Carnival's Outlook for Normalized Relations with Cuba? Caliente!

Cruise ship enthusiasts might be doing plenty of Havana daydreaming' in the wake of President Obama's announcement this month that the U.S. will begin to normalize ties with Cuba. But government and industry experts say it will take a lot of work before the Port of Charleston sees any departures for La Habana Vieja.

"Cuba is a tremendous opportunity," Arnold Donald, Carnival Cruise Lines' president and CEO, said during a conference call with analysts about a week ago. Carnival calls Charleston homeport for its 2,000-passenger Fantasy ship, which sails primarily to points in the Bahamas.

"There's a lot of pent-up demand to visit Cuba," Donald said. "It would allow us some very fuel-efficient itineraries. Also, just new itineraries for those who love to go to the Caribbean."

Still, Donald recognizes that "there will be investment in ports and other infrastructure required over time" to make Cuba a viable destination.

There are about 11 Cuban ports that could accommodate Carnival's ships, Donald said, but only small vessels would be able to dock in Havana.

"The Havana port specifically has a relatively shallow draft, so they will take some smaller ships," Donald said. "It can't be dredged because of the tunnels that are there - the tunnel that is there."

A tunnel under the harbor - which predates Fidel Castro and America's ban on Cuban tourist travel - connects the main historic area with eastern Havana.

The limitations could be good news for the Fantasy, which at 855 feet and 70,367 gross tons is one of Carnival's smallest ships.

There are eight ships in the Fantasy class, all of them the same size. In addition to Charleston, four of the ships sail from Florida and another from New Orleans. The other two are based in Los Angeles.

The East Coast and New Orleans ships would have the best shot at getting a route to Havana, both because of their size and location.

The Port of Charleston is 642 nautical miles from Havana's port, according to ports.com. That is just 11 nautical miles farther than the Fantasy's current voyage to Nassau, Bahamas.

Clearly, Donald sees a financial windfall for the day when Cuban cruises originating in the States become a reality.

"We are excited about the prospects for Cuba and it would definitely create the demand that we need to have the relative scarcity to drive yields," he said.

U.S. Commerce Secretary Penny Pritzker cautioned, however, that commercial tourism is still banned until Congress formally lifts the embargo.

"This is a process; this is not just opening up," Pritzker told CNN. "Banking laws and things like that, those will have to change over time. But that's not where we're at in the process. We're still subject to an embargo."

For now, though, just the thought of smoking a Cohiba cigar and sipping a Cuba Libre at the El Floridita has some stock analysts drooling.

"All of a sudden everyone is going to want to get on a boat to go to Cuba," Erik Herzfeld, managing director of Thomas J. Herzfeld Advisors Inc., told Bloomberg News this month.

"This has been the forbidden fruit for so many years," Herz-feld said. "So just the idea - you could see, if this is opened up, this could be 10 million people going there in a year. And that's quite a number."

Investors agree - Carnival's stock price is up about 5.3 percent since the day of Obama's announcement.

Source: The Post and Courier (Charleston, SC)