HAVANA, Cuba. – According to its most recent operations report dated December 31, 2020, Meliá Hotels International has withdrawn from three hotels in Cuba. In recent hours, the news has been retransmitted via various news outlets both inside the island and abroad.
In the document, published recently by Meliá, mention is made succinctly about “the few commercial opportunities” and about the “operational problems we have confronted,” as the reasons for their decision. However, in no report prior to 2020 does the Spanish chain give any indications of having started the withdrawal process, not even in the interim financial statements dated June 30, 2020.
This report, as well as an analysis of reports from 2018 and 2019, reveal
that the definitive withdrawal from Sol Largo Key, Sol Guillermo Key and Meliá Guillermo Key -865 Meliá’s portfolio guest rooms in total between the three – has been a last-minute decision that could be due not only to the economic repercussions of the pandemic but also to significant changes in the Cuban political context, laden with internal and external tensions, and an unusual pressure strategy on the part of the Spanish company to counteract the general indifference of the Cuban part –who owns the buildings- regarding renovation and repair of the hotels and the systematic lack of fulfillment of investment agreements that date back to before COVID-19.
Meliá’s withdrawals from Sol Largo Key and Sol Guillermo Key are justified. Their ratings are not good and the comments left by clients in sites like TripAdvisor leave no doubt as to the unpleasant stays they experienced at both hotels, but even so, those reviews haven’t been worse than the ones written about newer hotels, such as Paradisus Los Cayos –located in Santa Maria Key- or older and same-age hotels, like any others belonging to Meliá in Havana.
However, for Meliá Guillermo Key, it’s been an unexpected development. This five-star hotel, inaugurated in 1996, is one of the better-rated facilities of the 39 that Meliá operated in Cuba until about a year ago, and one of the most successful ones, with the highest percentage of reservations and recovery that Meliá reported in 2019. Even TripAdvisor ranked it among Cuba’s top 25.
More recenetly, in 2020, Meliá Guillermo Key and Sol Guillermo Key, together with another 23 Meliá installations, were again chosen among the 25 best hotels and received Certificates of Excellence awarded by TripAdvisor every year.
However, in the most recent report, withdrawal is mentioned as “having been completed” keeping in mind problems faced in “previous years”, as if this had been a withdrawal process that took more than six months, the time between the two reports. This notwithstanding, no report prior to December 2020 mentions signs of those difficulties that allegedly would make Meliá leave the administration of Meliá Guillermo Key. The decision has left many speechless.
What has happened in those six months that has prompted Meliá to make this “mutually agreed” decision with Gaviota S.A., its Cuban counterpart, to the extent of withdrawing from one of its most important hotels in the Cuban portfolio, more cost-effective and profitable than similar facilities in Santa Maria Key, Varadero and Havana?
Yes, it’s true that 2020 fared badly for Meliá as it did for the entire tourism sector globally; that room reservations in Cuba have been the lowest in the Meliá portfolio; that bankruptcy of a most important operator, Thomas Cook, along with Trivago’s decision to pull numerous Cuban hotels from its sales channels has been catastrophic. But to withdraw from managing three of its hotels, the real estate of which belongs to Gaviota S.A., does not explain it, not when the 30 hotels that remain in their portfolio show greater and older profitability problems.
The pandemic and the financial losses associated with it are reflected in both 2020 reports; however, as the documents make evident, Meliá has not
given up on continuing its investment plans in Cuba for 2022, the year four new hotels will finally be completed, for a total of 924 additional guest rooms.
From these unusual and unexpected withdrawals, one could probably infer that there is more than one reason for the decision, and probably even a hidden message to its Cuban counterpart.
Several reports published recently by CubaNet revealed how badly things are going with various hotels managed by the Spanish tourism chain, and how funds destined for renovations and repairs vanish in a sure labyrinth of ineptness, corruption and bureaucracy. Client dissatisfaction, poor ratings, together with the existing evidence about labor exploitation in the staff contracting system on the part of the Cuban employment agencies, have damaged the prestige of all Meliá brands in the island, and the Spanish have reached the conclusion that it’s no longer prudent to continue risking its reputation even more. Definitely not at a time of crisis, like the present.
Meliá has faced many disappointments –not less than their losses- in over 20 years of investment and expansion in Cuba. As far as their hotels in the keys, there is more than one unpaid account. Business agreements that have remained unmet promises or performed only partially, and even money placed on the table whose final destiny remains unknown.
As an example, we have the US$50 million (41.8 million Euros) that, according to Europa Press, the president of Sol Meliá, Gabriel Escarrer chose to assign to the construction of two hotels (coincidentally, one of them in Largo Key) and to the training of their future employees.
Escarrer had made the announcement during the inauguration of the 24th International Tourism Fair held in Cuba. He said he would build a 900-room hotel in Largo Key to be named Club Paradiso, and a 1000-room hotel in Santa Maria Key, both to be completed by 2006. However, 15 years after the “good news” were announced, neither hotel has materialized, nor has there been any training of alleged personnel that would never be hired.
According to information given to CubaNet by a Meliá officer in Cuba, that money, whose existence was known through the news, would be barely enough to win the management of a few other hotels, the one in Largo Key with only 300 guest rooms included, which now has been withdrawn from its portfolio due to its low profitability. No word about building that super hotel Club Paradiso.
Although Meliá has never made public, at least not officially, its many disappointments with the way the Cuban side handles the maintenance and renovation aspects of the hotels or its investment process, or the hiring of personnel through intermediary employment agencies, it would not be farfetched to interpret the recent decisions, as well as other equally-novel details found in the 2020 report, as an “ultimatum” or as the threat of a gradual and progressive withdrawal so that the Cuban regime can begin to take things seriously, and even to force it to pronounce itself on past requests that will favor Meliá and even to reverse decisions already made that have affected the hotel chain unfavorably.
Not even with our promise to protect the identity of individuals did a single person from the Spanish chain or close to it whom we questioned about this matter was willing to answer with convincing arguments our question about why there was a withdrawal from Meliá Guillermo Key now and not before, if in the official explanation, Meliá was dealing with the same profitability problems and management difficulties it was facing with the rest of the chain’s hotels.
That notwithstanding, in the most recent operations reports, an unusual argument like advocating for human rights –never before included in Meliá reports- is a new item which should be given a follow-up in future reports of the Spanish company.
Although Cuba is left out of those documents, there is a possibility that, any day now, the island could be included in such reporting, especially when Meliá has stated explicitly its commitment to extend the issue of human rights to every hotel it operates, as will be reflected in its 2021 report.
And that’s not all. On page 3 of the “Report on Operations and Annual Accounts Consolidated in 2019”, Meliá used, for the first time ever, the world “unstableness” in a brief paragraph where it mentioned “geo-political tensions”, a topic it would address again on pages 102 and 274 of the report.
It refers on those three instances to the challenges that are affecting its business in Cuba, and also mentions for the first time the “growing competition from alternative tourist destinations in the Caribbean”, maybe a way to beat some sense into a regime that behaves with excessive self-confidence.
To understand the real repercussions of the term used, it would be good to remember that “political stability” has been the main promise made by Cuban leaders to foreign businessmen in every investment portfolio that Cuba’s Chamber of Commerce has presented. They have regarded “political stability” as a given and without a doubt have spent heavy resources in police repression to guarantee it, but with Donald Trump’s stay in the White House, plus the increase in activism on the part of the internal opposition in more recent months, adventurous investors like Meliá have felt that the alleged solid ground they bought into has begun to collapse, and it’s best to take some precautions.
In the section titled “Evolution Regarding Human Rights” in the 2019 and 2020 reports, Meliá has stated that it owes allegiance to the commitment it acquired as signatory of the Human Rights Policy and as member signatory of the Global Compact in 2018. Such posture seems a bit theatrical but, who knows if in the near future such position could decide many issues with the Communist regime with which Meliá struck a “complicity agreement” during the 1990s. When things reach their most critical point, we don’t know how strong or how weak that old agreement will turn out to be.
At the very least, the possibility of a break-up has been put on the gambling table. Unlike its 2019 report, in the 2020 report Meliá describes the content of its analysis of compliance with human rights at its hotels: 10% focuses on “freedom of association and collective bargaining”; 20% on “cero tolerance regarding corruption”; 15% on “the dignity of persons, equality and safe working environment”; another 15% on “working conditions and fair and just wages” and 8% in the “formation, dissemination and communication on ethics and human rights”.
To top it off, Meliá adds in the report that “this analysis becomes especially important because the company operates hotels in 16 countries where, as Human Rights Watch reports in 2020, those rights are not respected” and “only in one of those countries is there room for improvement” (page 169).
Is Meliá referring to Cuba? The HRW report that Meliá quotes is the one where it makes reference to Cuba being in a state of “consolidating a dictatorship”, and that “the Cuban government continues to repress its critics”.
Is Meliá thinking of examining all the problems related to human rights in its Cuba companies? If we take into consideration what the 2020 report states as certain, that possibility exists. On page 169 of the document one can read the following: “Starting in 2021, we shall update our self-diagnosis and will implement a new analysis, thus increasing its reach in the portfolio (…).
Likewise, we shall define a global protocol with specific regional plans that allow us to consolidate an integrated conduct in this matter.”
On the “self-diagnosis” of the Spanish chain, with regards to human rights, “in order to identify potential collateral risks and plan the necessary mitigating actions,” the only country that is not included is Cuba. This not only casts doubt on whether the analysis involved 94% of Meliá’s global portfolio, as they claim, but instead suggests that the issue of human rights in Cuba is territory that Meliá is not allowed to address, or a matter they have not cared about until now, even though they claim to have been following as reference the policies defined by the Danish Institute for Human Rights, the Governing Principles on corporations and human rights, the Ten Principles of the U.N. Global Compact, as well as the approaches of the Modern Slavery Act.
Let us then wait to see what happens with the Business Report of 2021. The inclusion or exclusion of Cuba with respect to the analysis of human rights will always reveal how relations are going between Meliá and the military businessmen of Cuba.
Read in Spanish here.
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