With tourism to Cuba rising, U.S. state department deals a blow to nation's hotels

Iberostar Hotels & Resorts will open its first Cuban luxury hotel in Old Havana in the fourth quarter of 2018. 
Iberostar's new Grand Packard in Havana has been added to the Cuba Restricted List. Photo credit: Iberostar Hotels & Resorts

Adding another wrinkle into the complicated business relationship between the United States and Cuba, the U.S. State Department has added 16 hotels owned by the Cuban military to the Cuba Restricted List, which bans U.S. citizens from staying at these properties. 

The list identifies certain entities and subentities that are “under the control of, or acting for or on behalf of, the Cuban military, intelligence or security services.” Unless otherwise authorized, no U.S. citizen may engage in a direct financial transaction with any entities and subentities identified on the CRL. 

The latest additions to the list include the new Grand Packard Hotel, a 321-room property managed by Spain’s Iberostar Hotels & Resorts, which currently operates 27 hotels with 7,881 rooms on the island. 

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Cuban President Miguel Díaz-Canel reportedly attended the inauguration of the Packard a little more than a year after the opening of the Kempinski Gran Hotel Manzana (also on the CRL). The two properties indicated the Cuban government’s determination to drive the country’s hospitality sector more upscale. 

Notably, the Four Points by Sheraton Havana, which opened in 2016 as part of a joint venture with Grupo de Turismo Gaviota—one of the oldest military-run organizations in Cuba—is not on the list.  

Growing Tourism, Growing Development

The restrictions come as American travel to Cuba is gaining strength. Tour operator insightCuba, which organizes legal people-to-people travel for Americans visiting Cuba, has reported “spikes” in both leads and bookings for the country, which the company credits to the opening of new hotels and the increase in flights from the U.S. to the island. 

“Early signs of a comeback began in early January but were inconsistent, with ups and downs through April, but then in May, something started to happen,” Tom Popper, president of insightCuba, said in a statement. “For the first time in over a year we are showing consistent signs of growth in the marketplace. Each month sales revenue is growing by 25 percent as compared with the previous month.” In fact, as of October, the Cuban government was expecting to hit its goal of 5 million visitors in 2018.
 
Due to the confusion surrounding the U.S. travel regulations last year, group demand was at an all-time low. However, since July, insightCuba has seen a tenfold increase in group requests, which it claims are turning into fully deposited bookings, including an increase in multigenerational families as well as professional organizations.

The company also reported an increase in travel agent inquiries for trips to the island—a 40-percent year-over-year jump from June to September 2017 to the same period in 2018. This can be at least partially credited to the five U.S. commercial airlines that offer nonstop service between the mainland and the island (JetBlue, United Airlines, American Airlines, Southwest Airlines and Delta Airlines).

Global hotel companies have made inroads into Cuba for several years now. Spain’s Meliá Hotels International is adding 2,145 new hotel rooms through hotel renovation or construction by the end of 2018 in Cienfuegos, Camaguey and Varadero, while Iberostar (also based in Spain) is opening properties in Havana and eastern Cuba (the Iberostar Holguín, not on the CRL). The company also is renovating the Hotel Riviera in Havana. Singapore’s Banyan Tree Hotels and Resorts, meanwhile, just opened the Angsana Cayo Santa Maria on a private island off Cuba’s northern coast, the company’s second property in the country.

In September, Paris-based AccorHotels said it would open the So/Havana Paseo del Prado in 2020, marking the brand’s debut in the Americas. AccorHotels already has a presence in Cuba with the Hotel Mercure Sevilla Havane and the Pullman Cayo Coco. The So/Havana Paseo del Prado, also developed through a partnership with Gaviota, is on the CRL.

As of July, Havana had 15 hotels operated with foreign companies along with 95 management agreements accounting for 65 percent of Cuba's total number of guestrooms. According to the Cuban Ministry of Tourism, investments in 2018 reached $1.035 billion, driving a 3.5-percent increase in Cuban tourism this year compared to the same period last year. 

Restrictions and Opportunities

The success of Meliá and Iberostar in Cuba has clearly attracted more interest from Spain. Last week, Spanish premier Pedro Sanchez said that his country would continue to invest in Cuba, emphasizing Europe’s enduring interest in the opening market even as the United States pulls away. According to Reuters, Spanish companies, like other foreign providers, have suffered delayed payments from Cuba in recent years as the country has faced a major cash crunch in the wake of declining aid from chief ally Venezuela and weaker exports. Nearly two years ago, the European Union and Cuba signed an agreement to support economic development and promote both democracy and human rights.

James Williams, president of Engage Cuba, noted in a statement that the restrictions would only help international investors: “Further squeezing U.S. private-sector activity in Cuba is a gift to our foreign competitors, emboldens the hardliners in the Cuban government and rewards a dwindling minority of Americans who remain wedded to a failed policy that dates back over 50 years.”