Cuba’s hotel rates skyrocket; US companies shorten tours

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Yesterday I learned that the Cuban government has raised its rates for hotels and other tourist services by about 25 percent for the coming winter season.

This is clearly in response to the massive demand during the past 12 months by U.S. tour companies licensed to operate “educational exchange” programs under the people-to-people license provision.

I first predicted that this would happen in two articles that I wrote for Caribbean Travel & Life. In the first, ”Cuba Then and Now”, published in 2007, I wrote:

“Cuban tourism officials are clearly looking forward to the end of U.S. travel restrictions, not least because in 2006 tourist arrivals fell four percent. Political uncertainty over Fidel Castro’s illness... an outbreak of dengue fever... and the fact that Cuba is no longer a bargain. All combined to reverse an explosive tourism trend. Most hotels are now vastly overpriced by competitive standards. Little headway has been made in tackling moribund food and desultory service. And tourists’ complaints are usually met with a shrug of the shoulders. It's enough to leave exasperated visitors wondering if Basil Fawlty really is running the show.”

Cuba has since come a long way in addressing the lousy food scenario, and even several state restaurants now serve excellent meals (although paladares--private restaurants—are setting the trend). But the reference to overpriced hotels held true, leading to a fall-off in tourism numbers and in the average length of stays.

Cuba responded by lowering rates to induce a recovery.

Then, while attending the second U.S.-Cuba Travel Summit, in Cancún, Mexico, in 2009, I listened with disbelief as Cuba’s Minister of Tourism, General Manuel Marrero, told the audience disingenuously that Cuba was well prepared for a potential U.S. tourist invasion. Acknowledging predictions that one million U.S. citizens are expected to flood Cuba in the first twelve months after restrictions are lifted, Marrero told us how Cuba was adding 10,000 new hotel rooms through 2016.

In a potentially embarrassing moment for the minister, I took the mike and told him the math didn’t add up.

This year Cuba expects to receive about 3 million visitors. A sudden influx of one million U.S. visitors (in the first twelve months) would mean an immediate 25 percent increase. Yet, as I wrote, in Cuba on the Horizon (August/September 2009 edition of Caribbean Travel & Life):

“In high season, the current crop of hotel rooms is barely sufficient to keep up with demand... The country will have to double its hotel capacity to meet the prime-time rush… Nonetheless, speculation that the country’s tourism infrastructure will buckle under the weight of a stampede of Americans seems misplaced." And... "I suspect the Cuban government will opt to regulate the influx — by limiting aircraft landing rights and perhaps even introducing a visa system — until it can expand its capacity.”

I should have added… I suspect that the government will also jack up its rates to maximize profits. (I did make that point in my blog post about the summit.)

That’s exactly what it appears to be doing.

There is no evidence that new hotels are being planned for the areas that are in highest demand with U.S. tourists, especially Viñales and the colonial gem-city of Trinidad. The few hotels here are sold out completely for next season and well ahead.

Hence, Cuba clearly believes it has foreign tour companies over a barrel.

The result is predictable. U.S. companies that offer people-to-people trips will be forced to reduce the length of their trips.

Case in point: National Geographic Expeditions this week announced the 2012-13 season dates for its “Cuba: Discover its People and Culture” programs, which are being reduced from ten to nine days, not least to help keep the overall tour cost down.

Expect other U.S. people-to-people operators to follow suit.

Meanwhile, see my other blog post on this theme: “Cuba’s Hotel Shortage Causes a Group Tour Crunch”

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