The CubanAmerican Voice®

Why is Meliá leaving one of its hotels?

Melia Hotel Cayo Guillermo

Hotel Meliá Cayo Guillermo (Photo: MINTUR)

Why Meliá abandons one of its best hotels in Cayo Guillermo?
Nobody saw the disaffiliation of the Meliá Cayo Guillermo hotel coming. Will the Spanish company's decision have to do with its human rights policy?

HAVANA, Cuba. - According to its most recent management report, dated December 31, 2020, Meliá Hotels International has disaffiliated three hotels in Cuba. In the last few hours, the news has been replicated in several media inside and outside the island.

The document recently published by Meliá tersely mentions the "scarce commercial opportunities" and the "operational problems faced" as causes for such a decision; however, in none of the reports prior to 2020 did the Spanish company give any indication of having started such disaffiliation process, not even in the report of the Interim Financial Statements of June 30, 2020.

This report, together with the analysis of the 2018 and 2019 reports, reveals that the definitive abandonments of the Sol Cayo Largo, Sol Cayo Guillermo and Meliá Cayo Guillermo hotels -which between them all subtract some 865 rooms from Meliá's Cuban portfolio-, has been a last-minute decision that could be in line not only with the economic affectations due to the pandemic but also with significant changes in the Cuban political context, due to internal and external tensions, as well as to an unusual pressure strategy by the business group in view of the Cuban party's -owner of the properties- laxity in the rehabilitation of the hotel plant, and the systematic non-compliance with the agreements of the investment process, since long before COVID-19.

The disaffiliations of Sol Cayo Largo and Sol Cayo Guillermo are justified. Their ratings are not good at all and the comments left by customers on sites such as TripAdvisor leave no doubt about their unpleasant experiences but, even so, the ratings and descriptions have not been worse than those received by newer hotels such as Paradisus Los Cayos -in Cayo Santa María-, or other older or contemporary ones such as any of the Meliá hotels in Havana.

But in the particular case of Meliá Cayo Guillermo it has been unexpected. This five-star, inaugurated in 1996, is one of the top-rated facilities of the 39 maintained by Meliá in Cuba until less than a year ago, and one of the ones that reported the highest percentage of occupancy and recovery in 2019, even with recognitions from TriAdvisor, which even rated it among the 25 best in Cuba.

Much more recently, in 2020, Meliá Cayo Guillermo and Sol Cayo Guillermo, along with 23 other Meliá facilities, were again selected among the 25 best hotels and received the Certificate of Excellence delivered annually by TripAdvisor.

However, in the text of the most updated report, it talks about a disaffiliation that "has been completed" taking into account problems from "previous years", as if it were an exit process that spanned more than six months, which is the time between one report and the other. However, in none of the reports prior to December 2020 is it possible to find signs of those difficulties that forced Meliá to leave the management of Meliá Cayo Guillermo, leaving a few perplexed.

What could have happened in six months for Meliá to make a "mutual agreement" decision with Gaviota S.A., its Cuban counterpart, even giving up one of the most important hotels in the Cuban portfolio, much more profitable than similar facilities in Cayo Santa María, Varadero and Havana?

It is no less true that they did badly in 2020 as the whole sector globally, that room occupancy in Cuba has been the lowest of the entire Meliá portfolio, that the bankruptcy of an operator as important as Thomas Cook together with Trivago's decision to withdraw numerous Cuban hotels from its sales channels had catastrophic effects, but giving up the management of three hotels, whose properties belong to Gaviota S.A., does not make a difference. Not when among the more than 30 remaining hotels there are those with older and greater profitability problems.

The pandemic and the associated economic losses are in both 2020 reports, however, as warned in the documents, Meliá has not renounced to continue with its investments in Cuba planned for 2022, when it would conclude the incorporation of four hotels, with a total of 924 more rooms.

So, from these unexpected and unusual disaffiliations, it is possible to infer more than one cause and, possibly, even a message to its Cuban counterpart.

A couple of reports recently published by CubaNet revealed how badly things are going in several hotels managed by the Spanish chain and how the money earmarked for rehabilitations disappears in a probable labyrinth of incapacities, corruption and bureaucracy. The dissatisfaction of clients, the bad ratings, together with the evidence of labor exploitation in the system of personnel hiring by Cuban employment agencies, have damaged the prestige of all Meliá brands established on the island and, possibly, it is no longer prudent for the Spaniards to continue risking more. Not at a time of crisis like the present.

There have been a few disappointments -no less than losses- in more than 20 years of presence and expansion in Cuba. Thus, as far as hotels in the keys are concerned, there is more than one account receivable. Business deals that have been left as unfulfilled or half-fulfilled promises, and even money put on the table whose final destination is unknown.

As an example, according to information from Europa Press, in 2004, Gabriel Escarrer, president of Sol Meliá, had to allocate 50 million dollars (41.8 million euros) to the construction of two hotels (coincidentally one of them in Cayo Largo) and to training plans for future employees.

Escarrer had made the announcement during the inauguration of the 24th edition of the International Tourism Fair of Cuba. He said he would build a 900-room hotel in Cayo Largo, named Club Paradiso, and another one in Cayo Santa María, with 1,000 rooms, both with a completion date for 2006. But more than 15 years after that "good news", neither of the two hotels has been completed, nor has the training of workers who would never be hired been carried out.

According to information provided to CubaNet by a Meliá official in Cuba, that money, which was only heard about in the news, was barely enough to win the management of a few more hotels, among them this one in Cayo Largo, which has now been disaffiliated for being unprofitable, and which barely has 300 rooms. But there is no question of building that super hotel Club Paradiso.

Although Meliá has never made public, at least officially, its many dissatisfactions with the way in which the Cuban side handles the maintenance of the hotels and the investment process, as well as the hiring of personnel through intermediary employment agencies, it is not a mistake to interpret the latest decisions, as well as other equally novel details in the letter of the 2020 report, as an "ultimatum" or threat of slow and progressive withdrawal so that the Cuban regime starts to take things seriously, even to force it to pronounce itself on past requests that favor Meliá, even to retract decisions that affect it.

Not even under the promise to protect identities, no person from the Spanish group, or close to it, with whom we inquired on the matter would answer with convincing arguments to our question on why Meliá Cayo Guillermo was disaffiliated now and not before, if in the official version it would be the same problem of profitability and operational difficulties presented by the other hotels of the chain.

However, in the most recent management reports, an unusual element such as the approach to the defense of human rights -never before included in Meliá's reports- is a novel item that should be followed up in the next balance sheets of the Spanish company.

Although Cuba has been left out of such documents, there is a possibility that the island could be included at any time, especially when on this occasion Meliá has made an explicit commitment to extend the issue of human rights to all the hotels where it operates, as will be reflected in its 2021 report.

But that is not all the news. On page 3 of the "Consolidated Management Report and Annual Accounts 2019", Meliá used the word "instability" for the first time in a brief paragraph where it talked about "geopolitical tensions", a topic to which it returns on pages 102 and 274.

He refers in those three opportunities to the problems that would be affecting his business in Cuba and, in addition, he mentions another cause (also for the first time), the "growing competition coming from alternative destinations in the Caribbean", perhaps a way to pull the sheets off a regime dozing on overconfidence in itself.

To take into account the true repercussion of the term used, it is good to remember that "political stability" has been the main promise made by the Cuban rulers to foreign businessmen in all the "investment portfolios" presented by the Cuban Chamber of Commerce. They have taken it for granted and have undoubtedly employed considerable resources in police repression to guarantee it, but with the passage of Donald Trump to the White House, plus the increase in the actions of the internal dissidence in recent months, adventurers like Meliá have felt that the ground bought as firm begins to sink, and it is better to take some precautions.

Thus, regarding the section that, in the 2019 and 2020 reports, is entitled "Evolution in the management of human rights", Meliá has said that it is due to the commitment acquired as signatories of the Human Rights Policy and as a signatory partner of Global Compact in 2018, an element from which emanates a strong theatrical whiff but which, in the near future, could decide many things in relation to the communist regime, with which Meliá evidently reached an agreement of "complicity" in the 90s. But, come the most critical moment, we do not know how fragile or strong that old pact could be.

At least the possibility of a breakup seems to have been placed on the table. In the 2020 report, unlike the previous year, Meliá describes the content of its analysis of human rights compliance in its premises: 10 percent is focused on "freedom of association and collective bargaining"; 20 percent on "zero tolerance for corruption"; 15 percent on "human dignity, equality and safe working environment"; another 15 percent on "fair and dignified working conditions and remuneration" and 8 percent on training, dissemination and communication in ethics and human rights".

To top it off, Meliá adds in the report that "this analysis takes on special importance due to the fact that the company operates hotels in 16 countries in which, according to the Human Rights Watch 2020 report, these rights are not respected" and "only in one of these countries are there opportunities for improvement" (page 169).

Is he referring to Cuba? Because that HRW report cited by Meliá is precisely where it warns that Cuba is witnessing a "consolidation of the dictatorship" and that the "Cuban government continues to repress its critics".

Does Meliá plan to examine the problems related to human rights in its businesses in Cuba? Based on the assurances in the 2020 report, there is a possibility. On page 169 of the document it is possible to read the following: "From 2021 we will update our self-diagnosis and conduct a new analysis, increasing its scope in the portfolio (...). Likewise, we will define a global protocol with specific plans by regions that will allow us to consolidate the integrated management of this matter".

In the Spanish chain's "self-diagnosis" on human rights, "to identify potential associated risks and plan the necessary mitigation actions", the only country not included is Cuba, which not only casts doubt on whether the analysis has involved 94 percent of Meliá's entire portfolio worldwide, as they say, but it also suggests that human rights on the island are an area where they are not allowed to penetrate or that it is an issue they have not cared about for now, despite the fact that they claim to have taken as a frame of reference the approaches defined by the Danish Institute for Human Rights, the Guiding Principles on Business and Human Rights, the 10 Principles of the Global Compact, as well as the approaches of the Modern Slavery Act.

Let's wait and see what happens in the 2021 management report. Whether or not Cuba is included in the human rights analysis will always tell us how Meliá's relations with the Cuban military and businessmen are going.

Source: article in Spanish

Did you like it? Share your thoughts!