Why hotel developers are delighted about the prospect of an open Cuba

Hotels are anxious to build properties in Cuba, but recognize the hurdles of bringing their business to the island nation.

Hotels are anxious to build properties in Cuba, but recognize the hurdles of bringing their business to the island nation.

National Report – If all goes as planned, soon you’ll be able to have your Cuban cigar—and smoke it, too, legally.

For longer than many in the U.S. have been alive, ties between the Caribbean island of Cuba and the U.S. have been strained, to say the least—illustrated by years of embargo and enmity toward the Castro regime.

But after the recent release of Alan Gross, held in Cuba as a prisoner for more than five years, there is now the groundwork in place to restore full diplomatic relations with Cuba.

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And that has U.S. companies chomping at the bit. An open Cuba would mean big business for hotel companies, especially, eager to plant their flags and tap into a relatively unexplored resource.

UNTAPPED POTENTIAL

Though hotel executives are eager and excited about the prospects of an open Cuba, there are hurdles and risks associated with moving in to do business on the island. But those risks might be overshadowed by the unlimited potential of Cuba as a destination due to its undeveloped beaches and close proximity to the U.S.

“The minute it’s available, we’ll be down there,” said Choice Hotels International CEO Stephen Joyce.

Marriott International CEO Arne Sorenson sounded as bullish. “We will take our cues from the U.S. government, but look forward to opening hotels in Cuba, as companies from others countries have done already,” he said.

A statement from UK-based IHG read: “President Obama’s announcement on the U.S. and Cuba re-establishing diplomatic relations is quite fresh; therefore, we will continue to assess how this impacts the hotel sector, broader travel and tourism industry and our business for the short- and long-term.”

DEVELOPMENT OPPORTUNITIES

Up until now, European and Canadian chains, and smaller local operators have dominated the hotel infrastructure in Cuba. “U.S. hotel operators are better poised to enter the market than developers seeking to build,” said Eddy Arriola, chairman of Apollo Bank, a Miami-based lender for real estate projects. “The companies that are there now are the hotel operators that run a business. U.S. developers will have a much more difficult time because the major land owner is the Cuban government.”

Still, it may be a tad premature to get too worked up in regard to travel and development in Cuba. Travel to Cuba for the past several years has been limited to aid-related travel, as well as what’s known as the people-to-people exchange program—guided tours focused on education and cultural exchange—not fun in the sun. And that’s not going to change in the near future, as travel is still banned outside of these exclusive, costly programs.

Moreover, for developers, there undoubtedly will be challenges to building and ownership. As recent as 2011, Cuban citizens had trouble buying and selling property.

Still, hotel companies relish the opportunity. As Aaron Radelet, a spokesman for Hilton Worldwide said, “Our founder Conrad Hilton often spoke of ‘world peace through international trade and travel,’ which remains just as important and core to our business today.”

After all, Hilton once had a hotel in Cuba: the Habana Hilton, which opened in 1958. The Bay of Pigs Invasion happened three years later.

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