By David Jessop.
David Jessop is a consultant to the Caribbean Council and can be contacted at email@example.com.
Tourism now dominates most Caribbean economies, drawing huge numbers of visitors and wealth into the region. Despite this, many of those who work in or with the sector have yet to benefit fully from its success.
A few days ago, in the less than likely location of Baku in Azerbaijan, Jamaica’s tourism minister, asked a question that few Caribbean governments seem to want to address. That is whether an industry worth US$62bn to the region in 2018 is delivering benefits in an equitable manner and if its workers and dependent enterprises are receiving a fair share of the wealth it generates?
The minister, Edmund Bartlett, whose name has become something of a byword internationally for new thinking about tourism, said that if the sector is to be truly sustainable it must deliver a more equitable distribution of earnings and provide greater equality among stakeholders.
Speaking at an Executive Council meeting of the United Nations World Tourism Organization (UNWTO) he asked whether an industry which generated US$1.7 trillion globally in 2018 and created one in 11 jobs, is delivering all that it should, particularly in the world’s most tourism-dependent regions. The industry’s growth he said, “begs the question of the distribution of this enormous wealth and the impact that it is having”.
He went on to ask why nations in the Caribbean where the industry averages 40 percent of GDP and is the most tourism-dependent in the world, should also be characterised by high unemployment, a high debt to GDP ratio, seemingly intractable social concerns and high levels of income inequality.
Quoting UNWTO statistics he also made the point that while 80 percent of global tourism was provided by owners of small and medium-sized tourism enterprises, they received less than 20 percent of the returns.
“This is hugely disturbing and creates asymmetry and imbalance, and that picture doesn’t look so good,” Jamaica’s tourism minister said, indicating that the industry globally as well as in the Caribbean needed to consider how its impact could be more positive, equitable and inclusive. Tourism, he said, should become not just a receiver of visitors and taxes, but a driver of more equitable growth.
The minister is right to try to start an international debate about who owns tourism, an industry in which the most vital inputs are provided by the host country in the form of beaches, cities, seas and of course its citizens.
Tourism is an industry that makes use of often fragile environments in economies and locations that require holistic rather than gated development, requiring big minds that recognise the sector has the ability to bring great sustainable benefits to the citizens and governments of any country willing to share their nation and environment with others.
For a sector increasingly dominated by global brands and a desire to exploit the value of beautiful or interesting locations to the principal benefit of corporations and shareholders, this may seem revolutionary, even dangerous. However, if they value commercial continuity, such thinking is little more than common sense.
Nevertheless, there appears to have been little detailed economic research exploring the link between tourism growth and persistent social problems of the kind mentioned by the minister, let alone any policy response. This appears to be because most governments and the industry after the freewheeling experience of the 1970s have come to see investment, ever-increasing visitor numbers, profit and taxation as the overriding objective.
There are however a small number of interesting academic and governmental studies that suggest that ever-increasing visitor arrival numbers may actually drive down wages as nations and hoteliers seek to profit from mass tourism. Tellingly, recent industry-led research by the Federal German Tourism Association (BTW) in relation to 89 developing countries and emerging economies has concluded that while increases in international tourism cause income inequality to initially decrease, it then increases making long term inequality permanent.
Unsurprisingly, perhaps, most commentary on how to capture the tourism dollar in ways that ensure greater equity principally comes from NGOs such as Tourism Watch which has been exploring with others how to relate the industry to the globally agreed 2015 UN Sustainable Development Goals.
The group says that to achieve the UN targets by 2030, the trend to inequality that tourism has created must be reversed. It also observes that the popular assumption that growth in tourism automatically leads to development and diminishes inequalities is neither supported by the facts nor is realistic.
It argues that sustainable tourism should not be a goal in itself as it will not bring change. Sustainability in tourism, the NGO says, needs to be measured against the ways in which tourism contributes to reducing inequalities.
The problem with this is that while inequality between nations has been declining in recent years in-country inequality according to the World Bank has been accelerating globally.
In the case of almost all of the Caribbean, and despite its middle or high-income economic status, most nations have seen income inequality accelerate. Put bluntly, the incomes of the poor relative to the rich have not increased as a result of surging tourist arrivals.
The challenge this poses to government and the industry as a whole is that it requires both the public and private sectors to substantially revise the view that all tourism, accelerating arrival numbers and perpetual growth are good for all, and that the taxation and economic inputs that foreign visitors and investors provide will always have a positive economic outcome for society as a whole.
Minister Bartlett’s words suggest that that at least one person in a position of influence has understood the need to realign the industry’s objectives with those of citizens, that the value of Caribbean tourism as presently structured will peak and may soon reach a turning point, and that the industry in the national interest requires new thinking.
Tourism has moved on from being perceived as an industry involving servitude to one largely accepted as being central to the region’s economic future, assuming agriculture, fisheries and manufacturing can be better integrated. What is now needed is a broad-based debate that upends asks how the region and its people might benefit more from tourism’s success.
A spate of unexplained deaths of US tourists in the Dominican Republic, which have received extensive coverage in the media, and are now being investigated by the FBI, has caused tourist numbers to plummet. However, at the same time, tourism to other Caribbean islands has jumped.
A report by ForwardKeys, www.forwardkeys.com which analyses over 17 million flight bookings a day, reveals that from the 1st to the 19th June, bookings for July and August from the USA to the Dominican Republic have fallen by 74.3% compared to the same period in 2018. Previously, from the beginning of April to 31st May, bookings were up 2.8%.
Olivier Ponti, VP Insights, ForwardKeys, said: “My deepest sympathies go out to the families of the American tourists who have passed away. Their recent and tragic deaths appear to have had a dramatic impact on travel to the Dominican Republic. Our analysis of leisure travel shows a striking correlation.”
Three deaths at the end of May, Miranda Schaup-Werner on the 25th and Nathaniel Holmes and Cynthia Day on the 30th appear to have triggered the initial stall in bookings and the situation worsened with the death of Leyla Cox on June 10th and Joseph Allen on the 13th.
The deaths have not only caused a slowdown in new bookings; there has also been a spike in cancellations. During the period 1st – 19th June, cancellations of US bookings to the Dominican Republic, for travel at any future date, jumped by 51.2%. The day after Leyla Cox’s death on 11th June, cancellations exceeded 70%.
At the same time as bookings for the Dominican Republic were stalling, bookings for some other Caribbean islands surged. Jamaica, the Bahamas and Aruba exemplify the pattern; in the period from 1st April to 31st May, bookings were down 8.4%, up 7.0% and down 3.5% respectively. However, for the period 1st – 19th June, they were up 26.0%, 44.5% and 31.3% respectively.
Olivier concluded: “The recent deaths have sparked an extraordinary level of media interest in the USA, with many major news organizations reporting on the latest developments. It amounts to a dreadful image crisis for the Dominican Republic because the USA is the no.1 source market for tourism to the destination and its economy is highly dependent on foreign visitors – 17.2% of GDP and 39.1% of export revenue, according to the World Travel & Tourism Council (WTTC). Since the latest death on June 13th, we see a further erosion of bookings and no immediate sign of recovery, so I hope the authorities are successful in providing explanations that will convince the American public.”
The Conference Board Consumer Confidence Index® declined in June, following an increase in May. The Index now stands at 121.5 (1985=100), down from 131.3 in May. The Present Situation Index – based on consumers’ assessment of current business and labor market conditions – decreased from 170.7 to 162.6. The Expectations Index – based on consumers’ short-term outlook for income, business and labor market conditions – decreased from 105.0 last month to 94.1 this month.
“After two consecutive months of improvement, Consumer Confidence declined in June to its lowest level since September 2017 (Index, 120.6),” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board. “The decrease in the Present Situation Index was driven by a less favorable assessment of business and labor market conditions. Consumers’ expectations regarding the short-term outlook also retreated. The escalation in trade and tariff tensions earlier this month appears to have shaken consumers’ confidence. Although the Index remains at a high level, continued uncertainty could result in further volatility in the Index and, at some point, could even begin to diminish consumers’ confidence in the expansion.”
The monthly Consumer Confidence Survey®, based on a probability-design random sample, is conducted for The Conference Board by Nielsen, a leading global provider of information and analytics around what consumers buy and watch. The cutoff date for the preliminary results was June 14.
Consumers’ appraisal of current-day conditions declined in June. Those claiming business conditions are “good” decreased from 38.4 percent to 36.7 percent, however, those saying business conditions are “bad” also decreased, from 11.7 percent to 10.9 percent. Consumers’ assessment of the labor market was also somewhat less upbeat. Those saying jobs are “plentiful” decreased from 45.3 percent to 44.0 percent, while those claiming jobs are “hard to get” rose from 11.8 percent to 16.4 percent.
Consumers were less optimistic about the short-term outlook in June. The percentage of consumers expecting business conditions will be better six months from now decreased from 21.4 percent to 18.1 percent, while those expecting business conditions will worsen rose from 8.8 percent to 13.1 percent.
Consumers’ outlook for the labor market was also less favorable. The proportion expecting more jobs in the months ahead decreased from 18.4 percent to 17.3 percent, while those anticipating fewer jobs increased from 13.0 percent to 14.8 percent. Regarding their short-term income prospects, the percentage of consumers expecting an improvement decreased from 22.2 percent to 19.1 percent, while the proportion expecting a decrease inched up from 7.8 percent to 8.0 percent.
Source: June 2019 Consumer Confidence Survey®
The Hawaii Tourist Authority reports hotel room occupancy was down 0.8 percentage points in May 2019 to 79.2%.
According to the Hawai‘i Hotel Performance Report published by the Hawai‘i Tourism Authority (HTA), statewide RevPAR was $202.72 (+0.3%), in May 2019 with ADR at $256.01 (+1.3%) and average room occupancy at 79.2 percent (-0.8 percentage points down compared to May 2018.
Through the first five months of 2019 statewide RevPAR was $223.97 (down 2.1% compared with the same five months of 2018), ADR was $279.85 (up 0.6%) while average room occupancy was 80.0% (down from 82.3% compared with 2019).
The HTA’s Tourism Research Division issued the report’s findings utilizing data compiled by STR, Inc., which conducts the largest and most comprehensive survey of hotel properties in the Hawaiian Islands.
In May, Hawai‘i hotel room revenues statewide were down 1.2 percent to $339.3 million. There were nearly 26,000 fewer available room nights (-1.5%) in May and approximately 34,000 fewer occupied room nights (-2.5%) compared to a year ago. Several hotel properties across the state were closed for renovation or had rooms out of service for renovation during May.
Tables of hotel performance statistics, including data presented in the report are available for viewing online at:
About the Hawai‘i Hotel Performance Report.
The Hawai‘i Hotel Performance Report is produced using hotel survey data compiled by STR, Inc., the largest survey of its kind in Hawai‘i. The survey generally excludes properties with under 20 lodging units, such as small bed and breakfasts, youth hostels, single-family vacation rentals, cottages, individually rented vacation condominiums and sold timeshare units no longer available for hotel use. The data has been weighted both geographically and by class of property to compensate for any over and/or under representation of hotel survey participants by location and type. For May 2019, the survey included 160 properties representing 48,362 rooms, or 89.6 percent of all lodging properties with 20 rooms or more in the Hawaiian Islands, including full service, limited service, and condominium hotels.
Puerto Rico’s lodging market abounds with opportunities, following crises over the past several years. According to JLL’s Puerto Rico Hotel Destinations Report hotels across the Caribbean island have come back online after renewed capital investments and paired with economic incentives and strategic efforts of the Government of Puerto Rico and the U.S. Government, the island is primed for a hotel market comeback.
Air capacity to the island in 2019 will increase for the first time since 2016 and to meet this demand, by 2020, approximately 2,400 hotel rooms will be re-introduced to the market, along with more than 850 new rooms currently being developed. These figures will place available lodging supply ahead of prior supply levels by 2020. Additionally, GDP is projected to increase by 3.9 percent in 2019 and numerous investor-friendly policies are fueling strong lodging market performance.
“Spurring tourism development is a priority of the Government of Puerto Rico. The Island’s “Open for Business” policy, strategic geographic position, air and maritime access, modern infrastructure, and highly skilled bilingual workforce coupled with unprecedented incentives packages make it a fertile environment for hospitality industry investors. In addition, Puerto Rico is under the U.S legal system with financial sectors regulated by the FINRA, SEC and FDIC and part of the U.S. free trade zones and custom system. The combination of these characteristics and unique advantages make Puerto Rico the ideal destination to invest in right now”, states Carla Campos, executive director of the Puerto Rico Tourism Company.
Tourism and hospitality investors receive a 90 percent exemption rate of property taxes, as well as a 100 percent exemption on municipal construction and sales taxes. New tourism projects could be eligible for tax credits for up to 40 percent of project development costs, compared to 10 percent in the past.
Additionally, Puerto Rico’s designation as a Qualified Opportunity Zone enables investors paying U.S. taxes to invest recognized capital gains in qualified projects in Puerto Rico on a tax-advantaged basis, creating a compelling environment for development or major renovation projects like the El Conquistador.
For example, Puerto Rico Governor Ricardo Rosselló recently announced the $120 million transaction of the former Gran Meliá Puerto Rico Hotel, which will re-launch as the Hyatt Regency Coco Beach Resort and was completed partially through tax credits granted under the Puerto Rico Tourism Development Act and also qualifies as an Opportunity Zone deal.
The Governor also stated that while Puerto Rico currently has 15,000 hotel rooms, its aspiration is to double that to 30,000 rooms—and those rooms won’t only be in traditional areas either. “Within our vision, we’re not only looking to bring more visitors to the island but enhance and lengthen their stay,” he said. “People associate it with beaches, and that is one of our attractions, but we’ve seen people are coming to Puerto Rico for our authenticity and culture. That can be extrapolated to places that today are not being seen as tourist destinations. The island is 100 miles by 35, so there is accessibility to all of those spots. Our objective is to showcase that experience, so you can have a menu of places, whether it’s the colonial settings in the south or in the mountainous regions; we have the longest ziplining efforts in the world, and we have some of the longest underground rivers and caves as well. We are developing a green tourism and green economy aspect that will allow us to reach some other areas of Puerto Rico.”
“San Juan is one of the most stable lodging markets in the Unites States from a RevPAR perspective and investors are taking notice of this stability,” said Andrew Dickey, JLL Executive Vice President. “In general, Puerto Rico’s pro-investment environment particularly in tourism and hospitality, along with limited supply growth over the last 20 years, has set the stage for a strong lodging market and long-term fundamentals.”
Locations comprising Puerto Rico’s Metropolitan Area host most of the island’s lodging supply: San Juan has 61 percent of total room supply and is known for its historic sites, cultural activities and vibrant entertainment and night scene. The city is also home to the Port of San Juan and the Puerto Rico Convention Center (PRCC), both of which drive demand. Additionally, Carolina is home to Puerto Rico’s international airport, which handles more than 90 percent of total commercial passenger traffic. Carolina also features diverse demand drivers as the municipality is known for its renowned beaches and industrial center.
Markets to watch include the Convention District, where in addition to the PRCC, will soon be home to The District! Entertainment complex and an upcoming film complex, as well as the up-and-coming neighborhood of Santurce, which features trendy restaurants and bars and an artistic atmosphere.
“While events such as the Zika virus and hurricanes, particularly Hurricane Maria, were devastating, Puerto Rico is showing clear signs of an even stronger rebound,” said Ben Appelbaum, JLL Vice President. “The amount of opportunity across the island is remarkable – whether it’s a well-known market like San Juan or an emerging hot spot like Miramar, investors and owners are confident in Puerto Rico’s commitment to rebuild and it’s a lodging market where they want presence.”
View the full report http://bit.ly/2XNG0mZ.
According to the Puerto Rico Tourism Company (PRTC), the hotels and resorts endorsed by the PRTC saw the number of non-resident hotel registrations increase by 31.2% in April 2019, growing from 104,847 registrations in April 2018 to 137,524 registrations in April 2019. Registrations by local residents grew by 28.4% from 37,576 in April 2018 to 48,264 in April 2019. The number of hotel registrations made by guests from the USA increased by 38.0%, from 90,642 in April 2018 to 125,081 this April. Puerto Rico was severely impacted in September 2017 by Hurricane Maria which resulted in damage to, and the closure of, a number of hotels in Puerto Rico negatively impacting business in late 2017 and early 2018.
PRTC reports that the number of hotel/resort available room nights grew by 3.7%, from 350,075 in April 2018 to 362,930 in April 2019. The number of occupied room nights fell by 1.7% from 258,324 in 2018 to 253,836 in 2019 largely due to a decline in the average length of stay from 3.0 nights to 2.6 nights, with average room occupancy falling by 3.9 percentage points from 73.8% in April 2018 to 69.9% in April 2019. ADR grew by 11.3% from $159.61 in April 2018 to $177.64 in April 2019.
In the first four months of 2019 the number of non-resident hotel registrations increased by 53.5%, growing from 373,271 registrations in 2018 to 573,102 registrations in 2019. Registrations by local residents grew by 26.5% from 121,143 in 2018 to 153,277 in 2019. Registrations by visitors from the USA increased by 63.4%, from 318,415 in 2018 to 520,405 this year.
The number of hotel/resort available room nights grew by 2.2% in 2019, from 1,404,071 in 2018 to 1,434,730 in 2019. The number of occupied room nights fell by 9.2% however from 1,125,609 in 2018 to 1,021,973 in 2019 largely due to a decline in the average length of stay from 3.6 nights in 2018 to 2.5 nights in 2019 with average room occupancy falling by 9.0 percentage points from 80.2% in 2018 to 71.2% in 2019. ADR grew by 9.8% from $163.60 in 2018 to $179.62 in 2019.
Hawaii is in a tourism bind.
The Aloha State is pulling in more vacation-goers than ever before. But guest spending is flat, even as the influx drives up costs for services.
Left to cover the rising costs are local residents, who have been socked by a recent income tax hike, higher fees and taxes on gas in certain areas, and other burdens. There has also been legislation introduced that would increase taxes on gas and car registration statewide.
For some, the changing dynamic has gone too far.
“For the first time in decades, we are seeing statistics that residents are leaving for the first time in higher numbers than people are being born,” Honolulu City Council member Kymberly Marcos Pine said. “And that’s because they feel that they just can’t make it here anymore.”
Pine pointed to a study released in April, which found that despite “record visitor arrivals,” Hawaii’s cost of living issues were “of greater concern than ever.” It has even caused numerous residents to continue relocating, the study said.
The study found that cost of living was the second-biggest personal concern after affordable housing.
Pine blames flat tourism spending for increasing the cost of living for longtime residents. She chairs the City Council’s Committee on Business, Economic Development and Tourism, which recently heard testimony from an economist who stressed the gravity of the tourism dilemma. A recent AAA report shows that Hawaii’s gas prices are second only to California’s.
Honolulu’s mayor has also implemented several local taxes since taking office, she said. The Honolulu City Council on June 5 approved increases to property taxes on hotels, resorts, residential condos, and non-primary residences worth more than $1 million.
For the first time, a May economic analysis showed that tourists “are paying less to help maintain our island” and outlined continuous tax and fee increases, Pine said.
Paul H. Brewbaker, the principal of Hawaii economics consulting firm TZ Economics, recently talked to Pine’s committee about how total tourism receipts haven’t risen along with tourism itself. The rising number of visitors boosts costs for services, he said in his presentation.
“Social costs of additional tourists rise faster than social benefits once a congestion threshold is breached,” Brewbaker wrote in prepared remarks for the May 21 presentation. “External costs are unintended, uncompensated costs such as congestion and environmental degradation as simple as erosion from over-utilization of public-access natural recreational resources, or the cost of plucking ‘victims’ off mountain peaks for no reason other than Google Maps showed them how to get there and where to fall off.”
Brewbaker said that Oahu visitor arrivals increased to 6 million from about 4 million between 2009—when the Great Recession ended—and 2018. Despite that, he said, constant-dollar tourism receipts “have not grown for thirty years.”
Brewbaker’s presentation used data from the Hawaii Visitors Bureau and other government agencies to show that real visitor expenditures, or overall spending from tourists, were down to $17.8 billion from $18 billion in 1989, when adjusted for inflation.
The falling per-capita tourist outlays over time isn’t all that surprising, according to Brewbaker.
“Productivity growth alone could yield this outcome,” he wrote in the presentation. “Each wave of new tourists from previously untapped origin markets eventually spends less than upon initial discovery.”
Despite the stalled spending-per-tourist figures, Hawaii officials acknowledge that tourism continues to be the main driver of the state’s economy.
Hawaii House Speaker Scott K. Saiki (D) emphasized that tourism contributes about 30% of the state’s revenue, which he says provides stability in the job market. And he is less concerned about stagnant spending than some of his colleagues.
“Even though it is at a slower rate than in the past, the Hawaii Department of Business, Economic Development and Tourism still projects visitor expenditure increases over the next three years through 2022,” he said. “This revenue stream helps Hawaii residents by maintaining Hawaii’s low unemployment rate of 2.4% from escalating much higher than expected.”
Tourism is Hawaii’s top industry, and the rising numbers of tourists combined with the flat revenue from visitors is “troubling,” according to Tom Yamachika, president of the Tax Foundation of Hawaii.
“We’re getting more tourists and we have to spend more to provide them with services, but we’re not getting any more from them in terms of spending, so what do you do?” Yamachika said. “There may be ways to jack up taxes so they have a disproportionate effect on tourism, and that’s what was done” with the transient accommodations tax, which is supposed to be paid by hosts on the gross rental proceeds of any transient accommodation in the state.
Yamachika said that income taxes and estate taxes have also seen increases recently. Hawaii raised certain income tax rates in 2017, and the new law hiked the rate to 11% for all income over $200,000, according to the Tax Foundation.
Those tax increases are part of the reason some locals are moving away, Pine said.
Yamachika said the transient accommodations tax started at 5%, and is now above 10%.
The tax was increased by 1% in 2017 to raise $2.4 billion for a rail project in Honolulu, despite concerns from the hotel industry. The tax rose to 10.25% effective Jan. 1, 2018, and it applies to gross rental proceeds, Hawaii’s Department of Taxation says.
Getting operators for Airbnb and other home-based hotel services to pay the tax has been controversial in Hawaii, where Gov. David Ige (D) previously rejected efforts to allow companies to collect on behalf of hosts because he thought it would protect homeowners who illegally operate vacation rentals in neighborhoods where they are banned. A similar bill is before the governor, but he hasn’t yet indicated whether he will approve it.
Airbnb operators are currently taxable, but there’s “not 100% compliance,” according to Yamachika.
“I certainly do think that we ought to be enforcing the tax laws that we have on the books now, and if we can’t even do that, it’s really not fair to make our law-abiding, tax-paying citizens shoulder even more to make up for the scofflaws,” he said.
The number of visitor units in Hawaii, including hotels, timeshares, vacation rentals, and other accommodations, increased by 1.6 percent in 2017 alone. There were also 38,100 online vacation rentals advertised on sites like Airbnb and HomeAway in Hawaii in 2017, a 17% increase from the year before, according to a study by the Hawaii Tourism Authority. Earlier this year, Airbnb Inc. said it would have collected $64 million in revenue in 2018 had it been authorized to collect taxes on behalf of the state.
Brewbaker isn’t convicted that the Airbnb taxation bill would solve the state’s revenue problem. He said having hosting apps that collect lodging rental payments also collect associated taxes is “logical,” but that it doesn’t have much to do with the actual issues.
“Enforcing the tax code, not to mention the building code, are completely separable and should not be conflated with what is essentially a withholding tax arrangement,” he said in an email. “So, Airbnb collecting Hawaii TAT isn’t the cure to the State revenue inadequacy: a more robust, and unconstrained, economic expansion is required for that.”
Saiki said vacation rental units “should be regulated and taxed.”
“There seems to be a decrease in tourism spending per person even though more tourists are visiting Hawaii,” he said via email. “It’s not clear if unregulated vacation rentals are contributing to this.”
Major U.S. cruise operators say they will no longer sail to Cuba following the Trump administration’s ban issued on Tuesday, June 4th 2019 on travel to the Caribbean island, angering travelers and prompting worries about trip cancellations.
“Due to changes in U.S. policy, the company will no longer be permitted to sail to Cuba effective immediately,” Carnival Corp. said Wednesday.
A spokesman for Norwegian Cruise Line Holdings Ltd. said the company had ceased all calls to Cuba and was modifying sailings.
NCL said guests booked on cruises to Cuba through Sept. 2 have two options: sail the revised itinerary and receive a 50% refund as well as a 50% future cruise credit or cancel and receive a full refund. Sailings beyond Sept. 2 will be automatically canceled, and refunds given to guests, who also will be offered a 20% discount on new voyages within a specific date range.
In May of this year, Cuba said more than 140,000 US citizens had already visited the island in 2019 aboard cruises. Nearly 800,000 bookings were affected by the ban, according to the Cruise Lines International Association.
What the ban covers
The State Department said Tuesday that the U.S. would no longer permit visits to Cuba via passenger and recreational vessels, including cruise ships and yachts, as well as private and corporate aircraft.
Commercial flights were not included. Nonetheless, American Airlines, JetBlue Airways and United Airlines, which started flying to Cuba in 2016, said they were reviewing the revised regulations.
Delta Air Lines said it had stopped accepting bookings to Cuba under the so-called people-to-people license as of midnight Tuesday. Customers who booked under the exemption before that time will be allowed to travel.
“The reduction in the number of travelers will probably mean the end of U.S. commercial air flights from places outside Florida because there won’t be sufficient demand to fill regular flights,” said William LeoGrande, a Cuba expert and a professor of government at American University.
No grace period for cruises
The ban was effective as of Wednesday June 5th, the U.S. Commerce Department said, giving cruise lines no grace period to change destinations and sowing confusion among cruise passengers.
Both Carnival Cruise Line and Royal Caribbean Cruises said they would stop at different ports and would offer compensation to travelers.
Carnival said guests aboard its Carnival Sensation cruise that set sail Monday would stop at Cozumel, Mexico, instead of Havana, Cuba. The company said the guests would receive a $100 onboard credit for the inconvenience.
Guests with Cuba cruise reservations the rest of the year can remain on the altered sailing and receive a $100 per person onboard credit; move to another itinerary and receive a $50 per person onboard credit; or cancel the booking and receive a full refund.
Guests booked to travel on a 2020 Carnival sailing with a Cuba stop may remain on the sailing or move to another itinerary, but no credit will be offered, or they can cancel for a full refund.
“We are working as quickly as possible to secure alternative itineraries for the remainder of our Cuba voyages,” Carnival said.
Carnival Corp.-owned cruise lines Holland America and Seabourn, which had been scheduled to begin sailing to Cuba in November, both expect to directly contact guests booked on a Cuba cruise with special pricing and replacement ports by June 15.
Owen Torres, a spokesman for Royal Caribbean Cruises, parent company of Royal Caribbean, Celebrity Cruises, Azamara and Silversea, among other brands, told Cruise Critic that it has altered the itineraries for Royal Caribbean’s Majesty of the Seas and Empress of the Seas, which sailed Wednesday and Thursday and had been scheduled to stop in Cuba.
The cruise line said all cruises on the two ships this year will have alternative ports in the Caribbean. It is also working on alternate itineraries for 2020 sailings.
Guests can cancel their current booking for a full refund or can keep their sailing date with a new itinerary and receive a 50% refund, Royal Caribbean said.
MSC Cruises announced Thursday that the ports of either Key West, Fla., George Town, Cayman Islands or Mexico’s Costa Maya or Cozumel will replace Havana.
Cruisers now sailing on the MSC Armonia will receive $400 per stateroom as refundable onboard credit. For future Armonia sailings that were scheduled to visit Cuba, MSC said it will waive fees if guests wants to change ships and itineraries or give the $400 per stateroom onboard credit for those who remain on their altered sailing.
The cruise line said it was still working to update all future itineraries.
Cruise lines are nimble and can rearrange itineraries. Ships add and subtract ports often, such as when a hurricane is hurtling toward the region or an island is recovering from a natural disaster. The ships will do the same in the face of the Cuba ban.
“For cruises where a stop in Cuba is part of a wider Caribbean itinerary, it will be a matter of replacing just the Cuba calls with another port in the Caribbean,” said Erica Silverstein, senior editor at Cruise Critic, a website devoted to cruising. “For Cuba-focused cruises, it’s possible that they may replace the itinerary entirely.”
While cruise lines can easily swap ports, guests might have purchased the itinerary entirely for Cuba, Wolfe Research analyst Jared Shojaian noted.
Travelers took to Twitter to vent their anger and frustration over the forced changes in their vacation plans.
“Has anyone’s cruise to Cuba from @CruiseNorwegian been rerouted yet? If so where did they change the port of call to? I’m booked for July and PISSED! Thanks Trump!” tweeted Sabrina Carollo @superbri_22.
Susan Berland, a parenting coach from Huntersville, N.C., said she was enraged that a vacation designed around visiting Cuba had been upended.
“To say I’m angry is an understatement. This whole cruise was chosen around going to Cuba and now we can’t,” tweeted @SusanBerland.
Neither responded to requests for further comment.
Not everything banned
But while the U.S. government has closed some windows, the door to Cuba remains open a crack.
“We are really committed to continuing trips to Cuba,” said Peggy Goldman, founder and president of Friendly Planet Travel, which offers three itineraries to the Caribbean island. “This not the kiss of death for Cuba.”
According to the Office of Foreign Assets Control, which issued the restrictions, travelers who have made any transactions related to their trips to Cuba — such as booking flights, hotels or tours — before Wednesday can proceed with their plans. Cruising was removed from that grandfathered group, however.
John McAuliff, executive director of the Fund for Reconciliation and Development, a nonprofit that helps foster connections between the two countries, summed it up as, “Cruises are dead in the water. They’re over.”
Added Goldman, “This ruling was intended to stop mass tourism, mainly by the cruises.”
The rule also put the kibosh on people-to-people trips, the Obama administration program that encouraged Americans to interact with locals. Yet it preserved the similar Support for the Cuban People category. This means Americans can visit the island as long as they don’t frequent state-run businesses and institutions, such as hotels and restaurants. Instead, they must stay at private residences, eat in private restaurants, visit independently owned shops and devote their time to engaging with Cubans through such activities as volunteering in community projects.
The new restrictions don’t extend to travel in the Support for the Cuban People category. Americans can visit the island as long as they don’t frequent state-run businesses and institutions. Instead, they must stay at private homes, eat in private restaurants, visit independently owned shops and devote their time to engaging with Cubans.
Goldman said her company was already moving in that direction. She uses an independent bus company, not one owned by the Cuban army; taxis operated by private individuals; and guides who are historians, with the money going toward the rehabilitation of Havana’s buildings. Guests bunk in private homes called casa particulares and dine in private restaurants, or paladares.
“We will comb through all of our tours to comply with the other licenses,” she said. “It’s really not difficult for us to shift over.”
Tom Popper, president of insightCuba, a travel company that leads tours of the island, said travelers who booked trips before the deadline will not see any changes to their itineraries. For future tours, his team will tweak certain elements to include private accommodations and excursions that comply with the law.
“The rule only went so far as to include these two categories,” he said. “It could have been a lot worse.”
Individuals, families and groups of friends who travel under the aegis of the Support for the Cuban People category also must keep a record of their engagement activities for five years, McAuliff said. For example, the category requires U.S. visitors to follow a full-time schedule of experiences that “enhance contact with the Cuban people, support civil society in Cuba, or promote the Cuban people’s independence from Cuban authorities, and result in meaningful interaction with individuals in Cuba.”
“It’s very unclear what these activities are,” McAuliff said, “but they are consistent with independent travelers.”
The order for what is not permitted is less ambiguous: no substantial free time or recreation allowed.
Change may be temporary
Of course, these rules could be a temporary obstacle to freer travel to Cuba. McAuliff said Congress is expected to consider a bill that would end all travel restrictions, and it has garnered support from a bipartisan majority.
“The question is whether Trump will veto it,” he said.
Jim Hepple is an Assistant Professor at the University of Aruba and is Managing Director of Tourism Analytics.