Hotel Business Exclusive: Cuba and its Impact on Hospitality

NEWTOWN SQUARE, PA (October 7, 2016) — After several decades, the doors are now open to Cuba as the U.S. aims to build international relations with the island nation anew. The first U.S. flights to the country since 1961 have been cause for celebration. But, don’t light up those Cuban cigars just yet. There’s still much to consider: How will this impact the lodging industry?

“The lodging landscape will improve over time. As the number of U.S. travelers to Cuba begins to rise, a certain level of service and amenities will be expected, which is currently unavailable throughout the island nation and won’t be for some time,” said Alex Zozaya, CEO of Apple Leisure Group, based here.

Zozaya and his team are well-versed in all things travel, including Cuba. Apple Leisure Group is the parent company for six separate entities: Apple Vacations, AMResorts, Amstar, Unlimited Vacation Club, Travel Impressions and CheapCaribbean.com.

“Together, we’re the nation’s only vertically integrated leisure company with experts in all aspects of hospitality—from resort and destination management to sales and marketing; tour operations; online retail sales; and guest recognition,” said Zozaya. “Through the company’s various entities, we’ve created an extensive global portfolio and offer services throughout the world.”

The company’s current connection to Cuba is through its tour operator, Travel Impressions, which offers cultural and people-to-people tours on the island. Also, through AMResorts, the company’s luxury leisure resort arm, they’re monitoring the ongoing affairs between the U.S. and Cuba in order to determine the viability of opening a property there in the future, noted Zozaya.

“As the economic picture for the Cuban people improves, they will be able to upgrade their infrastructure and offer the same level of accommodations travelers are used to experiencing throughout other Caribbean destinations,” said Zozaya. “That being said, I wouldn’t expect any significant changes to the current lodging landscape in the coming weeks, but definitely within the next 12-24 months.”

In the decades since the fracture between the U.S. and Cuba much has changed. Zozaya noted that hoteliers would be surprised to learn about the details within the contracts between U.S. businesses and the Cuban government, and the impact they have on the speed of closing hotel deals.

“Consequently, this may ultimately impact the level of interest of U.S. investors or hoteliers,” he said. “Nevertheless, some unanswered questions remain about exactly how U.S.-based hotels will be allowed to operate in Cuba, and there could be additional surprises along the way.”

The interest of hotel brands in planting their properties in Cuba proves that there’s gold in them hills. However, there are some key factors at play that can be a boon or a challenge to prospective transactions.

“Starwood Hotels is a prime example of how U.S. brands will establish their presence on the island. First, by offering management contracts and re-flagging existing properties that continue to be owned by the Cuban government. After initial renovations and updates, these hotels will be labeled as “business hotels” to avoid the restrictions of Americans traveling to Cuba for pure leisure,” he said. “If and when the U.S. Congress decides to lift the economic embargo on Cuba, it will reassure many investors and U.S. hotel businesses that they’re likely to see a return on the money for re-flagging and begin constructing and expanding their presence within the destination.”

For U.S. hoteliers, the business-hotel category will prove to work best given the ongoing restriction set on U.S. travelers, which only allows travel from the U.S. to Cuba under 12 categories: family visits, official business of the U.S. government, journalistic activity, professional research and educational activities, among others.

“In the future, however, given Cuba’s 300-plus miles of linear beach, lifestyle hotel brands that offer resort-style accommodations hotels will prove to be the most appealing hotel category,” he said. “As many European hotel companies can attest to, having already opened a number of resorts on the island’s beaches.”

In terms of entering the country and working with the government, Zozaya stressed that it will be important for hoteliers to be patient and have a degree of humility.

“Expect and accept the challenges that will come when adapting to the nuances of Cuba’s culture and conducting business with the government,” he said. “U.S. companies will also need to be flexible and learn fast. Understanding the rules of engagement will be paramount. There must be transparency, goodwill, protection for investors and the right legal framework to foster business.”

About Apple Leisure Group

Philadelphia-based Apple Leisure Group® is a leading hospitality company holding a unique niche in the U.S. travel industry. Its vertically integrated business model and robust infrastructure leverages the expertise of six innovative subsidiaries to deliver exceptional value to savvy travelers and strong resort performance to owners. ALG’s award-winning subsidiaries include: Apple Vacations®, the world’s largest tour operator to Mexico and the Dominican Republic; Travel Impressions®, a prominent U.S. wholesaler possessing an extensive global portfolio; CheapCaribbean.com®, a popular online travel agency specializing in luxury vacation packages and resort accommodations in Mexico and the Caribbean; AMResorts®, provider of marketing and brand management services to six luxury resort brands; Amstar DMC®, a destination management company offering premium airport transfers, tours and excursions; and Unlimited Vacation Club®, AMResorts’ popular guest loyalty program for discerning travelers who expect the very best in a vacation experience. For more information on Apple Leisure Group, visit www.appleleisuregroup.com.