US hotel chains all set to race for Cuba deals in wait for green light

THE race for Cuba’s beach front is on. Executives from major US 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 US firms operating there.

Executives from Marriott International, Hilton Worldwide and Carlson Hospitality Group say they have held talks with Cuban officials.

“We’re all very interested,” says 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 US and Cuba restored diplomatic relations in July after decades of hostility. Washington further relaxed its half-century-old trade embargo last month, allowing certain companies to establish subsidiaries or joint ventures as well as open offices, stores and warehouses in Cuba.

The US wanted a deal allowing US airlines to schedule Cuba flights as soon as possible, a state department official said last week, amid speculation that a US ban on its tourists visiting Cuba could be eased.

US hoteliers are not allowed to invest in Cuba, and the island officially remains off-limits for US tourists unless they meet special criteria.

Foreign companies have to partner with a Cuban entity to do business there.

While they wait for the politicians, US hotel bosses are conducting fact-finding missions in Havana and holding preliminary meetings with Cuban government officials.

This week, Mr Middleton and executives from Carlson and Wyndham Worldwide are meeting Cuba’s Deputy Tourism Minister Luis Miguel Diaz at a conference in Lima.

In the 1950s, Cuba was an exotic playground for US celebrities such as Frank Sinatra and Ava Gardner, as well as ordinary tourists.

A recent relaxation of some restrictions on US travellers has encouraged over 106,000 Americans to visit Cuba so far this year, more than the 91,254 who arrived in all of last year, according to tourism Prof José Luís Perelló of the University of Havana.

Tourist arrivals are up nearly 18% this year after a record 3-million visitors last year. US hoteliers expect US visitor numbers to balloon if all travel restrictions are axed.

“If and when the travel ban is lifted, we estimate there’ll be over 1.5-million US travellers on a yearly basis,” says Laurent de Kousemaeker of Marriott.

Even if sanctions were lifted soon, Cuba traditionally has been slow to approve foreign investment projects.

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 aims to have 15,000 rooms in Cuba by 2018. It has 13,000 rooms via 27 joint ventures.

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.

Cuba’s tourism infrastructure went into decline after the 1959 revolution. Five-star hotel rooms, good restaurants and cheap internet access are all in short supply.

If they get a green light from both governments, executives say US chains are likely to offer branding and management partnerships to Cuban government partners.

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

But right now, US hoteliers cannot even refer to tourism when they meet Cuban counterparts, let alone discuss actual deals. Instead the buzz word is “hospitality”.

Mr de Kousemaeker likes to use an analogy from baseball, a sport loved both in Cuba and in the US, to describe the current situation.

“We’re learning, and taking batting practice, but we’re sitting on the bench.”

Reuters

By Mike Stone and Mitra Taj, BDlive

October 1, 2015

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