Cuba to Open Soon?

Cuba will help drive Caribbean demand when it opens to North American visitors, according to cruise line executives and financial analysts. How strong the impact will be and how soon are matters of different opinions, however.

Most cruise lines have had plans for Cuba as far back as 15 to 20 years ago – and are still waiting for access to the island.

An ailing President Fidel Castro has stirred interest again, although he appeared on television earlier this week looking frail, but very much alive, with Venezuela’s President Hugo Chavez.

At Banc Of America Securities, Leisure Analyst Michael Savner said that Cuba will be the holy grail of the cruise industry, and it is only a question of “when” the island will open up. And the best way to visit will be by cruise ship, since Cuba lacks infrastructure to accommodate all the Americans that will want to come, according to Savner.

David Leibowitz, managing director of Burnham Securities, painted a very profitable picture for cruise calls in Cuba.

By offering calls in Havana, Leibowitz said cruise lines can up their rates by, for instance, $100 per person, before incremental spending on tours, nightclub packages, cigars and rum, which the ships will sell too, he said, adding up to some $130 per person or up $15 million to $16 million per ship (2,500 passengers) on seven day cruises, going straight to the bottom line.

And Leibowitz expects Carnival Cruise Lines may be able to put anywhere from five to 10 ships into Cuban ports on a weekly basis, and Royal Caribbean International, from three to five.

Robert Lafleur, leisure analyst at Susquehanna Securities, said Cuba will be a solution to what he called the boredom issue affecting the Caribbean. But, he added, the question is, can you put 15 ships into Havana all of a sudden?

At Carnegie, Preben Rasch-Olsen, analyst covering consumer goods and cruise, said that Cuba will be very interesting for Americans and Europeans alike.

“Cuba will ultimately be significant,” noted Robin Farley, leisure and gaming analyst at Ubs Investment Research. “The best way to see Cuba will be by ship, but it might take six months or more after Cuba opens up.”

Cuba will be an extremely attractive destination, according to Tore Ostby, leisure analyst at Handelsbanken. But he does not think the industry should be holding is breath on Cuba.

Neither does Terry Thornton, vice president of market planning at Carnival Cruise Lines. He said it was hard to plan for Cuba. “We have a good understanding of what ports there can take ships, but they may not be ready right away, and then there is a question of what model Cuba will follow. For instance, will they restrict ships the way Bermuda does?

“Undoubtedly, Cuba will be very popular. It is a good vacation destination already for non-U.S. markets. But right now, we cannot even talk to people there.” When Cuba opens up, MSC Cruises will definitely be calling – maybe homeporting too, said Rick Sasso, president and CEO of MSC Cruises USA.

Cuba would be fascinating and stimulate demand, according to John Heylen, nautical manager at P &O Cruises. However, Cuba has few ports accessible to big ships, he said, noting that most ports are up river and that only Havana has decent access for big ships.

Peter Cox, director of itinerary planning at Seabourn Cruise Line, said Cuba is another Caribbean island. “Why would our guests want to go there? When the island opens up, people might as well fly there. I do not think it will be such an easy cruise destination. Havana will need a lot infrastructure work.”

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