Why Airbnb Thinks Cuba Can Become A Case Study

Why Airbnb Thinks Cuba Can Become A Case Study
Miguel Helft
FORBES STAFF

Like most Cubans, Alejandro Portieles spent much of his life in
government jobs. He started as a veterinarian, crisscrossing the
island's ruddy roads to tend to cows, horses and other animals at
government farms. He later became an administrator for the government's
food services overseeing restaurants and cafeterias in various
localities. He rose through the ranks and a few years ago, he was asked
to take over the running of food service operations in Old Havana, the
historic center of the capital and a magnet for tourists. Portieles,
then 62, didn't want the pressure and scrutiny that would be part of the
high-profile job. So he retired, and as a growing number of Cubans have
done recently, he became an entrepreneur.

Portieles now runs a beautiful bed and breakfast in the heart of Havana.
It's a 200-year-old house that belonged to a Spanish captain during the
colonial era, then to a Jewish family and eventually became a prominent
dry cleaning establishment. After the revolution, the government
expropriated it and turned into a multi-family tenement. It now belongs
to Portieles' son, a United Nations official working in Nicaragua.
Portieles and his wife Nelly Figueredo, painstakingly restored the
building – brick by brick, tile by tile, even saving portions of an
original fresco with the help of the government's historic preservation
experts. They opened in 2014, offering two spotless, air-conditioned
rooms with 25-foot ceilings that face an open air corridor and patio. In
the morning, the couple serves a delicious breakfast for their guests.
With the income they earned, they refurbished a third room, and are now
working on a fourth, upstairs. They're listed on TripAdvisor TRIP
-2.99%, on a number of European Web sites and Cuban agencies and,
courtesy of their son in Nicaragua, have their own Web site. They have
had guests from 54 countries, from Spain to Angola, Israel to Venezuela
and Switzerland to Korea. "That would be South Korea, naturally,"
Portieles clarifies with a smile and knowing look over his wire-rimmed
glasses. In June, I was their first Airbnb guest.

Airbnb landed in Cuba with a splash on April 1. The country had been
something of the original rent-a-room market and was in many ways
tailor-made for Airbnb. Room rentals started more than two decades ago,
when the Castro regime opened the door to private enterprise in a very
limited number of categories, including private rentals and restaurants.
As the government expanded those categories to more than 200, casas
particulares, as the rentals are known, grew into one of the largest and
most successful sectors. There are now more than 20,000 of them in Cuba,
and new ones are sprouting daily. They rent to some of the more than 2
million visitors who come to the island annually from Europe, Latin
America, Canada and other destinations. Travelers typically find homes
on TripAdvisor or other Web sites; others reserve through a handful of
local or European agencies; others are led to rentals by hucksters who
buttonhole tourists on the streets, outside Havana's hotels.

The promise of Airbnb is to bring order, trust, growth – and of course,
Americans – to this market. But its impact on the island's rent-a-room
market is hard to predict. For one, as relations with the United States
head toward normalization, an influx of tourists is expected to come to
Cuba of the likes the island has never seen. Only 100,000 or so American
visitors came to the island in 2014, but that number is on track
to grown more than 30% this year, based on early estimates. A full
normalization of relations between the countries would send that number
far higher, and could double or more the total number of visitors to the
island. Cuba's tourism infrastructure is ill prepared for a surge –
existing hotels are already largely booked during the high season, so
the casas particulares could help absorb the surge.

Airbnb for its part is not expecting a gusher of money to come from Cuba
– at least not any time soon, Nate Blecharczyk, co-founder and CTO of
Airbnb, told me during an interview in Havana. "It's not a meaningful
revenue source now," Blecharczyk said. "Maybe over time." Still, the
company is putting significant marketing muscle to advertise its
presence in Cuba. It has taken out full-page ads in The New York Times
and advertised elsewhere, including the Web. There are several reasons
for the push. "Most people expect the number of travelers coming to
Cuba to greatly increase," Blecharczyk says. "In that case, Airbnb can
play a role in helping Cuba accommodate many more travelers. It could
become a case study." The subtext here is that a case study of Airbnb
helping a city deal with a problem would no doubt help to counter some
of the bad press it has received in cities, including its home town of
San Francisco, where it has been accused of contributing to a housing
shortage. But perhaps more important, Cuba fits with Airbnb's sense of
mission. "The primary reason for doing this right now is to show people
how connecting individuals in different countries can bring countries
closer together," Blecharczyk added.

While the impact of Cuba on Airbnb is modest, the impact of Airbnb on
Cuba could be significant. Already, the country's remarkable
entrepreneurs in tech and beyond – the subject of a recent FORBES
feature – are welcoming the arrival of a major American company as a
sign that relations between the countries are on a path to
normalization. And Airbnb is seeing early signs of traction. It opened
with 1000 listings in April and has since grown to more than 2,600
listings. (The company says the growth in Cuba currently outpaces that
of any other destination except Philadelphia, which is seeing a
temporary surge in activity ahead of the upcoming visit of Pope
Francis.) Listings are spread across some 40 cities, with about half
them concentrating in Havana. Gauging the dollar impact of those
listings is impossible because Airbnb won't disclose how many bookings
it has received. Scores of listings don't have reviews, suggesting they
haven't been booked through the site yet. The average nightly rate is
$46, based on available rentals for three randomly-selected dates in the
upcoming months. The company does say, however, that hosts who have had
Airbnb guests have made about $250 per booking and have earned an
average of $900 in revenue across various bookings. In a country where
the official average wage is about $20 a month – though millions find
ways to supplement their income unofficially – those are significant sums.

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Airbnb Adds Over 1,000 Listings in Cuba

My rental, La Casa De Concordia, was clearly on the higher end of
properties. I paid $95 a night, for a spacious two room suite with its
own bathroom that could easily have accommodated four people. Like most
Airbnb hosts – and most Cubans — Portieles lacks Internet access or the
capability to receive online payments. His listing is managed by a third
party, who aggregates multiple rental properties, posts them on Airbnb
and communicates with guests, confirming bookings. Portieles received
payment, which I made on Airbnb with a credit card, through an
authorized provider of remittances who delivers cash to him. Like most
Cubans who have had a taste of working for themselves, rather than the
government, there's no going back. "I don't have anything to do with the
government," Portieles says. "I pay my taxes and that's it."

I visited over a dozen Airbnb properties around Havana and found a wide
range of accommodations, from beautifully restored old homes to simple,
but clean, apartments. Most hosts rent to complement their income and
support themselves or other family members. And like in other markets
where Airbnb operates, some hosts simply like to have company. Magalys
Lara Ramos is a 65-year-old retired nurse, who more than a decade ago
was sent to work in a hospital in Iraq, a government assignment that
resulted from the warm relationship between the Castro and Hussein
regimes. She was in Baghdad during the American invasion. Now, with one
of her daughters no longer living with her, she has extra space and not
much to do. "Knowing that I have to make breakfast for a tourist makes
me feel like I'm 20 years old," she says. "It pumps me with adrenaline."

While room rentals remain a cottage operation, there are signs that some
savvy entrepreneurs are eyeing it as a lifestyle business and an
investment opportunity. On a tour of properties organized for
Blecharczyk's visit, two of the nicest homes we toured were run by
foreigners, a Spaniard and an Italian, who had moved to Havana, bought
historic homes, restored them and put them up for rent. (Technically,
foreigners are not allowed to own property in Cuba, but their Cuban
spouses can.) The homes were purchased before Airbnb's entry into the
market. But there's a chance Airbnb could help turn this kind of
investment into a trend. If it does, Airbnb's "case study" could quickly
begin to raise eyebrows.

Source: Why Airbnb Thinks Cuba Can Become A Case Study - Forbes -
http://www.forbes.com/sites/miguelhelft/2015/09/06/inside-airbnbs-cuba/2/

Source: Why Airbnb Thinks Cuba Can Become A Case Study - Forbes -
http://www.forbes.com/sites/miguelhelft/2015/09/06/inside-airbnbs-cuba/