European Tour Operators in Cuba Mull How U.S. Thaw Will Change Competition

With U.S.-based travel and tourism companies such as Starwood, Marriott, JetBlue and Carnival on the way, along with an expected surge in American tourists, some foreign tour operators in Cuba still believe their experience there will serve as leverage against new Yankee rivals.

The UK is Cuba’s second largest market after Canada and 175,000 Brits visit the country each year. UK travelers’ demand for Cuba led Thomson, one of the largest UK-based tour operators, and part of TUI UK and Ireland, to restart Cuban itineraries from the UK that it had put on hold. Cuba’s opening to Americans isn’t a major concern for Thomson, at least for now, the company states, and flights and tours from London to Varadero, Cuba begin this week.

Holiday Place, a smaller UK-based tour operator that’s led Brits to Cuba for 30 years, sees things differently. It’s weighing whether to change-up itineraries to other Caribbean countries or to work with U.S. tour operators to help manage demand.

“European tour operators never got affected by Canadians because they’re very seasonal, they only travel in winter,” said Sergio Garcia-Gonzalez, head of marketing and IT for Holiday Place and a Cuban expat living in the UK “And for Cuba, Europeans were a great way to balance the books because Europeans think to travel year-round. For Europeans, Cuba tends to be a cheaper beach destination than most other Caribbean islands and that’s one of the top two reasons Europeans go there.”

“But with America being such a big diverse country, Americans will be traveling all year-round as well. You’ll probably see that balance that Europeans were providing become less necessary. There will be less incentive for Cuban companies to work with European tour operators.”

Garcia-Gonzalez realizes that many hoteliers and other lodging operators in Cuba may be looking beyond their traditional partners.

“We’ve been in the business with these hotels for a long time and they want to keep their relationships with us,” Garcia-Gonzalez said. “But they’re a business and they want to maximize their profits and they know that they’re not going to maximize their profits with just us. There haven’t been any major hotels added to Havana with hundreds of rooms, which is probably the city that will be at the core of demand for American travelers and most new flights from the U.S. will go to Havana. With Starwood and Marriott, they’ll bring the standards of the hotels up that they are reflagging in Havana but they won’t increase the capacity of the destination. Those new hotels are small, less than 100 rooms with one only at 10 rooms.”

Foreign tour operators in Cuba, most of them European, have decades of business relationships in the country. Some U.S. operators have also been in Cuba for many years running people-to-people tours but will eventually handle Americans visiting for leisure. U.S. companies will likely send millions of Americans to Cuba, perhaps more than the three million annual non-U.S. visitors the country currently gets. But this doesn’t signal foreign tour operators’ imminent demise in Cuba.

Claire Boobbyer, who’s written several travel guides for Cuba, said that some European tour operators “are confident that they’ll weather the arrival of U.S. operators.” But she predicts that U.S. travelers in Cuba will be willing to pay more for accommodations and services than Europeans, causing rates to rise.

“Some non-U.S. tour operators fear that loyalty over the last 20 years may not count,” said Boobbyer. “Cuba is so popular now that holiday bookings must be made at least three to four months in advance. The squeeze on hotels will not ease until the raft of proposed new hotels in Havana and across the island are built. Casas particulares have saved the day but the best and most popular B&Bs are booked solid for months. And hotel prices soared, in some cases, right after President Obama’s first announcement on December 17, 2014.”

Tour Operators Using Casas Particulares

Old Havana is densely populated with residences and adding more hotels to the area isn’t feasible as things stand, said Garcia-Gonzalez, leaving property owners an opportunity to monetize their homes as short-term rentals as hotels struggle to enter the area.

Short-term rentals aren’t always practical for tour operators and Holiday Place and Journey Latin America’s, another U.K-based tour operator, still put most customers in Cuban hotels. But both operators have turned to casas particulares, Cuba’s version of B&Bs, in recent years to supplement room availability as more Americans arrive.

General quality of casas has improved during the past five years but travelers won’t find all the comforts they’re used to in Airbnbs in the U.S. or France, for example.

“Casas are a popular way for Americans, for example, to justify that they’re traveling under one of the 12 categories and they’re a big focus for us,” said Garcia-Gonzalez. “There are a number of Cubans who live in places like Germany and Spain who I know personally who are considering going back to Cuba to invest in more casas particulares and you see this happening all over the country. Cubans who have made money in Europe come back and invest in Cuban property but aren’t present there. They know that Americans will raise demand and they want a piece of that.”