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Among the hurdles U.S. hotels face in Cuba: A booming Airbnb presence

Among the hurdles U.S. hotels face in Cuba: A booming Airbnb presence

The Four Points by Sheraton in Havana opened June 28, making it the
first U.S.-branded in Cuba. (Yamil Lage/AFP/Getty Images)
By Abha Bhattarai July 4 at 6:49 PM
Starwood Hotels & Resorts this year became the first U.S. hotelier to
ink a deal in Cuba in nearly six decades. Marriott International quickly
announced plans to do the same, and a number of big-name competitors
have since expressed interest in expanding to the island nation.

But as U.S. hotels look to move into Cuba, they face a massive number of
unknowns related to the country’s business policies, infrastructure
capabilities and economic embargoes, as well as another formidable
rival: Airbnb.

The home-sharing site, which quietly arrived in Cuba in the spring of
2015, has established a stronghold in the country, quadrupling its
presence from 1,000 listings to more than 4,000 in a little more than a
year, according to a company spokeswoman. Cuba is the fastest-growing
market in Airbnb’s eight-year history.

“The typical scenario has been the opposite, where hotel companies are
the established ones, then Airbnb comes later,” said Sean Hennessey,
chief executive of Lodging Advisors, a market analytics firm in New
York. “In Cuba, having the first-mover advantage, as we call it, is a
big plus in Airbnb’s favor.”

Airbnb, an online service that doesn’t face many of the regulations that
hotel companies do, was able to move quickly. The site began offering
rooms in Cuba in April 2015, four months after Obama announced
U.S. companies could begin doing business there.

It took nearly another year for Starwood to announce it had received the
go-ahead from the Treasury Department to manage hotels in Havana. The
Stamford, Conn.-based company plans to upgrade the Hotel Inglaterra in
Havana and another existing property and reopen them as
­Starwood-branded hotels later this year. (Starwood is in the process of
being acquired by Bethesda, Md.-based Marriott in a deal that is
expected to close in coming weeks).

“It is fair to say that today, Havana is basically sold out, every month
of the year, and every day of the week,” Jorge Giannattasio, chief of
Latin America operations for Starwood, said in an email, adding that
Starwood’s presence in Cuba would draw members of its popular loyalty
program. “There is enough space for different types of competitors in
the marketplace.”

Cuban officials agree there is plenty of room, and demand, for new
hotels in the country, especially if the United States further eases
rules to allow more Americans to travel there. Cuba — which had
3.5 million visitors last year, according to government statistics —
currently has 62,900 hotel rooms, many of which are in various states of
disrepair.

“It’s unbelievable the lack of [hotel] capacity in Cuba,” Reuben
Smith-Vaughan, director of the Americas for the U.S. Chamber of
Commerce, said recently at a meeting with American hospitality
executives and investors. “Who better to create a private sector in Cuba
than the most powerful and effective private sector in the world: the
U.S. private sector?”

But a number of hurdles remain, including the U.S. trade and
travel restrictions that limit U.S. interactions with Cuba.

On top of that, there are concerns about infrastructure, including
access to flights, building supplies and materials and being able to
import and beverages, said David Loeb, a lodging analyst for Robert
W. Baird & Co.

“The general consensus is that this is a big opportunity for hotels —
but none of the owners in the U.S. are particularly anxious to go,” he
said. “They certainly would rather see somebody else do the really hard
work of getting stuff built and converted and staffed and profitable.
They would rather just take their time and come in once all that is in
play.”

In the case of Airbnb, the company was able to benefit from an existing
state-run program, called Casas Particulares, that Cuba established in
the late 1990s as a way to help its residents earn extra money. When
Airbnb decided to expand into the country, it found a ready-made network
of licensed and willing homeowners to bring under its umbrella.

U.S. hotels lose an estimated $450 million in revenue per year to
Airbnb, according to a recent report by HVS Consulting & Valuation. The
site’s users tend to be younger leisure travelers — another fact that
has helped it capture the Cuban market, which analysts say tends to
attract more adventurous tourists. They say it is likely to take years,
and maybe decades, for hotel companies to catch up.

“Hotel capacity in Cuba simply has no way to keep up with demand, so
Airbnb is the winner,” said Jodi Hanson Bond, president of the U.S.-Cuba
Business Council at the U.S. Chamber of Commerce. “To Airbnb’s credit,
they were poised with a platform that could capture the existing need.”

But, she added, there is ample room for large hoteliers to move in:
“This is a supply-and-demand issue — and the demand is high.”

Source: Among the hurdles U.S. hotels face in Cuba: A booming Airbnb
presence – The Washington Post –
www.washingtonpost.com/business/capitalbusiness/among-the-hurdles-us-hotels-face-in-cuba-a-booming-airbnb-presence/2016/07/04/1aac15be-36ec-11e6-9ccd-d6005beac8b3_story.html

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