NEW YORK— Like so much forbidden fruit, Cuba remains out of reach to U.S. investors, yet continues to tantalize domestic hoteliers who observe their foreign brethren making inroads in the island nation’s lodging markets. A panel at the recent NYU International Hospitality Industry Investment Conference here examined the Cuban market and its opportunities. Panelists included: Sebastian Berger, president, Berger, Young & Associates, Ltd.; Scott Berman, partner/hospitality and leisure, PricewaterhouseCoopers, LLP (PwC); Mark Lunt, senior manager, Ernst & Young, LLP; and hotel consultant Stanley Turkel. “The Cuban tourism sector is getting healthier by the day, with first-quarter occupancy figures for Havana hotels at 95% and up,” with the rest of Cuba’s hotels at 85%, Berger noted. “A lot of the product is still low-key, low-level, all-inclusive resorts,” continued Berger, “So they have to build on the high end of the market now, which is non-existent.” There’s a projection of two million visitors this year, with a current hotel base of 34,000 rooms, he added, with a thriving hotel industry fueled by independents and international chains, including Sol Melia and Accor, which have 25 and six properties there, respectively. However, Berman expressed some reservations. “I won’t dispute the 95% occupancy— but occupancies in general, on a percentage basis, have been falling… [from a North American perspective], it was an A target that has really become a C target until we have more closure or more understanding of the timing of things, [i.e., sanctions],” Berman said. Berman said given the all-inclusive nature of product, Cuba’s competitive advantage is price, and it competes directly with the Dominican Republic, parts of Mexico and Jamaica. He noted, however, travelers looking for a full scope of amenities not based on price (e.g., golf, spas) would likely look to other Caribbean destinations, such as St. Lucia or Barbados. “Cuba, clearly, is not like other islands in the Caribbean,” said Turkel. He stressed what may be missing on the luxury resort side is balanced by lack of traffic [owing to lack of cars]and ease of transportation. He opined Cuba would be a prime target for American lodging companies if the U.S. embargo is lifted. Lunt said, however, there are operational challenges such as dealing with the island’s inefficient infrastructure, plus energy and food shortages. Additionally, he noted: “A lot of management contracts in place there have stipulations that they can be canceled if [the property]falls below a certain occupancy rate. In some of the resort markets, we’ve seen high occupancies, but they’re giving away rooms at $50 a night because they don’t want to fall below that threshold, which allows them then to be booted out by the government.” But Berger noted the dynamic is shifting: French restaurants are appearing; the British PGA closed a deal to build golf courses; and two marinas are to be constructed. “This is one of the most remarkable development stories I’ve ever seen anywhere in the world,” acknowledged Berman. “To go from literally less than 10,000 [hotel]rooms to over 30,000 rooms in less than a 10-year period, and 250,000 tourists in 1990 to forecasts 12 years later of two million. Nowhere else in North America has that occurred.” Turkel also noted the development has taken place without American entrepreneurs or capital. Lunt cited a recent report stating the embargo’s impact on the U.S. was below $1 billion a year in what it would expect to export to Cuba. “$1 billion on what we trade on with the opportunities in China, Russia and other countries is decimal dust,” said Lunt. The issue is more emotional than logical, he added, stemming from billions of dollars of American business and Cuban-American assets being nationalized by the Castro regime during the past half-century. It does not appear likely that the sanctions will be lifted soon, said Berman, noting that, “I would certainly
