Cruises Could Be Big Winners in Cuba

Cruises Could Be Big Winners in Cuba
The once-taboo island lacks tourist infrastructure. Ship operators hope
to change that.
by Christopher Palmeri
May 11, 2017, 10:00 PM GMT+2

After President Barack Obama eased restrictions on American citizens
traveling to Cuba last year, airlines raced to start service from the
U.S. to 10 cities across the island. But they quickly learned that fewer
passengers than expected wanted to fly to a poor nation with a paucity
of first-class hotel rooms, very high prices for even modest lodgings,
food shortages at restaurants, and the occasional lack of creature
comforts (think toilet paper). Now another part of the travel industry
figures it has the ideal solution for Cuba's dearth of luxury: the
cruise ship.

Carnival, Royal Caribbean Cruises, and Norwegian Cruise Line Holdings,
the world's three largest carriers, have added dozens of voyages to the
island nation between now and 2019, betting that their floating resorts
are perfectly suited to introduce tourists to the underdeveloped isle.
"The airlines overestimated by a long shot how much demand there was,"
says Norwegian Chief Executive Officer Frank Del Rio. "We bring our own
infrastructure, all the comforts of America. The imbalance the airlines
found is not at work for the cruise industry."

The prospect of sailing to Cuba—right in the middle of the world's
largest cruising region—has had ship operators salivating for decades.
Havana, with its nightclubs, cobblestone streets, cigar factories, and
Hemingway hangouts, could someday be the busiest cruise destination in
the Caribbean, ahead of the Bahamas and Mexico's Cozumel, predicts Del
Rio, who was born in Cuba before his family fled the island in 1961.
"Havana is a brand," he says. "Like all superstar brands, people are
just naturally attracted to it."

A couple of things could spoil the party. One is that the sudden surge
in sailings could flood the market with available cabins, pushing prices
down. At least nine cruise lines will be charting a course to Cuba this
year. That's even as air carriers including American Airlines Group and
JetBlue Airways reduce the sizes of their planes serving the island and
Frontier Airlines Holdings, Spirit Airlines, and Silver Airways have
announced that they'll stop flying there altogether.

There's also uncertainty about U.S. relations with the island. On the
campaign trail, Donald Trump said he'd reverse Obama's easing of
restrictions, and the National Security Council is conducting a review
of Cuba policy. Del Rio and his industry colleagues are pressing ahead
with their voyages to build a base of business, customers, and jobs. A
lucrative start might make it unpalatable for the president to demolish
his predecessor's policy, says Robert Muse, a Washington attorney who's
advised companies on Cuban issues. "I think they're trying to create a
reality that may be sustained by the Trump administration," he says.

Like the vintage automobiles that are part of Cuba's appeal, some of the
island's tourism infrastructure remains stuck in the past. Hotels often
lack things Americans have become accustomed to, such as internet access
and hot water, says Lauren Vikander, marketing manager at InsightCuba, a
tour operator that's run educational trips to the country for 17 years.
Because of the shortage of quality hotels, a room in a three-star
property in Havana could sell for hundreds of dollars a night, she says,
and it's not unusual for even the nicest ones to run out of toilet paper
and bottled water.

The average cost of a hotel room in Cuba has almost doubled since 2014,
to $206 a night, according to the Havana Consulting Group & Tech. The
average rate for a so-called five-star lodging is $362 this year. "Hotel
rates went up because there wasn't enough supply to meet demand," says
Collin Laverty, owner of Cuba Educational Travel. "You're paying Hong
Kong or New York City prices."

Unlike airlines, cruise operators will actually benefit from such
infrastructure challenges, according to Mike Boyd, an aviation
consultant. "The cruise business is the only one that's going to have a
bonanza in Cuba," he says. "They're going to have a field day because of
the way cruises work. You can walk the Malecón, go look at Hemingway's
house, and at the end of the day have a nice place to sleep, clean
water, and good food. You don't have that in Cuba."

Yet it hasn't always been smooth sailing. Not quite knowing when their
companies would get approval to begin service to Cuba, cruise executives
mustered whatever vessels they could. Royal Caribbean Cruises Ltd.
pulled a ship from a Spanish affiliate last year, only to have it sail
around the Caribbean for months waiting for the Cuban government's
go-ahead to start regular visits. That ship, the Empress of the Seas,
took its first voyage to Cuba in April, with salsa lessons, staff
wearing guayabera shirts, and an onboard lecturer who offered such
advice as, "If you want to leave a waiter a gratuity, wrap it in a
napkin and hand it to him directly," according to CruiseCritic.com, an
industry website.

Carnival Corp. was the first to offer Cuban voyages last year, with its
relatively small, 700-passenger Adonia, a vessel lacking a casino and
other amenities. The company promoted the Adonia as part of its socially
conscious Fathom brand. That line—which mixed humanitarian service
projects with vacation—didn't catch on with consumers, so its parent
company plans to offer Cuban stops on traditional ships such as the
Carnival Paradise, which starts sailing to the island in June.

Del Rio has his own opinion of why the "voluntourism" approach didn't
work: "There's something called the Peace Corps for that," he says.
Instead, the first voyage for a Norwegian-branded vessel was a party
ship, the 2,000-passenger Sky, which made its maiden trip to Havana in
early May. Rates on that ship started at $549 a person, including drinks
and an overnight docking in Havana for guests to enjoy the city's
nightlife into the wee hours. Norwegian's four-day excursions are among
the shortest of the cruise industry's Cuba itineraries, and it's spicing
up the onboard meals with local dishes such as sweet guava chicken and
fried malanga, a root vegetable.

Still, Cuba and the cruise lines may have a way to go to please U.S.
travelers used to more sophisticated experiences. Baltimore retiree
Janine Dowdle says she and her husband were on the first Cuban voyage of
Norwegian's higher-end Oceania Cruises line in March. A tour of Old
Havana was "really lame," she says. A stop at a market lasted too
long—45 minutes—and a lunch at a paladar, a privately operated
restaurant, that was supposed to be included never happened. (She
got reimbursed.)

Dowdle says she was charged on the island 13 percent to exchange her
U.S. dollars into Cuban currency after she was told local merchants
don't take credit cards. And postcards she sent to the U.S. from Havana
never arrived. "The old cars are cool," she says. "The buildings are
crumbling, it's a shame."

Del Rio says Cuba's travel industry is improving, with the historic
office building where his mother once worked as a secretary set to open
June 9 as a five-star Kempinski hotel. And port facilities could be
upgraded much faster if the U.S. embargo were lifted. "All the major
cruise lines would be fighting to invest in Cuban infrastructure if we
were allowed to do so," Del Rio says.

The bottom line: Tourists have been discouraged by Cuba's lack of
first-class hotels and restaurants. Cruise lines say they'll just ship
in the solution.

Source: Cruises Could Be Big Winners in Cuba - Bloomberg -
https://www.bloomberg.com/news/articles/2017-05-11/cruises-could-be-big-winners-in-cuba