Cuba – The historic Queen of the Caribbean facing a momentous opportunity

Although barely six years have gone by since we decided to start learning about the situation of the largest island of the Antilles, the once “Queen of the Caribbean”, changes are becoming significant and, in terms of the travel industry, they are even greater than expected.VaraderoBeachfun

It is true that the announcement made by presidents Obama and Castro on December 17 about the decision to re-establish diplomatic relations between both countries and embark on a process of bilateral normalization has had a major impact on the two countries as well as on the whole world; however, few people believed things could speed up as they have.

The recent Seventh Summit of the Americas, where Cuba participated for the first time, has been one of the most important events in international politics in the last few years. The personal encounter between the US and Cuban presidents and their ensuing statements has shown that the meeting marked a historic milestone that seemingly paves the way for a new course of action. Although huge obstacles are still in the way, the parties are not willing to retrace their steps.

Interests are manifold and the US Congress does not show a united front to ensure that Obama’s decision will be materialized as he thinks. However, he readily sent his proposal to Congress to remove Cuba from the list of terrorist-sponsoring nations. In fact, only three days had passed since their meeting in Panama City.

It is time now for both countries to move forward in resuming diplomatic relations, as announced on December 17; the reopening of their respective embassies, bank access by both countries, the discussion of other important issues, and, of course, the lifting of the US embargo against Cuba started almost 55 years ago (on October 1960).

Some Facts

As an example of what may happen to the travel industry, it is enough to consider the first quarter of 2015, when no less than one million tourists visited Cuba, which means a 14% (!!!) growth vis-à-vis the same period last year.

A country that reached a record of tourist arrivals in 2014, (3,016,655 visitors), i.e., a 5.3% increase compared to last year, is on the verge of experiencing a boom no one dares to size up. Anyway, if one weighed some variables, it would be easy to agree that growth will be explosive.

Let’s see; Cuba is the largest island in the Caribbean. It has a rich historic heritage that the Castro regime has bothered not to let fall into oblivion and has even taken an interest to preserve and enhance. Cuba has numerous and abundant natural resources which, added to their state of conservation in some cases and unspoiled condition in most cases, provide the country with a strength that will create a buzz. In addition, the island boasts high-quality human resources that are hard to find in similar quantities throughout the region, and Cuban people are known for their hospitality and cheerfulness. The country’s cultural and architectural heritage is priceless, and it has been kept and increased regardless of the hardships it has undergone. Cuba’s crime rate and drug consumption are nil, and its care for the environment is probably similar to the Northern European countries. And even if it is a well-known fact, the island (enjoying a very pleasant temperate and tropical climate throughout the year) is surrounded by a warm, crystal-clear ocean. If «well mixed”, this is a “bomb” ready to burst. It is a momentous opportunity.<0}

The Hotel Business

Cuba’s hotel business is basically concentrated in three Cuban companies that in one way or another are connected to international players – Grupo Gaviota, Gran Caribe, and Cubanacan. Additionally, there is the Habaguanex hotel chain, mostly located in the historic area of La Habana, La Habana Vieja, and Isla Azul. Furthermore, the non-hotel projects Palmares group has recently created Cubagolf. This group is focused on large-scale mixed-use projects, including resorts, second homes, and golf courses, to name a few.

The Rules of the Game for Hotel Development

Cuba has recently redesigned its policy for foreign investment development, which has a direct impact on the way of participating in the island’s hotel business.

The former investment law (Law 77 of 1995) has been replaced by the new Law 118 of March 2014, which is better adapted to the new times and facilitates relations with foreign companies and investors by establishing various forms of foreign investment ventures: a) Mixed enterprises, b) International economic association contracts (including hotel management contracts), and c) Wholly foreign-owned enterprises.

Option b) under which management contracts are allowed is quite a novelty that sets a new course for the island’s hotel business.

Foreign Investment in Tourism at December 31, 2014

At December 31, 2014, 26 mixed enterprises were set up, of which 12 have already made investments, with 14 hotels in operation featuring 5649 rooms. Also, 68 management contracts were approved with 18 international chains, amounting to 35,461 rooms, i.e. 58.6% of the country’s existing total (86.9% of the total amount of rooms in Cuba’s 4- and 5-star hotels).

The 68 management contracts have been signed with the three major Cuban hotel chains – Gaviota (30 hotels), Gran Caribe (21), and Cubanacan (17).

Investment Opportunities

The Cuban government has thoroughly analyzed investment opportunities throughout most of the country. These are focused on new developments in existing tourist destinations, on new destinations to be developed, and on the improvement of existing properties.

It is highly probable that more information on business opportunities will be provided during the forthcoming International Tourism Fair to be held in Cuba in May, which is logical in a country where everything is yet to happen in terms of tourism development.

Just think that even if the year were to end with 3.5/3.7 million arrivals, a figure that will certainly point to significant growth, it will be nothing compared to the 10, 12 or 15 million to be expected in the next few years.

The Arrival of Major International Hotel Groups

Groups like Meliá, Barceló, Iberostar, NH, Accor, and Pestana, among others, already have a share in Cuba’s hotel business. At the same time, other groups like Kempinsky are planning new developments.

Something that has not gone unnoticed among the major groups is Airbnb announcing the launching of its operations on the island. It goes without saying that the lodging platform will have thousands of rental properties across the island. As a consequence, the arrival of other major groups of this kind is expected. Cuba’s hotel and tourism sector deserves that the major players -those present and those to arrive- find their place in the countless opportunities offered by the island. Millions of travelers from around the world are hoping that this happens sooner rather than later.

To be continued…

Following this issue and through different channels, we shall be providing more information on how to capitalize on this extraordinary development process to be experienced by Cuba’s hotel and tourism industry.

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