Ithaca, NY, August 7, 2015 – Although the U.S. embargo remains in effect, the resumption of diplomatic relations between the U.S. and Cuba opens the possibility of a vast expansion of the island’s hospitality and tourism businesses. At the same time, Cuba remains an opaque nation tightly run by its central government. Those contradictions are explored in a new report from the Center for Hospitality Research (CHR) at Cornell University, “Cuba’s Future Hospitality and Tourism Business: Opportunities and Obstacles.” Posted on the Cornell University School of Hotel Administration website, the report is available from the CHR at no charge.
Written by John H. Thomas, Miranda Kitterlin-Lynch, and Daymaris Lorenzo Del Valle, all of Florida International University (FIU), the report details Cuba’s considerable potential for hospitality and tourism investors, along with the potential roadblocks.
“Cuba’s government has taken many steps in recent years to encourage foreign tourism companies and investors,” said Thomas, an assistant professor at FIU. “Some companies, notably Melia Hotels, have done well in Cuba’s hospitality and tourism business. With that success, Cuba is planning to open more hotel rooms and encourage more arrivals. Still, we see more changes that must be made, and there’s no indication that the U.S. Congress will reconsider the trade embargo.”
In addition to the embargo, investors face specific limitations imposed by Cuban authorities. “To begin with, Cuba’s government requires that foreign firms be at least 50-percent locally owned, typically in a joint venture,” said Kitterlin-Lynch, who is also an assistant professor at FIU. “This has worked well for Melia, which has numerous management contracts for locally owned hotels, but it might be challenging for some tourism firms.”
Del Valle, an FIU graduate student, explained that the report sees four issues that may interfere with international investment: (1) finance and banking availability is lacking; (2) the Cuban government must be a partner in every foreign enterprise; (3) labor availability and terms are controlled by the government; and (4) the nation lacks credible dispute resolution entities (courts or arbitration).
A unit of the Cornell University School of Hotel Administration, the Center for Hospitality Research (CHR) sponsors research designed to improve practices in the hospitality industry. Under the lead of the center’s corporate affiliates, experienced scholars work closely with business executives to discover new insights into strategic, managerial, and operating practices. To learn more about the center and its projects, visit www.chr.cornell.edu.