Opinion: What Does Cuba Mean For Bermuda?

January 14, 2015

[Opinion column written by Larry Burchall]

“Events, dear boy, events.

Reputedly, that was UK ex-Prime Minister Harold MacMillan’s response when asked what he feared most.

For Bermuda, two events have occurred. On 2nd December 2014, we learned that Bermuda would host the 2017 America’s Cup races. Fifteen days later, Bermuda learned that US President Barack Obama was moving to normalize US relations with Cuba.

For us at 32n64w, those were opposite events. The first, good for us. The second, not so good.

I’ve already described the primary good that the America’s Cup event could do for us. [Bernews: 10 December 2014]. However, Cuba’s opening up poses a massive threat to Bermuda’s struggling Tourist Industry.

Here are twenty direct and honest comparisons between tourist destination Cuba and Bermuda

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Cuba’s relative newness as a tourist destination will give it several years of premium value and attraction. Currently, annually, just over 1.5 million Europeans and Canadians make up the majority of travellers to Cuba. Annually, fewer than 75,000 ‘rogue’ Americans visit Cuba. These 1.6 million tourists already spend as much as two and a half hours additional time flying more than 1,250 additional miles to fly past Bermuda so as to get to Cuba.

Once the USA’s 53 year-old self-imposed barriers are finally – and inevitably – removed; then on cruise-ships and in airplanes, hundreds of thousands more Americans are likely to flood into this newest tourist playground.

European and Canadian investor groups may have been reluctant to invest large bundles of their euros and dollars in Cuban assets which might still face legal problems over the 54 years ago Cuban government expropriation of property that was then owned by US investors. This was partly because of their view that the US Government would likely stand behind any US Corporation that brought a lawsuit.

Now, with Cuba opening up, a large number of US investors will recognize a golden opportunity in a re-opening and revitalizing free market Cuba. However, US investors face one particular and unique problem. Do they wait for notoriously litigious squads of US potential litigators to still pursue 53 year-old claims in US courts? Do they expensively huddle with their expensive US lawyers and fret about being sued in US courts, while European and Canadian investors surge in and grab all the best opportunities? Or do US investors jump in now?

I believe that potential US investor and investor groups will – and should – make immediate and copious use of Offshore Financial Centres [OFC’s]. Use these OFC’s to mass and move their US investment capital into Cuba. For American investors, this would be an ideal but side door entry into that new market, given that in the fast shark eats slow tuna world of global finance, any lawful entry – even a side door entry – is a good entry.

As a reputable OFC in a strong non-USA legal setting, Bermuda could benefit from a surge in business with big chunks of US capital being off-shored to Bermuda prior to being on-shored into Cuba.

If that happens, it should be a boon to Bermuda’s severely shrunken IB sector and could – should? – provide some (50? 150? More?) new high-end jobs in Bermuda’s IB sector.

Those new jobs will be desperately needed.

Cuba’s free-ing up as a Tourist playground will work like a giant sucking machine. Cuba will suck millions more tourists into its 43,000 square miles (over 10 times the size of Jamaica and 2,000 times the size of Bermuda). Very low cost Cuba will negatively impact tourism throughout the low cost Caribbean and throughout Ebola plagued West Africa.

Cuba will be a fresh, new, and wonderful place to visit and explore. Initially, all costs in Cuba will be lower than on any other Caribbean island; and far, far lower than in Bermuda. Where a normal Bermuda tourist must allow for a minimum $500 a day basic costs (accommodation, meals, transport… no shopping!); in Cuba, that same tourist might require far less than $200 a day (accommodation, meals, transport… no shopping!).

First-in foreign investors will likely find that early on, new tourist accommodations can be completed in Cuba for something between $30,000 and $250,000 a room – depending on star grade. Contrast that with the $1,000,000 plus cost-per-room, for essential five star building in Bermuda.

For Bermuda, the second event provides an opportunity, but also presents a significant downer. In 2015, Bermuda will likely say goodbye to Desarollos/Club Med.

Events, dear boy, events.”

- Larry Burchall

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Comments (20)

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  1. Mr.Ed says:

    There should be some concern by the BTA if and when Cuba officially opens up its doors.
    Hundreds of vacation thirsty Americans would love to see a country that has been closed to them for so many years.
    I know its going to be 80% cheaper than Bermuda and a flight from Florida is only a 20min away.
    The threat is real which means our Govt.should be working on a way to counter this.– I only hope they are.

  2. Have you been to Cuba? says:

    It sucks, and the food is not good. Their infrastructure is not excellent, their public transportation is unsafe. Tourists are not allowed to use the hired cars, and you can be robbed in a taxi (I would say that is crime that affects tourists.) It’s a very poor country. The kind of people who go to Cuba are not the kind of people we are trying to get to come here. You are overreacting.

    • Ricko Chez says:

      @have you been to Cuba: Goodness me! Just imagine, as you say, tourists not being able to use hire cars.

      But then I remembered, this is Bermuda and that’s how it is here also.

      Its so easy to see how this is a major inconvenience somewhere else, we just need to realize the same here.

      Bermuda needs to get with it, embrace the competition, and provide a viable product. Today we don’t.

      Being polite and saying good morning is not enough.

      Tourists want casinos, they want hire cars, perhaps a topless beach. The religious lot will kill anything like this of course. They’d rather pray for things to get better. Good luck with that – you may as well do nothing.

    • stunned... says:

      Mr Burchall didn’t list the “Hooker/Sex Workers” who literally descend on male patrons like flies in any nightclub, or bar-that’s if they are allowed inside the place. Yes, saw it with my own eyes.

    • Julip says:

      Yes!! I have been a few times. The food choices(depending on the hotel) is often limited, but the hotel staff work very hard to please the clientele. Bermuda could learn something for sure. The beaches are clean and lovely.
      Tourism is their main economic source, and people are made to feel welcomed. Local transportation is a bit of a disaster, but have you been on some of the buses in the Caribbean islands?

      People tend to blame governments when tourism is faltering, when in effect every Bermudian is supposed to be an ambassador for our home land.We already have lots of competition in the tourism field, Cuba will be another competitor. We have to consider, what do we have that will be attractive to visitors and have them returning to our shores without them feeling ripped off financially due to the high costs, or unwelcomed by rude people. The wake-up call has been evident for years.

  3. J Starling says:

    Not so sure about marking Cuba in the column for excellent infrastructure or good roads.

    A lot of the key infrastructure is dated and in need of an overhaul.

    Roads are okay in the major cities, and generally okay in urban areas generally. But between urban areas, not so good.

    And I believe you’re in error in citing Cuba as having casinos. Those have been illegal since the revolution, and I’m not aware of any changes in that regard. They found them a magnet for organised crime and contrary to the ideals of social and economic development for the people.

    Access by air is so so. It is potentially easily accessibly by air from the US, but I wouldn’t expect direct US-Cuba commercial flights for some time yet. It’s easy enough to get there via Toronto, Nassau or Mexico City though.

    • Larry Burchall says:

      If, on this day, Cuba lacks good roads or sufficient airports or decent harbour facilities to accept the mega-cruiseships,or any other physical infrastructure, then all of that can be fixed within 24 – 36 months. Same if there is – as is true – a lack of hotel beds.

      Within the next 36 months, with, say, a $2 – $3 billion World Bank ‘developing country’ loan, the Cuban Government can build over 1,000 miles of good highway, add two airports, build a cruise-ship harbour.

      Within the next 36 – 60 months, outside ‘capitalist’ investors will understand that Cuban tourist arrivals can easily double from today’s 1.6 million to 3 million plus; and that this phenomenal growth will offer bonanza profits to the first ‘sharks’ to get in. So their energy and creativity and lust for profit will see hotels mushrooming.

      Crime? The ‘enclave’ style tourism that Jamaica pioneered takes care of that. Just keep the tourists inside ‘fenced off security patrolled’ all-in-one resorts.

      Cuba presents big new opportunity.

      Bermuda ought not be complacent.

      Larry Burchall

  4. Lois Frederick says:

    I am curious and troubled by your last sentence. Is that supposed to be a tease to your next instalment? Care to elaborate?

  5. stunned... says:

    instead of being frightened by the prospect of Cuban competition, we Bermudians should embrace the phenomenon by pooling resources and investing in their Tourism industry if ours is so behind the curve. Since we know (or claim) what the Hospitality Industry is about, we should be poised and ready. We could stipulate in our investment that 50% of staff has to be Bermudian etc. This thinking provides a return on investment, provides jobs and create an opportunity to cross sell Bermuda for the truly upscale clients that we keep trying to attract. Bill, any ideas?

    • flikel says:

      ‘We could stipulate in our investment that 50% of staff has to be Bermudian etc.’

      Bermudians turned their back on tourism and tourism jobs years ago. Now, as jobs are tight, Bermudians are returning back to the hospitality industry.

      It seems young Bermudians no longer aspire to be waiters, housekeeping cleaners, door men, steel drum players.

      Often times now, Bermudians seek these type of jobs because they cannot find anything else….these jobs are not their first choice, rather their ‘fallback’ jobs.

      Contrast to previous years in which Bermudians saw these type of jobs as viable career opportunities.

      We complain about the lack of locals in the hospitality industry, but it was us locals that walked away from it.

    • Are you a Comedian? says:

      You must be joking. Bermudians won’t work in hosiptality in Bermuda, what makes you think they will take $8,000 per year to work in Cuba?

      • stunned... says:

        where are coming up with these salaries? sigh…

        • Are you a Comedian? says:

          It’s actually a very high estimate, the wait staff at the resort I was in were making $20/month.

    • feel the love says:

      So you find it perfectly acceptable to demand 50% Bermudian hires in another country? Shouldn’t the same rules apply here if a foreigner wants to invest in Bermuda?
      On top of that I don’t see many Bermudians willing to move to a communist country and working for $5 per day.

      • stunned... says:

        Yes, the same rules should apply here. If people really want to work they’ll go where there is work, witness the number of ex-pats here. Who says that the wage will only be $5 per hour? Next.

        • feel the love says:

          Same rules should apply here??? LMAO! Here there is roughly 20% expats in the workforce and you are willing to raise that to 50%??? That happens and the riots start! Problem here is some people really don’t want to get an education and work for an honest paycheck. Suddenly they would be willing to do it in Cuba for less pay??? Foolish

          I suppose you didn’t read the article where it says current Cuban workforce is earning less than $5 per day.

          I am stunned at your ignorance

          • stunned... says:

            the comments above are a reflection of the dire straits Bermuda finds itself with Bermudians claiming to know what other Bermudians will or won’t do. Jumping to far flung conclusions about price points. an apparant unwillingness to think outside of the box but to presume their answer is the only correct one…ho hum

  6. Trickle Down Esq. says:

    Dear Mr Burchall,

    Please, please we beg, stick to the trickle down economics articles and the ones where you critique the PLPs terrible 14 year performance, or those confusing missives where you talk about $100,000,000 being used to pay a specific bond, or unemployment.

    You have insufficient exposure to, or experience in Cuba to pen anything credible, so please sir no more.

    Yours faithfully,
    Trickle Down esq.

  7. Chris Famous says:

    For Bermuda, the second event provides an opportunity, but also presents a significant downer. In 2015, Bermuda will likely say goodbye to Desarollos/Club Med.

    “Events, dear boy, events.”

  8. Politically Incorrect says:

    IMO the likely revival of Cuba as a tourist destination for Americans is the final nail in the coffin for BDA tourism. The next 2-3 years up to and just after the AC will represent a dead cat bounce. Sayonara after that for good.