Advertisement

U.S. hotels interested in expanding to Cuba find Airbnb already established there

U.S. hotels interested in expanding to Cuba find Airbnb already established there
Airbnb says it has grown to 4,000 listings in Cuba since entering the country in spring 2015. This home has been among the listings. (Airbnb)

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.

Advertisement

The home-sharing site, which quietly arrived in Cuba in spring 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 Inc.'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 San Francisco-based company began offering rooms in Cuba in April 2015, four months after President Obama announced U.S. travel companies could begin doing business there.

It took nearly another year for Starwood Hotels & Resorts Worldwide Inc. 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 this year. (Starwood is in the process of being acquired by Bethesda, Md.-based Marriott International Inc. in a deal that is expected to close in the 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. "There is enough space for different types of competitors in the marketplace."

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?


Share quote & link

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 at a recent 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 embargo 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 food 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."

Airbnb was able to benefit from a state-run program, called Casas Particulares, that Cuba established in the late 1990s as a way to help 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."

Advertisement

Bhattarai writes for the Washington Post.

ALSO

Advertisement
Advertisement