Choice’s Steve Joyce Sounds Off on Cuba, Airbnb

Choice Hotels CEO Steve Joyce is a newsmaker, and he had plenty to share at the Americas Lodging Investment Summit last week in Los Angeles. From international growth in markets like Cuba and Europe, to the development scene and brands like Comfort Inn and Cambria Hotel & Suites, he has made a lot of moves recently to position Choice for success. He also has one particular move he’s looking to make that will turn vacation rentals into a platform that can compete with Airbnb. Here’s what he had to say when he sat down with LODGING.

So, you just got back from Cuba. Tell me about it?

Cuba is fascinating because it’s like time froze in 1959. Nothing seems to have changed since then. The bulk of the cars are from the ’40s and ’50s and the colonial buildings are beautiful but sort of dilapidated. With the new tourist dollars coming in, they’ve been rebuilding the central part of the old town. You see the impact.

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One of the first things I did was meet with a group of entrepreneurs. Since the government loosened up the rules around people doing their own business, the place reminds me a lot of being in China in the early ’90s, when the entrepreneurial businesses started and the government is like, “We need to be really careful with this.” Then, pretty soon it gets away from them. It was very encouraging.

The state government owns a lot of the assets down there, and we had some really good conversations with them. Everybody is saying the same thing: “Since the rules changed, we’ll bring investors down and build hotels.” We’re thinking we can do that relatively quickly, so we’re going to go back fairly soon and see if we can’t cut some deals. We’ll see. We need a couple of interpretations from the treasury department and from state.

What sort of interpretations do you need?

Right now, the law says you cannot do business that helps the Cuban government. That’s what the rule is. You can do business with Cuban entrepreneurs. Some of the hotels we’re going to talk to are ones the Cuban government doesn’t own any part of. The bulk of the hotels—especially the classic ones you think about when you think about Havana—are majority owned by the Cuban government. We think we can get a ruling that says, “Look, simply funneling customers into hotels that may be owned by the Cuban government is not in and of itself a violation of the policy because you’re not physically running the hotel.” So they’ve got beautiful buildings that could be rehabbed and opened and the government is willing to lease those. Then, you’ve got the resort district, where it’s mostly Spanish all-inclusives, and I think they’re mostly on leased land that the government agreed to give to them.

The other thing is, Airbnb is there and operating in a lot of buildings owned by the Cuban government. So I think we can get [the Obama] administration’s support because it really wants to make this happen. If we do, then we can be comfortable doing some things down there. That will get us started relatively quickly versus waiting the three or four years for the law to change.

Infrastructure-wise, Cuba is kind of a mess, right? Especially when it comes to Internet access.

They have infrastructure that works. They have an open airport and a highway from the airport, but when they get that influx of travel, they’re going to be under a lot of pressure. They obviously have to invest in not only the main infrastructure—the airports, the roads, and everything else—but also the Internet infrastructure because it isn’t friendly right now. But that’s also a control mechanism.

You’ll see a Wi-Fi hotspot set up on a corner and all of a sudden 100 kids will come running. It’s like a dope deal, right, but they’re selling Internet access. Everybody comes running in with their phone to get the Internet access, and then they’ll call their relatives or download whatever TV shows they wanted to watch.

We actually talked to several people who believe that’s beginning to change as well. But the government is cautious to do that, in part because it’s still a communist-run government that wants to have a planned economy, but it’s hard not to see this coming once the tidal wave starts.

Switching gears, let’s talk about how Cambria Hotel and Suites is growing.

It’s really good. We had a grand opening at Times Square. Our view is that’s probably the point where people will say it really started. Our folks did 26 deals this year. They’ll do 30 to 40 next year. We’ll have 18 under construction within the next six months. We’re now working on a project on Brickell Avenue in Miami, two in Atlanta, one in the Warehouse District in New Orleans, one at LAX, and one in downtown L.A. that’s an office building conversion, uptown from here. It’s just really taking off. We’re trying to get to 100 hotels in the 2018 to 2019 time frame, and it looks pretty possible at this point.

A lot of these are projects that we just kept working and working, and now we’re starting to see them come together. We’ve got a great project in Durham that’s probably the last one that’s going to go in that close to Duke. We’ve got a hotel at Main and Main in Philadelphia. Both the volume and the quality and the positioning of the projects are great. When we have that many hotels in those major billboard locations, people are going to know this brand. That is going to help us get to the second 100 a lot faster.