Hotel Chains Are Racing to Build a Presence Across Cuba

Hotel Chains Are Racing to Build a Presence Across Cuba
Mike Stone and Mitra Taj, Reuters - Oct 01, 2015 9:43 am

U.S. hotel chains are in the unfavorable position of going up against
European brands that have already established a strong presence on the
island.
— Jason Clampet
The race for Cuba's beach-front is on.

Executives from major U.S. hotel chains have stepped up their interest
in the Communist island in recent months, holding informal talks with
Cuban officials as Washington loosens restrictions on U.S. firms
operating there.

Executives from Marriott International, Hilton Worldwide and Carlson
Hospitality Group, which runs the Radisson chain, are among those who
have held talks with Cuban officials in recent months, they told Reuters.

"We're all very interested." said Ted Middleton, Hilton's senior vice
president of development in Latin America. "When legally we're allowed
to do so we all want to be at the start-line ready to go."

The United States and Cuba restored diplomatic relations in July after
decades of hostility. Washington chipped away further at the
half-century-old trade embargo this month, allowing certain companies to
establish subsidiaries or joint ventures in Cuba as well as open
offices, stores and warehouses in Cuba.

The United States wants to strike a deal that lets U.S. airlines
schedule Cuba flights as soon as possible, a State Department official
said last week, amid speculation that a U.S. ban on its tourists
visiting Cuba could be eased.

U.S. hoteliers are not currently allowed to invest in Cuba, and the
Caribbean island officially remains off-limits for U.S. tourists unless
they meet special criteria such as being Cuban-Americans or join special
cultural or educational tours.

Foreign companies have to partner with a Cuban entity to do business and
U.S. hoteliers expect they will have to do likewise if and when U.S.
restrictions are lifted.

While they wait for the politicians to iron out their differences, U.S.
hotel bosses are conducting fact-finding missions in Havana and holding
getting-to-know-you meetings with government officials in Cuba and
various European cities.

This week, Middleton, along with executives from Carlson and Wyndham
Worldwide Corp., which runs the Ramada chain, are meeting with Cuba's
Deputy Tourism Minister Luis Miguel Diaz at an industry conference in
the Peruvian capital, Lima.

In the 1950s Cuba was an exotic playground for U.S. celebrities such as
Frank Sinatra and Ava Gardener, as well as ordinary tourists, who travel
led there en masse on cheap flights and ships from Miami.

A recent relaxation of some of the restrictions on U.S. travelers has
encouraged over 106,000 Americans to visit Cuba so far this year, more
than the 91,254 who arrived in all of 2014, according to data compiled
by tourism professor José Luís Perelló of the University of Havana.

Overall, tourist arrivals are up nearly 18 percent this year after a
record 3 million visitors in 2014, making Cuba the second-most popular
holiday destination in the Caribbean behind the much-smaller Dominican
Republic.


Cuba's tourist accommodations could lag behind

U.S. hoteliers expect the number of U.S. visitors to balloon if all
travel restrictions are axed.

"If and when the travel ban is lifted. We estimate there will be over
1.5 million U.S. travelers on a yearly basis," said Laurent de
Kousemaeker, chief development officer for the Caribbean & Latin
American region for Marriott.


De Kousemaeker accompanied other Marriott executives, including chief
executive Arne Sorensen, to Havana in July to meet with representatives
of management companies and government officials.

Hospitality the Buzz Word

Even if sanctions were lifted soon, Cuba traditionally has been slow to
approve foreign investment projects, making it unlikely that U.S. hotels
would be popping up immediately.

Rivals from Canada and Europe have seized the opportunity, operating and
investing in Cuban hotels and resorts, alongside Cuban government
partners, for years.

Spanish hotel operator Meliá Hotels International SA, is aiming to have
15,000 rooms in Cuba by 2018. It currently has 13,000 rooms via 27 joint
ventures.

London + Regional Properties Ltd, a U.K. hotel and real estate
development firm, agreed a deal this summer for an 18-hole golf course,
hotel and condominium project with state tourism enterprise, Palmares
SA, which has a 51 percent stake in the project.

But even with government plans to add 4,000 new hotel rooms every year
for the next 15, the island is not ready for a significant surge in tourism.

The island's tourism infrastructure went into decline in the decades
following the 1959 revolution. Five-star hotel rooms, good restaurants
and cheap Internet access are all in short supply.

When and if they get a green light from both governments, executives
said U.S. hotel chains will likely offer branding and management
partnerships to Cuban government partners such as Palmares and Tourism
Group Gaviota, the largest Cuban government tourism entity.

The ultimate goal would be to secure long-term leases on resort
developments, which is how Cuban authorities have generally operated
with foreign hotels.

But right now, U.S. hoteliers can't even refer to tourism when they meet
Cuban counterparts, let alone talk about actual deals. Instead the buzz
word is "hospitality."

Marriott's de Kousemaeker likes to use an analogy from baseball, a sport
loved both in Cuba and in the United States, to describe the situation.

"We're learning, and taking batting practice, but we're sitting on the
bench."

(Additional reporting by Jaime Hamre in Havana. Writing by Carmel
Crimmins; Editing by Stuart Grudgings)

Source: Hotel Chains Are Racing to Build a Presence Across Cuba – Skift
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http://skift.com/2015/10/01/hotel-chains-are-racing-to-build-a-presence-across-cuba/