Latin America

The Business And Politics Of Pricing Trips To Cuba

President Obama’s official state visit to Cuba marked the first time the top elected U.S. official had done so in nearly 90 years. Despite the time between trips, Air Force One still managed to navigate smoothly enough to and from its destination, and remarks by both country’s leaders seemed to bode well for the complete normalization of diplomatic and trade relations in the very near future.

Lost in the conversations of politics, however, is an economic one: Would travel companies rather it remained difficult and therefore more expensive for Americans to visit Cuba?

Since the partial lifting of restrictions on travel to Cuba, Americans who can prove their purposes for visiting fall into 12 somewhat narrow categories mostly related to humanitarian outreach and professional research. However, just because the U.S. isn’t ready to open the floodgates of tourism for the Caribbean island doesn’t mean consumers aren’t itching to see Cuba for themselves. According to research from travel analytics firm Hopper, online searches on airfare to Cuba from the U.S. have increased 500 percent compared to last year.

The vast majority of those would-be travelers most likely ended their searches there — not only because they didn’t fall into the approved categories, but likely also because the average U.S.-Cuba roundtrip flight costs around $717. For reference, a roundtrip flight from Miami to Mexico City (which might actually fly over Cuba) can be routinely had for under $200.

If Washington, D.C., and Havana keep moving toward what looks like normalized relations, however, Hopper’s data suggests a precipitous fall in prices on flights to the island. With few, if any, restrictions on which Americans are legally allowed to sip on a cocktail at El Floridita or La Bodeguita, Hopper estimated that the average roundtrip flight could fall as much as 50 percent to a post-embargo price of $364 per traveler. The news gets even better for those flying out of Miami, as non-stop roundtrips could dip as low as $275, Hopper estimated.

While it’s understandable to think that one or two charter airlines that did very well under the former travel restrictions might not be pleased at the prospect of slashed rates, other major carriers have already shown interest in capitalizing on the soon-to-be boom in commercial travel. The Associated Press reported at the beginning of March that eight U.S.-based airlines — American, Delta, JetBlue, Southwest, United, Alaska, Frontier and Silver — had submitted air route proposals for Cuban-bound flights to the U.S. Department of Transportation for regulatory approval. While only 20 flights will be allowed in and out of Havana per day, these will be commercial jetliners capable of carrying around 160 passengers each, as opposed to the varying sizes of charter planes making the trips now.

So with airfare to Cuba about to plummet and the number of flights about to skyrocket, how are all these American tourists supposed to find places to stay on the island? Walking around any foreign country and asking for a place to stay is never a safe proposition, and especially so in a country that relies on a cash economy like Cuba. Fortunately, Priceline’s Booking.com recently signed a deal with the Cuban government to begin listing hotel rooms on the island on its U.S.-facing site, Todd Dunlap, Americas managing director at Booking.com, told Reuters.

Dunlap said that his company began putting out feelers to Cuba shortly after the Obama administration loosened travel restrictions in December 2014, and though he didn’t put his name to a specific date, Dunlap said rooms would start popping up on Booking.com within a few weeks. American travelers who fit into one of the 12 pre-approved categories are, nominally, the only eligible lodgers at this time, but in an example of just how on-point the travel industry can be for emerging markets, Dunlap said reservations would only ask travelers to certify that they did indeed fit into one of the 12 categories and would not seek further verification.

Booking.com has even figured out how to make sure U.S. travelers can pay for Cuban hotel rooms despite existing prohibitions on such direct trade – payments will be routed through an unnamed European provider and then sent back across the Atlantic to the Havana hotel awaiting the funds.

It may not be the cleanest or most above-the-board way of accommodating what’s already being called a surge in U.S. travelers to Cuba, but for an industry hungry to capitalize on the opportunity, it’ll do just fine.

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