Wyndham’s Super 8 Worldwide Will Not Manage Resort Property In Cuba

Parsippany-Troy Hills, New Jersey-based Super 8 Worldwide, a subsidiary of Parsippany, New Jersey-based Wyndham Worldwide was to replace Ile-de-France, France-based AccorHotels as the management contract holder for the Playa de Oro Hotel in Varadero, Republic of Cuba, owned by Republic of Cuba government-operated Grupo Hotelero Gran Caribe.  Super 8 Worldwide was expected to commence operations in April 2017.

The management contract was reportedly through a Quebec, Canada-based consortium within which one of the members has a partnership with Wyndham Worldwide brands operating in Canada.

Wyndham Worldwide has not reported if the company obtained (or required) a license from the Office of Foreign Assets Control (OFAC) of the United States Department of the Treasury to manage a property(s) in the Republic of Cuba.  Licenses from the OFAC are generally valid for two (2) years.

For reasons that neither Wyndham Worldwide nor Grupo Hotelero Gran Caribe have disclosed, the companies reportedly terminated the management contract and/or discussions for a management contract and Grupo Hotelero Gran Caribe has decided to self-manage the property.  Uncertain as to which party initiated the discussion relating to the termination.

If accurate, the only United States-based hotel brand with a presence in the Republic of Cuba is Stamford, Connecticut-based Starwood Hotels & Resorts Worldwide (a subsidiary of Bethesda, Maryland-based Marriott International) which manages The Hotel Quinta Avenida (re-branded as Four Points Sheraton Havana on 27 June 2016), expects to manage the Hotel Inglaterra (delayed from December 2016 to December 2019), and had reported a Letter of Intent to manage a third property, the Hotel Santa Isabel, but no information has been provided about that property since 2016.  

If the OFAC issued a license to Starwood Hotels & Resorts/Marriott International in 2016, it would generally expire in two (2) years; thus, if OFAC issued a revised license on or before 20 January 2017, the license would generally expire prior to December 2019.  There is a possibility that the OFAC provided a license of indefinite length.

The decision by Grupo Hotelero Gran Caribe may be a result of the company believing that whatever marketing and operational value Wyndham Worldwide would deliver was not worth the management fee(s) that would be paid to Wyndham Worldwide.  More likely, however, is given the low demographic guest profile for the Playa de Oro Hotel, Grupo Hotelero Gran Caribe believes that guests will continue to be attracted to a low-cost vacation opportunity regardless of the increased guest experience (and personnel training opportunities) that would result from a management contract with Wyndham Worldwide.  

In addition, with the government of the Republic of Cuba’s chronic shortage of foreign exchange, saving the management fee was enticing from a financial perspective.  There is also a belief by Grupo Hotelero Gran Caribe that another non-Republic of Cuba-based hotel management will be attracted to the property whenever it becomes available for a management contract.  Another issue for non-Republic of Cuba-based hotel management companies is the desire by the government of the Republic of Cuba for hotel management contracts to include a provision that the holder of the hotel management contract will provide financing for the property; a provision that most hotel management companies reject.

An anomaly to the Republic of Cuba hotel management marketplace is a requirement for those non-Republic of Cuba-based companies with a management contract to obtain their operating funds from the owner of the property, rather than directly from guests into an operating account controlled by the holder of the management contract.  Due to the government of the Republic of Cuba's chronic shortage of foreign exchange, it desires immediate access to funds and then distributes payments, as required by a management contract, but often delayed, to the holder of the management contract.  This is an unsustainable financial management modality.  

From the company: "Super 8 ® Worldwide is the world's largest economy lodging chain with over 2,200 properties in the U.S., Canada and China.  Super 8 has recently launched a brand refresh with a new logo and a fresh, new interior and exterior design program.  Guests can depend on every Super 8 to deliver a complimentary SuperStart breakfast, free high-speed Internet access, upgraded bath amenities, free in-room coffee and free premium cable or Satellite TV.  Kids under 17 stay free at Super 8."

In September 2016, Geoff Ballotti, President and Chief Executive Officer of Wyndham Worldwide:

“We are working on opportunities there,” Loewen said. “Our teams have been there. We have partners that we’re talking to. We’re looking to bring some more brands there. We’ve talked both to people who want the upscale side and some who really see the need for good solid economy hotels.” The biggest challenge, of course, is utilities and other infrastructure. “The government’s got a lot of work to do down there, I think. But it will be a great location.” 

Mr. Robert Loewen, Executive Vice President And Chief Operating Officer of Wyndham Worldwide:

"We always look at every opportunity, and we think Cuba and the Caribbean in general are going to be big opportunities. I’m excited from a personal standpoint because 25 years ago I worked in the Caribbean doing yacht charters. And every year, it was a story of, 'Cuba’s going to open up, and we can finally take sailboats to Cuba.' It looks like it’s finally broken down and is opening up, and the infrastructure is not there."

In May 2016, Hollywood, Florida-based RCI (a subsidiary of Wyndham Worldwide), reported that it would offer travel options to the Republic of Cuba for its timeshare owners.

"RCI is the worldwide leader in vacation exchange with approximately 4,300 affiliated resorts in more than 100 countries. RCI pioneered the concept of vacation exchange in 1974, offering members increased flexibility and versatility with their vacation ownership experience. Today, through the RCI Weeks® program, the week-for-week exchange system, and the RCI Points® program, the industry’s first global points-based exchange system, RCI provides flexible vacation options to its 3.8 million RCI subscribing members each year. RCI’s luxury exchange program, The Registry Collection® program, is the world’s largest program of its kind with approximately 200 affiliated properties either accessible for exchange or under development on six continents. RCI is part of Wyndham Destination Network and the Wyndham Worldwide family of brands (NYSE: WYN)."