What’s behind Airbnb’s overnight success in Cuba?

Email this to someoneShare on FacebookTweet about this on TwitterShare on Google+

 

This past New Year’s was a busy time for Daniella Suarez and her family to visit Cuba. The city was crowded. Restaurants were at or near capacity. One thing she didn’t have to worry about: a room for the week she spent in Havana.

“I’m glad I booked our stay ahead of time,” said the 29-year-old from West Palm Beach.

Suarez spent the holiday with her husband and siblings in one of more than 19,000 home rentals known as casas particulares (or private houses) in Cuba, found on the community-driven hospitality site Airbnb. Roughly two-thirds of the rentals are located in Havana alone.

For Airbnb, the Cuban market has been an overnight explosion. “Cuba is the fastest growing country on Airbnb ever in the history of our platform,” CEO Brian Chesky announced when he visited the island in 2016 as a Presidential Ambassador for Global Entrepreneurship.

For Suarez, the San Francisco-based company offered her a sense of security and familiarity for booking her stay in Cuba. “I chose Airbnb because I knew that they already had a presence in Cuba long before we decided to visit, and because I had already used Airbnb in the States,” she said.

Similar to the Airbnb model everywhere else, travelers book and pay in advance—a big advantage in a country like Cuba, where cash is required for just about everything, due to U.S. banking restrictions. On the other hand, a one-night stay in Havana can run $66––more than twice the average Cuban monthly salary of $25––and Cuban hosts earn an average of $250 per booking.

While serious hurdles still remain, particularly for the hosts (even at $2 an hour, the internet is painfully slow), Airbnb has nonetheless managed to do what no other major U.S. company has done: tap into an existing and thriving industry in a communist country that had zero recognizable American presence.

 

Tapping into an industry in Cuba

When home-sharing site Airbnb arrived in Cuba in 2015, it was able to piggyback off the existing state-licensed program of casas particulares. Launched during the “special period” of the early 1990s, the program allowed families to rent rooms in their homes. Families began renovating their homes in an effort to make money, which the government supported since the casas paid taxes and licensing fees.

While it took nearly 20 years for the first 10,000 casas to establish themselves, the industry really took off in 2008––after Raul Castro began his economic reforms—and spiked after the Obama administration allowed Cuban-Americans to send unlimited amounts of money to relatives on the island. More than 25,000 casas particulares now flourish across Cuba.

At the same time President Obama lifted restrictions on cash remittances, he also loosened restrictions on travel by U.S. citizens to Cuba. The new bounty of visitors to Cuba only added fuel to the fire.

Airbnb launched in Cuba with 1,000 listings on April 2, 2015, four months after Obama declared that U.S. travel companies could begin doing business there. At first it could only book U.S. travelers, in compliance with U.S. regulations at the time, but within 12 months the company received special Treasury Department authorization to accommodate non-U.S. travelers.

Within a year, Airbnb had increased its listing base to 4,000, then springboarded to their present count of 19,000. By comparison, it took three years for some of Airbnb’s biggest markets, like San Francisco and Berlin, to grow to 1,000 listings. While a majority of the new hosts are in the capital of Havana, listings are now spread across nearly 40 cities and towns, with concentrations in Trinidad, Viñales, Santiago de Cuba, Matanzas, Santa Clara and Cienfuegos.

“As we Cubans say, Airbnb has stolen the show here,” says Orlando Cordero Rodríguez, owner of Hostal D’Cordero in the revolutionary city of Santa Clara, whose bookings have nearly doubled since becoming an Airbnb host.

“It was viewed as a new idea and here it was something that was already familiar to the culture,” Chesky told the public radio program Marketplace in March. “There were tens of thousands of people that were already sharing their homes and so we felt like it wasn’t that big of a risk. And all we had to do was make sure the community embraced Airbnb.”

For that, the company deployed ground troops to recruit hosts. The company held meet-ups in Cuban cities for owners of casas particulares to learn more about the company, while others heard about Airbnb through word of mouth. “We spent some time on the ground prior to launch, studying Cuba’s casas particulares network, and communicating the benefits of hosting on Airbnb to prospective hosts,” Airbnb spokeswoman Maria Rodriquez told Cuba Trade.

A big part of making the system work depended on solving the twin problems of limited internet and limited banking access. Airbnb solved the first partly by coupling hosts with “partners that have internet access and can help them manage their Airbnb profiles, requests, and bookings,” said Rodriguez. In other cases, hosts have made do with Cuba’s growing number of wifi hotspots, where they can check in with Airbnb daily. “It’s important to note that casas particulares have been flourishing in Cuba for well over a decade without the support of widespread internet accessibility,” said Rodriguez.

Payment to Airbnb hosts are made through a variety of channels, including via intermediaries who can deposit funds into Cuban hosts’ bank accounts. For hosts who aren’t able to accept payments this way—or who choose not to—Airbnb uses the Miami-based remittance company VaCuba to issue payments in convertible Cuban pesos, hard cash that is then delivered in person to hosts.

But getting that money can take time, and some people have recently criticized slow payments. In April, the Miami Herald ran a story about Airbnb hosts complaining that payments were in some cases months behind.

Airbnb spokeswoman Rodriguez told the Herald that the delay in payouts was due to the increase in volume, and that “we are working around the clock on near-term and long-term solutions to ensure our growing host community gets paid quickly and efficiently.”

To CEO Chesky, such glitches are mere growing pains for the company’s overnight B&B kingdom in Cuba. Similar challenges face any advanced digital and marketing platform moving into Cuba. “Our involvement there will go beyond home sharing,” Chesky recently posted on the company’s website. “My personal focus will be to work with Cuban counterparts to increase internet literacy, while also providing practical education in areas like photography and marketing, and facilitating new payments solutions that will not just help Airbnb, but allow other platforms to come online as well.”

Most hosts seem sanguine about delays, and grateful for the basic reliability of Airbnb. “It is the one [booking service] that has encouraged or facilitated the arrival of the Americans the most,” said host Cordero, adding that Airbnb’s policies of requiring prepayment are a welcome guarantee. “We often had clients who made reservations online that wouldn’t show up… and we would get stuck with an empty room for that day. With Airbnb, everything is different.”

Host Cordero said his main problem isn’t with getting paid by Airbnb, considering the legal and political hurdles. “Our problem is mainly with the U.S. government’s embargo that doesn’t allow us to use the American dollar nor direct bank transactions,” he said. Like most hosts, he relies on VaCuba to get paid by Airbnb, which can often take a week to arrive, he said.

Airbnb co-founder and CEO Brian Chesky is interviewed during a luncheon meeting of the Economic Club of New York, Monday, March 13, 2017. (AP Photo/Richard Drew)

Besting the other players

Although several sites book travel to Cuba, Airbnb was able to tap into the already present and growing private home industry to dominate the industry, analysts say.

“Airbnb moved very early and aggressively in Cuba, and did a lot of hands-on research to understand the local home rental market with local networks enabled by the government there,” said Douglas Quinby of the travel research company Phocuswright.

There are other players when it comes to booking a stay in Cuba. Dallas-based Travelocity and Vancouver-based Cuban Ventures also offer bookings. On island there is Revolico.com, which allows Cubans to buy and sell things as well as rent out rooms.

But at this point in the supply-and-demand game, “it will be very difficult for other players to catch up,” noted Quinby.

One of Airbnb’s main competitors is Dublin-based Homestay.com, which lists about 2,000 properties in Cuba. Last year it saw a six-fold increase in bookings by Americans compared to 2015, according to CEO Alan Clark. And, he said, “we are set to triple that again in 2017, based on bookings in the first three months of this year.”

While that growth seems spectacular, it comes from a tiny base, and Homestay’s primary market remains European and Asian travelers. In the United States the Airbnb brand—now planting its flag across the country—has the advantage.

Emily Nipps, for example, made sure she was on the very first inaugural flight from Tampa to Cuba on Dec. 12, 2016. She was planning a two-day, one-night trip in Havana.

First she did a Google search for hotels in Cuba, then “cheap hotels in Cuba,” and then went to the basic travel sites, but found they were all expensive and the reviews for the rooms not good. Eventually she turned to what she knew: Airbnb.

“Airbnb feels more personal than a travel site that contracts with a hotel,” said the 39-year-old, who handles public relations for Tampa International Airport.

Nipps booked a room at Casa Amistad Habana in the heart of Old Havana for $46 through Airbnb and immediately got a text message from a host partner in Canada. Nipps said she felt comfortable booking online with Airbnb because she was able to communicate with the host partner in English.

She later recommended the site to a group of friends who went to Cuba a month after her visit.  H

Email this to someoneShare on FacebookTweet about this on TwitterShare on Google+

, ,

Trackbacks/Pingbacks

  1. Cuba in the spotlight at eMerge as Trump nears a policy announcement - Cuba Trade Magazine - June 13, 2017

    […] The success in Cuba of Airbnb, the online booking site for private room and home rentals, shows how U.S. engagement has helped strengthen entrepreneurship in Cuba, said McIntyre. Since entering Cuba in 2015, Airbnb has grown to 22,000 listings on the island, more than in San Francisco, Boston and other major U.S. cities. Hosts in Cuba have been paid an average $2,700 from AirBnB yearly, while Cuba’s government pays its workers an average of about $400 yearly, an Airbnb report said. […]

Leave a Reply