Lack of U.S. investment paves way for other companies in Cuba

Four Points by Sheraton Havana
In 2016, the former Hotel Quinta Avenida in Havana’s Miramar district became the Four Points by Sheraton Havana, the first American-flagged hotel to open in the country since 1959. Photo credit: Marriott International

Sen. Patrick Leahy, D-Vt., along with 45 Democratic and Republican cosponsors, will introduce the Freedom for Americans to Travel to Cuba Act of 2019 on July 29, which aims to end the restrictions on American travel to Cuba. 

Identical legislation is being introduced the same day by Reps. Jim McGovern, D-Mass., and Tom Emmer, R-Minn., in the House. "Based on my conversations with other senators, I am confident that if we were afforded the opportunity to vote on this bill, more than 60 senators would support it," Leahy said in a statement on his website.

The move follows the Trump administration's banning of cruise ship operations from the United States to Cuba and elimination of "people-to-people" educational travel, making it more difficult for Americans to visit the island. 

FREE DAILY NEWSLETTER

Like this story? Subscribe to IHIF!

The hospitality industry turns to IHIF International Hotel Investment News as the must-read source for investment and development coverage worldwide. Sign up today to get inside the deal with the latest transactions, openings, financing, and more delivered to your inbox and read on the go.

"We are introducing this bill for one reason: so Americans can travel to Cuba in the same way that they can travel to every other country in the world except North Korea," Leahy said in the statement, noting the executive order barring U.S. travel to that country. Leahy goes on to call the federal government's ban on American citizens' and legal residents' travel to Cuba "indefensible," and claims the country poses "no threat" to the United States. 

"At a time when U.S. airlines are flying to Cuba, does anyone here honestly think that preventing Americans from traveling there is an appropriate role of the federal government?" Leahy asked on his website. "Why only Cuba? Why not Venezuela? Or Russia? Or Iran, or anywhere else? It is a vindictive, discriminatory, self-defeating vestige of a time long passed."

Hotel Opportunities

Earlier this year, Mintur (Cuba's tourism ministry) announced that it expected the island to reach 5 million visitors in 2019, making the year the 12th consecutive year of tourism growth. U.S. visitation to Cuba increased from 618,000 in 2017 to 630,000 last year, according to the ministry—in spite of governmental restrictions. But the length of stays dropped by half, affecting the independent casas particulares that are run by private citizens in addition to military-backed companies like Grupo de Turismo Gaviota, which have a hand in larger hotels.

Global hospitality companies have taken note of the increases and have stepped up investment. Mintur recently estimated that the hotel pipeline in Havana alone has a dozen properties in development, and the city's room count will soon surpass 12,500. 

Leahy's bill would not do away with the economic embargo on conducting trade with Cuba—which means that U.S.-based hotel companies will continue to face challenges in taking advantage of the growing demand for hotels. This does not mean, however, that investment in Cuba's hotel sector is impossible: In 2016, the former Hotel Quinta Avenida in Havana’s Miramar district became the Four Points by Sheraton Havana, the first American-flagged hotel to open in the country since 1959. Other Marriott-flagged properties had been announced at the time, but no others have been announced since then.

The lack of American investment gives an advantage to global companies looking to gain ground in Cuba's most popular tourism districts—and the country's government is eager to make deals. Cuban President Miguel Diaz-Canel has repeatedly said that foreign direct investment is a priority for the country's development. Rodrigo Malmierca, Cuba's minister of foreign trade and investment, claimed that Cuba has approved business deals with foreign investment commitments of more than $4.5 billion dollars in the past two years alone. 

"Real progress is being made in boosting collaboration with China in the tourism sector and we hope to announce new investments in the near future," Jose Daniel Alonso, director of business development at Mintur, told Chinese state-operated news service Xinhua. A Cuban-Chinese joint venture is developing a large hotel-apartment complex and an 18-hole golf course in the Havana suburb of Bellomonte, due to begin construction next year. Alonso expects the investment to be more than $500 million. Another Chinese company has reportedly been "very interested" in a new real estate project and golf course in Loma Linda, in the eastern province of Holguin.

Last month, Melia Hotels International President Gabriel Escarrer Julia reaffirmed the Spanish company's commitment to Cuban development. Melia has more than 30 properties in Cuba already, but does not own its assets in the country outright. As such, the company is not subject to any lawsuits that could be filed from the U.S. under Title III of the 1996 Helms-Burton Act that prevents lawsuits from Americans over properties confiscated during the Cuban revolution.

Spain's Iberostar, meanwhile, has several projects in development around the country, including the Bahía del Almirante and the Iberostar Selection Almirante, due to open next year.

In May, Swiss hotel company Kempinski Hotels and Grupo de Turismo Gaviota signed a management contract for the Cayo Guillermo Resort Kempinski, approximately 500 kilometers east of Havana and slated to open by the end of the year.

"Cuba represents a unique opportunity to build an economic relationship that supports a range of U.S. industry, agriculture and security interests," Emmer said in a statement supporting the Freedom to Travel to Cuba Act. "The U.S.’ decision to further restrict travel to Cuba undercuts efforts to help promote democracy and improve the lives of the Cuban people. In fact, American travel can do wonders for the spread of democracy, especially in Cuba. This legislation is an important step in facilitating a relationship between two nations that have much to benefit from one another."

Suggested Articles

Ahead of this week's Questex-sponsored Israel Hotel Investment Summit, Meitar Liquornik Geva Leshem Tal partner Carmit Bar-On talks opportunities.

By strengthening workplace culture, hotels can improve recruitment and retention, customer loyalty, brand reputation and the bottom line.

According to STR’s latest hotel pipeline report, Europe has 1,620 hotels with 205,383 rooms under construction as of October.