Cuba could see tourist boom amid improved international relations

16 June 2017 Consultancy.uk

Cuba may be in the beginnings of a tourist boom, according to a new study. The decreasing severity of America’s decades long embargo on Cuba under the Obama Presidency has seen an influx of US visitors taking advantage of relaxed travel requirements to the country.

Cuba has in recent years become more accessible for foreign people across the globe, as while the United States still imposes a commercial, economic, and financial blockade against the communist state, restrictions on travel and some limited trades imposed on the country reduced – while relations between the two neighbours warmed, in part through the visit of former US President Barak Obama.

The increase in travel – last year around 4 million tourists travelled to the country – has had a beneficial effect on various aspects of the society, while national GDP has seen 3% growth over the past decade, with tourism a key source of income for the country.

In a new report from The Boston Consulting Group (BCG), titled “Taking the Long View on Cuba’s Tourism Opportunity”, the consulting firm explores key current trends in visitors to the island from North America.

Travel to Cuba grows rapidly

Visiting Cuba has become increasingly easy for US citizens, where previously a (notoriously hard to attain) visa with considerable conditions related primarily to purposes such as culture exchange or missionary work was required.

The boom has seen the number of travellers increase from around 2.5 million in 2010 to 4 million this year. The number of US citizens among that number has meanwhile increased from around 63,000 to 285,000 over the same period. Since 2014 in particular, considerable growth hit the market with numbers increasing by 16% per year on average, and US citizen numbers up 77% over that same spell.

The initial rush for visiting the country has, however, hit a barrier of culture shock, with media pundits citing differences between the inhabitants and US citizens expectations cooling enthusiasm for such trips, while the increasingly isolationist attitudes of the American electorate have undoubtedly also contributed to this. This in turn has created a conundrum for airlines which have increased the number of flights to the country to meet initially expected demand.

Aggressive growth scaled back

Not Plane Sailing

The entry of various US airlines to the route has been relatively spectacular. From November to December last year, the number of flights to Havana increased by almost 2,400% between September last year and December, while the number of flights to other Cuban cities increased by more than 3,300% between August and January.

Reflecting decreasing demand, airlines have now started scaling back flights to the country, averaging around a -7% percentage point difference between December last year and August this year for Havana and -33% for other cities.

The long-term picture for US tourism to Cuba still gives cause for optimism however. As part of the paper, BCG interviewed 500 US tourists – a mixture of both those whom have been and those that plan to go – and found that continued interest is likely, with compound growth of between 20% and 50% up to 2020, with as many as 2 million visitors from the US by 2020 estimated.

While visitor numbers are robust, signalling that demand expectations from carriers is likely to be utilised – the firm notes that the development of the tourist market in Cuba remains in its nascent stages, creating both a cultural experience for travellers, and an impetus for the development of regional conditions from the country in coming years.

According to BCG’s Marguerite Fitzgerald, a Partner and the author of the research, “These shifts are the fairly typical of what you see in any fast-growing market. Success will require unusual – and unorthodox – approaches. The demand is strong and growing.”

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