Cuba: Hotel Outsourcing to Stay Afloat
HAVANA TIMES – The Cuban government disguises government and military owned hotels by outsourcing their management to foreign entities. These companies present the hotels as their virtual properties for marketing, webpages, sales, monetary exchange, and of course management. The contents of this article will convey the schemes used to utilize a capitalistic structure in a state-owned economy to gain monetary value for the island’s subsistence.
Government Outsourcing of Hotel Management
In their study, Julio Cervinino and Jaime Bonanche from the Carlos III University in Spain wrote: “Outsourcing hotel management in Cuba requires navigating significant regulatory hurdles, as the Cuban government must approve foreign investment contracts and often retains a majority stake. Foreign companies must partner with Cuban state-run entities, understand the complex hiring processes through government agencies, and align with Cuban priorities, such as providing local employment and training.”
As noted by Jessica Dominguez Delgado (El Toque 2023): During the 2023 International Tourism Fair (FITCuba), Cuban Prime Minister Manuel Marrero reported the statistics —18 foreign managements running 113 contracts covering 65% of hotels, plus 24 mixed joint-venture companies managing about 5,000 rooms.
Though some of the hotel management includes foreign ownership, it’s not the dominant business model on the island. For example: Melia Hotels manages five hotels through joint enterprises, they have made minimal capital investments: Melia continues to operate primarily as a manager. On the other hand, Iberostar is party to 19 hotel administration contracts, including four hotel joint ventures, in which it is a 50% owner, notes Miguel Alejandro Figueras a Cuban economist with more than 50 years of experience in the field.
“During these past three decades, almost all of the capital for financing Cuban tourism development has come from State resources. Foreign capital represents approximately two percent (2%) of all funds dedicated to the Cuban tourist sector,” said Figueras back in 2020.
The “Leasing” Model
Recent reports by Travel and Tour World (2025) note the Cuban state is exploring the business model of “leasing” hotels to foreign investors. The foreign company would pay a fixed lease fee to the Cuban government, guaranteeing a steady income regardless of the hotel’s performance. The foreign entity would then be responsible for the operations and profitability, retaining only earnings beyond the lease payment. This scheme would compensate the state as the tourist rate diminishes, and the foreign entity would be held accountable for the loss of revenue.
Who are these Foreign Players
Introduction of of these foreign entities who participated in the island’s management of hotels:
Consider, these countries are democratic societies with capitalist economic systems. A level of irony, Cuba, with a socialist government and a mainly state-centered economy essentially outsourcing to foreigners to do their bidding and gain monetary value.
What’s in it for the Cuban People
In 2020 workers in the Cuban tourism sector were known as well-educated human resources, around 70% having more than a 12th grade education. At that time, there were approximately 20,000 university graduates working in the hotel sector, reported Figueras back in 2020.
Flashing forward, pandemic, hurricane damage, island infrastructure degradation, mass exodus of Cubans. The Cuban Tourism Industry in the Post-COVID Era per Paolo Spandoni (2024) quotes,“ As of 2024, it is estimated that around 10,000 Cuban tourism workers had left the sector or the country, leading to service quality issues and a contraction in the workforce.
How does the Cuban worker benefit from government and foreign entities as the backbone of the hotel labor industry? The compensation for any hotel worker can depend on a salary and the generosity of daily tips. Per Tour Republic (2023), typical hotel staff tipping for porters is $1-$3 USD per bag and housekeeping of $1-$5 USD per day. A high end salary per month for a hotel salary is 8000 Cuban pesos (around $20 USD), as reported by Marisela Jimenez (2025).
The question to ask, out of the revenue pie from a hotel room, what percentage does the Cuban employee receive for compensation. A calculation based on the peso exchange rate and hotel typical gross margin provides the answer:
As a comparison, 1.63% for Cuban labor percentage versus neighboring islands. Per the Caribbean Hotel Association (2006) labor averages around 27% of operating costs. Accordingly, the profits are not equitably shared by the government or the foreign entities with the Cuban employee. Thus, the only value for the Cuban employee are tips which can range from $20 USD to $100 USD monthly based on a five day work week. It’s the tips that are the lifeline for Cuban salary compensation by hotel visitors.
The final note in the outsourcing scheme is the use of the monetary exchange rate between the Cuban peso for the foreign entity, the government, and the Cuban hotel employee. The process operates where the foreign management companies pay the state employment agency in Euros or USD which provides the stability of foreign currency not subject to the devaluation of the peso (CUP).
The Cuban government sets conditions for the hotel employees base pay and that is eventually a salary the employee is provided through an employment agency also controlled by GAESA/Gaviota. The foreign hotel management company pays the agency a given amount of money, but the worker typically receives less than 10 per cent of that amount in salary. The rest goes to the Cuban military, per Evan Dyer (2022).
The payment funnel scheme: the foreign entity and the government utilize the official monetary exchange rate of USD and Euro and pays the Cuban employee in devalued pesos (CUP). For example:
The foreign company pays an agency at the official rate of 24 pesos to 1 USD
8000 CUP / 24 CUP (Rate Paid to the employment agency) = 333 USD
The Cuban employee’s 8,000 CUP translates to around $20 USD since the street value of the pesos is around 400 to 1 USD.
Nonetheless, Tourism workers earn a base pay almost twice as much as teachers and considerably more than doctors who receive the highest-paying jobs according to the National Institute of Statistics and Census (ONEI).
Foreign Company and Government Accountability
To summarize the contents of this article:
- The Cuban government uses foreign management to operate their hotel properties.
- Questionable ethics for monetary gain by foreign entities operating with the Cuban government
- The Cuban employees receive nominal share of profits and must depend on tips
- Foreign companies are participating in perpetuating the poverty cycle of the Cuban people
Foreign governments that enable their businesses to expand ownership in Cuba’s hotel industry should carefully consider the broader social and economic impacts. Rather than limiting their perspective to the comfort of visiting resorts, officials would benefit from engaging with communities directly to better understand how profits leaving the island contrast with the daily struggles faced by many Cubans.
