There is no escaping it: Cuba is primed to become a locus of development activity. As the previously incendiary relationship between the island nation and the U.S. continues to thaw—though lets hope this doesn't derail progress—U.S.-based companies wait with bated breath, ready to pounce on an open Cuba.
As an island nation with beautiful beaches, the temptation may be to build lavish luxury resorts. But PwC's U.S. hospitality and leisure group leader, Scott Berman, says otherwise, telling Law360 (subscription needed) that midscale and economy hotels are the smarter bet, at least in the early going.
"If you think about all of the infrastructure that's going to be required in that country, there is going to be a lot of imported professional talent: engineers, construction workers, designers. They are going to need accommodations," Berman said. "There is a heck of an opportunity right now for basic lodging, not design for the American tourist."
When it comes to outfitting hotels in Cuba, Berman is a proponent of modular design, a technique wherein guestrooms are built off-site then dropped into the hotel development, similar to how cruise ships are put together.
"If I were to put my money into Cuba right now, that's what I would be developing," Berman continued.
For more on why U.S. hotel companies see such opportunity in Cuba, read this February article from Hotel Management.
While Berman may not be an advocate of resort development in Cuba, he is in the U.S—well, what he calls resort redevelopment. "There is a thirst to add resorts to branded portfolios. The major operators are focused on adding resort inventory in order to satisfy loyalty redemption because there is not enough quality inventory," Berman went on to tell Law360.
During the Great Recession, resort development, not unlike hotel construction in general, came to a halt. On a risk scale, resorts skew high. "A resort is a complex animal, and it's difficult in the U.S. to sustain profitable margins. It's labor-intensive and stressful on the physical asset, requiring constant maintenance to deal with the wear and tear, particularly in tropical climates. It tends to be in tropical climates," Berman said. "Ground-up resort development is complex, and we are carefully advising clients with these sorts of opportunities given the different variables related to these types of deals."
As Hotel Management wrote back in March, expectations by many are that resorts are in comeback mode and primed for a good stretch as the economy continues to chug along.