"THE HOTEL INDUSTRY by JESSICA DOMINGUEZ DELGADO | November 6, 2019 | Society | fifteen
The exact number of hotels in Cuba is not known. Depending on the institution requested, the number varies: 393 according to Manuel Marrero , Minister of Tourism, in the National Assembly and 405 according to officials of the ministry itself. There is no precise information, hotels change names, merge into complexes, new facilities are opened, they are closed for repairs or they change operators.
But, until at least October 2019, the El Toque team created a database that counted 381 accommodation facilities among aparthotels, motels, villas and hotels for this investigation; with a number of rooms that almost quadruple those of Cuba 30 years ago, when Cuba bet on tourism as a lifeline for the national economy. This decision, not without consequences, transformed a service accessible to Cubans into an exclusive product accessible mainly to foreigners. Before 1990, a room at the Habana Libre Hotel cost 21 pesos per night; today it ranges from $ 65 to $ 165. Even until 2012, it was not possible for Cubans to reserve accommodation in these facilities.
The hotels, built before 1959 and many of which were houses or were in ruins, became an important business for the Cuban state, which began to explore a previously ignored sector and thus began an ambitious race to increase revenues and, with it, the number of properties. Today, tourism in Cuba provides about 2.5% of GDP as a direct contribution to national income and about three times that amount if indirect and induced effects are taken into account, according to the Oxford Economics report for the World Travel and Tourism Council. . Only in 2018 did tourism enter at 1,840 million 331 thousand dollars , which places it in the second important economic activity of the country.
The aspiration of the Cuban authorities is to increase the number of visitors every year. And it has succeeded in a decade. From a figure of 2.3 million in 2008, Cuba has grown to 4.7 million in 2018.
Currently, there are more than 72,000 rooms in state premises and 26,000,224 in private accommodation, the latter in houses or hostels. Compared to other regions in the region such as the Dominican Republic, whose number of hotel rooms at the end of 2018 was 78 thousand, and Puerto Rico with 15 thousand rooms at the end of 2017, the Cuban figures are not negligible.
With the current accommodation capacity (including rooms of private owners), if all tourists arrived consecutively and stayed one night, in two months the five million visitors to which the country aspires would arrive; but for the country's growth aspirations, it is still insufficient.
For 2019, the Ministry of Tourism (Mintur) had forecast a growth of 4,000 new rooms - some already operational. However, until May, there were 7,000 rooms in the country "out of service", according to José Daniel Alonso, general director of development, business and investments of Mintur. In other words, almost twice as many as those to be built have not been marketed. A country with more hotels can be a country with more value, more development, more potential. For this reason, the government is betting on tourism as its trump card. WHO CONTROLS THE MARKET? The hotel operators are managed by four Cuban commercial companies whose shareholders can be legal or natural persons, but in no case public: Grupo Gaviota SA, Grupo Cubanacán SA, Grupo Gran Caribe SA and Islazul SA. In addition, there are two hotels in charge of Grupo Palco y Servicios Médicos SA and there are other lower category accommodation establishments belonging to the companies of Campismo Popular and Palmares SA, subordinate to the Ministry of Tourism. But not all are on an equal footing. The Gaviota group, which belongs to the armed forces and is outside the administrative and economic jurisdiction of Mintur, is the one with the highest growth, reaching 31,000 rooms in 2018, with aspirations to triple this figure in the next decade.
However, the ownership of the hotels is not (with a few exceptions) held by these companies, but by two other real estate companies Inmotur SA and Almest SA, belonging respectively to the Ministry of Tourism and the Armed Forces Group. This separation frees the property from the economic liabilities that the operating company may incur, thus preserving its ownership.
Gaviota's power is evident if we consider that its hotels are of the highest quality, representing 44% of the country's total capacity. Cubanacán, the second chain with more hotels, manages less than half of the rooms than Gaviota. While Islazul is the smallest and with the lowest category hotels, present throughout the national territory. In addition, with the exception of Havana, Varadero, Cayo Coco and Cayo Guillermo, which are tourist poles of greater exploitation and antiquity, the Cuban chains have divided the country and there is a geographical predominance of each of them. The Greater Caribbean dominates the southern part of Cuba, especially Isla de la Juventud and Cienfuegos; and Cubanacán is in Pinar del Río, Trinidad, Villa Clara, Camagüey, Granma, Santiago de Cuba and Holguín.
In the case of Gaviota, it controls the Topes de Collantes, Baracoa and the northern keys of Cuba. In Havana, it is responsible for more than 20 hotels in the historic center that belonged to the defunct Habaguanex SA, of the city historian's office. Geographically strategic locations, mountains and new tourist poles. This is directly related to the amount of income, since Gaviota has higher rates for its hotels. Of the 33,214 5-star rooms in the country, Gaviota manages 27,115. "Gaviota states that it is only from its hotel operations that it makes an annual turnover of more than 700 million CUC, although it does not offer details," states the 2016 report Tourism in Cuba, on the wave of sustainable prosperity by authors Richard E. Feinberg and Richard S. Newfarmer.
By far, when talking about hotels in Cuba, we must mention Gaviota; its expansion capacity and income level give it greater independence and autonomy in this matter. In this business, they decide and look for the best alliances. FOREIGN PARTNERS Thirty years in international tourism have not reached Cuban operators to position themselves in the world market as major players, which goes beyond the advantages of the landscape: an established name also depends on consumers and especially on the quality of the offer and the service provided in the facilities; the latter, the Achilles heel for the Cuban product.
Dr. José Luis Perelló, a specialist in the subject and advisor to Mintur, explains that "tourism marketing is in the hands of monsters (the big tour operators) that operate abroad, and let's say that Cubanacán or the Greater Caribbean, for example, are without stature to go and discuss at this level."
On May 10, 1990, they signed the first hotel management contract - and a joint venture - for the Sol Palmeras Hotel in Varadero. When the establishment opened, Fidel Castro said: "I hope that one day we will not say to the Spanish chain that it manages: Hey, do you want to manage our hotel too? I hope that we will not arrive [...]; but it can be a prospect if we do not learn to manage it with the necessary efficiency."
Since then, the number of hotels managed by foreign managers has continued to increase. As of April 2019, 97 management and marketing contracts had been signed, 87 of which were already in progress.
In total, 119 hotels are operated by 21 foreign chains from 12 countries; of them only 9 with a three-star category, the rest between four and five stars, including the six with a category plus five stars that exist in the country. 46% of these properties managed by foreigners belong to Gaviota.
And the intention is to continue increasing. The 2019 portfolio of opportunities offered to foreign investors includes 54 hotels available for future contracts. Spain is the country with the largest presence in the Cuban hotel industry. It manages a total of 92 hotels managed by 9 chains: Iberostar, Meliá Internacional, BLAU Hotel, Be Live, NH Hotel, Roc Hotels, Barceló, Valentin Hotel & Resorts and H10 Hotels. More recently, Asian companies such as Banyan Tree Hotels & Resorts, MGM Muthu Hotels and Archipelago International have joined, the latest arrival in Cuba. To work in the country, a foreign company has two ways: on the one hand, it constitutes a joint venture with the Cuban party or, on the other hand, it signs a hotel administration and marketing contract (CACH), which may or may not include financing for the remodeling of the property. The first of these meets the needs of the Mintur groups (Gran Caribe, Cubanacán and Islazul) that do not have investment funds to renovate their facilities. The second is the one used by the Gaviota group, which has its own budget and only offers its hotels (already finished and in perfect condition) to renowned hotel companies for their administration; with the exception of the Saratoga Hotel, the only joint venture of the group, a company inherited from the non-existent habaguanex. As explained by Mintur's director of development, José Daniel Alonso, at a press conference in June 2019: "In joint ventures, you have a stake, invest capital for the same proportion and receive dividends for the same proportion."
There are currently 27 joint ventures established, but only 14 (linked to five chains) have made investments: BLAU Hotels & Resorts, Blue Diamond Resort, Iberostar, Meliá Hotel International and Roc Hotels.
In addition, explains José Daniel Alonso, "in the administration contract you have a scale of incentives, the more you produce, the more you earn. It is a percentage of the profits, but the more they get, the more we earn. The CACH is for a new facility where you put them in administration, for example, the International is new and Meliá begins to operate it. When it is with financing they are hotels with deterioration and we give them the administration and they contribute, for example, for the Riviera Iberostar it gives 25 million euros; the financing of investments is part of the company."
No contract is the same as another - but all are signed by the Minister of Tourism - and each one is negotiated separately depending on the characteristics of the property (number of stars, location, owner, estimated occupancy, etc.) and the chain that requests its operation. Those that are negotiated in the Mintur are agreed for 10 years and are renewable, but in the case of Gaviota they are only for 5 years.
According to the Meliá Group's annual financial report , its hotel revenues in Cuba in 2018 amounted to 14.4 million euros and, although the total income of foreign operators cannot be calculated precisely, data published by Richard E. Feinberg and Richard S Newfarmer estimates that 30% of the profits remain in foreign hands. This represents an amount of money equivalent to all the expenses of importing inputs that the sector has.
The economist Ricardo Torres, researcher at the Center for the Study of the Cuban Economy, considers that the participation of foreign companies is the best formula to earn more because they bring customers and, in addition, if they invest, they share the risk; although you have to share the profits. Because if the commercialization of these facilities were not in the hands of recognized operators, we would earn much less. Among the evils, obviously the least.
However, for Gustavo D´Meza Pérez, Martha Zaldívar PuigI and Ramón Martín Fernández : "Hotel management contracts (...) represent a significant cost and compromise the development and technological sovereignty of the country, since they only transfer the essential operational knowledge to guarantee the service standards of the foreign chain, while the strategic knowledge remains protected. , without transfer. In this sense, national hotel groups must consider the mission of increasing their participation in their own management in the 4 and 5 star categories, increasing the quality of service and creating synergies and competitive advantages at the hotel group level, which are the main real estate advantages that allow the expansion of international hotel chains."
Although this is a more viable economic method in the short term, 30 years later, hotel management has not managed to become independent and does not seem to think about it.
Tourism, as a sector, provides the necessary and immediate monetary liquidity to support the country's payments and, according to official sources, generates 111,698 jobs.
In the name of this evolution, in some neighborhoods such as Old Havana, it has led to the elimination of social and sports spaces. Investments have taken over sites that were previously the headquarters of the Ministry of Finance and Prices, the Kid Chocolate multipurpose room (when it was still in operation), and even caused scandals when the historic Payret cinema was attempted to be converted into a hotel.
In addition, it overloads the infrastructure for the basic services of the place. To build hotels, spaces that today occupy parks and other buildings for public use will be taken.
The economic benefits of the hotel industry are significant, especially in direct currency; therefore, it does not matter who operates them, but their profitability. In times of crisis, everything else seems secondary."
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