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4w ago

Blue Diamond and Iberostar Pull Operations From Cuban Hotels

The departures raise the risk of a collapse in Cuba’s tourism revenue by pushing firms to cut ties with the military-run conglomerate Gaesa under U.S. sanctions.

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El sector turístico ha sido desde siempre uno de los motores económicos de Cuba.
A view of a nearly deserted beach amid concerns about the spread of the coronavirus disease (COVID-19) in Varadero, Cuba, October 23, 2020. Picture taken October 23, 2020. (REUTERS/Alexandre Meneghini).
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Overview

  • Blue Diamond announced on Monday that it will cease operations in Cuba with immediate effect after progressively scaling back since February and it managed about 62 hotels under ten brands without owning the properties.
  • Iberostar has reported that it will stop operating a block of hotels tied to Gaviota, a Gaesa-controlled firm, removing its management from roughly 12 Cuban properties.
  • The companies cited severe operational limits and weak market conditions that followed a U.S. executive order, OFAC designations of Gaesa-linked firms, and a looming June 5 compliance deadline that exposes non-U.S. firms to U.S. penalties.
  • A de facto fuel squeeze has forced multiple carriers, including Air Canada, Air Transat and WestJet, to suspend many flights to Cuba, sharply cutting visitor flows and complicating hotel operations on the island.
  • Tourism, Cuba’s second-largest source of foreign currency and long dependent on Canadian visitors, now faces deeper contraction with likely broader economic fallout and complex legal and contractual challenges for hotel operators that manage but do not own properties.