Hotel Saratoga Havana facade

Reports Suggest Market Resistance to Havana Room Rate Increases

According to Integra Realty Resources’ (IRR) analysis in “Caribbean Market Update, 2016 Mid-Year Report” slightly over 30 million stopover visitors will visit the Caribbean in 2016 (including Cancun, Cozumel and Belize).

Their data indicate average growth in tourist stopover arrivals to the (23 of 30) reporting markets in the Caribbean region (excluding Belize, Cancun and Cozumel) of 4.85% for the year to date 2016, based on data reported by individual countries for various months. However, the top 14 markets in terms of arrivals indicated average growth of only 2.03%.melia cohiba havana cuba

The highest growth indicated in the region is Cuba, at 12.7% for 2016 (January only); followed by Martinique at 10.5% and Dominican Republic at 6.2%. Four of the top 14 destinations are indicating negative growth for the current year to date; namely the Cayman Islands, Trinidad & Tobago, Haiti and the USVI.

As expected, high demand in Cuba is leading to higher rates. But how high is too high?

Anecdotal reports from several sources indicate Havana room rate increases for the upcoming season are meeting resistance from international travel companies seeking to secure rooms in bulk against their future bookings. In some cases, asking rates for single occupancy in Havana’s luxury and business segments are up 50% or more. The current listed rate for a room at the Hotel Saratoga in November is $639 per night.

Marla Whitesman, co-founder of Other Cuba Journeys, which has been arranging custom (or specialty) Cuba trips for over 15 years, says she has seen the single supplement for their people-to-people cultural exchange options increase from about $450 to more than $1,500. She fears rising prices will collide with the near perfection people will expect in such high prices. While Cuba is a wonderful place to visit, its hotel inventory suffers from “imperfections” that are inconsistent with prices more common to Hong Kong or Dubai.

By comparison, for the twelve months through May 2016, the Cayman Islands is reporting the highest ADR in the region at $356.91, (up 3.4%) followed by the USVI ($329.46, up 3.5%) and Barbados ($288.18, up 2.2%), according to IRR.

Cuba currently has approximately 60,000 hotel rooms. The bulk (3/4) of Cuba’s hotels are in beach locations with the balance in urban centers. A small number are located in natural preserves.

Meliá Hotels

Citing improved relations between Cuba and the US, Meliá Hotels recently reported impressive 2015 financial performance from its Cuba revenue base of $435.4 million.

The Spanish hotel company was one of the first foreign hotel companies to begin operations in Cuba after the island national opened its hotel sector to outsiders in the 1990s. Today, the hotel group manages 29 hotels in Cuba with 12,552 rooms, up from 12,310 rooms in 2014. Meliá Hotels is the largest foreign operator of hotels in Cuba today and is a major force in the all-inclusive category.

The company reported 5.7 million overnight stays in 2015, with an average occupancy of more than 70%. Its Cuba hotel operation is managing hotel assets under contract with local hotels owners, a group of three military-affiliated Cuban entities: Gran Caribe Hotel Group, Gaviota SA Tourism Group Corporation and International Trade and Tourism Cubanacan SA.

Melia Hotels in Cuba

Here is Cuba’s Q1 2016 hotel pipeline.

Reports Suggest Market Resistance to Havana Room Rate Increases was last modified: July 24th, 2016 by Simons Chase