Trouble in Paradise

A huge influx of visitors to Cuba has brought exorbitant price increases that are dampening enthusiasm for travelers
| By Gordon Mott | From Maggie Siff, July/August 2017
Trouble in Paradise
Photo/iStock Photo

The loosening of travel restrictions to Cuba brings good news and bad news. In the 1990s, the few Americans who were approved to make the trip were smart to bring basic amenities—even toilet paper—and to be prepared for sporadic electricity and nonexistent hot water at hotels. Now, tourism to Cuba is widely available and modernized, but is no longer the great deal it had been. Today’s visitor may pay $600 a night for very basic hotel rooms, $350 a day for guides and chauffeurs and $40 for restaurant entrees.

The soaring prices coupled with slow-moving improvements to services and infrastructure are a bitter pill for travelers to Cuba, which could slow down the phenomenal growth in tourism to the island, which increased by 13 percent last year alone. 

One of Britain’s largest travel tour companies pinpoints Cuba’s problems on its webpage: “Having organized tailor-made trips to Cuba for over four years [our] standard of tailor-made experiences are not currently achievable in Cuba, which needs time to catch up with the demand it is facing.”

The first evidence of a changing demand in U.S.-based travel has come from the airlines. American Airlines cut back its scheduled flights to Cuba by nearly 25 percent this spring, and JetBlue also reduced its service. Three airlines, Spirit, Frontier and Silver Airways, are planning to terminate their flights altogether. An American Airlines spokesperson said the flights had been dropped “to remain competitive” in the market, but published reports say that the demand for flights has not been as high as anticipated, especially with a 300 percent increase in available seats after the routes were approved. 

Local tourism professionals in Cuba, people-to-people tour operators in the United States and others with knowledge of Havana confirm the wide range of difficulties that face travelers heading to Cuba. Across the board, they are bracing for a slowdown in U.S.-based tourism in 2017.

Tom Popper, the president of Insight Cuba, which plans on operating nearly 200 people-to-people visits in 2017 (down from 250 in 2016), says that his primary task is managing expectations. “With those higher prices,” says Popper, “there are higher expectations, but we, with purpose, try to set those expectations. We tell people their visit isn’t about the hotel or the food, it’s about the experience. Cuba still has its magic…the experience hasn’t changed.” However, he quickly adds that the “Obama crest has crested” and he expects a new normal to take effect as the travel demand starts to “quiet down.”

The changes in Cuba’s tourism world began roiling the country in December 2014. After quiet negotiations with the government of President Raúl Castro, President Barack Obama announced a round of diplomatic initiatives that eventually led, in July 2016, to the reestablishing of diplomatic relations between the two nations. While these moves left the trade embargo with Cuba intact, and the strict guidelines for legal travel under 12 authorized categories, the U.S. government relaxed the reporting rules and the stringent interpretations of what constituted legal travel. Late last year, the U.S. government began permitting travelers to bring Cuban cigars (and alcohol) back to the U.S. when traveling abroad, product categories that had either been prohibited or sharply curtained for decades. 

At the same time, the U.S. and Cuban governments began negotiating a new air-travel agreement, which led in September 2016 to the inauguration of the first regularly scheduled flights in 50 years. Initially service excluded the capital city of Havana for flights between the United States and nine smaller Cuban cities. Havana routes were added later. Nearly 100 flights now connect the two nations each week. Eight cruise lines were also authorized to start making port calls in Cuba, with Carnival Corp.’s Fathom line becoming the first U.S. carrier to dock in Havana in May 2016. Many experts believe the cruises could bring nearly 170,000 more tourists to the island this year.

Cuba’s Ministry of Tourism announced that the country received more than four million visitors in 2016, surpassing even its own predictions of about 3.7 million. That was a 13 percent increase over 2015, and presented more than a 25 percent increase in total since the 2014 changes in U.S.-Cuban relations. The increase in American tourists to Cuba has been even steeper: the 614,000 who visited in 2016, according to the Ministry, marked a 34 percent increase over 2015 numbers. 

The booming increase in Cuba tourism highlights an underlying problem: Cuba was not ready for the huge influx of travelers. No major hotels have opened during that period. One large luxury hotel is slated to open its doors this summer: the Gran Hotel Manzana Kempinski La Habana. While Airbnb now touts Havana as its fastest growing market in the world, most of those accommodations lack such amenities as Wi-Fi or air conditioning, and prices are reported to be rising quickly and exorbitantly. Even while new restaurants open regularly, the best private restaurants, known as paladares, are often solidly booked, and food quality across the island remains problematic. The best restaurant in Havana, La Guarida, often does more than 200 covers a night, and turns tables two or three times. At least one published report suggested that the demand for food in the restaurant universe was creating food shortages for the Cuban people. 

John Kavulich, the president of the U.S.-Cuba Economic Trade Council, is blunt about the problems. “We have businessmen coming back with the perception that U.S. company representatives are being abused. They are paying $200, $300, $400 a night for rooms that should be $79.99.” Kavulich, whose organization promotes legal business activity between Cuba and the United States, says the Cuban government is promising to tackle the problem and reduce room rates, “but it’s too little too late.”

“We have businessmen coming back with the perception that they are being abused. They are paying $200, $300, $400 a night for rooms that should be $79.99.”

If changes or adjustments are coming, they were not evident in early March during a visit to Havana. The Meliá Habana, one of the better hotels in the city, was asking 600 cuc (Cuban convertible pesos) for one night in a standard room, which amounts to $678 when factoring in the penalty for exchanging U.S. dollars into cucs, the currency used by all tourists in Cuba. An executive level room, which amounts to nothing more than an upgraded single room, was 750 cucs, or $847, a rack rate that would raise eyebrows in London or New York City. 

One Mexican visitor, who traveled on short notice, and stayed at the Habana Libre, a rundown hotel in Havana’s Vedado section, was charged 400 cuc, or $452, per night. The new Kempinski, part of a luxury European hotel chain, is expected to debut with room rates between $600 to $700 a night. Touted as Havana’s first true five-star hotel, it will need to provide the kind of quality expected from those prices.

Restaurant prices also are quite variable. In past years, restaurant entrees other than lobster rarely topped 20 cuc. Now, 20 cuc is common, and individual item prices can exceed 30 cuc and reach as much as 40 cuc. At one top government restaurant, El Templete, which faces the main dock in Havana’s harbor, an octopus entree on a recent visit was priced at 30 cuc, and lunch for two with two beers came to more than 100 cuc. 

In today’s Havana, it is not uncommon to spend between 50 cuc and 60 cuc per person at any restaurant with pretentions for fine cuisine. Those prices quickly run much higher if wine is ordered. One tour operator, who asked to remain anonymous, recounted going to a well-known paladar with a group and receiving a bill that came out to 190 cuc per person. “I thought something was wrong,” he says, “but when I checked the menu, the dishes were all 40 cuc or higher.”

Another tour operator reports that private drivers had previously been charging 150 to 200 cuc as recently as 2016 for a round-trip drive to Trinidad, a city in south-central Cuba that is roughly a four-hour drive from Havana. This year, the price had gone up to 350 cuc.  “I got a call recently from one of my usual drivers, who had taken my clients to Trinidad,” says the operator. “He threatened to leave without them unless I agreed to pay him $450. What could I do?” 

The operator, who deals mostly with private travelers and helps set up people-to-people compliant itineraries, says that clients are comparing Cuba prices to other countries, and the comparison is lacking. “I’m getting a lot of pushback on pricing right now,” he says. “People are asking things like ‘I can go to Mexico for the weekend for $500. Why is Cuba more than $2,000?’ ” The operator adds that while the company is still able to offer its clients a wonderful experience, people who are trying to go on their own “are having a terrible time.” In part, that is because the big tour operators are able to negotiate somewhat lower prices for bigger groups. Still some of them have said they have gone back to clients between the booking date and departure to ask for more money to cover unexpected price increases.

Happily, prices on Cuba’s most famous product, a fine cigar, have remained quite inexpensive, despite the soaring prices in other sectors. Many of Cuba’s great cigars still sell for around 10 cuc or less per cigar. You’ll pay more for Cohibas and large cigars such as double coronas and Churchills, but there’s plenty to buy for a great price. A Hoyo de Monterrey Epicure No. 2 sells for 7 cuc per cigar, a Bolivar Belicoso Fino is a mere 7.65 cuc and a Montecristo No. 2 sells for 9.65 cuc. Even more surprising is these prices have been unchanged since 2015. 

One Cuban official, speaking off the record, acknowledges that the government knows it has a problem with soaring hotel, restaurant and transportation charges, and had commissioned a study to examine how to control the surge. He recognizes that given the government’s history of starting and then rolling back economic reforms, many Cubans were skeptical of rule changes that allowed so much private economic activity. That skepticism also had an effect on people trying to get what they could while they can, he says. But he adds, “We know we can’t go back to the way things were. We are not going back. I can promise you that.”

Popper says, “Of course, it was inevitable that prices had to go up. But the Cubans have been slow to react. The market is definitely cooling down. And they may find themselves with a lot of empty hotel rooms this summer and fall.” He adds that Cuban officials were told about the pushback in 2016, but had not responded.

Micheal Zucato, who is the general director of Cuba Travel Services, another people-to-people tour operator, believes that prices are going to moderate over the next six months. “It is going to take awhile to take effect, and for demand to fully recover. But we still see a lot of demand for people wanting to visit Cuba.” He notes that for many such travellers, the price isn’t their biggest concern, and they still are getting a wonderful experience.

Another tour operator, who asked to remain anonymous, isn’t so sure prices will come down any time soon. “If hotel prices go up and hotels are still full, how can we convince anyone to lower the prices? And private house owners smell money, and due to the influx of Americans, there is still a big pond to fish in…As long as they keep coming and rave about their experiences when they get back home, nobody is going to stop the price hikes. On the contrary. That won’t happen until it gets too expensive and other destinations offer a similarly unique experience for less money. But that’s in the future.”

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