Published on
August 27, 2025
Cuba is considering the option of leasing hotel properties to foreign investors because of the persistent difficulties faced by the tourism sector. This initiative, which is intended to boost the tourism economy of the country, has sparked discussions whether it offers a permanent solution or simply deals with the problem superficially. Let us explore the possible advantages and challenges of applying this method, and whether it could realistically transform the tourism industry in Cuba.
A New Approach for Foreign Investments: The Concept of Leasing
Leasing is a contractual arrangement whereby one party rents an asset to another. In Cuba’s case, the foreign direct investment leasing model has been suggested for management of the state-owned hotels, which means that foreign investors would be able to manage the hotel operations. The government of Cuba would receive a fixed lease payment which offers a guaranteed revenue stream for the government. This payment is a predetermined amount and is obtained irrespective of the hotel’s occupancy or performance.
While this arrangement may yield a stable income source for the government, the scheme is still risky. The effectiveness of such a scheme is largely dependent on the tourism industry. Cuba’s tourism sector is currently grapbling with a myriad of challenges, including outages, insufficient economic infrastructure, and persistent economic embargoes. These issues can hinder almost every business, whether domestic or international, so it is uncertain whether there would be any long-term commitments from foreign investors.
Difficulties for Global Stakeholders
While leasing hotel facilities may be of interest to foreign investors looking to penetrate the market for its unique cultural offerings, a myriad of problems may dissuade them. For starters, the prolonged economic turmoil in the country, coupled with lack of access to basic infrastructure, makes Cuba a less appealing target. To compound matters, the current sluggish demand with low hotel occupancy rates could lead potential lessors or hoteliers to pessimistically evaluate lease payment profitability.
In the eyes of the Cuban government, renting out the hotels could serve as a method of achieving guaranteed income, even when there is a lack of tourism. Still, the fixed lease payments might lead to situations where the government makes less revenue than if the hotels were fully operated and serviced. Although the income may be more stable, it is possible that it is less profitable than scenarios where full operational control is either ceded to foreign investors or retained by the government.
Labor Issues: A Major Roadblock
Human resources is arguably the tourism industry’s most troublesome bone to pick in Cuba. Travelers often cite poor service as an area for improvement when comparing Cuban hotels to those in Mexico or the Dominican Republic. The lack of qualified personnel is certainly an issue, but in the case of Cuba, the centralized wage structure is a far larger contributing issue.
Due to wage controls, the hotel industry in Cuba suffers from a shortage of skilled workers, as hotel managers and foreign investors cannot offer more competitive salaries to incentivize these workers. The salary ceiling motivates employees to seek tips and wages through unofficial means, hurting their morale and the standard of customer service they provide.
Service quality enhancement will be a major challenge for foreign investors acquiring Cuban hotels. Even if investors are permitted to increase wages and improve employee benefits, the overarching problem of Cuba’s wage structure continues to pose challenges. As long as the flexibility to pay for exceptional performance is not granted to hotel managers, payment systems in place are unlikely to change, and therefore, service standards will remain stagnant.
Decentralized Management: An Essential Issue
A key indicator of success for leasing arrangements is the extent of operational control granted to foreign investors. Should the Cuban government constrain hiring, resource allocation, and asset upkeep to a narrow set of options, the performance of the leased hotels will be severely limited.
Leasing only proves effective if the lessee has control over the operational aspects of the business. Should the Cuban government continue to strictly control the management of hotels, investors may find it challenging to implement service enhancement, occupancy optimization, and profit maximization strategies. Increasing foreign investment autonomy may be pivotal for revitalizing Cuba’s tourism, yet the extent of government autonomy granted for such foreign control remains uncertain.
Might There be Better Options than Joint Ventures?
Rather than focusing solely on leasing, Cuba may enter into foreign joint venture agreements, or even grant foreign ownership of hotels. These joint ventures would allow foreign investors not only to have ownership interests, but also provide the ability to manage the properties effectively. These arrangements are likely to encourage foreign hotels to invest more in infrastructure and service in order to improve the overall experience of the guests.
It stands to reason that hotels managed through joint ventures, or fully owned by foreign hotel chains, would perform better. These investors have the capital and expertise to turn failing properties into profitable ventures. Additionally, Cuba stands to boost its appeal as a tourist destination by augmenting international brand partnerships, which would increase hotel occupancy.
Beyond Hotels: Tackling Other Wider Aspects of Tourism in Cuba
Leasing hotels is only one problem of the whole puzzle. Cuba is one of the countries in the world which solely depend on tourism when it comes to revenue. Thus, it is the tourism infrastructure which deals with the whole transportation, quality of the motor vehicles rented, and even the aviation services which need to be improved in order to make the tourist’s visit more enjoyable.
There are other deeper economic concerns, like fuel shortages and the restrictions imposed by the US embargo, which limits Cuba’s abilities in attracting tourists and investors. Even with the revenues generated when leasing the hotels, the lack of focus on other systemic fundamentals will make the Cuban tourism industry not only underperform, but stagnate in the long run.
Conclusion: A Long Term or Temporary Solution
The leasing of hotel property to foreign investors seems like the best option in terms of revenue to Cuba during its tourism crisis. As much as it may ease the fiscal pressure of the country, it will not be long before the strategy is abandoned when tourists no longer flock to the country.
For leasing to work, the Cuban government would have to permit more managerial freedom in hotels, revamp the country’s payment structure to entice knowledgeable employees, and improve infrastructure on a wider scale. In the absence of these modifications, leasing hotels may merely provide a Band-Aid solution instead of a route to sustainable recovery. To regain competitiveness in the international tourism market, Cuba needs to move beyond scapegoat shortcuts and implement extensive restructures.
