Puerto Rico vs Cuba - A rivalry in the making?

Puerto Rico vs Cuba: A rivalry in the making?
COMMENTARY by Matt Schiavenza SEPTEMBER 22, 2015, 6:00 AM EDT

Many, including Pope Francis, are calling for "reconciliation" between
the U.S. and Cuba. But will opening Cuba's tourism hurt Puerto Rico?

Soon after Pope Francis landed in Cuba last weekend, he urged the U.S.
and Cuban governments to further reconcile. "We have witnessed an event
which filled us with hope: the process of normalizing relations between
two peoples following years of estrangement," the pontiff said.

President Obama already relaxed the 55-year-old Cuban embargo and
announced last week a raft of other measures intending to strengthen
economic ties between the two countries. But, the U.S.-Cuba
rapprochement has some practical implications that go far beyond
geopolitics.

Cuba, a tropical island famous for its sandy beaches, colonial
architecture, and rum cocktails, could soon be available to widespread
American tourism for the first time in over five decades. This
development is likely to pose not only challenges for Cuba but also for
the Caribbean tourism industry. Can other Caribbean islands—most notably
beleaguered Puerto Rico—handle the competition?

Although tourists face restrictions to enter Cuba, interest is high.
According to the country's Ministry of Tourism, visits to the island
increased by 17% during the first half of this year, putting Cuba on
track to attract four million visitors overall in 2015. Full,
unrestricted access for American citizens—as proposed by existing
legislation in Congress—could double this number.

"It's natural to perhaps to become a little concerned, but when they
read that the experience in Puerto Rico hasn't been touched, hasn't been
in any way or form diminished, they understand that this is a tremendous
destination," Milton Segarra, president and CEO of Meet Puerto Rico, said.

Puerto Rico as a competitor

Cuba's arrival on the tourist scene is worrisome for Caribbean
destinations, especially Puerto Rico. The tropical American commonwealth
has long been an attractive destination to American mainlanders, but the
island's tourist industry has stagnated—the number of visitors to the
island has barely budged in 20 years. One major factor is wages.

As a U.S. territory, Puerto Rico is subject to the federal minimum wage,
which, at $7.25 an hour, is significantly higher than entry-level wages
paid in the Dominican Republic or Cuba. This translates to higher
construction costs that, in turn, discourage expansion. These problems
are exacerbated by an island-wide financial crisis that has left the
territory $72 billion in debt—an amount that Puerto Rico Governor
Alejandro Garcia Padilla admitted his territory will be unable to pay back.

Joaco Villamil, a Puerto Rican economist and business consultant,
acknowledges that Cuba's re-entry will cause some "leakage" in Puerto
Rico's tourism numbers. Tourism contributes an estimated $7 billion a
year to the island's economy.

Still, he argues that the U.S. commonwealth can nonetheless profit from
the disruption. "Puerto Rican firms can provide services to the Cuban
tourism industry," he said. "Puerto Rico is pretty sophisticated in
terms of technology."

How Puerto Rico could benefit

According to the International Monetary Fund, the rest of the Caribbean
should benefit, too—a 2008 study published by the institution estimated
that unfettered U.S. access to Cuba would increase tourism by 11%
region-wide.

Puerto Rico tourism experts told Miami's WPLG TV that they hope to
attract Europeans who have been visiting Cuba, and they want to partner
with Cuba on marketing campaigns. "I see it as a great opportunity for
Puerto Rico," said Ingrid Rocafort, the executive director of the Puerto
Rico Tourism Company.

Puerto Rico also still possesses advantages that Cuba isn't likely to
match – at least not for a while. U.S. citizens still cannot travel to
Cuba without obtaining a visa, a time-consuming and cumbersome process.
Any American can visit Puerto Rico with just a drivers' license—and
don't need to waste time at the airport dealing with immigration and
customs. In addition, U.S. airlines offer flights to San Juan, Puerto
Rico's capital, from a variety of cities across the country.

Weak infrastructure

"A lot of tourists have complained about the quality of service on the
island," said Gerardo Gonzalez Nunez, a Puerto Rico-based business
consultant. "The rooms aren't clean enough, they say, the menus aren't
interesting, the quality of food isn't high enough. They go to a hotel
marked five-stars but really it's three-star caliber."

Cuba also lacks sufficient high-end shops craved by wealthier
passengers, and even shopping for basic necessities—such as bottled
water and canned food—can be a challenge due to frequent shortages. The
island's lack of Internet access—just 5% of the Cuban population
regularly goes online, one of the world's lowest rates—is also a
problem. Wireless hot spots, despite recent expansions, are scarce
outside of central Havana, and the country still lacks 3G or LTE
networks for mobile phones.

Cuba's carm

A white paper released this year revealed that the Cuban government
plans to extend Internet access island-wide within five years. But until
then, Cuba's very lack of development may be essential to its charm for
tourists, particularly those jaded by overexposure to hyper-developed
places like Cancun or the Dominican Republic.

"There's a special fascination for Cuba among people in the United
States," said Nunez. "The history and the revolution are very enticing,
and almost sexy. People want to see and ride in the vintage cars and
drink mojitos at the bar that Ernest Hemingway drank in."

No amount of development can erase Cuba's unique history. During the
first half of the 20th century, the island just 90 miles from Florida
was a favorite destination for American travelers, attracted by the
island's tropical charm and tolerance of vice. By the 1950s, when
entertainers like Frank Sinatra held court at Havana's seaside hotels,
90% of all tourists to Cuba were U.S. citizens.

But it's easy to see a future where new, glitzy hotels, spruced up
infrastructure, and glistening services render Cuba as little more than
another Puerto Rico – though not quite as appealing as the real thing.

Matt Schiavenza, Senior Content Manager for Asia Society, is a
contributor to the Atlantic. His work has also appeared in the New
Republic, the Daily Beast, the Huffington Post, and many other publications.

Source: Puerto Rico vs Cuba: A rivalry in the making? - Fortune -
http://fortune.com/2015/09/22/puerto-rico-cuba-tourism/