Airbnb, The Hospitality Industry & Cuba

Businesses in the hospitality industry have been looking at Cuba as a fabled land of underdeveloped beach-front real estate for years, and until recently, it had been a pipe dream to pursue building there.  With Cuba/US relations beginning to mend, people are very excited that this could be a real possibility in the near future, or could it?

Most all the major players in the hospitality industry have publicly expressed a sigh of relief and deep interest in expanding/returning their business to the previously embargoed island.  So with all this interest and capital, what kind of barriers would prevent the island from becoming the tourist hotspot that it once was?

The question here is much more simple than the answer, but there is one business that has the potential to pave the way for revitalizing Cuba’s hospitality industry.  That company, is Airbnb, and it’s already making significant strides in developing and adapting its business model to find success in this impoverished island.

Barriers To Entry

There is a rather significant problem that exists in Cuba that many hospitality businesses interested in developing Cuba overlook.  

While the embargo may nearly be dissolved, sourcing and moving building materials is still incredibly difficult.  Even Airbnb hosts have expressed their frustration and struggle to update their own buildings to draw more customers to their listings:

“It’s complicated to do it here,” said Jonathan Ashton, who lists two Airbnb properties in Central Havana. “It’s difficult to source products.”

There’s no Home Depot in Cuba. Some items can be purchased locally in hardware stores, some bought on the black market, [and] some brought in from abroad.

Additionally, while Cuban roads and airports are currently able to withstand the use of the current population, this will change dramatically if tens-of-thousands more people visit the country each year.  A hospitality publication, The Meeting Magazine, recently published a study on some of this:

Safety upgrades alone pose a challenge for Cuban airports. Many of the country’s runways and taxiways are in need of restoration. That means new signage, better lighting, pavement repairs and other improvements to come into compliance with international standards. Even the terminals themselves require some repairs if they are to take on an increase in foot traffic.

The Havana government’s Business Construction Group has indicated that more than three-quarters of Havana’s roads are in poor condition and require “complex” repairs.

Western best management practices can produce significant results; however, hotel management practices in Cuba are constrained by a state-imposed political context.

Despite the undeniable potential for success the hospitality industry has in Cuba, the barriers to entry are still so significant that it will take several years for this to become a reality.  One publication was even bold enough to state that it would be at least ten years before there was a US owned hotel in Cuba.

However, as Airbnb continues to expand its infrastructure in Cuba, it can potentially kickstart the Cuban economy.  If this happens, the currently crumbling Cuban infrastructure could begin to be rebuilt in order to meet the rising needs of incoming tourists and travelers.  This could potentially create an environment where the political and business climate may be ready invite more foreign hospitality businesses, specifically from the US, sooner than later.

Airbnb to Pave the Way?

So far the most detrimental element for Airbnb’s for growth and success in Cuba’s fledgeling hospitality industry is the lack of high speed internet.  An article by Fast Company recently stated this about Cuba’s internet connectivity:

The National Statistics Office and the International Telecommunication Union estimated that about 22% of Cubans have Internet access, but that included people who only had access to a government-controlled Intranet. Until 2008, Cubans were banned from buying their own computers.

So, this is clearly a problem for Airbnb who is a digital company that does a majority of its business online and through credit card payments.  However, things are able to work through a series of middlemen, which are mainly internet cafes, hotels, and money transfer companies.  This process is inefficient and somewhat opaque, but is also expected to be streamlined eventually.

Access to high-speed internet may not seem as though it is the most significant factor in improving the overall infrastructure of Cuba, but having it will increase the rate at which things will be accomplished simply because of increased communication, transaction speed, and order placement and fulfillment.  As any 3PL Company will tell you, in the past 10 years the internet has allowed us to do business with fewer mistakes, in greater volume, and with improved shipping times for the same reasons.

Conclusion

Airbnb’s exploration of the Cuban hospitality market has encountered many problems and setbacks.  However the interesting thing about these problems is that they are not as detrimental to their business model as it would be to the traditional hospitality industry’s business model.  

So as Airbnb continues to grow, Cuba’s infrastructure is paced to grow with it, and this is a good thing for the hospitality industry.  This is because the combined growth of Airbnb’s and Cuba will eventually produce an environment suitable for the hospitality industry to successfully enter Cuba.

Another reason this is a good thing for the hospitality industry, is because Airbnb won’t be a direct competitor for hotels or resorts once this evolution occurs.  While this statement is purely speculation, it stands to reason because there is already a shortage of hotel/resort rooms available in Cuba, and many of them need to be updated significantly.

This means that there will be a segmented version of travelers visiting to Cuba:  Those who are looking for a more culturally integrated version of travel, and those who are looking for an all-inclusive hotel/resort type of travel.

Ultimately, Airbnb is set to be a valuable asset in Cuba for the hospitality industry and logistics, because it’s set to provide the initial boost to the Cuban economy that is needed to kickstart  its struggling economy.

Again, these are just the trends that we as a hospitality logistics company have noticed.  If you have anything to add, please find us on twitter and engage with us using “#futurelogistics.”

 

Axis Worldwide offers a wide spectrum of “Industrial & Hospitality” supply chain logistics/managed freight services for Fortune 500 companies. Our expertise, experience, and buying power allows us to offer the best transportation rates and frequent transit times within the US, Canada, Mexico, Asia and Europe. Through our licensed, US bonded facility in Southern California and other facilities, we provide warehouse and distribution solutions to our clients. Our freight services include air freight, both domestic and international, ocean import/export, less than truckloadfull truckload, and emergency ground expedites. We also provide emergency air freight services 24/7.