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8/19/2019 Cuban Economy and Tourism
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The New Eng ine of t he Cuban Econom y
by Philip PetersVice President, Lexingto n Insti tu teDecember 200 2
INTERNATIONAL TOURISM
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IntroductionC uba’s budding tourism industry, built during the 1990’s, has replaced sugar as the
island’s top foreign exchange earner. In contrast to sugar, tourism is based on
sound com petitive advantages, and it has the potential to generate additional
grow th, incom e, and em ploym ent in the decades ahead.
The sector is still relatively sm all –it em ploys 100,000 w orkers directly, about the
sam e num ber laid off from sugar industry jobs this year alone. But its significance
is large. Tourism developm ent is national in scope. It draw s foreign investm ent and
know -how . It forces officials and state enterprise executives to cope w ith
international m arket realities, and it is bringing m anagers and w orkers to learn the
art of custom er service.
Tourism also benefits other parts of the C uban econom y, creating dem and for
goods and services provided by state enterprises and, in spite of the econom y’s
clear socialist orientation, by C uba’s sm all private sector as w ell.
This paper exam ines the grow th and com position of C uba’s tourism industry and
its im pact on the C uban econom y and w orkers, and considers the industry’s
com petitive future in the international tourism m arket. It is based on field research
conducted in C uba, including visits to tourism businesses and interview s w ith
officials, executives, w orkers, and tourists them selves.
The evolution of Cuba’s tourism industry
U ntil the 1990’s, C uba w as alone am ong C aribbean econom ies in its lack of a
strong tourism sector or even an aggressive tourism prom otion policy.
The decision not to prom ote tourism in the early decades of Cuba’s socialist revolution
stem m ed from authorities’revulsion at the ills associated w ith tourism in the 1950’s:
gam bling, drugs, prostitution, and the presence of Am erican organized crim e in hotels
and casinos, w orking in league w ith the Batista governm ent. To this day, Cuban
officials are adam ant that gam bling w ill play no part in their tourism industry.
1 International Tourism: The New Engine of the Cuban Economy
The New Eng ine of the Cuban Econom y
by Philip PetersVice President, Lexingto n Insti tu te
INTERNATIONAL TOURISM
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By the 1970’s, C uba decided to diversify its econom y prom oting tourism , and the N ational Tourism Institute
w as created in 1976. In 1987, a decree-law w as
prom ulgated to allow for joint ventures in the tourism
sector in partnership w ith foreign capitalist investors.
The tourism institute becam e a governm ent m inistry
and a new state corporation, C ubanacan, w as created
to develop the industry and to enter into partnerships
The first tourism joint venture w as created in 1989 w
the H otel Sol Palm eras.
W hen the end of the Soviet bloc plunged C uba into a
econom ic crisis in the 1990’s, efforts to prom ote
tourism w ere redoubled. Tourism w as view ed as a use
of scarce investm ent capital that had a good prospect
of producing high and rapid returns. O ne fifth of
investm ent in the 1990’s w ent to the tourism sector.
In 1957, 275,000 tourists visited C uba, a peak that w
not reached again until 1987. By 1990, that record w
surpassed w ith 340,000 visitors, and now m ore than
1.7 m illion visitors enter Cuba each year, six tim es the
1987 level, w ith an average stay of seven days. The
im pact on C uba’s econom y has been significant:
•The tourism sector em ploys 100,000 w orkers, and
officials calculate that another 200,000 jobs in
agriculture, light industry, com m unications, energy,
and other sectors have been created by tourism .
•In 2000, tourism alone accounted for 41 percent of
foreign exchange earnings, ten tim es the level of a
decade earlier. Sugar’s contribution fell from 80
percent to 33 percent.
•A decade ago, an official says, C uba had “the typic
C aribbean tourism developm ent –fruit, drinks,
uniform s, m eats w ere all im ported.”O nly 12 percen
of the sector’s purchases w ere m ade from C uban
suppliers. Today, official data indicate that 68 percent of purchases are from
C uban sources.
•Cuba’s hotel capacity tripled in the 1990’s; today there are 37,225 room s in 240 hote
If tourism is socialist C uba’s first m ajor brush w ith globalization, the results have
not all been positive. The econom ic dow nturn of 2001 and the travel scare that
follow ed the Septem ber 11 terrorist attacks com bined to stop the grow th of
C uban tourism in 2001 and 2002, preventing C uba from reaching its projected
2 Lexington Institute
Old Havana and the southerncoastal city of Trinidad are
two centers of colonial
architecture that are
undergoing restoration and
attracting tourists.
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level of 2 m illion visitors. Initially, the im pact w as severe: 10,000 hotel room s w ereput out of service, and m any support services such as taxis and restaurants w ere
idled. Like the rest of the C aribbean, C uba recovered slow ly, and O ctober 2002
brought the first possible sign of renew ed grow th, as a ten percent increase in
visitors w as recorded that m onth over O ctober 2001.
Industry strategy
C uba’s tourism prom otion strategy is built around three m ain attractions: beach
resorts, history and colonial architecture, and nature and ecotourism . The tourism
m inistry has targeted eight regions around the island for tourism developm ent;
initially, H avana and the Varadero beach resort received the lion’s share of
investm ent, and now the em phasis has shifted to other regions.
Beach resorts. The pristine beaches of Varadero, a 22-kilom eter peninsula tw o
hours’drive from H avana, have long been a refuge for C ubans and foreigners alike
M uch of the peninsula w as once ow ned by the D upont fam ily; in 1931, Irene
D upont de N em ours com pleted construction of a m ansion, w ith C uban m ahogany
and Italian m arble throughout, w here she spent a few w inter m onths each year.
The m ansion serves today as a restaurant and guest house, and its servant quarters
now house the pro shop of Varadero’s golf course.
Except for longstanding residential areas and a nature reserve on the peninsula’s south
side, Varadero’s geography is dom inated by tourism developm ent. Club M ed, Barcelo,
Sol M elia, Sandals, Superclubs, and other international resort brands are present. O ne
third of Cuba’s hotel capacity and nearly one fourth of tourism jobs are here. Thepeninsula consum es up to 50 m egaw atts of energy per day, all supplied by Energas, a
Canadian-Cuban joint venture that captures, cleans, and burns the highly sulfurous
natural gas that is a by-product of local crude oil production.
750,000 visitors cam e to Varadero in 2001, m ost arriving at the nearby international
airport. Random interview s w ith tourists indicate that a large num ber split their tim e
betw een Varadero and destinations such as Trinidad, Pinar del Rio, and H avana.
A ccording to Lester Felipe O liva, the tourism m inistry’s top official in Varadero, plan
call for the construction of about 9,000 m ore hotel room s, tw o new golf courses
(both slightly inland), and the quadrupling in capacity of Varadero’s 150-slip m arina
to prepare for the day w hen A m ericans travel w ithout restriction to C uba. O liva and
local tourism executives are also keen on expanding the area’s shopping, restaurant
and recreational offerings so they can m arket Varadero, in one executive’s w ords,
“not just as a beach, but as a com plete destination.”
Even as Varadero continues to grow , C uba’s investm ent em phasis is being placed
today on new beach resorts, especially in the keys off C uba’s north coast betw een
Villa C lara and H olguin provinces.
Colonial architecture. C uba w as settled and colonized by the Spanish in the 16th
century, and the island today holds som e of the m ost extensive areas of colonial
3 International Tourism: The New Engine of the Cuban Economy
Tourists to Cuba: how many...Visito rs Gro ss revenue s
(thousands) ($ million)
1978 97 -
1989 275 -
1990 340 243
1991 424 402
1992 461 550
1993 546 720
1994 619 850
1995 746 1,100
1996 1,004 1,333
1997 1,170 1,515
1998 1,416 1,7591999 1,603 1,901
2000 1,774 2,034
2001 1,774 1.85
...and where from
Tho usan ds o f visito rs in 2001
C anada 350
G erm any 172
Italy 159
Spain 140France 139
M exico 98
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architecture in the A m ericas. C uban officials are w orking to preserve and restorethis architecture, fully aw are that they are enhancing C uba as a tourism destinati
as they safeguard their national heritage.
H avana’s colonial center is the m ost extensive and varied in C uba, and its
restoration effort is unique. U nder the direction of the city’s historian, Eusebio Lea
every dollar of O ld H avana’s tourism incom e is spent on restoration of buildings,
m onum ents, housing, and other neighborhood assets. A governm ent decree put
Leal’s office in charge of every zoning, land use, construction, and design decision
in its tw o-square-kilom eter area. A specialized w orkforce and a netw ork of
enterprises under Leal’s direction is executing dozens of renovation projects at a
tim e. (See the study “Rescuing O ld H avana”at w w w .lexingtoninstitute.org/cuba.
Trinidad, a city on C uba’s southern shore, is a sm aller, quieter place w ithcobblestone streets and a large area of historic buildings, m ainly housing. Som e
local tourism revenue is recycled into local restoration, but not in such a com plete
w ay as in H avana. Because there are alm ost no large buildings that could, if
restored, serve as hotels, Trinidad has m any private entrepreneurs w ho rent room
in their hom es to tourists.
Ecotourism. C uba’s natural environm ent offers m any
opportunities for ecotourism developm ent: the m ountains, cave
and geological form ations of the V inales valley in w estern C uba
the forests and w ildlife of the Rosario, Escam bray, and Sierra
M aestra m ountain ranges; the w etlands of the Zapata peninsula
The island’s w aters apparently boast spectacular environm ents aw ell. W riting in the February 2002 National Geographic, author
Peter Benchley describes a dive he m ade off southw estern C uba
that revealed “an underw ater realm that had not existed, so far
as I knew , since the 1950’s…anim als in num bers and diversity I
hadn’t seen in decades.”
Ecotourism developm ent is only in its incipient stages in C uba,
but its evolution w ill have an im portant bearing on environm ent
protection. W hile C uba has environm ental protection policies, it is also true that
m any of Cuba’s pristine areas, such as those described by Benchley, are
undisturbed sim ply because C uba has lacked resources to exploit them . A future
flow of tourists attracted by these assets can give the country an opportunity to
earn profits by protecting nature.
Other attractions. In addition, C uba is developing attractions to bring new visito
to Cuba or to give current ones greater reason to spend m oney, or to return.
C uba is beginning to m ake appeals to C anada’s long-term tourists, the
“snow birds”w ho spend up to six m onths in Florida each year. In Tarara (just east
of H avana) and elsew here, C uba is tailoring beach cottage sites to provide the
4 Lexington Institute
Las Terrazas, a mountain resort about
40 minutes’ drive from Havana, is an
example of nature tourism. Its hotel,
shown here, is built into a mountaintop
forest. A mainly European clientelemixes with Cubans to enjoy hiking,
swimming in waterfalls, cycling, and
exploring the ruins of a 19th century
French coffee plantation.
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Tourists conquer uninhabited isles
Northeast of the town of Caibarien in Villa Clara province,
across a 46-kilometer causeway that spans open sea, salt
marshes, and small islands, lies Cayo Santa Maria, one of
hundreds of keys off Cuba’s north coast.
Cayo Santa Maria, formerly uninhabited, is now home to the
300-room Hotel Sol Cayo Santa Maria, opened in March
2002, the first of three hotels to be built on the island. The hotel
is owned by Cuba’s Gaviota tourism chain and is operated by
Spanish executives under a management contract. It operatesunder an all-inclusive pricing plan. Similar projects have been
built on keys along the northern coast.
Like other Caribbean beach resorts, the Sol Cayo Santa
Maria has plenty to keep its guests busy on site, including
swimming, boating, tennis, a gym, shops, restaurants,
child care, and live entertainment. Inland excursions are
available for guests, but this is clearly a place where
visitors satisfied by beaches and relaxation can stay
without ever venturing into Cuba itself.
The resort appears to be built with minimal environmental
impact: its buildings are only one or two stories tall, guest
rooms are spread out in a vast area of bungalows, and thebuildings are barely visible from the beach. Raised wooden
walkways traverse the dunes, protecting them from foot traffic
and erosion.
One Sunday last April, the new staff was getting a workout
as 290 Canadians, Britons, and Germans were checking out,
and 263 more visitors were on their way to check in.
lodging, am enities, health services, and pricing that these travelers require. NewA m erican im m igration restrictions that lim it the issuance of long-term U .S. tourist
visas m ay aid C uba in w resting part of this m arket from Florida.
G olf courses are expensive to build, but C uban officials are finding that they m ight
profit by building new ones to com plem ent the island’s single professional-grade
course at Varadero. The C aribbean has an average of one golf course per 2,000
hotel room s; C uba’s ratio is 1:40,000. A ccording to tourism m inistry econom ist and
adviser M iguel Figueras, golf is one of m any services that can attract higher-
spending visitors. H e notes that com pared to per-tourist spending at the beach
resorts in the C uban keys, spending is 40 percent higher per tourist in Varadero,
and 70 percent higher in H avana.
5 International Tourism: The New Engine of the Cuban Economy
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Industry structure and foreign participationIn business term s, there are tw o pillars to C uba’s tourism industry: a netw ork of
state enterprises, and the participation of foreign capitalist corporations that brin
investm ents and know -how .
In the tourism sector, several conglom erates dom inate
the m arket. These include C ubanacan, founded in
1987, w hich has 15 separate com panies and 33,000
em ployees and earns one third of C uba’s tourism
incom e. G ran C aribe ow ns 45 hotels, accounting for
one fourth of the island’s hotel capacity. O thers includ
G aviota, a tourism business ow ned by the arm ed
forces, and H abaguanex, a com pany that is operatedby the O ffice of the H istorian in O ld H avana and w ho
profits are used for that area’s restoration.
Tw enty Cuban hotels are joint ventures w ith foreign
corporations, w here the foreign partner contributes
capital at the beginning of the project, ow ns up to ha
the business, participates in m anagem ent and
m arketing, and receives distributions of profits. The
partners –from Spain, C anada, Britain, N etherlands,
Italy, G erm any, France, and M exico –operate hotels
w ith a total num ber of 4,000 room s. Joint ventures
w ere the predom inant form of foreign participation in
the early 1990’s, w hen dom estic capital w as scarce.
N early half C uba’s hotel capacity (17,420 room s) is
operated under a second form of foreign participation
hotel m anagem ent contracts. This arrangem ent has
been used m ore frequently in recent years as C uba
recovered from the depths of its 1992-1993 econom i
crisis and had dom estic capital to invest in hotels.
The M inistry of Tourism has a 19-page standard m anagem ent contract form that
the basis for negotiations w ith foreign partners. U nder this sam ple contract:
•the foreign m anaging com pany assum es responsibility for all operations, trainin
and international m arketing, and its “internal audit and quality control team s”are expected to visit;
•accounts are kept according to “the 1986 uniform accounting system of the
H otel A ssociation of N ew York C ity;”and
•the foreign partner’s com pensation consists of a) a percentage of the hotel’s gro
revenues, and b) a share of profits distributed on a sliding scale, w here higher
volum es of profits result in a higher percentage share for the foreign partner.
M anagem ent contracts offer advantages to C uba: the foreign partner contributes
know -how , m anagem ent services, and m arketing but does not receive a share of
6 Lexington Institute
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ow nership; and higher shares of profits rem ain in C uba. O ne disadvantage is thatthe entire initial capital expenditure is m ade by C uba.
C uban officials say that they are again favoring joint ventures to finance new
tourism projects precisely because they allow C uba to conserve its ow n capital –
and to use it to build the golf courses, restaurants, and m arinas that m ake the
industry m ore profitable. C urrent plans call for 12,000 new hotel room s to be built
under joint ventures.
Tourism’s impact on the Cuban economy: stimulating domesticproduction
Tourism is valued in C uba’s econom ic strategy not only because it earns hard
currency from abroad, but because it creates a m arket for diverse goods and
services supplied by C uba’s dom estic industry.
Vice M inister of Tourism Eduardo Rodriguez de la Vega sees three benefits to the
tourism sector: direct em ploym ent, the stim ulation of dom estic production, and a
push for greater quality. “W e are w orking under the pressure of very dem anding
custom ers, our foreign tourists,”he says. “This puts our producers on the field of
international com petition.”
O fficials say that Cuba buys dom estic supplies for the
tourism industry only w hen they m eet quality standards
and are m ore com petitively priced than im ports. “W e
support but w e do not protect dom estic industry that
sells to tourism ,”according to the tourism m inistry’s
M iguel Figueras. Rodriguez de la Vega describes a
m onthly m eeting w here the supply situation is review ed
region by region to identify products that Cuban
producers are not delivering. “The hotel chains are the
ones that interest m e –they are the client,”he says.
“W e’re interested in producers having relationships w ith
each hotel for the product and delivery that the hotel
requires. That allow s us to m ove tow ard zero inventory.”
According to official data, C uban producers provided
12 percent of the tourism industry’s supplies in 1990
(w hen there w ere 340,000 visitors) and now provides 68 percent to an industry
that is serving nearly tw o m illion visitors per year.
It is im possible to m ake an independent evaluation of these figures, but
observations and official accounts m ake it clear that the share of dom estic sales to
the tourism sector has increased significantly.
•A purchasing m anager for a m ajor hotel chain used to buy his dairy products from
Holland and N ew Zealand and his vegetables from M exico, Chile, and Canada. “Now , I
buy alm ost all those products from Cuban sources,”he says.
7 International Tourism: The New Engine of the Cuban Economy
A worker monitors automated,
imported equipment that
produces towels for the tourism
industry in the Hilatex
company outside Havana.
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•O fficials say that 500 greenhouse operations are producing vegetables andflow ers for tourism , 95 percent of the tourism sector’s beer is of dom estic
production, tour buses are produced in a C uban-H ungarian joint venture, Ikarus
and increases have been registered in dom estic production of construction
m aterials, soft drinks, and other products.
•A report to the C ouncil of M inisters records that of $41 m illion in tourism purchas
in February 2001, $27 m illion w as bought from Cuban suppliers, and in February
2002 $24 m illion of a total $36 m illion in purchases w as spent in Cuba.
•An executive at the Solym ar hotel in Varadero says that w hile he still im ports
w ine, beef, chicken, apples, pears, silverw are, paint, and other products, he
relies on C uban sources for juices, w ater, vegetables, m any fruits, beverages,
dairy products, cereals, sheets, tow els, m attresses, floor tiles, and paintings.
•Vice m inister of light industry Isaac A layon G onzalez says his m inistry has
concluded m ore than 50 “cooperative production agreem ents”w here a foreign
partner brings know -how and equipm ent to a factory and is com pensated w ith
negotiated share of the factory’s revenues. U nder these agreem ents furniture,
soap, perfum e, textiles, and other item s are produced and sold to C uban hotel
•Air conditioners for the tourism industry are produced in a C uban-Spanish joint
venture, Frioclim a.
8 Lexington Institute
The return of cruise ships
Cuba receives about 80,000 cruise ship passengers per year – a market that, officials
say, is small and not highly profitable, but welcome nonetheless. Cuba tries to expand
the economic benefits by negotiating contracts with cruise lines to employ Cuban hotel
staff on the ships. Here, a ship berthed at the renovated passenger ship terminal in
Old Havana. The city’s long-term master plan calls for all cargo shipping to be
moved from the Bay of Havana to the port of Mariel so that only cruise lines, and
perhaps a cleaner bay, will be left behind. 220 kilometers to the southeast, a beach in
the nature reserve at Punta Frances on the Isle of Youth is reserved for day visits by
cruise ship passengers who arrive by launch while their ship remains well offshore.
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•Bottled w ater is produced by the C iego M ontero joint venture w ith Sw itzerland’sNestle corporation.
•Soaps, sham poos, and other item s in hotel room s are produced by the C uban
com pany Suchel.
•Cuban softw are is used for hotel m anagem ent, accounting, and building
controls system s.
N ear Havana’s airport, the Prim ero de M ayo Tow el Factory, founded in 1984,
provides an exam ple of the im pact of tourism on dom estic industry. The factory is
part of the H ilatex com pany, and form erly used Soviet equipm ent to m ake thread,
yarn, tow els, and fabric for w ork clothes.
The com pany w as hit hard by the econom ic crisis of the early 1990’s. The Soviet
equipm ent consum ed large am ounts of energy and often had to be idled. M any of the
com pany’s 4,000 w orkers w ent to agriculture or to new businesses developed by
Hilatex, such as a bicycle assem bly operation and a service com pany that m eets other
com panies’transportation, food, m aintenance, cleaning, and security outsourcing needs
H ilatex attem pted to expand its production of tow els for tourist hotels, but
encountered difficulties. In particular, one executive recalls “a terrible girl,”a
Spanish purchasing executive from a m ajor hotel w ho had very exacting standards
of quality. “She could not be satisfied,”the H ilatex m anager says. “She m ade us
sw eat blood, but it w as good. N ow she is satisfied and she buys from us.”
W ith the help of an $8 m illion investm ent in European m achinery, H ilatex now sells
to that “terrible”custom er and to dozens of others. A show room displays Hilatex
tow els used in all m ajor C uban hotels –an array of colors, textures, sizes, borders,
patterns, and m eans of placing the logo on the tow el that w as im possible to
achieve w ith the com pany’s old tools and techniques.
W ith the old Soviet m achines m othballed in a corner of the factory floor, w ith new
technology and one fifth the w orkforce it had a decade ago, H ilatex is m oving
tow ard annual production of six m illion tow els, tw elve tim es its 1994 production. It
is also w ithin sight of profitability; w hen it reaches that goal, the com pany w ill
provide production bonuses, in dollars, to its w orkers.
Impact on the Cuban workforce
A s part of a global industry that exposes its participants to constant international
com petition, C uba’s tourism sector could not be m ore different from the centrally
planned industries in w hich m any of its people form erly w orked.
O ne exam ple is M iguel Figueras of the M inistry of Tourism . He once w orked as a senior
official in the Cuban governm ent’s state planning board, coordinating internal
econom ic plans and Cuba’s participation in the planned trade and investm ent flow s of
the socialist bloc. Today his duties include analysis of foreign m arkets to determ ine how
Cuba can increase tourist visits from particular countries. He pays particular attention to
9 International Tourism: The New Engine of the Cuban Economy
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Canada, Cuba’s top m arket. “Every day I get to the office,”he jokes, “I have coffee wthe m inister, and w e w atch C NN to see w hat the tem perature is in Toronto.”
In the industry itself, thousands of other w orkers have a sim ilar outw ard focus as
they m arket Cuban destinations to tour operators, adopt international m anagem
and accounting system s, and receive training in custom er service.
An A m erican tourism executive w ho has exam ined Cuba’s tourism industry notes that a
the industry develops, it w ill continue to create dem and for high-skill jobs. “There’s a
m isconception that the jobs are just m aking beds in hotels. But tourism dem ands m ore
than that, a w hole netw ork of ancillary services such as m anagers, suppliers, chefs,
specialized m ultilingual guides, dom estic air and land transportation and all the service j
associated w ith them .”
Foreign executives generally have a high opinion of Cuban personnel. “Cubans are givto service –the biggest challenge is learning foreign languages,”one executive says.
A Spanish executive says Cuban w orkers have “a high level of professionalism and cultu
w hat’s needed is tim e to train them to give excellent service in a relaxed w ay, because th
tendency is tow ard form ality.”He m anages a hotel w ith 492 em ployees, only tw o of
w hich are Spaniards, “a sign that w e believe in the C ubans’capacity,”he says.
A C anadian consultant, D avid M cM illan, says C uban tourism w orkers are “very w
educated”if not “overqualified.”They are “eager to learn, disciplined, and
responsive to guidance,”he says, but they “have not been exposed to quality
service as a custom er, and respond slow ly to the delegation of responsibility.”He
view s these as “system ic”problem s, not personal traits.
Foreign executives do echo dom estic Cuban criticism s of the system of em ploym e
agencies through w hich C uban w orkers are hired. Som e executives say the system
generally w orks w ell and delivers pools of qualified candidates for particular jobs
But a European U nion critique of C uba’s foreign investm ent system , issued in July
2002, com plained that the agencies are one of m any rigid features of the C uban
system : “The system of staff selection is controlled by the em ploym ent agencies
w ho try to im pose their candidates (frequently not suitable professionally) and m a
it difficult to hire candidates identified by the foreign partner.”
The em ploym ent agency system also m akes payroll costs high. A n em ployer m ay
pay the agency $450 per m onth for an em ployee’s salary and benefits, w hile the
w orker in turn m ay only receive a salary of $15 in C uban pesos from the agency.
H ow ever, through a variety of m eans, tourism w orkers fare far better than the
average C uban w hose salary is the equivalent of $10 per m onth. Exam ples:
•Entertainers in a Spanish-operated Varadero hotel are paid a sm all peso salary p
a m onthly cash supplem ent of $80.
•A m aid in another Varadero hotel earns a salary of 288 pesos each m onth ($11
plus about $30 in tips.
•A w aiter in a Varadero hotel earns $5-$25 daily in tips, from w hich he contribu
a few dollars each day for the benefit of other hotel w orkers w ho earn no tips
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•A supply m anager for a hotel chain receives $15-$20 perm onth from the pool of tips earned by other w orkers.
•A bartender on a cruise ship that calls on H avana w eekly
and is staffed by a C uban personnel agency earns $5 in
pesos plus $380 per m onth, plus tips.
Tourism supports Cuban entrepreneurs
To see how tourism affects Cuba’s sm all private sector,
type“Cuba casa part icular” (C uba private hom e) into an
Internet search engine. The results show how som e of
C uba’s licensed entrepreneurs –the 6,000 w ho rent room s
in their hom es to tourists, business travelers, and other
visitors –are m arketing their services to the w orld.
Visitors w ho stay in private hom es generally pay $25-$50 per
night for a room , and according to one British tourist, they
“form a connection w ith local people and a glim pse into som e
of the difficulties of living here, w hich you w ouldn’t see if you
stuck to hotels.”This tourist, Jeannette H yde, w rote in
London’sObserver last February that she used local referrals to
find private room s in Havana and Trinidad; som e w ere noisy,
others in Trinidad w ere “spectacular, like stepping into a
m useum .”A Canadian, David H ow ell, w rote of a trip w ith his
son that started in a Varadero hotel and proceeded to privatelodging, costing $20 per night, in Havana and Trinidad.
According to a H avana retiree w ho w orks as a rental agent for
m ore than 100 private hom e renters, the pattern of these tw o
visitors is increasingly the norm –instead of staying in one
place, his clients w ant to tour the country. For this reason, he
has added dozens of private hom es in Trinidad and Pinar del
Rio to his portfolio, and he books his visitors’entire itinerary.
A Septem ber 2002 report from independent journalist M anuel
David O rrio reported on the form ation of renters’cooperatives,
akin to associations of bed-and-breakfasts, in several Havana
neighborhoods. “In fact, the hom e rental cooperatives aresm all private enterprises,”he w rote. M em bers refer clients to
each other and cooperate in m arketing on the Internet. At
tim es, he reported, they pool their m oney and pay the tax bill of a m em ber w hose
revenues don’t cover a tax paym ent in a particular m onth. O ne leader of a 15-m em ber
cooperative said that her cooperative creates jobs for 50 independent entrepreneurs
w ho provide laundry, plum bing, repair, electrical, and transportation services.
11 International Tourism: The New Engine of the Cuban Economy
Bed and breakfast
Visitors seeking lodging in a private
home can make advance reservations
through word of mouth or the
Internet, or once in Cuba they canlocate rooms by spotting this
“Licensed Renter” logo on a renter’s
front door. Above, the interior
courtyard of a home in Trinidad that
offers two rooms for rent to tourists.
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In a quiet H avana neighborhood, a retired couple hasbeen renting tw o room s in their hom e since 1996. Th
get their clients from w ord-of-m outh and referrals fro
an inform al neighborhood netw ork of renters. They
also have substantial return business.
The couple pays $500 in m onthly tax to rent tw o
room s, plus $7 for the parking space they offer to
clients. They have alw ays paid their tax bill, and in an
average m onth they have a net profit of about $1,50
They are occasionally visited by inspectors w ho check
see if they are renting the space they have registered,
and to check their log of visitors w here dates of stayand passport num bers are recorded.
They em ploy one m aid, one laundry assistant, and a
night guard. Their profits have enabled them to instal
new interior doorw ays and new w indow s, to paint th
house’s interior, to convert their garage into a bedroo
w ith bath, and to buy a stereo and kitchen equipm ent.
“This is the situation of those of us w ho rent our hom es –it’s not to get rich,”the
husband says. “You can’t get rich anyw ay,”his w ife interjects. “It’s to have better
furniture,”he continues, “better food, better conditions in your house, to save som
m oney in case you need to buy m edicine at the dollar pharm acy. It’s to have a bette
standard of living, and I don’t think the state is fundam entally opposed to that.”
O ther m em bers of C uba’s com m unity of 150,000 licensed entrepreneurs –artists
taxi drivers, private restauranteurs –also derive their incom e from tourism .
A n artist w ho sells paintings in O ld H avana’s m arket sold 11 paintings, each price
at $40-$60, during a recent w eek. H e easily m eets his $159 m onthly tax bill, and
his revenues allow him to em ploy four vendors (they alternate, w orking tw o at a
tim e) and one studio assistant and to pay $20 per m onth to a w om an w ho store
his w ares overnight in her nearby hom e. H e and his associates are evangelical
C hristians, and he teaches Bible study classes on Sundays. “I do w ell because I pu
m y trust in G od,”he says.
N earby in the sam e m arket, a w om an w orks as a vendor for three artists. She ha
w orked in the m arket for nine years; she earns approxim ately 20 percent of the
value of her sales, clearing $50-$60 in an average m onth.
O n the streets of Trinidad, a retired w om an w hose m onthly pension am ounts to
$3.00 m akes and sells straw hats; her m onthly profit averages $20. A retired
couple sells clothing and souvenirs, earning $30-$40 per m onth. A w om an w ho
rents room s in her hom e earns an average m onthly profit of $150 –“not enough
to get rich,”she says, but enough to provide w ell for her fam ily.
12 Lexington Institute
A private art market in Old
Havana provides income
for artists and vendors and
tax revenues for the
neighborhood’s restoration.
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The epicenter
The peninsula of Varadero, 140
kilometers east of Havana, is the center
of the most intensive tourism
development on the island. It has a golf
club that has been featured on the European professional tour, 46 hotels
in operation and others under
construction, and the Xanadu mansion,
a restaurant and guest house that was
formerly a Dupont family property.
The outlook W hat w ill be C uba’s future com petitive position in the
C aribbean tourism industry?
The econom ics of Cuban tourism involves tw o artificial
restrictions on its grow th: the C uban governm ent’s ow n
decision not to prom ote tourism strongly during the
first three decades of the socialist governm ent (a
decision that has now been reversed), and Cuba’s
continued status as the only Caribbean destination that
is cut off from its natural m arket, the U nited States.
C uba has m ade a spectacular start in the 1990’s,
increasing annual tourist visits fivefold. Starting from alow base, it has becom e the w orld’s fastest grow ing
tourism m arket, m oving from three percent of
C aribbean tourism in 1990 to nine percent in 2000,
and its tourism sector is still relatively sm all, in
C aribbean term s, relative to the size of its econom y.
W ith new infrastructure in place –hotels, resorts, and
11 international airports now served by 60 foreign
airlines –Cuba is ready to receive greater num bers of
visitors. A nd C uba’s uniqueness gives it strong reason
to becom e an increasingly attractive destination. In
contrast to regional com petitors that offer prim arilybeach resorts, C uba has colonial architecture, natural
riches, cultural attractions, and H avana, the
C aribbean’s largest city, a place that intrigues m any
visitors in spite of its physical decay. In addition, C uba
has niche attractions such as the house w here Ernest
H em ingw ay spent a third of his life and the w aters
w here he fished, and a rail netw ork built to serve the sugar industry, w here
railroad enthusiasts m arvel at m useum -piece steam locom otives, som e m ore than a
century old and still in operation.
W hen restrictions on A m erican travelers are elim inated, C uba w ill experience a
second boom . A m erican travel analysts predict that in the first year after travel
restrictions are dropped, one m illion A m ericans w ill visit C uba –a num ber that
w ould cause a 58 percent increase over current visitation levels. “If A m ericans
com e, w e have hotel capacity for the first m illion,”an official says. This near-term
shortage w ould benefit thousands of C uban fam ilies that w ould be able to rent
room s in their hom es to a segm ent of the new A m erican m arket.
The terrorism scare that has dam pened tourism w orldw ide m ay cause C uba to
low er its grow th projections, w hich have anticipated five to seven m illion visitors by
13 International Tourism: The New Engine of the Cuban Economy
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2010 w ithout A m erican tourism . H ow ever, it is safe to assum e that C uban tourismw ill continue to grow substantially even if A m erican policy rem ains unchanged.
A nd tourism w ill in turn continue to drive the C uban econom y. “Any com pany
m aking investm ent decisions looks at present and projected levels of tourism ,”a
foreign investor w ith operations in C uba notes. “It drives dem and for dom estic
production, energy, im ports, and everything else. W e can’t count on the em bargo
ending, so for now tourism is the key factor.”
Cuba’s tourism grow th prospects –and the rate of return visits –w ill be further
enhanced if C uba continues to im prove quality, know -how , and custom er service
C om petitors in the island C aribbean, M exico, and even Florida have good reason
to keep an eye on this em erging destination.
14 Lexington Institute
Room to growTourism revenue as percent
of gross dom estic product
C uba 8
Jam aica 17
Barbados 27
Dom inican Republic 15
G renada 17
Baham as 38
St. Lucia 39
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15 International Tourism: The New Engine of the Cuban Economy
Further reading“The Im pact on the U .S. Econom y of Lifting Restrictions on
Travel to C uba,”a study by D orothy Robyn, Jam es D.
Reitzes, and Bryan C hurch, the Brattle G roup, W ashington,
D C , July 2002.
A w ebsite that illustrates the C uban governm ent’s approach
to tourism prom otion is found at w w w .gocuba.ca. A n am ple
listing of C uban w ebsites w ith C uban m edia, speeches,
announcem ents, decrees, other official inform ation, and
new s on C uba’s econom y, is found at w w w .cubaw eb.cu.
“C uba Reefs –A Last C aribbean Refuge,”by Peter Benchley,
National Geographic, February 2002; a description of C uba’sm arine environm ent and the im pact of tourism . O ther recent
National Geograph ic coverage of C uba: “Evolution in the
Revolution,”by John Putnam , June 1999; and “Cuba’s
G olden Past,”by Thom as B. A llen, July 2001.
The Cuban Way: Capitalism, Communism and Confrontat ion ,
by A na Julia Jatar-H ausm ann, Kum arian Press, 1999.
The G eorgetow n University C uba Briefing Paper Series covers
econom ic, social, and political topics in depth. Papers are found
at: w w w .georgetow n.edu/sfs/program s/clas/Caribe/cbps.htm .
Lexington Institute studies on C uba’s econom y and U .S.-C uba relations, and other m aterials are found at
w w w .lexingtoninstitute.org/cuba.
Havana: Two Faces of t he Antillean M etropolis, by Roberto
Segre, M ario C oyula, and Joseph L. Scarpaci, U niversity of
N orth C arolina Press, 2002 (revised edition).
Studies by the author published by the A lexis de Tocqueville Institution: “C uban
A griculture: Slow Road to Recovery,”M arch 1999; “Cuba’s New Entrepreneurs:
Five Years of Sm all-Scale C apitalism ,”August 1998 (text available at w w w .adti.net;
authored by Philip Peters and Joseph L. Scarpaci); “Cubans in Transition: The
People of C uba’s New Econom y,”M arch 1999; and “A D ifferent Kind of
W orkplace: Foreign Investm ent in C uba,”M arch 1999; all available for sale at theA lexis de Tocqueville Institution (w w w .adti.net).
“Cuba’s Econom ic Perform ance and the C hallenges Ahead,”m onograph by
A rchibald R.M . Ritter, C anadian Foundation for the A m ericas; see w w w .focal.ca.
To contact the author: peters@ dgs.net
Photos by Philip Peters
The Lexington Institute gratefully
acknow ledges the financial support
provided by the Ford Foundation for
this study.
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16 Lexington Institute
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Lexington Institute •1600 W ilson Boulevard #900 •Arlington VA 22209 •w w w .lexingtoninstitute.org/cub