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October 28, 2015

As the United States reopens its embassy in Cuba and international relations are normalized between the countries, periods of rapid growth are expected for key sectors within the Cuban economy. The hospitality and tourism industry is among these projected growth areas, particularly as travel restrictions for Americans are reduced.

Ilan Marcoschamer, Senior Director with Alvarez & Marsal’s (A&M) Hospitality & Leisure Group, was recently featured on regarding his thoughts on “Brand Cuba,” following an exploratory trip to Cuba and meetings with tourism industry and business leaders on the island. Global Marketing spoke with Mr. Marcoschamer about what he sees as the potential opportunities for A&M, both for our hospitality sector services group and across the firm.

Q.  As the normalization of relations between the U.S. and Cuba continues, what can the hospitality industry expect for the remainder of the year and as we move into 2016?

Given the “lure factor” that Cuba has, particularly for hoteliers and other hospitality industry stakeholders, there is already a tremendous amount of intrigue about the destination. Most, if not all, of the major hotel companies have already sent fact-finding teams to the island. However, as long as the U.S. embargo remains in place, American companies cannot operate in Cuba. But what is already taking place is a considerable increase in non-U.S. actors moving in to secure deals and relationships prior to any U.S. companies, in anticipation of the eventual lifting of the embargo.

Q.  How can American hotel entities and other businesses within the sector most successfully capitalize on “Brand Cuba’s” new opportunities, now and in the near future?

Airlines and cruise ship companies have already been conceptually permitted to serve Cuba out of the U.S. as long as the purpose of travel of their passengers falls within the 12 categories currently permitted under the Department of the Treasury’s Office of Foreign Assets Control (OFAC) rules. As far as the lodging sector is concerned, publicly traded, traditional hotel companies are still prohibited from doing business in Cuba as long as the embargo is in place. However, U.S. players that are determined to be early entrants and can employ boldness and legal ingenuity in their strategies may find opportunities through which they will be able to insert themselves into the Cuban market before the full lifting of the embargo. Afterwards, U.S.-based lodging brands and operators will likely be highly sought after due to their ability to channel lucrative American business to the island. The U.S. companies that invest time and effort in understanding the Cuban market and the mode of doing business there prior to the full normalization will be best suited to move quickly on the most attractive deals.

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