Cuba Tourism Revenue Jumps 15 percent in First-Half of 2016 - Case Study Example

Tourism Economics “Cuba tourism revenue jumps 15 percent in first-half of 2016.” Name Institution Course Name & Number Date Table of Contents Table of Contents 2 1.0 Summary 3 2.0 Background 3 3.0 Analysis 4 3.1 Who or which parties are affected by the news? How are they affected? 4 3.1.1 American citizens 4 3.1.2 Cuban Government 5 3.1.3 American government 5 3.1.4 Cuban Travel Agencies 5 3.1.5 Cuban Hotel Industry 6 3.2 Why and how the government could influence the outcome 6 3.3 Interrelated Demand Analysis 6 4.0 Recommendations 7 References 8 Appendix 9 Copy of News Article 10 10 11 1.0 Summary The Cuba’s tourism industry registered 15% revenue growth during the first half of the year 2016 in comparison with the same period in 2015 The number of international tourists from the U.S. grew by 80%. The country’s income from the tourism sector also grew to $1.2 billion and this is expected to help sustain Cuban economy at a time the country’s economy is facing the challenge of lower global prices and the fact that Venezuela, which is its key ally is also facing a crisis The removal of the travel restrictions by the U.S. government is expected to spur growth of Cuban tourism sector in the coming years Although Canada remains the largest source of tourism for Cuba, the removal of travel restrictions between the U.S. and Cuba has seen Americans now become the third largest tourist groups to Cuba following closely Cubans staying abroad. Cuban tourism sector that is famous for its classic cars, beaches and fading glamour has been transformed significantly since the relationship between the U.S. and Cuba improved following 2014 meeting between the former U.S President Barack Obama and Cuban President Raul Castro. Trade embargo continues to restrict American citizens from traveling to Cuba as tourists, though there are 12 exceptions to the ban Total tourists numbers rose 11.8% Even as tourism industry record immense growth, Cuban broader economy continues to struggle as trade surplus fell by over 40% in 2015 Despite growth of tourism sector, service exports earnings fell by $1.3 billion with healthcare, and overseas workers forming the bulk of Cuban services. Hotel occupancy still below 50% despite tourism growth. 2.0 Background Tourism industry is a major source of foreign exchange for the Cuban economy. Tourism contributes significantly to the country’s GDP. However, the Cold War between the U.S. and Cuba that has lasted several years since the Cuban War that saw the United States impose a travel ban on its citizens to Cuba greatly affected Cuban tourism industry. However, things have began to change as the 2014 meeting between the Cuban President Raul Castro and its U.S. counterpart Barack Obama has resulted in the lifting of travel ban for citizens of the two countries and this has had a positive impact on Cuban tourism industry that is currently booming as more and more American tourists visit the country. Acostaet al. (2016) report indicates that the Cuba’s tourism industry registered 15% revenue growth during the first half of the year 2016 in comparison with the same period in 2015 which income from the tourism sector also grew to $1.2 billion during the same period. The growth of Cuba’s tourism sector has been spurred by the rising number of arrivals from the United States. According to Acostaet al. (2016) report, the number of visitors from America grew by about 80% with the removal of travel restriction expected to result in increased number of tourists from America and this is expected to promote further growth of Cuban tourism sector. However, even as the number of American visitors continues to increase exponentially, Canadians remain the largest tourist groups to Cuba with Americans now at the third position having overtaken visitors from European countries, such as the UK, Germany, France and Italy that have traditionally been the major tourism source for Cuba. Although the lifting of the travel ban for Americans has promoted the growth of Cuban tourism industry with a large number of Americans visiting Cuba, there is still the issue of embargo that still makes it difficult for Americans with the intension of touring Cuba to do so. This implies that Americans can only visit Cuba for the approved 12 categories of exceptions that include business and cultural purposes. 3.0 Analysis 3.1 Who or which parties are affected by the news? How are they affected? 3.1.1 American citizens Americans are the major stakeholders who are affected by the news reported by Reuters in this article. For many years, Americans have been banned from traveling to Cuba following the Cold War that had been going on between Cuba and the United States. The Cold War that began during the Cuban War has meant that any American with an interest in traveling to Cuba could not do so because of the travel embargo issued by the United States. For this reason, this news item affects them directly considering that the lifting of the travel ban means that Americans can now visit Cuba as tourists though still within the 12 categories of exceptions to embargo. 3.1.2 Cuban Government The Cuban government is the other key stakeholder who is affected directly by this news item. The Cuban government is affected by this news because Cuba depends on tourism as a major source of foreign exchange. However, the embargo issued by the U.S., coupled with travel restrictions for its people had an adverse effect on Cuba’s tourism industry because the Cold War between the U.S. and Cuba meant that Americans could not tour Cuba. However, going by the Acostaet al. (2016) report, Cuba is affected by this news because it is the greatest beneficiary of the now good relations between it and the U.S. as the cooperation deal signed between President Raul and President Obama has greatly promoted the growth of the country’s tourism sector that now received a large number of American tourists and this has translated to earnings growth of up to $1.2 billion. The Cuban government is also affected by this news because it can use the report to find ways of improving its tourism sector so as to make it more attracting to visitors. 3.1.3 American government The United States government is an interested party and is affected by this news article in various ways. First, the United States is affected by this news because there is still a trade embargo in place that prohibits Americans from traveling to Cuba with the exception of the 12 categories of exceptions that had been approved by the Obama administration. Therefore, the American government is interested in this news because it is interested in ensuring that the trade embargo rules are followed by Americans and that Americans visit Cuba only for the reasons allowed, such as business and cultural visits among others. Besides, the American government is affected by this news because it enables the government to understand the impact that the improved relations between Cuba and the U.S. is having on the Cuban economy and how best to sustain the good relations for the betterment of the Cuban economy. 3.1.4 Cuban Travel Agencies The Cuban travel agents are another stakeholder of the tourism industry and are affected by this news. As travel agents, the Cuban travel agencies are interested in knowing the tourism trend so that they can plan how to serve tourists better by ensuring that they have enough vehicles and travel guides to accommodate the booming industry. This news also helps travel agencies understand the major source of tourists so as to ensure better planning. 3.1.5 Cuban Hotel Industry Hotel industry go hand-in-hand with tourism and are affected by this news directly. For instance, Reuters report indicates that Cuban hotel occupancy capacity stands below 50% despite the growing number of tourist arrivals. Therefore, this news affect them as it highlights the areas that hotel managers need to improve on to make them attractive to visitors. 3.2 Why and how the government could influence the outcome Although tourism industry has been a major contributor to the Cuban GDP, the industry has been recording slow growth, which has for long been partly contributed by the tension between the United States and Cuba. Therefore, the best way to promote growth of the industry was for the Cuban government to build a good relationship with the U.S. so as to allow free movement of people from each of these countries by removing travel restrictions and influencing the U.S. to lift trade embargos that have prohibited the American citizens from visiting Cuba for many decades. This, therefore, implies that the Cuban government needs to initiate economic policies directed towards improving the state of its tourism industry so as to promote economic growth. 3.3 Interrelated Demand Analysis The demand and supply of tourists is closely related to state of the economy Tourism sector plays an important part in the development of an economy and there is a relationship between demand for tourism and the state of the economy. Tourism demand refers to the number of individuals that intend to buy tourism products at any given time (Seth, 2006). Tourism demand has direct impact on the economy of a country. However, it is important to note that there are three types of tourism demands, namely actual, suppressed and latent demand. Nonetheless, it is the actual tourism demand that has an effect on the economy of a country. Actual demand is demand that comes from tourists who are engaged in the actual tourism process (Woodside & Martin, 2007; Nissan et al., 2011). Gunn and Var (2002) note that, when actual demand for tourism increases, this results in an increase in the economic growth of a country. This is because increased demand for tourism translates to increased demand for tourism amenities in a country, such as hotels, tours and travel, accommodation and fees, which translates to GDP growth of a country (Woodside & Martin, 2007). For instance, the increased demand for tourist from American citizens visiting Cuba has resulted in growth of revenue and income, which translates has in turn improved the state of the Cuban economy. Illustratively, Appendix 1 indicates that, when the demand for tourism increases from D1 to D2, GDP/capita growth increases from Q1 to Q2. Accordingly, this implies that, there is a positive relationship between tourism demand and economic growth. Tourism supply also has a direct relationship with economic growth. Tourism supply involves the provision of important facilities of the tourism sector by the host government or tourism destination and extends to promotion and maintenance of tourism facilities and resources, such as hotels (Sahli & Carey, 2013). The critical tourism resources for tourism supply include infrastructure development (transport, telecommunication and accommodation), tourism reception service development, such as travel agencies, hire companies, tourist offices and visitor managers. Supply of tourism has a direct relationship to economic growth of a country in the sense that, when a country has good infrastructural facilities in place, such as good roads, state of the art hotels, attractive beaches, good tour and travel agencies, this makes the country attractive to tourists, which in turn results in high tourist arrivals, thus increased foreign exchange. In the end, this translates to economic growth (Vanhove, 2010). For instance, Cuba has been attractive to tourists because of its good beaches, and classic cars, which attract tourists from far and wide. On the other hand, when a country lacks the tourist supplies, this makes a country less attractive to visitors, thus resulting in low tourism arrivals, which translates to slow economic growth. Appendix 2 demonstrates that, when the supply for tourism increases from S1 to S2, this result in a shift in GDP per capital from Q1 to Q2, making a growth in the economy. 4.0 Recommendations Tourism industry is important for the growth of Cuba. For many years, the country has recorded low growth of this important sector of the economy. However, the lifting of the travel ban by the U.S. government for its citizens wishing to visit Cuba has greatly promoted the growth of Cuba’s tourism industry. However, considering that there is still a trade embargo in place that prohibit Americans from traveling to Cuba, it would be important for Raul’s government to pursued President Trump’s administration to consider removing the trade embargo in totality so as to allow Americans to tour Cuba in large numbers as this would be good for its economic growth. References Acosta, N., Osterman, C., & Marsh, S. (2016, Nov. 11). Cuba tourism revenue jumps 15 percent in first-half of 2016. Reuters, p. 1 Retrieved from http://www.reuters.com/article/us-cuba-tourism-idUSKBN13627I Gunn, C. A., & Var, T. (2002). Tourism planning: Basics, concepts, cases. New York: Psychology Press. Nissan, E., Galindo, M., & Méndez, M. T. (2011). Relationship between tourism and economic growth. The Service Industries Journal, 31(10), 1567-1572. Sahli, M. & Carey, S. (2013). Inbound tourism and economic growth: A review of theory and empirics. In C. A. Tisdell (Ed.) Handbook of Tourism Economics: 619–640. World Scientific. Seth, P. N. (2006). Successful tourism: Volume I: Fundamentals of tourism. London: Sterling Publishers Pvt. Ltd. Vanhove, N. (2010). The economics of tourism destinations. Cambridge: Routledge. Woodside, A. G., & Martin, D. (2007). Tourism management: Analysis, behaviour, and strategy. London: CABI. Woodside, A. G., & Martin, D. (2007). Tourism management: Analysis, behaviour, and strategy. London: CABI. Appendix Appendix 1 Price D2 D1 P12 P1 Q1 Q2 GDP/capita growth Appendix 2 Price S2 S1 P1 P2 Q1 Q2 GDP/capita growth Copy of News Article Read More