International Monetary Fund report
An opening of Cuba to U.S. tourism would represent a seismic shift in the Caribbean’s tourism industry.
This study models the impact of such a potential opening by estimating a counterfactual that captures the current bilateral restriction on tourism between the two countries.
After controlling for natural disasters, trade agreements, and other factors, the results show that a hypothetical liberalization of Cuba-U.S. tourism would increase long-term regional arrivals.
Neighboring destinations would lose the implicit protection the current restriction affords them, and Cuba would gain market share, but this would be partially offset in the short-run by the redistribution of non-U.S. tourists currently in Cuba.
The results also suggest that Caribbean countries have in general not lowered their dependency on U.S. tourists, leaving them vulnerable to this potential change.
II. Adapting Gravity Trade Theory
1. Descriptive Statistics of Caribbean Tourism
2. Destination Tourist Base Concentration
3. OECD and Caribbean Country Groups
4. Hurricanes Making Landfall, 1995–2004
5. Gravity Estimates of Caribbean Tourism
6. Cuba: Estimates of Bilateral Tourist Arrivals
7. The Impact on the Caribbean of Opening U.S. tourism to Cuba
8. Alternative Estimates of U.S.-Cuba Unrestricted Tourism in the Caribbean
9. Model 1: Projected Arrivals from Gravity Estimates
10. Model 3: Long-term Gravity Estimation with Industry Costs
1. OECD Tourist Arrivals
2. Cuba-U.S. Tourism Distortions
3. Evolution of Cuba in Caribbean Tourism
4. Distribution of Tourist within Destinations
5. Top Five Clients of Caribbean Destinations, 1995–2004
6. Top Five Destinations of OECD Visitors, 1995–2004
7. Clustering by Tourism Preferences 1995–2004
8. Clustering by Fundamentals and Culture
9. Cost Comparison Across Caribbean
10. Market Concentration Based on Hotel Rooms, 1996–2004
11. Airlines Owned by OECD and Caribbean Countries
12. Modeling of Tourist from the U.S.A
13. Modeling of Tourist Arrivals to Cuba
14. Hotel Capacity Utilization
15. Before and After Assuming U.S. Tourists New to Caribbean
16. Pie Chart of Visitor Distribution Assuming All New U.S. Tourists
17. Before and After Assuming No New U.S. Tourists
18. Pie Chart of Visitor Distribution Assuming No New U.S. Tourists
19. Map Assuming U.S. Arrivals Divert from the Rest of the Caribbean
20. Caribbean by U.S. Arrivals and OECD by Arrivals to Cuba
21. Gravity Estimates of Long-term Adjustment of Destinations
22. Pie Charts of Gravity Estimates
23. Gravity Estimates of Percent Change in Arrivals
24. OECD, Caribbean, Relative Size with Open Tourism
The trade literature regularly seeks to explain how changes to trade barriers impact exports.
For example, recent work that more tightly linked the workhorse gravity trade model to its empirical applications solved a major puzzle as to why borders reduce trade.
Empirical studies have measured export growth after European Monetary Union (EMU) or World Trade Organization (WTO) accession, or the industrialization of China.
Similarly, this study seeks to estimate the impact on the Caribbean of normalizing bilateral tourism trade between the U.S. and Cuba.
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