Despite hurricanes and Trump, Cuba retains charm for foreign tourism firms

Banyan Tree Holdings

11/05/2018 16:28

By Marc Frank
    HAVANA, May 11 (Reuters) - New U.S. travel restrictions and
a destructive hurricane season last year sucked some air from
Cuba's tourism boom but foreign businesses from Spain's Melia
Hotels  MEL.MC  to China's Jin Jiang are pursuing new
investments in what remains a promising frontier.
    According to sources with knowledge of industry figures,
tourist arrivals in the first three months of the year fell to
roughly 1.4 million compared with 1.5 million in the same period
of 2017.
    Of that figure, 177,000 people arrived by sea and spent
relatively little money onshore, an increase of 38,000 from the
previous year, as foreign cruise lines stepped up their visits.
    The downward trend continued in April, the sources said, the
tail end of the November-to-May high season in Cuba.
    Yet hospitality companies including Spain's Melia Hotels
International and Iberostar Hotels & Resorts, Singapore’s Banyan
Tree Holdings Ltd.  BANY.SI  and Apollo Global Management LLC’s
 APO.N  Diamond Resorts International Inc. have all announced
new projects. 
    Representatives of the companies often complain about the
impossibility of owning their properties outright and the local
bureaucracy, but acknowledge they make a profit.
    "Cuba was, is and will be a key tourism area so it is just a
matter of timing," said Eric Peyre, who represents Louvre Hotels
SAS, a French subsidiary of China’s state-owned Jin Jiang
International Hotels Development Co  600754.SS , one of the
world’s largest.
    Peyre, who has worked in the Cuban tourism industry for 25
years, said the company just took over one hotel but plans to
have 10 within a few years.
    "Every hospitality company will come to Cuba one day or
another and we have decided to enter now," he said.
    Over the last two years more than a dozen cruise lines have
also arrived, including U.S. leaders Norwegian Cruise Line
Holdings Ltd.  NCLH.N , Carnival Corporation  CCL.N  and Royal
Caribbean Cruises Ltd.  RCL , which have steadily increased
their Cuba stake.
    "United States cruise lines continue to add sailings and
increase the size of vessels on the routes," said John Kavulich,
president of the New York based U.S.-Cuba Trade and Economic
Council, who follows the sector. He said the main restraint on
growth was port capacity in Cuba.
    The dip in tourism revenue this year is painful for Cuba's
Communist-run government, which is struggling with declining
export revenues and dwindling support from crisis-hit ally
Venezuela. 
    The Trump administration has made it more difficult for
people to travel to Cuba, banned Americans from patronizing
military-owned establishments and issued a travel warning that
it may be unsafe to visit Cuba.    

    HAVANA HARD HIT 
    Havana was particularly hard hit as the number of American
tourists dramatically declined, leaving once overflowing hotels
and restaurants with plenty of room to spare.
    The U.S. trade embargo restricts Americans to cultural,
religious and educational tourism or family visits, thus making
Havana, and not beach resorts, a top draw for U.S. visitors.    
                 
    U.S. visitors, not including those of Cuban origin, fell to
98,000 in the first three months of the year versus 160,000 a
year earlier. Of those, 25,000 came on cruise ships, twice the
number during the same period in 2017, the sources said.
    Nevertheless, there are five new five-star hotels under
construction in Havana, three of which broke ground recently. 
    The hotels are all owned by the military-run Gaviota
hospitality corporation and will be managed by foreign firms. 
The Trump administration has forbidden U.S. citizens from
patronizing Gaviota.     
    Other hotels in the Cuban capital are undergoing
renovations. Most are owned by non-military tourism companies, 
such as the famous sea-front Hotel Habana Riviera built by U.S.
mobster Meyer Lansky on the eve of the 1958 Communist
revolution.
    "Everybody is planning long term. That is why the Cuban
government is building in Havana and all foreign companies are
asking how to be part of this development," Peyre said.
    Foreign businessmen and local experts say 2017, with a
booming 26 percent growth in arrivals before Hurricane Irma hit
in September, was a fluke and so this year’s downturn is not the
end of the world. Despite the hurricane's impact, arrivals for
last year as a whole rose 16 percent. 
    "We are very pleased that we can show the world that for us
Cuba is indeed the next big frontier market and a great place to
invest," said Sebastiaan Berger, CEO of Ceiba Investments, a
Guernsey-incorporated company with close to 20 years experience
in Cuba and a $175 million portfolio.
    Ceiba announced this month a $150 million project to upgrade
four joint-venture hotels and build a fifth with Cuban partner
Cubanacan and Melia Hotels International. The Melia Habana Hotel
will add 168 rooms.
    Berger, like Peyre, was unperturbed by the Trump
administration.
    "We are a company dedicated to investments in Cuba and have
been investing in real estate under Presidents Bush Sr., Bush
Jr., Bill Clinton, Barrack Obama and now Trump," he said.

 (Reporting by Marc Frank
Editing by Daniel Flynn and Alistair Bell)
 ((marc.frank@thomsonreuters.com; +537-833-3145; Reuters
Messaging: marc.frank.thomsonreuters.com@reuters.net))