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Priceline Strikes Hospitality Deal with the Cuban Government

Zacks Equity Research

The Priceline Group Inc.PCLN has inked a deal with Cuba under which Cuban hotel rooms will be made available to U.S. customers through the company’s subsidiary Booking.com. With this deal, Priceline has become the first U.S. online travel company to tie up with the Cuban government.

Priceline started planning to operate in the island state since President Obama’s Dec 17, 2014, announcement of restoring diplomatic ties with Cuba.

Improvement in diplomatic relations between the two nations boosted the travel and tourism sector of Cuba.  In 2015, Cuba recorded 3.52 million visits, up 17.4% from 2014. U.S. visits augmented 77% to 161,000 during the same period.

So, the deal is well timed and will allow Americans travelling to Cuba to book rooms at several Cuban as well as foreign hotels. Currently, travel agencies and tour groups are the only modes of reserving hotels available to these travelers. Airbnb is the only major American lodge booking service operating in Cuba.

Initially, Booking.com will operate in Havana. It is also planning to work with state-run Cuban Hotel chains, France's Accor and Spanish chains Meliá Hotels International SA and NH Hotel Group SA.

Officially, tourism by Americans to Cuba is still illegal under the U.S. trade embargo. However, U.S. travelers are permitted by the Treasury’s Office of Foreign Asset Control (OFAC) under ‘general licenses’ that allow travelling on family, sports, religious and cultural grounds.

OFAC declared on Mar 17 that the rule to visit Cuba only in groups has been relaxed allowing individual tours as long as they fall under permitted categories. Booking.com therefore declared that it would ask travelers to certify that they fit one of the permitted categories although it doesn’t intend to verify the information.

Priceline is not the only company to take advantage of this warming relation to enter the Cuban hospitality sector. Hotel management group Starwood Hotels & Resorts Worldwide Inc. HOT has already obtained approval for management of two hotels in Havana and is awaiting approval for the third.

Currently, Priceline is a Zacks Rank #2 (Buy) stock. Investors may also consider stocks like Travelport Worldwide Limited TVPT and Gaiam Inc. GAIA. Travelport sports a Zacks Rank#1 and Gaiam carries a Zacks Rank #2.

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PRICELINE.COM (PCLN): Free Stock Analysis Report
 
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