Starwood, Marriott enter Cuba signing frenzy
 
Starwood, Marriott enter Cuba signing frenzy
21 MARCH 2016 10:51 AM
UPDATE: Hoteliers say there are both challenges and advantages to being the first U.S. hotel companies to reach Cuban shores.

Updated 10:33 a.m. Eastern Daylight Time, 23 March 2016 with comments from Alex Zozaya, CEO of hospitality firm Apple Leisure Group

Updated 10:48 a.m. Eastern Daylight Time, 22 March 2016 with comments from Jorge Giannattasio, SVP and chief of Latin America operations at Starwood Hotels & Resorts Worldwide

HAVANA—On the heels of President Barack Obama making the first United States presidential visit to Cuba since 1928, Starwood Hotels & Resorts Worldwide has signed three hotels in Cuba’s capital of Havana in the first hotel deal there by a United States company since the Cuban Revolution in 1959.

European hotel chains—including Spain’s Meliá Hotels International, Iberostar and Paradisus—have been active in Cuba for decades, particularly with resort properties.

Starwood’s CEO Thomas Mangas said the company will have a huge advantage as the first U.S. hotel company to reach Cuban shores.

“Starwood’s history of creativity, innovation, sustainability and being a first mover is core to who we are and what has made us a formidable competitor,” Mangas said.

Starwood has signed three urban Havana properties, including Hotel Quinta Avenida—which will become a Four Points by Sheraton—while Hotel Inglaterra and Hotel Santa Isabel will become part of The Luxury Collection soft brand.

Grupo de Turismo Gaviota, S.A., owns the Quinta Avenida, while Gran Caribe owns Hotel Inglaterra, both of which will open under Starwood flags in 2016. The third property, Isabel, has no opening date as yet but Starwood has signed a letter of intent with its owner, Habaguanex Hotels.

Starwood will soon be joined in Cuba by Marriott International, which announced Monday it has been given permission by the U.S. Department of the Treasury’s Office of Foreign Assets Control to investigate deals in the Caribbean nation.

The two companies announced a revised merger agreement Monday, after Starwood had rejected Marriott’s original offer in favor of a new bid from a consortium led by Anbang Insurance Group.

Jorge Giannattasio, SVP and chief of Latin America operations at Starwood Hotels, told Hotel News Now that Starwood has prepared for expansion into Cuba over the last 12 months. The knowledge of the company’s Latin America regional teams and the numerous visits to Cuba by corporate executives have helped, but the first push into the country has still been a sharp learning curve.

He added obtaining regulatory licenses to operate in Cuba was “very compelling, the first license given to a U.S. company.”

Giannattasio said Starwood also obtained the necessary licenses to import materials into Cuba for what he said would be “significant renovations.”

“The competitive and first-mover advantage we have due to our understanding of the region cannot be underestimated,” he said. “We were first in Brazil, first in Chile, first in Uruguay, first in Argentina.”

Giannattasio said Starwood was not “inventing hospitality in Cuba, but with the increase in travel from the United States coming down to Cuba, we will have significant advantages, especially as these are urban properties.”

The brand choices are important, too, he said.

Giannattasio said the Hotel Quinta Avenida is in a mostly business area of Miramar, an outlying western district of Havana, and will be converted to a Four Points by Sheraton property. The two other properties—Hotel Inglaterra and Hotel Santa Isabel—are two of Havana’s most classic hotels, which Giannattasio said will have their heritage preserved and maintained by becoming a part of the chain’s The Luxury Collection brand.

“The Inglaterra is the oldest hotel in operation in Cuba, a national monument,” he said. “We will keep it traditional, keep the property what it is, while the Isabel is where President (Jimmy) Carter has stayed on both of his (unofficial) visits.”

Havana is the first step in Starwood’s Cuban plans, according to Giannattasio.

“This is just the beginning of our work with different Cuban companies,” he said. “There are challenges. Understanding local regulations, officials and companies took time, which we overcame with flying colors, although the challenges are similar to those of any new market. Lots of education will be given.

“(Starwood) always has been a pioneer, and we will be pioneers in Cuba’s luxury product.”

Marriott President and CEO Arne Sorenson was part of President Obama’s Cuba visit. Sorenson is officially traveling with U.S. Secretary of Commerce Penny Pritzker.

Sorenson said in a news release that his company had “long been convinced that with the right frameworks in place, new economic opportunities, including dramatically expanded travel, abound in Cuba.”

Sorenson also mentioned that hospitality training would be provided to Cuban nationals.

Hot on the heels of both companies are Airbnb, which has “special authorization” as of 20 March to allow travelers to book stays in Cuba, and Booking.com, which today in a press release said it was the first U.S. online travel agency to open up the country, with bookings in Cuba likely to be available within weeks.

Cuba has in recent years set up a popular, Airbnb-like system of room rentals called casas particulares.

The initial stages
Alex Zozaya, CEO of hospitality firm Apple Leisure Group, a subsidiary of Bain Capital, said U.S. hotels chains might be initially looking at soft brands and conversions, but there will eventually be possibilities for new builds.

“As restrictions continue to lift and more companies are allowed entry … I anticipate the playing field will level out and more brands will have access to the same opportunities,” Zozaya said.

“Until financing institutions and lenders are more active in Cuba, it will be easier to rebrand rather than seek ownership through acquisitions or attempt new construction,” he said. “Once new construction is possible, however, I anticipate that there will be companies that will want to create self-contained destinations, like we see in other parts of the Caribbean. It will be a similar model to the one we see in Cancun, Punta Cana or Jamaica but with a strong Cuban flavor and uniqueness.”

He said Cuba’s tourism industry must mature over the next few years as the initial novelty wears off.

“So far we have seen a trend towards cultural tourism, but that trend will fade away after the mystique wears off,” Zozaya said. “That’s why it is important to offer variety in the hotel product. We will see everything from limited-service to extended-stay to ultra-luxury to cater to different travel needs. The more variety, the more ways for hotel companies to appeal to consumers and attract repeat business.”

Zozaya agreed with Giannattasio that challenges lie ahead.

“Acquiring the necessary financing to improve the infrastructure to meet the needs of the high-end U.S. market is a challenge, but will lessen as the country continues to open,” Zozaya said. “Another challenge is how freely can a U.S. business operate in Cuba. Will we be able to one day invest, own, manage and control a business in the island?”

He said that until that happens, U.S. hoteliers must adjust to work in the current system.

“U.S. companies will need to be flexible and learn fast,” Zozaya said. “They will need to adapt to the Cuban culture and the Cuban government. It still is, and will continue to be, very different than conducting business in Mexico or many other places in the Caribbean.”

Zozaya added that working with the government in Cuba is likely to be no different than working elsewhere.

“The key to working with any government is to understand the rules of engagement,” he said. “There must be transparency, goodwill, protection for investors and the right legal framework to foster business.”

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