Stop blaming the embargo for every empty hotel room in Havana.
The mainstream narrative is exhausted. It’s a comfortable, lazy script: Cuba’s tourism industry is collapsing because of US sanctions, power outages, and fuel shortages. It’s a tragic story of a Caribbean paradise strangled by external geopolitics. But if you spend five minutes looking at the actual mechanics of the Cuban economy, you’ll realize the sanctions are a convenient shield for a much more embarrassing reality.
Cuba isn't failing because it can’t trade with Florida. It’s failing because the Cuban state is running a 1950s business model in a 2026 digital economy. While the media cries about "deserted destinations," the real story is a massive, systemic misallocation of capital that would make any sane CEO jump out of a window.
The Hotel Construction Paradox
Here is the data point that the "sanctions-only" crowd refuses to touch. While the Cuban government claims it has no money for food, medicine, or the power grid, it has been on a feverish hotel construction spree for the last five years.
Data from the Cuban National Office of Statistics and Information (ONEI) shows a staggering imbalance. In recent years, investment in tourism infrastructure has consistently dwarfed investment in agriculture, health, and social services. We are talking about billions of dollars funneled into luxury high-rises in Galiano and Miramar while the average occupancy rate hovers somewhere around 15% to 20%.
In any functional market, a 15% occupancy rate is a death sentence. It’s a signal to pivot, to downsize, or to liquidate. In Cuba, it’s a signal to build more. This isn't a result of "external pressure." This is internal mismanagement at a scale that borders on the surreal. The state is betting on a "build it and they will come" strategy that has been proven wrong for a decade.
The Myth of the Sanctions Wall
Let’s dismantle the idea that sanctions have made Cuba an island of isolation.
Go to Varadero. You aren't seeing Americans, but you also aren't seeing the massive waves of Canadians, Russians, and Europeans that used to keep the lights on. Why? Because the product has deteriorated beyond the point of basic competence.
I’ve talked to tour operators who have stopped sending clients to five-star resorts in Holguín not because of the Helms-Burton Act, but because there is no toilet paper. There is no eggs. There is no reliable Wi-Fi. You cannot charge $400 a night for a room where the air conditioning is a suggestion and the buffet is a collection of sad cabbage.
Sanctions didn't break the supply chain for local produce; a centralized, Soviet-style agricultural policy did. Cuba is an island with some of the most fertile soil in the Caribbean, yet it imports nearly 80% of its food. When a tourist can’t get a fresh lime for their mojito in the land of the mojito, that isn't a Washington policy failure. That is a Havana planning failure.
The Private Sector Boomerang
The most disruptive thing happening in Cuba right now isn't the lack of fuel—it's the rise of the MIPYMES (small and medium-sized private enterprises).
While the state-run hotels sit empty and dark, the private sector is showing exactly how to survive a crisis. Private restaurants (paladares) and boutique rentals are sourcing their own supplies, installing their own solar backups, and actually providing service that justifies a price tag.
The "lazy consensus" says the private sector is being crushed by the sanctions. The truth? The private sector is the only thing keeping the country from a total blackout. They are the ones navigating the complex logistics to bring in goods that the state monopolies are too bloated and bureaucratic to handle.
If you want to see the future of Cuban tourism, stop looking at the state-owned monoliths. Look at the entrepreneurs who are thriving despite the state, not because of it. The state’s insistence on maintaining a monopoly over the most lucrative parts of the industry is exactly what is killing the industry.
Why the "Fuel Shortage" Argument is Flawed
The headlines scream that the lights are out because the tankers didn't arrive.
Energy is a currency. In Cuba, the energy crisis is a symptom of a bankrupt state that cannot pay its bills. The country has had decades of subsidized oil from Venezuela and favorable deals with Russia and Mexico. The problem isn't that the oil doesn't exist; it's that Cuba has no liquid capital to buy it on the open market because its primary export—tourism—has been mismanaged into the ground.
It’s a death spiral.
- Build hotels no one wants.
- Neglect the power grid to pay for those hotels.
- The power goes out.
- The remaining tourists leave and tell their friends not to come.
- Revenue drops.
- There’s no money for fuel.
Repeat until the system breaks. Blaming the US for this cycle is like a gambler blaming the casino for his empty pockets while he’s still doubling down on a losing hand.
The Dominican Republic and Mexico are Eating Cuba's Lunch
While Cuba’s leadership complains about the "unfair" advantages of its neighbors, the Dominican Republic and Mexico (specifically the Riviera Maya) are setting records.
They are operating in the same global economy. They faced the same post-pandemic hurdles. The difference? They have a competitive, market-driven approach that prioritizes the guest experience over ideological purity. They have diversified their offerings. They have invested in infrastructure that actually works.
Cuba is currently the "bad value" destination of the Caribbean. It’s expensive to get to, expensive to stay in, and the quality is a gamble. Travelers aren't staying away because they hate the Cuban people or because they are afraid of a fine from the Treasury Department. They are staying away because they can get a better steak and a colder beer in Punta Cana for half the price.
The Hard Truth for Investors
If you are looking at the Cuban market and thinking, "Once the sanctions lift, this place will blow up," you are setting your money on fire.
The removal of sanctions would certainly help, but it wouldn't fix the underlying rot. It wouldn't fix the dual-currency mess that was "unified" into a triple-digit inflation nightmare. It wouldn't fix the lack of property rights. It wouldn't fix the fact that the state takes a massive cut of every worker’s salary, leaving the people who actually run the hotels with no incentive to provide good service.
The "sanctions" narrative is the ultimate get-out-of-jail-free card for a government that has failed its people. It provides a moral high ground for incompetence.
Stop Asking the Wrong Question
The question isn't "When will the US lift the embargo?"
The question is "When will the Cuban state stop prioritizing its own survival over the basic functionality of its economy?"
If the government redirected the capital currently being used to build empty luxury towers in Havana into the national power grid, the "energy crisis" would vanish in twenty-four months. If they allowed farmers to sell directly to hotels without a state middleman, the "food crisis" would vanish in twelve.
The current state of Cuban tourism is a choice. It is a choice to prioritize control over growth. It is a choice to prioritize the military-industrial complex (GAESA) over the average citizen.
If you want a real, disruptive perspective on Cuba, look past the headlines about "fuel and sanctions." Look at the cranes on the Havana skyline building hotels that no one asked for. That’s where the real crisis is.
The lights aren't just out; the entire business model is in the dark.
