Spanish Hotel Chains Lost Up to €100 Million Trapped in Cuban Banks
Profits blocked by the Cuban government highlight the exhaustion of the regime’s tourism model, as unpaid debts mount and companies reduce their exposure to the Island.
HAVANA TIMES – The leading Spanish hotel chains operating in Cuba have between €80 million and €100 million frozen in the Island’s banking system—funds they have been unable to repatriate due to the regime’s shortage of foreign currency and which their parent companies in Spain now consider losses on their balance sheets.
The figure, published by the Spanish newspaper El Economista, confirms the deterioration of a business model that for three decades was one of the pillars of Spanish investment in Cuba and is now experiencing its worst crisis.
The inability to recover these profits adds to the regime’s financial troubles, which also include approximately €500 million in unpaid debts to more than 200 Spanish small and medium-sized companies supplying food, medicines, medical equipment, and other goods. Many of these companies have abandoned the Cuban market or even gone bankrupt.
From a Highly Profitable Business to Damage Control
Collaboration between Spanish hotel chains and the Cuban government began in 1990 with the opening of the Sol Palmeras Hotel in Varadero under a joint-venture model in which foreign companies financed the investment and managed the hotels while the Cuban State retained ownership of the land, the economic publication recalled.
That model led to the construction of more than one hundred hotels and made Spain the leading foreign investor in Cuba’s tourism sector. The accumulated investment by Spanish hotel chains totaled around €160 million, roughly one-third of all Spanish investment on the Island.
During the first 20 years, the companies more than recovered their initial investments thanks to substantial profits that they were able to repatriate without difficulty.
GAESA Changed the Rules
The situation began to change when the military conglomerate GAESA, controlled by Cuba’s Armed Forces, accumulated enough financial strength to build its own hotels through its subsidiary Gaviota.
From that point on, two models coexisted: the traditional joint ventures and hotel management contracts under which chains such as Meliá, Iberostar, and Canadian companies led by Blue Diamond Resorts managed hotels owned by GAESA in exchange for management fees.
The system remained stable while Washington suspended enforcement of Title III of the Helms-Burton Act. However, its activation in 2019, combined with Cuba’s worsening economic crisis and later the pandemic, marked a turning point.
Since then, foreign companies have been unable to repatriate profits because of the regime’s shortage of hard currency, while US sanctions have increased the risks of doing business with entities controlled by the Cuban military.
Meliá and Iberostar Reduce Their Exposure
In recent weeks, Meliá and Iberostar stopped managing hotels owned by GAESA in order to avoid the consequences of US sanctions, although they continue to operate with civilian entities such as the Ministry of Tourism and Gran Caribe.
Experts previously consulted by El País warned that Havana could even attempt to sue both companies for withdrawing from those contracts. However, the hotel chains could argue that their decision was driven by the operational collapse of Cuba’s tourism industry, marked by power outages, fuel shortages, food scarcity, air connectivity problems, and a sustained decline in visitor arrivals.
Even so, El Economista reports that the Spanish hotel chains do not plan to leave Cuba entirely. Their strategy is to minimize losses while maintaining a presence they consider valuable should Cuba’s economic system eventually change.
A Market That Is No Longer a Priority
The financial newspaper states that Cuba “has ceased to be a strategic priority” for Spain’s major hotel chains, whose focus in the Caribbean has shifted to destinations such as the Riviera Maya, Cancún, and Punta Cana.
The companies are maintaining a presence on the Island under a “damage control” strategy, convinced that their experience and long-standing relationships with the Cuban authorities could give them an advantage over future competitors if the country eventually undertakes economic reforms.
That outlook, however, contrasts sharply with the sector’s immediate reality. Cuba’s tourism industry has yet to recover to pre-pandemic levels, dozens of hotels once managed by foreign companies have ceased operations, and hundreds of Spanish businesses remain unpaid for debts accumulated over several years, reflecting the regime’s growing difficulty in meeting its financial commitments to its international partners.
First published in Spanish by Diario de Cuba and translated and posted in English by Havana Times.