7 things you need to know about Cuba
22 JUNE 2015 6:06 AM
One consultant has spent the past six years familiarizing himself with Cuba’s hotel industry. Here are seven of the things he’s learned.
NEW YORK CITY—International tourist arrivals to Cuba increased 5.3% during 2014 to surpass the 3-million mark for the first time.
News that the United States and Cuba would work to restore and normalize diplomatic relations undoubtedly contributed to that bump, said Arturo Garcia Rosa, president of HVS Argentina—and that’s before any actionable policy has been put in place.
When the doors actually do open, allowing U.S. and Cuban citizens to travel freely back and forth for the first time in more than five decades, expect those same numbers to skyrocket, he said during an interview held in conjunction with the 37th annual NYU International Hospitality Industry Investment Conference.
The 14.4% year-over-year increase of inbound arrivals during the first quarter offers a brief glimmer of what’s in store, Garcia said.
That’s mostly investors trying to get their foot in the door, he added.
“Not only some U.S. (visitors) are going, but also European tourist and investors because they say it’s time to go,” he said.
It’s been “go” time for Garcia for much longer. Anticipating this normalizing of relations, the head of HVS’ Buenos Aires office has been making inroads into Cuba for the past six years. Here are seven insights he’s learned during that time:
1. Size and scope
Cuba has an existing hotel inventory of 61,000 rooms, Garcia said. The majority (65%) of that inventory is classified as 4- and 5-star. Nearly 13,000 rooms (21%) is classified as 3-star.
2. The big 3
There are three predominant players in the hotel space in Cuba—all of them with ties (whether loose or direct) with the Cuban government:
Cubanacan Hotel Group
The oldest of the three groups, Cubanacan counts 17 hotels in its portfolio.
Gaviota Hotel Group
With 25 years of experience, Gaviota is the organization with the most dynamic growth in the tourism industry during the past few years with 30 hotels in its portfolio.
Gran Caribe Hotel Group
With 20 years of experience, Gran Caribe operates 45 tourist facilities, including all-inclusive resorts, urban hotels and other beach properties. The group holds the iconic Hotel Nacional (the National Hotel of Cuba) in Havana within its portfolio of 21 hotels.
“All are official Cuban entities. All is absolutely transparent. They perform as typical private companies as in U.S., Europe or other non-communist/socialist markets. The management structure is more or less the same. They have a board of director, CEO, etc,” Garcia said in a follow-up email.
3. How to structure a development
Garcia said all of the above Cuban hotel companies have properties that they manage as well as other hotels in 50/50 joint ventures with international hotel companies such as Meliá Hotels International, AccorHotels, NH Hotel Group and Iberostar Hotels & Resorts.
Hotel developments, like all investments, were previously conducted via a 50/50 joint venture with the Cuban government with one of the above entities, Garcia said.
There are 14 hotels with 5,649 rooms open and operating under this structure, he said. A further 12 JV deals have been executed but are not yet open.
In April 2014, the Cuban government eased those restrictions to fuel further investment in the sector. Enter the management agreement, he said.
There are 68 hotels with 35,461 rooms under management agreements with 18 foreign hotel companies, Garcia said.
4. More than just money
While Cuban officials want investment to fuel growth of its tourism infrastructure, equally important is know how, Garcia said.
“They would like that some of the partners put some money, but they are requesting knowledge, expertise,” he said. “This is the great opportunity for U.S. hotel companies.”
5. Moving into mixed-use
“They are changing some rules to develop mixed-use projects. This is absolutely new,” Garcia said.
Signaling this shift is the recent creation of Cuba Golf Group, a subsidiary of Palmares Group, which is in charge of the program to promote Cuba as a golf destination by developing mixed-use projects.
Typical targets are vast swathes of oceanfront property earmarked for a mix of residential, resort and golf course, he said. Two such projects are in “very advanced” stages of discussion.
“But they will need and they will expect that U.S. hotel companies will be part of this,” Garcia said.
6. Infrastructure needs a boost
Much of Cuba’s hotel supply could use a facelift, Garcia said. “They say they have luxury hotels; they don’t have luxury hotels.”
The same is true for the country’s tourism infrastructure as a whole, he added.
“Infrastructure must be developed in the same way that the new properties that will develop will arrive. They need to refurbish and upgrade airports. The airport in Havana is lacking.”
7. A hospitable homeland
One of Cuba’s greatest assets is its people, Garcia said.
“The good news is the quality of the people. This is not a minor point. … It’s important to know this,” he said.
He described them as culturally rich, friendly, welcoming, smart—and eager to begin this new era.
That means more of a willingness to embrace the hospitality industry and take part in its workforce, Garcia said.
“And this is not usually easy in the other areas in the Caribbean and some other countries in Latin America,” he said. “This is a huge advantage.”