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Is Cuba Open for Business?
Cuba has opened its doors to the U.S. What does this mean for the franchise industry?
In late March, Starwood Hotels & Resorts Worldwide became the first U.S. hotel company to sign a deal with Cuba since the 1959 revolution.
With a multimillion-dollar investment, Starwood announced that it would manage and market two properties in Havana. According to The Washington Post, the brand also signed a letter of intent to operate a third. This deal marks a breakthrough in the loosening of the sanctions that will allow Starwood to do business, upgrade facilities, hire local workers and artisans and conduct transactions in U.S. dollars through American financial institutions.
Cuba’s tourism industry has boomed since the December 2014 agreement with the U.S. According to Fortune, international visitors rose 17% to a record 3.5 million in 2015, including a 77% increase in American visitors to 161,000. Cuba expects a similar increase in American visitors this year now that the two nations signed an agreement to let U.S. airlines to operate daily round-trip flights to Cuba.
With U.S. citizens now being allowed to once again visit Cuba and businesses like Starwood making their way into the country, what does this mean for the future of the U.S. franchise industry? According to Scott Lehr, the International Franchise Association’s senior vice president of international development, the spread of franchises in Cuba could take many years, but the landscape looks hopeful for anyone going into a tourism-based business—especially for chains like Marriot and Hilton.
“Staying in a place with a well-recognized brand can be very important to travelers when visiting a new country. Certain people will seek out those international brands,” Lehr said in an interview with Entrepreneur Magazine. “These tourist-centered franchises can help pave the way for other future franchises as tourism brings increased economic prosperity to a country.”
According to a recent article posted on Veteran Franchise Centers, Cuba is expected to run franchising similarly to the Dominican Republic. Both areas have approximately the same number of inhabitants and they are both in locations of high tourism traffic. Franchises that are expected to prosper if opened in Cuba include cleaning services, tutoring centers, frozen yogurt restaurants and delivery service specialists like The UPS Store.
“If we use the Dominican Republic as our insight into what Cuba will look like once franchising picks up its pace, the fast-food and hotel industries are expected to boom,” the article states.
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