The expansion of U.S.-based companies into Cuba keeps picking up steam. It’s been a year since Airbnb announced its presence in Cuba, and less than a month since Starwood and Marriott received approval to operate hotels in the country. At the same time, Priceline struck a deal with Cuba to make hotel rooms on the island available to U.S. customers via its subsidiary Booking.com.
Just last week, Engage Cuba, the leading coalition of private companies and organizations working to end the travel and trade embargo on Cuba, announced a partnership with the American Hotel & Lodging Association. “Regulatory changes can keep the Cuban embargo intact for only so long,” James Williams, president of Engage Cuba, said in a statement. “Engage Cuba and its allies are working on the ground now to ensure that when the embargo and travel ban are lifted, there is a strong infrastructure on the Island to allow the American hospitality industry to enter a new market and thrive.”
Last month, just before Marriott and Starwood announced their Cuban initiatives, the U.S. Office of Foreign Assets Control published a rule that further facilitates travel to Cuba, authorizes additional types of financial transactions and allows companies to have a greater business presence on the island.
But even with all of these advances, there is still an embargo in place and restrictions on both travel and business operations between the U.S. and Cuba. The walls may be coming down, Doreen Edelman, a shareholder at Baker Donelson said, but the changes are slow in coming.
How They Get Permission
Over the last year, increasing freedoms in regards to Cuban travel and business raised questions from American travelers and business professionals: “‘If I go there, can I spend money? What can I bring back? Can I get insurance?’ The regulations kept dribbling out,” Edelman said.
Put simply, American businesses can get approval to operate in Cuba if they can prove that they will help the Cuban people. As such, Airbnb is able to operate in the country because they only work with private Cuban entrepreneurs operating casas particulares. “They’re not dealing with Cuba’s hotel sector in general, because that’s government-owned,” she explained. Of about 200 hotels in the country, she said, half are owned by the government, a quarter are owned by international companies in a joint venture with the government, and a quarter are run by private individuals—working under the guise of foreign hotel owners.
To put it mildly, Edelman said, it’s a “very complicated” situation. “U.S. hotels want to go into Cuba, but they need to be sure they have exception for people.” Since the travel industry has opened up, she said, certain business development trips are authorized, but business professionals have to determine the scope of what exactly is being authorized under these general licenses. “For example, you may need authorizations for your work-related equipment,” Edelman said. “Consider each item and transaction with respect to each applicable exclusions and/or special license.” Every transaction and idea needs to be run through a checklist to confirm that it is legal, and documentation is vital. “Is there an exception that applies to get you there?” she asked rhetorically. “If you can’t find an exemption that exists, you can also apply and get permission for a special license.” It is, she added, more of an art than a science.
Marriott and Starwood, Edelman said, will be operating in Cuba through special licenses. Following the rule that any U.S. businesses operating in Cuba must prove that they are helping the Cuban people, Marriott will provide career training for locals. “They are teaching Cubans about the supply chain and what kind of services will be needed when Marriott comes into Cuba.” In addition to operating the three hotels already announced, Starwood will also provide training for locals.
So what can U.S.-based hotel companies who want to operate in Cuba do to get a foot in the door? “Think outside the box,” Edelman advised. “Take what exists and get creative like Marriott did. See what you can do. Now is the time to apply and ask for licenses. Take business development trips. Go over there and explore. If you can go over to Cuba, you can set up a business, if you have an approved reason to be there.”