By Oliver Roberts

“All-included Resort in Cuba is: 51 percent dictatorship, 49 percent foreign company, 0 percent Cuban people,” read a protest sign held by Cuban refugee Felix Blanco in Montreal, Canada. On July 11, 2021, many Cuban-Canadians like Blanco took to the streets in solidarity with the mass protests concurrently breaking out across Cuba. The protestors aimed to raise awareness of how Cuba’s tourist industry, of which Canada is a primary market, financially supports the Cuban state apparatus (Dyer). This research paper explains how Cuba’s hospitality industry generates capital for regime leadership by extracting capital from local workers and foreign investors while systematically underinvesting in public services and other economic sectors. First, the paper examines how implicit labor taxes and taxes on foreigners are funneled into state hotel construction rather than social programs; second, it details the military’s control over industry revenue; and finally, it evaluates the broader economic consequences for a country where, as of 2024, 89 percent of the population lives in extreme poverty (Observatorio Cubano de Derechos Humanos).

Background: History and Structure of the Hospitality Industry

Following the collapse of the Soviet Union, which accounted for 70 percent of Cuba’s trade during the 1980s, the island experienced an economic crisis. In response to Cuban GDP shrinking by 35 percent, Cuban leader Fidel Castro announced a“Special Period in Time of Peace” in 1990. The policy framework opened the country to international tourism, small-scale domestic entrepreneurship, and investment from Western capitalist countries (excluding the United States). By the late 1990s, international tourism replaced sugar as the country’s principal source of revenue, with over one million tourists per year, mostly from Western Europe and Canada (La Botz). Under Raúl Castro’s leadership beginning in 2008, Cuba’s economy became increasingly controlled by its commercial conglomerate GAESA (Grupo de Administración Empresarial S.A.) (Gámez Torres).

Reforms from the “Special Period” allowed foreign firms to operate in Cuba’s hospitality industry through joint venture or management contracts with Cuban state-owned enterprises (SOEs), with the SOE retaining at least a 51 percent share. GAESA businesses, such as its primary hotel management company Gaviota, function similarly to SOEs but send their revenue to the military rather than the state treasury. Prior to June 2026, all Cuban hospitality workers were hired and employed exclusively through SOE or GAESA employment agencies (Feinberg and Newfarmer). However, Cuba’s June 2026 economic reforms now allow for foreign firms to directly hire workers (Gámez Torres and Padilla). Cuba’s small-scale private hospitality sector consists of restaurants (paladares) and private room rentals (casas particulares), which make up around one-quarter of Cuba’s hotel room accommodations (Feinberg and Newfarmer). As of July 14, 2026, travelers can still rent casas particulares through Airbnb.

Cuba’s tourism industry peaked in 2017 amidst the Obama administration’s diplomatic normalization, with 4.65 million overseas tourists and $3.3 billion in gross hard currency revenues mostly from Western Europe and an emerging US market (Benchetrit). However, this growth was soon reversed.The COVID-19 pandemic led to Cuba closing its borders to tourists from March to November 2021, destabilizing the county’s leading industry (La Botz).

Post-COVID Cuba entered its most severe economic downturn since the Special Period, marked by declining real wages, chronic power outages, widespread supply shortages, deteriorating public infrastructure, record emigration, and rising crime (La Botz). Tourism has been heavily affected. In 2025, 1.8 million tourists visited Cuba, a 17.8 percent decrease from 2024 and short of the government’s 2.6 million visitor target for the year (Hermosilla). The oil blockade and increased sanctions under the Trump administration has further deteriorated the situation, as most foreign firms have left or suspended their operations on the island. In the first five months of 2026, 360,000 tourists visited the island – a 58 percent drop compared to the same period in 2025 (Oppman).

Government Taxation and Divestment from Other Industries   

Cuban President Miguel Diaz-Canel called tourism “the locomotive of the Cuban economy”, stating that “what we have on a weekly basis to pay credits, to buy raw materials and to invest, comes from tourism.” (Dyer). However, state expenditure data indicates a disproportionate share of tourism revenue is recycled back into tourism infrastructure, such as hotel construction, rather than essential public services. According to Cuba’s National Office of Statistics and Information (ONEI), the state invested 11 times more in tourism during 2024 than in public health and education combined. Of the total $4.107 billion government investment budget, tourism accounted for $1.535 billion (37 percent). In contrast, Public Health and Social Assistance received $82 million, Education received $41 million, and Agriculture received $11 million (Swissinfo.ch). This allocation of capital is visible in Havana’s skyline, where newly constructed, glass-mirrored luxury hotels like The Selection La Habana contrast sharply with the city’s aging and deteriorating residential housing (Rodríguez).

The state extracts revenue from the hospitality industry primarily through labor mediation and direct taxation. Across the state-managed industry, the government enforces a high implicit labor tax by utilizing SOE employment agencies to capture 90 percent of hospitality workers’ earned wages, severely reducing their ability to purchase essential goods. In contrast, guest workers from India working in one Cuban hotel were paid ten times more than their Cuban peers (Dyer). Although Cuba’s June 2026 economic reforms allowed foreign firms to directly hire and pay Cuban workers without an SOE employment agency, the practical impact of this policy is minimal (Gámez Torres and Padilla). The exodus of foreign firms and the military’s ownership of the majority of hotels leaves few venues where direct hiring can occur. Meanwhile, the private hospitality sector, paladares and casas particulares, must register with their municipal authorities as self-employed entities (cuentapropistas) for a multitude of taxes. However, determining the actual tax burden on cuentapropistas is difficult, as they are known to underreport their earnings to avoid heavy taxation (Feinberg and Newfarmer).

Foreign firms and international travels also provide direct revenue to the state. Foreign firms with JV and management contracts are subject to corporate income taxes ranging from 15 percent to as high as 35 percent depending on their ownership structure (Feinberg and Newfarmer). Beyond corporate taxation, the government levies a mandatory $50 tourist visa fee for individual US travelers, a mechanism that generated  $8 million in state revenue from 160,000 US visitors in 2015 alone (Editorial Board).

Military Control of the Industry

The largest player in Cuba’s economy is GAESA. According to leaked financial records obtained by The Miami Herald in 2025, GAESA’s had approximately $18 billion in assets as of early 2024 – a figure exceeding the foreign exchange reserves of nations like Costa Rica, Uruguay, and Panama. The Miami Herald investigation revealed GAESA’s gross revenues account for nearly 37 percent of Cuba’s total GDP, with its 2023 earnings more than trip the entire tax revenue collected by the state treasury. Despite this immense capital capture, GAESA operates with minimal state fiscal oversight, retaining the vast majority of its earnings for military enterprises rather than funding public services. Financial records reflect this relationship: in August 2024, GAESA recorded about 920 million pesos (about $38 million) in taxes while receiving 9.2 billion pesos (about $380 million) in direct state funding and investments (Gámez Torres).

Within the hospitality sector, GAESA, exercises near-monopolistic control through its primary tourism subsidiary, Gaviota. Gaviota directly manages over 55 percent of all Cuba’s hotel rooms and as of late 2024, holds an estimated $4.3 billion in cash reserves (Gámez Torres). The physical assets of GAESA’s hotels belong almost exclusively to GAESA’s real estate company, Almest S.A., which minimizes foreign equity participation by mostly restricting international operators to management contracts rather than JV partnerships. Similar to SOEs, the earned wages of hospitality workers in GAESA-owned hotels are captured by GAESA employment agencies which divert money to the military rather than the state treasury (Dyer). Consequently, as long as military enterprises control the vast majority of hotel properties, reforms allowing foreign firms to directly hire and pay Cuban workers will yield minimal economic benefits for the population.

Implications

According to Emilio Morales, a former marketing official for Cimex, GAESA’S retail subsidiary, the Cuban government invested approximately $24 billion in hotel construction between 2009 and 2024 (Bradford). These investments were at the direct expense of strategic sectors critical to long-term economic stability, including the energy infrastructure, agriculture, and social services (Morales). By comparison, the capital used on hotel construction far exceeds the $43 million required annually to resolve shortages across 63 pharmaceutical products, as well as the $250 million per year to maintain and stabilize the national electrical grid (Gámez Torres). Rather than serving as the economy’s “locomotive”, overinvestment in tourism has exacerbated the energy shortages and broader system decay that has rendered the island less attractive to both foreign investors and tourists (Morales).

The under investment in other economic systems has drawn human capital away from essential public professions and toward entry-level hospitality roles. Driven by the opportunity to earn foreign currency tips, engineers, healthcare professionals, teachers abandoned public sector positions for hotel service jobs. In 2021, for instance, a Cuban in the hospitality sector might earn $100 per month with tips but only $30/month in other sectors of the economy (Dyer). However, today, Cuba’s 85,000 hotel rooms have an occupancy rate of only about 20 percent. This contraction, exacerbated by the withdrawal of foreign firms and decrease in tourists, led an estimated 10,000 hospitality workers to exit the work force, seek alternative work, or emigrate (La Botz). Cubans remaining in the sector are left with inconsistent work and few viable employment opportunities (Tico Times).

Despite the contraction in tourists, state and military leaders continue to direct scarce capital towards hotel construction. Prime real estate and luxury hotel properties remain overwhelmingly controlled by GAESA. According to Paolo Spadoni, a professor at Augusta University in Georgia who recently wrote a book on Cuban tourism, the military views hotel construction as a long-term real estate acquisition. Spadoni asserts the long game of military officials is likely to control these valuable properties should the Communist government transition to democracy (Isai and Robles).

Conclusion

The research paper details how Cuba’s hospitality industry both generates capital for its regime leadership and exacerbates the humanitarian crisis that derails the industry itself. It displays the consequences of a command economy’s mismanagement in the 21st century, decreasing a population’s welfare and limiting their economic participation and productive capacity. The evidence in this paper displays how these systemic failures are ingrained within the regime, with little signs of policymakers changing its course. Until the fundamental structure of capital extraction is dismantled, international tourism in Cuba will remain, as protestors like Felix Blanco noted, an industry that enriches the regime while effectively zero percent for the Cuban people.

Oliver Roberts is an aspiring diplomat studying History, Political Science, and Spanish at Texas Christian University (Class of ’28). During his summer 2026 internship at the Center for a Free Cuba, Oliver was driven by his own past travel to Cuba to investigate how the Cuban tourist industry directly supports the government rather than the people. 

Works Cited

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