost agricultural production and manufactured goods. This would also have positive effects on tourism; first, by replacing imports, and second, by developing our domestic market, which could even become the most important one—albeit in absolute, not only relative, terms—in light of the economic downturn in other markets. Right now, it’s the one and only market; there is no other. It has been in greater demand than I ever expected.

For instance, domestic tourism is Spain’s saving grace today, if only for very few people in the sector, inasmuch as it can’t compensate for the loss of tens of millions of foreign tourists every year. There, as in almost every emitting market in the world—bar Cuba—they provide credit opportunities that many tourists seize upon. I thought that these times of hardship, months into the pandemic, would reduce domestic tourism flows, but as it turned out people had savings stashed away under the bed. MINTUR’s Delegate in Varadero [Beach] recently reported that Cuba’s prime sun-and-beach destination had lodged “62,087 vacationers so far in August, for a daily average of 5,174” visitors in 15 active hotels, that is, in just 20% of the resort’s capacity.

Just imagine what would happen if the recently announced economic measures were implemented.

“Get to know Cuba first and other countries afterward” was the first 100% tourism-oriented advertising campaign that I remember in the early days of the Revolution. There were investments in beaches and other tourist destinations devoted to meeting domestic demand. This trend finally died down with the crisis that we know as the Special Period, the prelude to the development of international tourism in the search for the hard currency that we needed so much after losing 35% of our GDP in a matter of months.

The domestic market had no noticeable impact until 2008, when Cubans were no longer banned from hotels charging convertible pesos (CUC). After just a few years, this sector has become a major market for the summer holiday season, second only to Canada, in destinations like Varadero Beach.

Where does the cash to create this domestic tourism demand come from? Some years ago I studied private entrepreneurship in the Cuban tourism sector, namely the sources of funds to start a business in Cuba, i.e. “primitive accumulation” in Marxist terms. There I said that “family, friends and Cubans living abroad are a significant means of support” (Díaz y Barreiro, 2019). However, we must add the earnings of private business, as well as those of high-yield cooperative members and farmers, who should account for at least half of that sector. The total number of employees in the so-called non-state sector comes close to 1,500,000. Assuming that only 40% of them are well-off enough to afford tourism services, that’s 600,000 people; and if their family is made up of at least 1.5 members, the demand potential, or the size of the market, comes to 1.5 million domestic tourists.

Two sectors are not included in this picture: state sector workers and remittance recipients.

According to an Último Jueves panel discussion organized by our journal and published under the title ¿Compañeros ricos? Los grupos de altos ingresos en el socialismo,[1] the remittances can add up to USD 3 billion per year (272 CUC per capita, albeit they go to 25% of the Cuban population), i.e. 1,000 CUC per capita, or less than 85 CUC/month, a figure which, unless you have other sources of income or someone else in family also receives remittances, is barely higher than the state salary paid in the three economic sectors analyzed below.

There are state workers, although not in large numbers, who are paid much more than the average salary. According to the 2018 register of the Cuban fiscal agency (ONEI), the only employees whose average monthly salary is above 1,000 CUP (equivalent to 40 CUC) are those who work in construction (1,539 CUP), mining and quarrying (1,423 CUP) and banking (1,199 CUP). Not even that income seems sufficient to afford a four-day vacation at Varadero Beach, except perhaps in the case of a young childless couple. If you add the number of people with above-average income thanks to the remittances, this segment’s potential demand as domestic tourists could reach the 200,000 mark.

If we throw this on top of the aforesaid 1.5 million, the potential demand would fall short of 2 million. But this is just an imprecise calculation. The highest specific estimates of domestic tourists add up to almost 9 million overnight stays in one year, a mark reached in 2016. This figure dropped to 7.5 million in 2018, with only 50% of them in hotels, while the rest stayed in the so-called Alternative Lodgings such as camping sites. In summary, an average three-night stay would point to around 1.5 million physical domestic tourists in 2016 and 1.2 million in 2018. These numbers come close to the estimated demand potential of CUC accommodation providers in the summer.

Some of the so-called travel or receiving agencies, which have worked in practice as genuine tour operators since late in 2008, divide domestic tourists into two segments, Family and Couples. The former and larger one comes for the summer holiday season (July-August), whereas the latter comes in late June and early September. The other period is, for example, what Cubanacan Travels calls Victory Week, held at the same time as the Bay of Pigs victory. It’s actually a 15-day period, since it spans the School Break and Holy Week. During the rest of the year, the demand is mostly focused on the weekends, for understandable reasons.

Domestic demand in this sector is lower than 10% of that among international visitors. Therefore, not much can be expected from domestic tourism beyond September, even less so in the midst of the pandemic, with no vaccine and with a major outbreak in Havana, the top source of visitors.

Such is the ongoing situation that the economic reform could improve as long as it’s coherently and fruitfully implemented. This would entail the gradual rectification of today’s inverted pyramid, where the professions and jobs of highest professional and intellectual value and importance to society get the lowest salaries, and efforts to stimulate tourism demand among them.

We should rescue that original slogan of the Revolution, just as valid today, and, more importantly, extend it throughout our economy, in order to curtail the outflow of hard currency. The results of the last few years confirm that the domestic market is a lot more important than the foreign one, never mind that we are an “open economy” largely contingent on the latter. For instance, we cannot speak of “import substitution”, an economic policy that Che Guevara had already critiqued as early as in 1965, without a strong and well-developed domestic market. The nonsensical purchases and imports of all kinds of goods and services throughout the years can only be effectively remedied with a fully operational domestic market, without detriment of the socialist context in which it needs to work.

Repeated virus outbreaks keep world tourism in a disastrous situation. As we explained, Spain is suffering a great deal because of its high economic dependence on tourism in spite of its rich experience in the sector and in the service industry, and its desperation for a reopening is coming at a very high price.

Cuba should bear that lesson in mind. Almost four months ago, on April 30, I submitted a proposal to MINTUR’s Marketing Division with ideas that I thought feasible with a view to taking Cuban tourism recovery steps. At the time, both the COVID-19 curve chart and the daily number of cases were on a sustained downward trend. I suggested to prepare sun-and-beach destinations, including airports such as those in Coco and Largo keys, for international visitors. I added Varadero Beach, since its airport is close and could be isolated from the rest of the country, which turned out to be a mistake, as it’s much better to use it for purposes of meeting domestic demand.

The idea was to try to restart operations in July-August and, should that fail, everything would be ready for the fall season, even without a COVID-19 vaccine or effective cure. We have accomplished this to a considerable degree.

My proposal was not only based on the supply but also, and especially, on the demand, considering that the two aforementioned curves were showing similar trends in international outbound markets like Europe and Canada. These figures led tourism suppliers to start working again, namely the tour operators, who nowadays are key to any market and even more so to destinations like Cuba and the Canary Islands. European airlines reopened flights, particularly low-cost ones that operate short- and medium-distance routes to both sun-and-beach and city destinations.

However, the pandemic never let up; it has kept spreading throughout the world at a rapid pace. Fresh outbreaks in Europe brought the timid takeoff of intra-European travel to a halt in July, if with an upside for the continent this time over: the death toll was much smaller than in March and April. In fact, what we are seeing is a policy of opening as many operations as possible and keeping the infection level and death count at a minimum while awaiting the hoped-for vaccine. And this opening at restricted capacity is even stricter in tourism, with cancelled flights to destinations affected by a coronavirus outbreak, shutdown of indoor sites and attractions, and issuing of travel advisories.

Tourism lost the summer season virtually worldwide, Cuba included. Should the present status of the pandemic remain stable, our country could be expected to resume operations by September at the aforesaid beach resorts. Several tour operators have rescheduled the August flights to these destinations. If they succeed, we could recover at least 30% of the winter season and, if a vaccine becomes available before December, over 50% of the peak season between January and April 2021 can be salvaged.

However, our main city destination, Havana, which receives a fourth or more of all international inbound tourists, will not recover until next year even with the vaccine. The arrival in the last month of some flights with returning Cubans and alien residents shows that neither Havana nor the rest of the island can risk new outbreaks bound to make the current situation even worse. Every single natural tourism product and destination should be the object of analysis. Another matter is the renewed potential for demand in the so-called “health tourism” sector, a concept that I don’t condone, even if I favor the marketing of Cuba’s assorted products in this field.

With its results in the fight against COVID-19 and its medical work in tens of countries around the world, Cuba has considerably improved its image as a safe country with a supportive and hospitable people, culture and society. So when we overcome the pandemic, our health system will boast a far better image than that of nearly every other competing destination in the region. But the Cuban tourism model must change to adapt itself to the new reality of world tourism, regardless of the impact of COVID-19 on these trends.

Translation: Jesús Bran

References:

Figueras, Dr. Miguel Alejandro. Dinámica, estancamiento y caída de los ingresos por turista en Cuba, 2013

D’Meza Pérez, Gustavo, Zaldívar Puig, Martha and Martín Fernández, Ramón. Costo de los contratos de administración extranjera para la industria hotelera cubana

Skift July 27 2020. Cruise Lines: Booking Practices in a Pandemic Are “Astonishing”: CDC Official

(Hosteltur, July 1, 2020), El sector aéreo afronta el desafío de recuperar la confianza del cliente

Skift, July 24, 2020. Borders Are Open, It’s Peak Holiday Season in Europe, But Are Europeans Really Traveling?

Hosteltur, July 3, 2020. La aerolínea creada por los hoteleros canarios se constituye como sociedad

Díaz Fernández, Ileana and Barreiro Pousa, Luis, Un análisis del sector cuentapropista en La Habana. Econ. y Desarrollo [online]. 2019, vol.161, n.1, e7.

Temas, Panel, March 2018. ¿Compañeros ricos? Los grupos de altos ingresos en el socialismo

Guevara, Ernesto. Carta a Fidel, La Habana, 26 de marzo de 1965, published as La otra carta de despedida del Che a Fidel, in La Tizza, Jun 28, 2019