Cuba's Private Sector Anticipates Tourism Boom

Cubans renting out private accommodation to tourists are hoping for a boost from an anticipated influx of American travellers following the US-Cuba détente.

Rooms or entire properties registered with the state but rented out by private owners – known as casas particulares - are often deemed the best way to discover Cuba.

Sometime these are rooms in family homes, or properties bought specifically for rental. Much cheaper than state-run hotels, they also offer a taste of “real” island life.  

The business is still state-controlled; landlords must pay taxes, register all foreigners who stay in their properties and report this to the migration office. Travel agencies such as Cubanacán, Cubatur and Habanatur that sell packages to tour operators and groups in the state sector also liaise with private landlords.

Isabel Hamze Ruiz, director of the department of work and social security in Havana, said that there were now more than 12,000 houses available for private holiday lets in Cuba.

In Havana alone there are 8,000 such homes, of which 100 are included in tourist packages offered by the state provider. 

As for the state, it has 63,000 hotel rooms, 70 per cent of which are in four or five star establishments, the Cuban News Agency (ACN) reported in January of this year.

Havana is planning to increase this capacity to more than 85,000 rooms by 2020.

Even so, state infrastructure may struggle to cope with the anticipated rise in demand.

US tourism to Cuba jumped as soon as the détente was announced on December 17, 2014

Some 160,000 American tourists flew to the island in 2015, an increase of 77 per cent over the previous year, despite the on-going embargo on tourism from the US.

Travel is only permitted through one of the 12 licenses approved by Barack Obama’s government that authorise particular visits, such as educational or religious trips.

This tourism boom should pay dividends for private landlords. Airbnb - one of the first US accommodation companies to operate in Cuba – also reported soaring interest in accommodation in Cuba for American visitors.

According to a press release from the home rental website, there was a 70 per cent increase in searches for Cuban listings by users from the US in 2015.

Havana became one of the most searched-for Latin American destinations for US citizens, beating Río de Janeiro, Buenos Aires and Mexico City.

Only homeowners can rent their property, and a permit to do so must be bought from the National Tax Administration Office in either Cuban pesos (CUP) or in convertible pesos (CUC).

CUC is on a par with the US dollar, while the CUP is worth 25 times less. Those who hold permits in CUC can rent to both Cubans and foreigners, while permits obtained in CUP are only for receiving Cuban residents.

There is also a large domestic market, although in this case rentals are most usually by the hour or overnight.

For Cubans living in sometimes overcrowded conditions, casas particulares are a convenient way for couples seeking some privacy.  Cuban citizens pay between three to five CUC or 75- 125 CUP for a three-hour rental period.

Alfredo Caballero has more than 10 years experience in renting his home out to foreign visitors.

“This business is a major benefit because it helps the family economy, though like all business it has its highs and lows according to the time of the year,” the 50-year-old said.

A major problem for those renting out property is continuing state control over the internet.

Although Cuba has relaxed its grip on the web in recent years, access is still largely limited to dedicated access points, similar to internet cafes, around the island.

(See also Tight Controls Over Cuban Web Access).

This makes it harder for individuals to advertise their properties.

Some enterprising landlords manage to access listing site Revolico, although it is banned by the government, or hand out business cards to advertise their properties.

The fact that internet is still banned for private homes, although one pilot project is currently underway to provide restricted access in Old Havana, also puts landlords at a disadvantage.

“If I could have wifi in my house… competition with the state would be fairer,” said Mariela Castellanos, a host in Habana Vieja.

There are other obstacles to the successful running of casas particulares. For instance, the government does not have a wholesale market to supply the private sector.

Private landlords have to shop in government chain stores, which only accept CUC, and they have to pay everything at the same price as the rest of the population. Food and cleaning materials are their biggest cost.

Then there are taxes, which can make a significant dent in profits.

Landlords can charge foreign citizens around 15-20 CUC for a private room, or 40-60 CUC for an apartment.

However, the monthly tax for a room is 150 CUP or approximately 6 CUC depending on the currency chosen for the permit. If the house has a swimming pool, there is an extra charge of one CUC or ten CUP per square metre. A garage means an extra charge of six CUC or 40 CUP.

“You have to pay the state 65 CUC [65 dollars or 1,625 CUP] for each room you have in the house, whether they are occupied or not. Plus 10 per cent of the earnings, without counting everything we have to buy in the [chain stores],” Castellanos said.

“Just imagine, plenty of taxes and low earnings,” Castellanos said. “I mean that you can eat, but you can’t save money.”