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Spain’s Meliá, the largest foreign hotel operator in Cuba, has officially started withdrawing from the island after US sanctions targeted the main state conglomerate active in tourism.
“In the context of the evolving geopolitical, social, legal, and economic environment in the Republic of Cuba, Meliá Hotels International announces that, as part of its ongoing and rigorous risk assessment process, it has taken the decision to immediately cease the provision of management and commercialisation services, as well as the licensing of its hotel brands, in relation to 15 hotels located in the country,” the company said in a statement on June 3.
Meliá managed a portfolio of 34 properties on the island at the end of the first quarter of the year, with another two in the pipeline. However, occupation rates fell to 34.1 per cent in the first quarter, with most international arrivals evaporating as the US administration tightened sanctions on the island. That had already forced the company to shut down 50 per cent of its local capacity.
“The overall impact of this decision is limited, as the majority of the hotels listed are currently non-operational due to ongoing energy constraints and reduced demand affecting the Cuban market,” the company’s note added.
On May 7, the US Office of Foreign Assets Control added military-run Cuban conglomerate Gaesa and its executive president, brigadier general Ania Lastres Morera, to its list of specially designated nationals.
Gaesa, via its subsidiary Gaviota, owns 121 hotel properties across the island, many of which are managed by international groups. The hotels listed on Gaviota’s website feature brands like Spain’s Meliá and Iberostar, Germany’s Kempinski and Turkey’s ATG Hotels.
Ofac confirmed that foreign entities face sanction risks for dealing with Gaesa, or subsidiaries where it owns (directly or indirectly) at least 50 per cent interest, beyond a 30-day wind-down period. Despite the group’s opaque structure, it is widely accepted that Gaviota is fully controlled by Gaesa.
While Meliá is cutting ties with 15 properties in Cuba, it is still running the remaining 19 hotels in its Cuban portfolio, a company’s spokesperson confirmed.
Its decision further weakens the prospects of Cuba’s tourism industry, one of the country’s main sources of foreign currency, which has already disappeared from international booking platforms.
It follows on the heels of that of Canadian mining company Sherritt. The new round of sanctions announced by the US administration in early May create “conditions that materially alter the corporation’s ability to operate in the ordinary course,” the company said in a note on May 4 as it announced plans to pull out from the island after more than 30 years of operations.
Sherritt has now entered into a nonbinding agreement with the US’s Gillon Capital for a private placement that would give the US company a majority stake in Sherritt.