The hotel race in Cuba is officially on.
Just one day after Starwood Hotels & Resorts announced it would be the first U.S. hotel company to operate in Cuba after nearly 60 years, Bethesda, Maryland-based Marriott International has announced that it too will begin doing business in the country.
The U.S. Office of Foreign Assets Control of the Department of Treasury approved the company’s application to pursue a business transaction in Cuba, and Marriott says it is talks to “develop a hospitality relationship with potential partners.”
Marriott’s president and CEO, Arne Sorenson, has long been a proponent of allowing U.S. travel companies like Marriott being allowed to operate in Cuba. He is traveling with U.S. Commerce Secretary Pritzker during President Obama’s visit to Cuba, which officially began today.
“We are gratified to receive permission from the U.S. government to pursue business opportunities in Cuba,” Sorenson stated in a media release. “While there is still work to do before any agreement is reached, we are actively pursuing relationships in the hospitality sector. We have long been convinced that with the right frameworks in place, new economic opportunities, including dramatically expanded travel, abound in Cuba. These could deliver real benefits to the Cuban people and also have the effect of bringing both Americans and Cubans closer together.”
The release also noted that the company intends to bring its Marriott brands to Cuba, provide hospitality training for Cuban nationals, generate new business opportunities in the hospitality sector, and also support local communities in Cuba.
Marriott representatives did not provide any additional information or details when asked for comment.
Competing with Starwood and Airbnb
With his historic visit to Cuba — making him the first U.S. President since Calvin Coolidge to visit the country since 1928 — Obama has made it clear that he intends to further open up relations between the two countries, and to end the nearly 60-years-long Cold War that has separated them.
Marriott is certainly on its way to opening/adding Cuban properties to its global portfolio, but it is following in the footsteps of two U.S.-based competitors: home-sharing juggernaut Airbnb, and Starwood, the company it may or may not acquire by this June.
Airbnb was the first major U.S. company to begin doing business in Cuba, receiving approval to operate there back in April 2015. Today, Airbnb announced that it has received special approval from the Obama administration to open its listings to travelers from around the world, beginning on April 2. Like Sorenson, Airbnb’s co-founder and CEO Brian Chesky also traveled to Cuba this weekend to meet with Airbnb hosts and attend White House-related events on the island.
According to Chesky, Airbnb’s listings account for 4,000 homes, or casas particulares, throughout Cuba, and this week alone, more than 1,700 guests are staying with Airbnb hosts in Cuba. More than 50 percent of the company’s listings in Cuba are located outside of Havana, in nearly 40 different cities and towns that include the UNESCO World Heritage Sites of Trinidad and Viñales, as well as Santiago de Cuba and Santa Clara.
Any traveler looking to stay in an Airbnb accommodation in Cuba is required to confirm he or she is traveling to the country under one of 12 license categories as directed on the platform during the booking process.
And then, there’s Starwood. If you weren’t aware, Starwood and Marriott share a bit of a history with each other. Here’s a brief recap: In November 2015, Marriott and Starwood entered into a $12.2-billion merger agreement of mostly stock, and for all intents in purposes, it seemed both companies would finalize that deal by June, which would have made them the single biggest hotel company in the world.
However, earlier this month, Starwood received an unsolicited rival takeover bid from a consortium made up of Beijing-based Anbang Insurance Group, New York-based private equity firm J.C. Flowers & Co., and Beijing- and Hong Kong-based Primavera Capital. That all-cash takeover bid, which was initially $76 per share, has been upped to $13.2 billion, or $78 per share, and on Friday, Starwood’s board of directors has now determined it is a “Superior Proposal” to Marriott’s. Right now, Marriott has until March 28 to counter Anbang’s offer, or it can walk away with a $400 million breakup fee from Starwood. [An update: Today, March 21, Starwood accepted a new offer from Marriott valued at $13.6 billion, but Anbang still has a chance to counter-offer until April 8, when Marriott is scheduled to holds its postponed shareholder vote on the deal.]
In the race to do hotel business in Cuba first, however, it appears Starwood has prevailed over Marriott. Last night, Starwood signed deals to convert two properties in Cuba to Starwood’s The Luxury Collection and Four Points by Sheraton brands, with another third property to soon be added as a member of The Luxury Collection. All three hotels, following renovations, are expected to fly under Starwood’s flags by the end of this year.
All three of those properties are also owned by the Cuban government tourism companies, and it has yet to be determined whether this may or may not present a conflict to Starwood’s possible deal with Anbang, which itself is known to have deep ties to the Chinese government.
Skift spoke to Starwood CEO Thomas B. Mangas last night, shortly before the historic deals were signed in Havana allowing Starwood to operate in the country. He said that, although Marriott and Starwood have had a merger agreement since November 2015 — one that may no longer close — that both hotel companies pursued permissions to operate in Cuba independent of each other.
“This was a totally independent effort,” Mangas told Skift. “I’m sure they are pursuing their own independent efforts, but there’s been no coordination by Marriott and Starwood on this effort. “We’ve been acting as competitors, and we’re excited to get these hotels signed up first.”
The Hotel Race Begins
Now that Airbnb, Starwood, and Marriott have approval to operate in Cuba, it’ll be interesting to see how American travelers and Cuban locals respond, especially given both countries’ long and contentious history with one another.
There’s also the question of whether or not Cuba will be able to preserve its anachronistic atmosphere, or if it will change dramatically once more U.S. companies begin doing business there.
The majority of hotels currently in Cuba are owned by the government, and the majority of hotels from foreign companies are operated by brands from Latin America and Europe that include Melia Hotels International, Riu Hotels & Resorts, Iberostar Hotels & Resorts, and Barcelo Hotels & Resorts. Right now, there are an estimated 61,000 hotel rooms available in Cuba, 65 percent of which are considered four- and five-star, according to numbers released by the Cuban Ministry of Tourism.
Cuba is currently seeing record visitor numbers. Since Obama’s December 2014 announcement regarding a loosening of restrictions on Cuba, the number of U.S. visitors to Cuba jumped by 77 percent in 2015 versus 2014. And according to a 2015 World Travel & Tourism Council report, the number of international visitors to Cuba is estimated to reach 4.83 million by the year 2025. The record visitor numbers, in many instances, have lead to many hotels being sold out on a consistent basis throughout Cuba.
It’s also not that easy for Americans to travel to Cuba yet, although it’s becoming easier. Right now, individual American travelers can go to Cuba for “people-to-people” educational trips. Last month, both the U.S. and Cuba signed an agreement providing U.S. airlines the opportunity to operate up to 110 daily roundtrip flights, which would resume commercial airline service between the two countries for the first time in more than 50 years.
Other tourism companies, including cruise lines, are also looking to enter the Cuba market, and are waiting for approval from both U.S. and Cuban government officials.
For now, it’s clear there’s room for Starwood and Marriott, and a host of other U.S. tourism companies, to enter the Cuban market — but how this will all play out remains to be seen.
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Photo credit: Tourists watching a dancer in Havana, Cuba in January 2016. 171328 / 171328