What New York Gov. Andrew Cuomo’s Cuba Trade Mission Means For US Travel Industry

Among the members of New York Gov. Andrew Cuomo’s high-profile trade delegation to Cuba, which arrived in Havana on Monday, is JetBlue CEO Robin Hayes, whose company also happened to charter the plane that flew Cuomo, bigwigs from several New York corporations and a gaggle of reporters down to the island nation.

That’s not unfamiliar territory for JetBlue; the airline is the leading U.S. carrier to destinations in the Caribbean and has expanded its charter flight service to Cuba since President Barack Obama eased travel restrictions between the U.S. and the Communist island in January. But Hayes’ presence represents more than just his airline’s interest in adding routes, including scheduled commercial ones, to Cuba: It’s emblematic of the U.S. travel industry’s desire to break back into Cuba in a big way.

It’s a lucrative prospect. Roughly half of the U.S. population is within a four-hour flight of Cuba -- and before the Cuban Revolution, the tropical nation was a haven for American tourists seeking a getaway full of sunny days and casino- and music-filled nights. In fact, many hotels on the island were owned and operated by Americans (including a significant organized crime element), said William LeoGrande, a professor at American University and co-author of “Back Channel To Cuba: The Hidden History of Negotiations Between Washington and Havana.” The Habana Libre, one of Cuba’s larger hotels, started out, in fact, as the Habana Hilton.

“I wouldn’t be surprised if, 10 to 15 years from now, there will be 30 or 40 million Americans vacationing in Cuba every year,” said Mauro Guillen, a management professor at the Wharton School of Business, who recently planned the Cuba Opportunity Summit in New York City. And American businesses are itching to get those tourism dollars, experts say.

Of course, that will depend on the United States lifting its trade embargo against Cuba. While Obama’s recent Cuba policies have gone a long way in thawing relations between the two countries and have made it easier for Americans to travel to Cuba if they fall into one of 12 authorized categories, there is still a general ban on Americans doing business there.

“In other words, Hilton could not go down there and build a hotel, as much as it might want to,” said LeoGrande.

But that doesn’t mean Cuomo’s mission is for naught. “They’re laying the groundwork. U.S. business representatives have been traveling to Cuba for the last few decades in anticipation of doing business when the embargo is lifted, getting to know Cuban officials, establishing relationships,” said LeoGrande.

"These industry leaders will serve as ambassadors for all that New York State has to offer and will help form the foundation for a strong economic relationship between New York and Cuba as legal restrictions on trade are eased in the future," Cuomo said Sunday in a statement.

Stephen Kobrin, professor emeritus of multinational management at Wharton, agrees. “This is going to be a long process on both sides, but this sort of mission increases understanding and develops the relationships needed to do business,” he said. And Guillen is optimistic that the embargo could be lifted within a few years, most likely after the 2016 presidential election. It would require congressional approval, and while Republicans have generally opposed it, Guillen says there are plenty of pro-business factions in the Republican party that could drum up enough support for the embargo’s reversal.

Still, the exceptions Obama has made through executive order have allowed pockets of the U.S. travel industry to exploit opportunities in Cuba. The number of tour companies offering educational trips to Cuba has exploded since December, thanks to the new policies that eliminate the need for such companies to get licensed by the U.S. government. Further, the president has licensed American businesses to trade with Cuba's private sector. That’s how home rental powerhouse Airbnb has been able to gain a foothold in the country.

“Airbnb works with residential clients in Cuba who are willing to rent out rooms,” said LeoGrande. He said it simply formalizes the “casas particulares” system of home rentals that’s already popular in the country, and he expects that even tour groups may offer its customers the option to stay in Airbnb rentals, which are selling at deeply discounted rates compared to hotels.

For now, commerical air service is perhaps the biggest travel opportunity on the horizon. JetBlue, along with rivals American, Delta, Southwest and United, are all itching to start commercial service from the U.S. to Havana. But first the two countries must negotiate a bilateral air services agreement. According to the U.S. Department of Transportation (DOT), Cuba and the U.S. held discussions on civil aviation in Washington in March.

“The government-to-government discussions covered economic, safety, and security issues related to civil aviation,” said a DOT spokesperson in March. “The next steps are still to be determined.”

That JetBlue’s Hayes is in Cuba alongside Cuomo bodes well for the agreement.

“[Commercial flights] would be very attractive to Cuba because they would have to employ Cubans,” said Joe Schoonmaker, chairman of the New York District Export Council and a trade-risk insurance broker.

Of course, it woudn’t be a bad bet for American businesses, either. Cuomo’s trade mission is an important step in making those opportunities possible.