Cuban Tourism Industry Ready to Roar Again

Cuba was once the pearl of the Caribbean.Cuban tourism

It was the destination hot spot for tourists from around the world. The country boasts more than 300 world-renowned beaches with powdery white sand and crystal-clear waters.

Havana casinos attracted wealthy high rollers and globe-trotters from all over the planet. We’ve all seen movies depicting the 1950s in Cuba – Hollywood glitz, mobsters, Latin-influenced jazz playing.

But then Fidel Castro’s communist “paradise” happened. Now the country is only known for its cigars and rum, and the cool 1950s cars still running around the island.

Cuban Tourism Industry Coming Back

As evidenced by President Obama’s visit in March, the shackles of communism are coming off – albeit very slowly.

The president announced a plan to normalize relations with Cuba in December 2014. Since then, the seeds of Cuba tourism have begun to sprout once again.

The number of visits to Cuba by tourists were up 17% year-on-year in 2015 to 3.5 million people. Visits from Americans rose 77%.

Companies from the tourism industry are trying to regain a foothold in Cuba again. For example, Royal Caribbean Cruises (NYSE: RCL) could launch cruises to Cuba as soon as July.

In March, Starwood Hotels & Resorts Worldwide (NYSE: HOT) signed a landmark agreement to manage three prominent hotels in Havana. This is the first time in 60 years that a U.S. hospitality company has been allowed to conduct business in Cuba.

Airlines Will Benefit

That brings us to the group that may benefit the most from the reopening of Cuba: airlines.

There are already 10-15 daily charter flights between the two countries. Most of those are handled by American Airlines Group (NASDAQ: AAL) and JetBlue Airways (NASDAQ: JBLU).

But the real money will lie in the regular commercial flights when they begin for the first time in over 50 years. The airlines are jockeying now for position for when U.S. citizens will be allowed to visit Cuba strictly for tourism.

The U.S. Department of Transportation is in charge of parceling out commercial route rights to Cuba to the carriers that requested permission. It will not decide on the winners of the likely lucrative 20 round-trip flights to Havana until later this summer. That’s because airlines made requests for nearly 60 daily flights.

Among those eagerly awaiting the DOT decision will be Delta Air Lines (NYSE: DAL), United Continental Holdings (NYSE: UAL), Spirit Airlines (NASDAQ: SAVE) and Alaska Air Group (NYSE: ALK). Add to the list the aforementioned American and JetBlue, as well as Southwest Airlines (NYSE: LUV) and others.

However, the Department of Transportation did give approvals to airlines that would serve Cuba’s nine other international airports with 10 daily round-trip flights.

The OKs were given to Southwest Airlines, American Airlines, JetBlue, Frontier Airlines, Silver Airways and Sun Country Airlines. An approval for Eastern Airlines was deferred.

A Likely Winner Among Airlines

It’s way too early to pick a definite Cuba tourism winner among the airlines.

We have to see which companies are chosen by the DOT for those Havana daily flights. And, of course, diplomatic relations between Cuba and the U.S. have to improve to the point where tourism in Cuba is permitted.

But if I had to pick one company right now, it would be American Airlines.

It is the leading U.S. carrier to Latin America. American, though, has something else in its corner. It literally has decades of experience in Cuba thanks to those charter flights it runs.

American has the lay of the land, so to speak. It knows how to operate in Cuba in spite of outdated infrastructure. And it has familiarity with the communist authorities.

That should give American a leg up on its competition when the Cuban tourism industry goes full-bore and when tourists return in droves to the pearl of the Caribbean.

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Published by Wyatt Investment Research at