Lowered Room Rates Weigh on the Bottom Line of Melia Hotels in Cuba

This September the inauguration of the Hotel Sevilla Habana Affiliated by Meliá is scheduled. (Meliá)

14ymedio bigger14ymedio, Madrid, 1 August 2023 — The drop in the price per room in Cuba in the first half of this year has caused a decrease in the profits that the Meliá hotel obtained in the first half of 2023. Although it is the main international hotel manager on the island and earned 46.1 million euros in this period, according to its results report, published this Monday, Cuba marks the exception and became a drag for the company, being the only one of its main markets in which revenue per available room (Revpar) fell, at 39.1% less than the same period a year ago.

Occupancy at Meliá hotels in Cuba was barely 40.9%, 7 points more than in the first half of 2022, but among the lowest in its business portfolio. Only Vietnam (32.7%) and Venezuela (26%) are below the island. The latter also contributes, together with Cuba, to weigh on the good figures of other Caribbean destinations such as the Dominican Republic (67.7%), and Mexico (64.1%). The United States is, globally, the one that registers the best occupancy data for the company, with 77%, although countries such as France or Italy, with the highest cost per room, achieve better performance.

In the case of Cuba, the average price per room this semester was only 84.9 euros, 27.8% less than in the same period of the previous year, when the price was around 117.5 euros. According to Meliá’s analysis, “Cuba has seen an upward trend in terms of international tourism, but it was affected by the contraction of the domestic market and the fall in average rates.”

Although the reactivation of flights led to the recovery of Canadian tourism, the main source of tourists for the Island, the report is devastating. “The aforementioned drop in the participation of national tourism, together with the new devaluation of the Cuban peso, implied the need to resort to offers to face the growing competition. This factor, added to the reopening of several hotels that operate in lower price segments, has caused an overall drop in average rates.”

In addition, the prospects for the hotel chain are not encouraging. “The quarter is expected to continue in the same vein as the previous one, with improvements in the arrivals of international customers but combined with the contraction of the domestic market,” the document reports, as it announces the opening of two new hotels for the third quarter of this year.

According to the report, “the second quarter confirms the return to normality in the tourism sector, with the exception of Cuba.” (Meliá)

Meliá’s expansion in Cuba has not stopped despite the bad data in this report. With the next two establishments to open – the Meliá Trinidad Peninsula, the first five-star hotel in the colonial town of Sancti Spiritus, and the Hotel Sevilla Habana Affiliated by Meliá – there are four opening this year including the Sol Caribe Beach, in Varadero, which has just started operations, and the Innside Havana Cathedral.

In addition, for 2024 there is another planned opening and after 2025, without a specific date, two new establishments. If the operation is completed according to forecasts, by that date Meliá would have 37 hotels on the Island, seven more than now, with a total of 15,515 rooms.

In this semester, however, the hotel company got rid of two establishments: the Gran Hotel Cuba, in Camagüey, with 72 rooms, and the Camagüey Colón, in the same province, with 58. Today, Meliá has 13,786 beds in its premises.

Despite the bad data for tourism on the Island, which began to decline in 2019 and sank with no sign of recovery during the pandemic – unlike in most countries where the sector is powerful – Meliá has not given up on its determination to continue improving facilities and expanding capacities in Cuba. Company CEO, Gabriel Escarrer, sanctioned by the US in 2020 after the activation of Title III of the Helms-Burton Act, has shown his confidence in the recovery of the market whenever he has been able.

On his last visit to the island, on the occasion of the International Tourism Fair (FitCuba) this May, Escarrer stated that the company intends to consolidate its position and that it trusts the forecasts of the Cuban Government regarding the increase in the flow of travelers to the country.

However, that projection has been crashing against reality for months. In the first half of the year, Cuba barely received 1,298,539 international visitors and is far from the 3.5 million target for the year. The statistics, as the Cuban economist Pedro Monreal noted, indicate that it is practically impossible to meet the target since, not even in 2018, a year with a record number of travelers, was a figure of 2.2 million travelers for the second half of the year achieved.


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