HAVANA, Cuba. – As part of the dollarization process of the economy being implemented by the Cuban regime since mid 2020, it’s anticipated that starting in July of this year and coinciding with the final phase of monetary unification that implies the disappearance of the convertible peso (CUC, by its Spanish acronym), over 90 percent of hotel establishments and tourism services aimed at the national market will begin to charge customers in “freely convertible currency” (MLC, by its Spanish acronym). This will eliminate the present possibility of paying in Cuban pesos (CUP, by its Spanish acronym), i.e., currency in which salaries are paid to the majority of workers in the island.
A high-ranking officer at the Tourism Ministry (MINTUR, by its Spanish acronym) has confirmed to Cubanet that, just like with the network of retail stores, soon a list of hotels and tourism spots will be published to indicate that their services will now be marketed in US dollars. That list will include 5-Star and 5-Star-plus establishments, as well as the network of hotels managed by foreign chains, such as Iberostar, Accor, Meliá, Kempinski, Mercure, NH Hotels, among others.
This information, which is corroborated by officers at the Ministry of the Economy and by tourism workers in the island, also indicates that tourist-packages in Cuban pesos will be limited to about 30 hotels under domestic administration – Islazul and Cubanacan- which represents barely nine percent of the 400 hotels in the island.
“A total of 350 hotels will now go into the new operations model. Some of them offer high-quality services for which they must import certain components, and it’s impossible to continue charging for their services in Cuban pesos,” according to the MINTUR officer, who spoke to us on condition of anonymity, for they are forbidden to provide information to independent journalists.
“If they continue charging for services in both currencies (Cuban pesos and US dollars), not only will the accounting become complicated, as it is now with the CUC, but also to continue business as usual means doing so in currency that, let’s face it, has no real, hard-currency backing. We would be dealing with symbolic prices. All services provided before in CUCs will now be charged in freely-convertible currency (MLC); some hotels, like Manzana, Paseo del Prado, Nacional, Packard and others at that level, are still considering other variants for charging customers at their bars and restaurants, pools, gyms, retail stores, i.e., services that are purchased by clients who are not lodged at the hotels. These options discard cash transactions, and could be conducted through pre-paid consumer cards for services within the hotel proper; the use of mobile Apps to conduct transactions; pre-payment of services, etcetera, due to the difficulties that can come up when using a POS payment system.”
In August of 2020, Cuba’s Tourism Ministry began marketing tourism packages to be paid via freely-convertible currency (MLC) cards, whose backing is provided basically by remittance funds that Cubans who reside abroad send to their relatives in the island.
During that initial period, although some of the hotels in the northern keys and in Varadero were reserved exclusively for foreign tourists, due to the epidemic situation caused by the COVID-19 pandemic, for the remaining hotels, the option of paying in CUCs was kept open for domestic clients. At the same time, the use of MLC cards to effect payment was incentivized by offering a 10% discount to users from within Cuba or from abroad.
However, the retail chain Caracol, and car rental companies eliminated totally all sales in CUCs in order to adopt directly the MLC cards system. Lodging services to domestic clients was limited to less than twenty-odd units in mid- June 2020, when the decision was made to initiate several provinces into the first phase of post-pandemic recovery. About this, the same MINTUR officer comments:
“Cubanacan started experimenting with a dozen hotels, as did Islazul, in order to determine the cost-effectiveness of charging for services in domestic currency, be it CUCs or Cuban pesos. Car rentals and retail sales transactions (Caracol), however, were used as testing ground to see if people were receptive to the idea and to learn if they would respond positively to the initiative. That’s just what happened. In spite of the limitations imposed by the coronavirus, reservations were made, and sales transacted, in MLC, as we foresaw initially. We have also corroborated that it is impossible to keep offering services in Cuban pesos. It has been difficult to convince the foreign sector to charge for its services in currency that has no backing, so we have no other options,” he stated.
For their part, tourism sector workers who were interviewed about this issue, confirm that there are sales-operations adjustments taking place, and they anticipate these will become effective in this year’s second quarter. Hotels like Packard, Manzana, Nacional and Paseo del Prado will do so much earlier, as soon as services are restored.
In the case of the Packard Hotel, located in Havana, pre-payment trials at the hotel registration desk are going on already via the issuance of purchase cards.
According to a sales specialist for the Spanish hotel chain Iberostar: “Once we return to normalcy and we start receiving Cuban clients, whether as lodged guests or in general areas accessible both to guests and visitors, we are studying the possibility of using the cards, or a pre-deposit at the registration desk, to avoid any complications with the network cards issued by Cuban banks, connectivity problems, insufficient funds, lost or mistaken cards, which happens often at MLC stores.”
“There is no discussion yet about dates, but we are working on it. What is certain is that bar service, at the terrace and swimming pool area previously charged in CUCs will not be charged in Cuban pesos going forward. We still do not know how this will take place, if Cubans will be allowed to come to the hotel if they are not guests there, but services definitely will not be charged in Cuban pesos. [Management] will have to find a solution because services offered at the terrace bring in the most income to the hotel,” stated a female worker at the Packard Hotel, in Havana.
Although nothing has been said about MINTUR’s decision, when changes do consolidate in the next few months and its hotels adopt the sale of goods and services in freely-convertible currency (MLC), the social divide between a minority that receives US dollars from abroad and the greater majority of Cubans whose salaries the regime pays in currency that has no value, will become more acute.
Back in mid-2020, when the regime announced the opening of retail stores that would only accept MLC, it assured the population that this unpopular and highly discriminatory decision would only be implemented in 72 stores across the country. Its purpose was to hoard hard currency in order to provide supplies to the CUC retail network. But months have gone by and shortages become more dramatic every day, while dollarization of stores has gone above and beyond the number announced initially by over 200 stores throughout Cuba.
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