Caribbean Hotel and Resort Investment Summit

From Caribbean Hotel and Resort Investment Summit

The Elephant in the Room (a/k/a the U.S. Embargo)

  • Established by Executive Order during President Kennedy’s Administration in 1960 in response to the confiscation of American property by the Castro government
  • Codified primarily in the Helms-Burton Act – it imposes economic sanctions, travel restrictions, and international legal penalties
  • Many in the Cuban exile community continue adamantly to support it, including their elected representatives in Congress
  • Conservative business publications, including Forbes (“It’s Time for the U.S. To End Its Senseless Embargo of Cuba,” January 2013) and The Economist (“Time to Hug a Cuban,” Feb. 15, 2014; “If Not Now, When? – This would be an especially good time for a change in America’s relations with Cuba”) have insisted on the end of the embargo
  • Prominent business leaders of the Cuban-American community (including sugar industry magnate Alfonso Fanjul and others) have publicly cited recent visits to Cuba and contemplation of future investment in the island
  • U.S. allies, including the European Union, oppose the embargo as counterproductive, while continuing to maintain economic ties with Cuba, though monitoring unsavory obstacles to a transition to democracy and positive economic reform (cited human rights abuses; “flip-flop” in policies affecting the viability of business ventures in Cuba)

Cuba: Tourism and Hospitality Industry

  •  Tourism generates over 3 million annual arrivals in the island
  • One of the main sources of revenue for Cuba since the 1990s Visitors come mainly from Canada and Western Europe, with a growin trend of arrivals from South America
  • It has been reported that around 20,000 to 30,000 Americans illegally travel to Cuba every year, while the Cuban government ‘s estimate is over 60,000. Americans usually reach Cuba via flights from Canada, Panama or Mexico.
  • Lodging facilities developed mostly in the model of resort enclaves in or around famous beaches, most prominently the iconic Varadero, or urban hotels mostly in Havana and less in other major cities
  • As of the mid 1990s, there has been an official effort to attract foreign investment in hotels, resorts, golf courses and marinas, although reportedly not on a consistent policy path
  • Although from 1990 to 2000 a reported US$3.5 billion was invested in the tourism industry, and hotel room count available to international tourists increased from 12,000 to 35,000, growth has not been achieved as projected
  • As a result of relatively scarce foreign investment to date, there is ample opportunity for growth in tourism-related facilities and services
  • According to Cornell University research, foreign investors and hoteliers from market based economies have found that Cuba’s centralized economy and bureaucracy has created particular staffing issues and higher costs than normal.
  • An additional factor cited by foreign investors is the degree of state involvement at the executive level, which is far higher than average.
  • According to Tulane University research, the Cuban government has established safeguards designed to ensure that tourism and other development do not adversely impact the environment. The development of new tourist facilities and related infrastructure in Cuba must, among other things, proceed in accordance with Cuban environmental laws and policies.
  • Pursuant to Cuban Law 81 of the Environment, one of the most comprehensive “framework” environmental laws in the region, a number of decree laws and resolutions aimed at sustainable development.
  • Decree Law 212,Coastal Zone Management, establishes setbacks and other site requirements for new facilities in coastal areas.
  • Ministry of Science, Technology, and Environment (CITMA) Resolution 77/99 requires a thorough environmental assessment of major new construction projects and requires that project developers obtain an environmental license from CITMA.

Health Tourism

  • According to BBC reports, Cuba attracts health tourists, generating revenues of around US$40 million a year for the Cuban economy.
  • Cuba has been a popular health tourism destination for more than 20 years. In 2005 more than 19,600 foreign patients traveled to Cuba for a wide range of treatments including eye-surgery, neurological disorders such as multiple sclerosis and Parkinson disease, and orthopaedics.
  • Many patients are from Latin America although medical treatment for retinitis pigmentosa, often known as night blindness, has attracted many patients from Europe and North America.
  • An October 2007 Miami Herald story addressed the high quality of health care that Canadian and American medical tourism patients receive in Cuba.

Other Policy Developments

  • According to the Sydney Morning Herald, the policy of restricting certain hotels and services to tourists was ended by the government of Raúl Castro in March 2008.
  • Officially allowing Cubans to stay in any hotel, the change also opened access to previously restricted areas such as Cayo Coco.
  • Access remains very limited in practice, as the vast majority of Cubans do not have access to the hard currency needed to stay in such hotels.