As relations between the United States and Cuba continue to improve, talk has escalated about the Cuban hotel landscape and its potential. How will American hotel companies enter the market, and when? The likely scenario is via strict management. The timeline is still unclear.
Some Cuban tourism companies reportedly will consider joint ventures that include investments to build or renovate, as well as management. In no case today, however, will the Cuban government sell land.
The three key hotel players in Cuba are Gaviota Group, Gran Caribe and Cubanacan – the largest by far is Gaviota Group. HOTELS was able to conduct an email interview with Raniel Leyva Medina, business vice president of Grupo de Turismo Gaviota SA. Here is the transcript from the Q&A:
HOTELS: Can you outline Gaviota’s hotel development plans moving forward, especially considering the potential influx of American travelers in the years ahead?
Raniel Leyva Medina: Gaviota, at present, is the most dynamic touristic group in Cuba. Regarding the new scenarios, it’s moving forward into high-class tourism, luxury hotels, international standards and well-known international hotel brands, these are the main objectives for the near future.
With 25,688 rooms by the end of 2015 and another 26,000 in the pipeline for 2025, we are basically emphasizing Havana as the number one Cuban plaza and continuing with Varadero (Matanzas Province), Cayo Santa Maria (Santa Clara Province), Cayo Coco (Ciego de Avila Province), Cayo Cruz (Camaguey Province) and Holguin (Holguin Province), where magnificent beaches and well-preserved flora and fauna will delight at first sight.
H: How did the hotel business perform in 2015 and what is the outlook/expectation for 2016?
RLM: In 2015 the hotel business in Cuba was as predicted, growing on daily basis.
More than 3.5 million of tourists visited Cuba last year, a record figure. Canada, Germany, France, Italy, still represent our main markets, accompanied with the USA strongest growth as emerging market link to the 12 approved licenses by government and some of the traditional ones recovering.
H: What challenges does Gaviota currently face from an operations and development perspective, and how is it addressing these challenges?
RLM: Gaviota is under a great developing process in which we are specially focused, creating a luxury atmosphere in Havana based on the association with reputable international brands. We keep working on our well-known resort plant in different locations with a privileged natural environment.
In terms of operation, we focus on developing our human resources, upgrading the levels of communications skills, and improving new channels of distributions and relations with distributors.
H: In more general terms, how is the Cuban hotel industry starting to prepare for the potential arrival of American tourists and business travelers?
RLM: Cuba has been working to upgrade the hotel plant so the touristic services, targeting the new markets, not only USA, will bring into Cuba a new segment of travelers.
In the case of USA specifically, we are working on new projects that take into consideration the specific standards of this market. We are upgrading mostly Havana hotels and preparing our human resources with the requirements of each job.
In the projection of our new hotels, we are confident to bring into them new technologies and all class of equipment deemed necessary for business tourists.
H: How will American hotel companies enter Cuba? Will it strictly be via franchising their brands with Cuban owners, or do you think they will be able to manage or even develop ground-up projects?
RLM: Cuba had presented in the last touristic fair in May 2015 its business opportunities, which represent all Cuban hotel companies. In the specific case of Gaviota till this moment, the relationship with all our business partners is only through management contracts, basically based on international management contracts. Wording takes into consideration the Cuban law.
Because of the blockade, American hotel companies cannot enter into Cuba. From this point of view, we are prepared to negotiate with any international hotel company wanting to do business with us.
H: How much of an advantage/head start do other global players such as Accor and Melia have over American hotel companies who want to grow in Cuba?
RLM: In Cuba, for many years, we depended on those who gave us their support in difficult circumstances, as a result of the blockade. We will never forget those partners, but we are pretty sure that Cuban potentialities are huge and therefore, we are open to work with those who will bring us the best results.
H: How difficult might it be for U.S.-based owners and operators to acquire hotels in Cuba once more of the blockades are lifted?
RLM: As said before, our main objective is to deal with the best hotels operators, but through management contracts. We are not granting shares in our properties – it’s our model of business.
H: Are you aware of any discussions going on between American and Cuban hoteliers or owners or the Ministry of Tourism?
RLM: Last September we attended the international meeting, SAHIC 2015, in Lima. In this important meeting, most of the American hoteliers were present and the Cuban delegation made a presentation to them. Some of them were interested, but unfortunately, till the blockade is lifted we cannot go on.
H: You continually hear in the U.S. that Cuba’s infrastructure is not quite ready for the potential influx of American tourists. Can you comment on this perception? Where does work need to be done and how long will it take?
RLM: We are working on it; just waited till this moment and now we are focusing on keeping our development strategy.
H: In general, how much of a growth opportunity is there for the hotel industry in Cuba?
RLM: Only Gaviota in the next 10 years is building 26,000 rooms. You can imagine how many possibilities are there for the whole hotel industry.
H: If relations between the U.S. and Cuba further normalize, how long do you think it will take before Cuba becomes a much bigger and further developed hotel market?
RLM: We are developing new concepts that will match with this new market. I bet that in the coming future we will be positioned in a very privileged place.
H: How do you feel about all of this discussion about Americans potentially coming to Cuba?
RLM: Beyond any argument regarding this issue, I’m sure it will happen because it is something American people are expecting and also desire. Cuban people are hospitable by nature and we will receive them like we do with everyone who visits our country. Something to keep in main, the American tourist is the only one that cannot visit Cuba freely.