Puerto Rico vs Cuba: A rivalry in the making?

Soon after Pope Francis landed in Cuba last weekend, he urged the U.S. and Cuban governments to further reconcile. “We have witnessed an event which filled us with hope: the process of normalizing relations between two peoples following years of estrangement,”the pontiff said.

President Obama already relaxed the 55-year-old Cuban embargo and announced last week a raft of other measures intending to strengthen economic ties between the two countries. But, the U.S.-Cuba rapprochement has some practical implications that go far beyond geopolitics.

Cuba, a tropical island famous for its sandy beaches, colonial architecture, and rum cocktails, could soon be available to widespread American tourism for the first time in over five decades. This development is likely to pose not only challenges for Cuba but also for the Caribbean tourism industry. Can other Caribbean islands—most notably beleaguered Puerto Rico—handle the competition?

Although tourists face restrictions to enter Cuba, interest is high. According to the country’s Ministry of Tourism, visits to the island increased by 17% during the first half of this year, putting Cuba on track to attract four million visitors overall in 2015. Full, unrestricted access for American citizens—as proposed by existing legislation in Congress—could double this number.

“It’s natural to perhaps to become a little concerned, but when they read that the experience in Puerto Rico hasn’t been touched, hasn’t been in any way or form diminished, they understand that this is a tremendous destination,” Milton Segarra, president and CEO of Meet Puerto Rico, said.

Puerto Rico as a competitor

Cuba’s arrival on the tourist scene is worrisome for Caribbean destinations, especially Puerto Rico. The tropical American commonwealth has long been an attractive destination to American mainlanders, but the island’s tourist industry has stagnated—the number of visitors to the island has barely budged in 20 years. One major factor is wages.

As a U.S. territory, Puerto Rico is subject to the federal minimum wage, which, at $7.25 an hour, is significantly higher than entry-level wages paid in the Dominican Republic or Cuba. This translates to higher construction costs that, in turn, discourage expansion. These problems are exacerbated by an island-wide financial crisis that has left the territory $72 billion in debt—an amount that Puerto Rico Governor Alejandro Garcia Padilla admitted his territory will be unable to pay back.

Joaco Villamil, a Puerto Rican economist and business consultant, acknowledges that Cuba’s re-entry will cause some “leakage” in Puerto Rico’s tourism numbers. Tourism contributes an estimated $7 billion a year to the island’s economy.

Still, he argues that the U.S. commonwealth can nonetheless profit from the disruption. “Puerto Rican firms can provide services to the Cuban tourism industry,” he said. “Puerto Rico is pretty sophisticated in terms of technology.”

How Puerto Rico could benefit

According to the International Monetary Fund, the rest of the Caribbean should benefit, too—a 2008 study published by the institution estimated that unfettered U.S. access to Cuba would increase tourism by 11% region-wide.

Puerto Rico tourism experts told Miami’s WPLG TV that they hope to attract Europeans who have been visiting Cuba, and they want to partner with Cuba on marketing campaigns. “I see it as a great opportunity for Puerto Rico,” said Ingrid Rocafort, the executive director of the Puerto Rico Tourism Company.

Puerto Rico also still possesses advantages that Cuba isn’t likely to match – at least not for a while. U.S. citizens still cannot travel to Cuba without obtaining a visa, a time-consuming and cumbersome process. Any American can visit Puerto Rico with just a drivers’ license—and don’t need to waste time at the airport dealing with immigration and customs. In addition, U.S. airlines offer flights to San Juan, Puerto Rico’s capital, from a variety of cities across the country.

Weak infrastructure

“A lot of tourists have complained about the quality of service on the island,” said Gerardo Gonzalez Nunez, a Puerto Rico-based business consultant. “The rooms aren’t clean enough, they say, the menus aren’t interesting, the quality of food isn’t high enough. They go to a hotel marked five-stars but really it’s three-star caliber.”

Cuba also lacks sufficient high-end shops craved by wealthier passengers, and even shopping for basic necessities—such as bottled water and canned food—can be a challenge due to frequent shortages. The island’s lack of Internet access—just 5% of the Cuban population regularly goes online, one of the world’s lowest rates—is also a problem. Wireless hot spots, despite recent expansions, are scarce outside of central Havana, and the country still lacks 3G or LTE networks for mobile phones.

Cuba’s carm

A white paper released this year revealed that the Cuban government plans to extend Internet access island-wide within five years. But until then, Cuba’s very lack of development may be essential to its charm for tourists, particularly those jaded by overexposure to hyper-developed places like Cancun or the Dominican Republic.

“There’s a special fascination for Cuba among people in the United States,” said Nunez. “The history and the revolution are very enticing, and almost sexy. People want to see and ride in the vintage cars and drink mojitos at the bar that Ernest Hemingway drank in.”

No amount of development can erase Cuba’s unique history. During the first half of the 20th century, the island just 90 miles from Florida was a favorite destination for American travelers, attracted by the island’s tropical charm and tolerance of vice. By the 1950s, when entertainers like Frank Sinatra held court at Havana’s seaside hotels, 90% of all tourists to Cuba were U.S. citizens.

But it’s easy to see a future where new, glitzy hotels, spruced up infrastructure, and glistening services render Cuba as little more than another Puerto Rico – though not quite as appealing as the real thing.

Matt Schiavenza, a Senior Content Manager for Asia Society, is a contributor to the Atlantic. His work has also appeared in the New Republic, the Daily Beast, the Huffington Post, and many other publications.

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For more on Puerto Rico, watch this Fortune video:

Many, including Pope Francis, are calling for “reconciliation” between the U.S. and Cuba. But will opening Cuba’s tourism hurt Puerto Rico?



By Matt Schiavenza
Puerto Rico vs Cuba: A rivalry in the making?