Leadership and Democracy LabWestern Social Science

Cuban Tourism: Competitive Factors and Risks

Team Leader: Mary Peplinski

Author: Jennifer McElwain

Keywords: Caribbean, tourism dependency, Cuba, competition

2015 statistics from the Caribbean Tourism Organization show the pace of Caribbean tourism growth outperforming all major destinations in the world. There is a projected increase between 4.5% and 5.5% in 2016 from a stopover arrival rate of 28.7 million. The Caribbean is widely considered the most tourism dependent region in the world, with 14.8% of the regions total GDP coming from the travel and tourism sector. Cuba’s main competitors in tourism are all located in the Caribbean basin. Cuba remains competitive with the Caribbean region. For reasons of expediency, the country’s main competitors may be reduced to the Dominican Republic, Jamaica, and Puerto Rico

Travel from the United States to Cuba remains prohibited by statute (excluding 12 categories of authorized travel). Consequently, Cuba is excluded from those potential profits to which other regional tourist destinations are not. This is an upper-hand shared by all Cuban competitors. This risk could be mitigated through increased governmental relations between the United States and Cuba. The process of normalizing relations began with the Obama administration in December 2014, however president-elect Donald Trump indicates he is not opposed to dialing back this progression.

The Dominican Republic acts as Cuba’s greatest competitor, with 5.6 million visitors in 2014. Punta Cana is the country’s most popular destination. The country is projected to host 6 million tourists in 2016, with a growth rate double the world average. The United States is the Dominican Republic’s largest source of tourists, with two million in 2015. The Dominican Republic dominates the Caribbean tourism market largely through hotel availability. Punta Cana offers 37,000 rooms in the area, and the country boasts a hotel occupancy rate of 75.5% (2015). The Dominican Republic also witnessed a 64% increase in cruise arrivals after the opening of Amber Cove in Puerto Plata. Expansive hotel availability and active cruise ports ensure the Dominican Republic remains highly competitive in the Caribbean.  

In 2015, Jamaica witnessed a sixth consecutive year of above-average growth in international travel. In order to remain competitive, the Jamaica Tourist Board (JTB) focuses primarily on marketing. Key initiatives include training overseas travel agents on effectively selling Jamaican tourism, deploying 22,000 agents to various international trade shows,  and hosting global travel agents on familiarization tours. Recently, the JTB announced a revamp of marketing strategies for the year 2017. New initiatives include leveraging social media, and an aggressive cruise marketing initiative. This initiative aims to market the destination to customers, cruise agencies and travel agents alike.

Puerto Rico’s tourism market is highly dependent on the United States; U.S. citizens constitute 90% of visitors to Puerto Rico. Puerto Rico leverages this by taking an aggressive seasonal marketing approach targeted at the east coast of the United States. In order to encourage growth within the industry, the Puerto Rican government financially incentivizes tourism development, this includes tax credits, and tax exemptions. Despite this, some indicators show that the country’s tourism industry is lagging, burdened by state debt. The country has displayed relative stagnation—while the number of visitors remain high, Puerto Rico has not displayed a surge like other regional competitors. The possibility of lifting the ban on U.S. travel to Cuba would give Cuba an upper hand and has the potential to severely damage American tourism to Puerto Rico.

Increased U.S.-Cuba governmental relations acts as the most effective form of risk mitigation—lifting the travel ban would vastly increase the potential tourism market for the country, thereby improving the industry’s profitability. Moreover, in order to remain competitive in the region, Cuba could mitigate risk by playing an active role in developing the hotel industry. Currently, the country has only 68,000 hotels rooms total—of which 28,000 are two or three star hotels. The country finds itself in a hotel room deficit, which would only be exacerbated by the U.S. lifting the embargo. Cuba could also become more regionally competitive through an international marketing approach. Cuba has recently indicated a desire to adopt this approach in the finalization of a multi-destination marketing campaign with Jamaica and the Dominican Republic. While regionally competitive determinants hold strong, Cuban tourism remains a growth industry with predictions of a bright future ahead.