Cuba Libre: Airbnb’s Approach to Diplomacy in Cuba

As United States foreign policy doubles down on a generation old and globally contentious trade embargo, Airbnb is flexing its home sharing platform to let Americans and Cubans reestablish ties through “person-to-person diplomacy”

Few geopolitical relationships in history are more fraught with nationalism, retrenchment, and global intrigue than the diplomatic relationship between Cuba and the United States. At the height of the Cuban Missile Crisis, Fidel Castro urged “Comrade” Nikita Khrushchev, the Soviet Premier, to launch a preemptive nuclear attack against the United States [1].

In his defense, Castro famously claimed that “history will absolve me,” arguing that the Cuban Revolution was a liberating force from de facto colonialism and inescapable economic inequality under the regime of American-backed Fulgencio Batista [2]. Certainly, some humanitarian value was created as a result of the Cuban Revolution: the infant mortality rate in Cuba is lower than in Boston [3] [4].

In response to the Cuban Revolution, President Eisenhower in 1960 issued a ban on exports to Cuba [5]. Since Eisenhower’s proclamation, the globally controversial Cuba Trade Embargo has largely remained intact, with the first material changes made under the Obama administration, including lifting certain travel and trade restrictions [6]. It is this complex and antagonistic backdrop in which Airbnb entered Cuba in 2015 [7].

Airbnb’s mission is to connect the world and enable unique travel experiences. Brian Chesky, co-founder of Airbnb, describes interactions between Cuban hosts and American guests as “person-to-person diplomacy.” [8] Beyond its rental platform, which provides listings in 191 countries, Airbnb recently launched experience based interactions [9]. Want a salsa lesson from a renowned instructor in Havana? Airbnb makes it happen.

To its core, Airbnb is global, facilitating understanding across cultural boundaries. Political movements that stoke fear of differences and inflame indignation based on racial identities not only serve as risks to growth in Airbnb’s network of hosts, number of renters, and breadth of experience based tours, but also contradict Airbnb’s mission.

According to the World Bank, international tourism as measured by the number of arrivals has grown at a 4.2% annual rate since 1995 [10]. A once resilient tailwind is at risk of dissipating in a world of travel bans and demands to standoff immigration.

Airbnb’s value chain is relatively simple. Downstream orders from vacationers are automated, upstream suppliers consist of a single constituency, homeowners, and payments are electronic. Strategically, Airbnb wins on the basis of its user interface, speed to market, and ultimately strong network effects. Adapting this delivery model to Cuba, where only 5% of the population has access to an open internet connection, transactions are in cash, and exports from are the U.S. are only tepidly given the green light, has required flexibility in Airbnb’s supply chain.

For safe measure, Airbnb clarifies even the most mundane operational decisions – for instance, can photos taken by a Cuban be posted on its website – with the U.S. government [11]. To source a stable supply of hosts, Airbnb has built software workarounds for web access and tapped into a network of rental homes, or casas particulares, that have been available since the fall of the Soviet Union [8]. Home listings are managed from internet cafes. Transferring money to a cash-only island nation is done by third-party cash transfer services, oftentimes with bags of cash left on doorsteps [11].

Beyond near-term operational complexities, Airbnb has an eye on driving long-term demand. Airbnb is an activist for ending discrimination and creating “a world of belonging,” addressing these challenges by providing toolkits on unconscious biases to its members and creating campaigns such as its #OneLessStranger initiative to highlight how interconnected the world is [12].

Looking forward, Airbnb’s path in Cuba is mired in political tension. In early November, the Trump administration unraveled Obama era rapprochement policies with Cuba by blocking most individual visits, while allowing U.S. companies with existing contracts to continue to operate [13].

Airbnb should double-down on Cuba. According to Gallup, 59% of Americans favor ending the Cuba Trade Embargo [14]. To an extent, Airbnb controls its own destiny. Travel to Cuba by Americans increased by 77% in 2015 [7]. By fighting protectionist trade policies through promoting global connectedness, Airbnb can prompt political change by creating a free market for vacation travel.

Airbnb should deepen network effects by launching training programs that educate Cuban hosts on best practices for pleasing tourists. While U.S. tourism is on hold, Cuba as a destination should be marketed to other geographies.

The objective should be to entrench Airbnb in Cuba. The economics for tourists and hosts must outweigh the politics. The U.S. prides itself on evangelizing democracy. The average Cuban host on Airbnb makes $250 per booking, the average Cuban salary is $23 per month [8]. Airbnb should emphasize its nation building effects to government officials.

This pattern is familiar. Disintermediation happens in an instant. Governments react slowly. Should Airbnb’s humanitarian mission continue to push the envelope? Can Airbnb dismantle the last remnants of an Iron Curtain that governments continue to stumble over? (Word Count 796)

[1] Fidel Castro, “Letter to Comrade Khrushchev,” Nikita Khrushchev, October 26, 1962, [http://microsites.jfklibrary.org/cmc/oct26/doc2.html], accessed November 10, 2017.

[2] Fidel Castro and Ignacio Ramonet, Fidel Castro My Life (New York, NY: Scribner, 2008).

[3] Brigham and Women’s Hospital. “Community Health Needs Assessment and Implementation Plan.” 2016. [http://www.brighamandwomens.org/About_BWH/communityprograms/our-programs/2016-CHNA-Report.pdf], accessed November 10, 2017.

[4] [CIA Factbook Statistics], CIA, https://www.cia.gov/library/publications/the-world-factbook/rankorder/2091rank.html, accessed November 10, 2017.

[5] Gary Clyde, Jeffrey Schott, Kimberly Elliott, Milica Cosic, “Case Studies in Economic Sanctions and Terrorism.” Peterson Institute for International Economics. [https://piie.com/publications/papers/sanctions-cuba-60-3.pdf], accessed November 10, 2017.

[6] Julie Hirschfield David. “Obama, Cementing New Ties With Cuba, Lifts Limits on Cigars and Rum.” New York Times, October 16, 2016, [https://www.nytimes.com/2016/10/15/world/americas/obama-cuba-trade-embargo.html], accessed November 10, 2017.

[7] Airbnb, “How Airbnb Helped Cuban Travel Flourish,” [https://blog.atairbnb.com/how-airbnb-helped-cuban-travel-flourish/], accessed November 10, 2017.

[8] Erin Griffith. “How Airbnb Pulled Off a Coup in Cuba.” Fortune, April 22, 2016, [http://fortune.com/cuba-havana-airbnb/], accessed November 10, 2017.

[9] Katie Benner. “Airbnb Broadens Its Business with Tours and Travel Experiences.” New York Times, November 17, 2016, [https://www.nytimes.com/2016/11/18/technology/airbnb-trips-travel-tours-tailored-experiences.html], accessed November 10, 2017.

[10] [World Bank Data], World Bank, https://data.worldbank.org/indicator/ST.INT.ARVL, accessed November 10, 2017.

[11] Sarah Kessler. “No Internet, No Credit Cards, No Problem: How Airbnb Launched in Cuba.” Fast Company, April 13, 2015, [https://www.fastcompany.com/3044895/no-internet-no-credit-cards-no-problem-how-airbnb-launched-in-cuba], accessed November 10, 2017.

[12] Airbnb, “Diversity at Airbnb,” [https://www.airbnb.com/diversity], accessed November 10, 2017.

[13] Karen DeYoung. “Trump administration puts in place new Cuba policy.” The Washington Post, November 8, 2017, [https://www.washingtonpost.com/world/national-security/white-house-implements-new-cuba-policy-restricting-travel-and-trade/2017/11/08/a5597dee-c49b-11e7-aae0-cb18a8c29c65_story.html?hpid=hp_hp-more-top-stories_cuba-1225p%3Ahomepage%2Fstory&utm_term=.9ebee443f136], accessed November 10, 2017.

[14] [Gallup In Depth Topics: Cuba], Gallup, http://news.gallup.com/poll/1630/cuba.aspx, accessed November 10, 2017.

 

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17 thoughts on “Cuba Libre: Airbnb’s Approach to Diplomacy in Cuba

  1. The $250 rental income vs. $23 monthly salary figure is shocking and underscores the income disparity between tourists and locals in Cuba. And while this income is great for the hosts, it does bring to mind some of the externalities associated with increasing tourism to Cuba. On the subject of supply chains in particular, Cuba experienced severe shortages of food due to the massive influx of tourists. Hotels and restaurants in the hospitality industry could afford to go to the black market to access scarcer produce (fresh fruit, etc.) to supply hungry tourists – thanks to the high tourist revenue stream, but locals could not. I expect in the longer term some retaliatory regulation will come into effect to mitigate this disparity (and therefore the earning potential for Airbnb hosts). But in present time, it is certainly an interesting, non-steady state opportunity for Airbnb.

    Reference for food shortage issue:
    https://www.nytimes.com/2016/12/08/world/americas/cuba-fidel-castro-food-tourism.html?mtrref=www.google.com&gwh=4732C7122CD2F1AF4CC094E425683503&gwt=pay

  2. I found this article particularly moving. I enjoyed how Airbnb demonstrated a high degree of flexibility in accommodating the stricter policies in Cuba to still engage their customers and provide unforgettable stays for tourists. Something I considered while reading this article is how sustainable these practices will be. As Airbnb continues to grow into a behemoth, I wonder if they will be able to allow for unique practices such as web workarounds and the ability to pay in cash moving forward. If they plan to introduce Airbnb into other geographies with similar restrictions, will they be able to provide this level of customized workarounds that would allow them to operate there? I think Airbnb should look into the feasibility of investing in geography specific operations teams to understand the local intricacies of different geographies and customize the offering accordingly. If they can accomplish that, they would be able to offer an unparalleled user experience that local constituents will approve of.

  3. Seeing as tourism is one of the largest industries in Cuba and reading this article, I think AirBnB can gain a lot of positive publicity by pushing for more open travel between the US and Cuba. Currently, almost one million Canadians go to Cuba annually (https://en.wikipedia.org/wiki/Tourism_in_Cuba), and given the US population versus Canada, the opportunity might be about ten times that (or billions of dollars for the hospitality industry). That provides a lot more flexibility in spending money now to both invest in getting AirBnB entrenched in Cuba and lobbying (or other great government influencing activities).

  4. Is entrenchment enough? It seems like isolationism is unraveling Airbnb’s prospects. What measures could Airbnb take to combat the political risks (e.g. lobbying)?

    I’d also be curious to hear a local opinion on the “person-to-person diplomacy” touted by Chesky – Americans tried to export democracy via capitalism to Cuba pre-Revolution; didn’t work out so well.

  5. Very interesting article! This is a fascinating topic – I backpacked around the island for a bit over a month in 2013, and would like to share a couple of aspects that highlight how difficult I think it will be for Airbnb to expand operations in Cuba.

    (1) If you are going to more than one city in Cuba, you usually connect with the owner of one casa particular and they arrange everything for you with their own network of casas particulares across the country, with whom they work on a regular basis (and share commissions for sending tourists). Given that it is virtually impossible to access the internet during your stay, this is the most convenient approach. I imagine it would be hard to manage your Airbnb bookings while in Cuba, like you do when visiting any other country.

    (2) I have had very bad experiences when it comes to truly authentic local experience-based interactions. If what you want is to connect with someone who will only provide you a service aimed at tourists (e.g. a salsa lesson), I believe Airbnb’s offer works well. However, if you want to go beyond that and also want to get to know the locals, it gets more complicated. At the time, I used Couchsurfing to connect with young Cubans, and the income disparity that you mention in your article, and the restrictions on free speech and political freedom made things very uncomfortable. On the one hand, tourists in Cuba as regarded as cash cows (which is understandable given the huge income inequality…), and everybody tries to take advantage of them. My experiences with Cubans were far from authentic because of this. On the other hand, in addition, Cubans cannot voice their opinions freely, so the conversation lacks authenticity.

    (3) US citizens are not well received in many places in the island – in particular in less touristy towns. In fact, my ex boyfriend, who is American, told everybody he was Canadian to avoid problems. Cuba is a country where there are no TV channels, radios or newspapers asides from the official government-owned ones, so citizens have limited and biased information about what happens outside their borders. This leads them to sometimes have an unfounded very negative image of the US.

  6. Similar to Michelle, I have travelled around Cuba and stayed at the omni-present casa particulares. However, my experience was incredibly positive. I found the people very authentic and open. I don’t think Airbnb will revolutionize the accommodation industry in Cuba – in fact, if anything, Cuba has a super sophisticated “Airbnb network” through its casas particulares. Although in principle I believe Airbnb can facilitate contact between Americans and Cubans, I wonder how much of this contact could already exist naturally through the casas particulares. In addition, the internet connection is a really issue for a couple of key reasons. As already mentioned in the text and other comments, connection is limited and cash transactions are the main payment method. Secondly, when you are in Cuba, you can’t even access airbnb website to book more houses. Finally, most home owners have “real” tourists knocking on their door on a daily basis or other casas particulares sending them tourists through phone call reservations. This means that as a user, trusting the airbnb availability – or even more challenging – getting quick responses from home owners, can be extremely tricky.

    That said, casas particulares and Airbnb have too much in common not to leverage each other. The cuban people is extremely savvy and hospitable, I am sure they will find a way to work together with Airbnb and create a value proposition that helps tourists, airbnb, and hopefully, most of all, the cuban people.

  7. I agree that Airbnb should double down on Cuba. The tourism benefit potential for both the Cuban hosts and revenue for Airbnb is too large to forgo. Americans have always circumvented the travel restrictions to Cuba by booking flights through Canada, and Canada itself has always provided a steady stream of tourists to Cuba. In this sense, there is already sufficient market demand for Airbnb to be operating in Cuba. By doubling down on growth and being loud about promoting global connectedness, Airbnb has the upside of free publicity. Furthermore, if regulators actually decided to prosecute Airbnb’s operations in Cuba, Airbnb could pursue a workaround such as running its Cuba operations out of a separate legal entity incorporated in another county, ie, Airbnb Canada.

    On a more facetious note, Airbnb’s growth to date has been fueled by standing up to regulators, employing lobbyists, and breaking laws outright. Continuing to operate and grow in Cuba in light of Trump’s isolationist policies is simply in the modus operandi of Airbnb.

  8. As both an Airbnb user and an avid traveler who still has Cuba on the bucket list, this article gives me a lot of hope. I speculate that there are more Americans who are currently comfortable with using Airbnb than there are those who feel they could adequately navigate the complexities of travel/tourism to Cuba, though they may want to. I further believe that the positive effects of global travel experiences will elevate that 59% in the Gallup poll. I wonder what options Airbnb has to communicate the ‘travel-from-Canada’ approach to U.S. citizens during the traveler’s trip planning – for example, presenting the idea to Americans looking at properties in Toronto?

  9. I have traveled Cuba and stayed in the three most common choices: (i) casa particulares, (ii) Airbnb, and (iii) government owned hotels. While I would rank my stays in that particular order, I would say that given the environment in Cuba, this is tough topic. In an ideal world, this is never an issue, but here we are.

    I’m not entirely sure what the outstanding questions are. Do you think there’s a potential issue with raising someone’s income by more than 10x from the currently government subsidized wages ? If so, who’s responsibility is it to educate the citizens of Cuba on how to handle the influx in cash? If you’ve visited Cuba, you know there is a paper trail and every dollar is stringently accounted for, which can force Western Union to be the usurious lender of last resort. On a positive note, maybe Airbnb has led to a more economic peer to peer lending environment down there!

    For the author, your footnote 7 references an AirBnb website which uses this link (https://uk.reuters.com/article/uk-cuba-usa-tourism/cuban-tourism-boom-seen-slowing-but-finding-a-room-still-hard-idUKKCN0VW238). Given this, even when taking into account a 77% increase in US tourism, US tourists accounted for less than five percent of all tourists in 2016. By AirBnb entering the market, are they increasing market prices and squeezing out the largest base of tourists in Cuba, Russians, and Canadians? Is it possible that by AirBnb entering the market, they are causing more harm to the local economy in citizens, and instead profiteering from a “humanity” based mission?

  10. As a the son of a Cuban immigrant, I find this topic fascinating. It is important to note that Airbnb didn’t create the home sharing market on the island; Airbnb’s rapid growth in Cuba is largely explained by the already existing extensive network of casa particulares. In many ways, this makes me think of the Fasten case and how ridesharing had long existed in Russia before making its way to the US market.

    Cuba is certainly a very interesting market for Airbnb: the number of rooms available in the country is a clear bottleneck that needs to be solved in a context of the recent tourism. In addition, the company perfectly timed its entry in the market (right after the US eased their policy towards the island), which ended up being a great Marketing coup for Airbnb in the US and globally.

    While the current administration will probably go back on Obama’s policies on Cuba, there is no doubt that the number of US tourists visiting Cuba will continue to increase in the coming years. In addition, Airbnb is now a global brand and Canadian/European tourists who used to book casa particulares over the phone or in person will also be a source of growth for Airbnb.

  11. I agree that a isolationist policy like the one Trump enacted is a huge threat to Airbnb’s business in Cuba, as I imagine that U.S. travelers represented a large majority of Airbnb stays within Cuba. However, there are 2 things to consider that mitigate this in the short term and long term. In the short term, as you alluded to, they could build up supply side capabilities with hosts and other players and cater to European/Canadian/Asian tourists. In the longer term, its important to note that just as Trump reversed Obama’s policy and enacted restrictions, the next president could remove this ban. I think the trends (political support for ended US Cuba embargo) point to a removal of this ban – particularly with a more liberal president, which Airbnb can think about how like that is in next election. Further, there may be brand image benefits to showing commitment to staying in Cuba, showing that Airbnb operates close to their mission and creates real income growth for owners – particularly at a time when governments are making isolationist policies that many regard as shortsighted and damaging.

  12. Though I don’t know if Airbnb alone can dismantle the last remnants of the Iron Curtain (one can hope!)… I do think Airbnb has a fantastic opportunity to push the envelope for humanitarian and diplomacy gains. I think Airbnb’s typical customer – younger, tech early adopter, experience-driven and one that enjoys connecting with new and different people – is a prime candidate for Cuban travel. I’d also hypothesize that this customer is less likely to be mentally dissuaded from traveling to certain countries due to isolationist rhetoric and policies (i.e., there won’t be lasting “Trump effects” on this population’s desire to travel to Cuba). So I agree it’s a great opportunity and one they should continue to invest in – and market heavily to support their overall brand image.

  13. Great article Open Sesame, thank you! I really like and appreciate Airbnb’s goal regarding facilitating understanding across cultural boundaries and given the complicated history between the two countries, Cuba seems like a great fit to this goal. However I don’t think Airbnb has much power if US government keeps on blocking visitors to Cuba. Of course, Airbnb can work harder to overcome this and attract people to Cuba but unless people in the USA are willing to take the risks and insist on going to Cuba, I see their power in this situation fairly limited. And based on the information you provided regarding how drastically they had to change their operating model (e.g. payments etc.) in Cuba, I question whether it makes sense for Airbnb to keep pushing there…

  14. I thought the discussion about AirBnB’s role as an activist in ending discrimination in this context extremely interesting. As the company extends its platform globally, serving both hosts and consumers, the potential exists for hosts to discriminate based on the nationality of potential customers that they are willing to rent their home or apartment to. If this occurs, AirBnB could actually end up exacerbating isolationist tendencies and nationalistic attitudes at the individual level globally, completely hampering the positive concept of person to person diplomacy. As the author mentions, AirBnB continues to provide education to its consumers regarding unconscious bias and other topics aimed at eliminating discrimination throughout the platform. I think this will become even more important as it expands globally to prevent nationalistic discrimination.

  15. Why is AirBnB willing to “push the envelope” for humanitarian and diplomatic gains? Is it because the company believes that travelers should be allowed to go anywhere in the world that they like, even if they disagree with the political tensions that may be at play between their home country and their destination? I think it is probably more for capitalist reasons – to monetize on a large, previously untapped, willingness of travelers to pay for a local experience in Cuba. But how far can they “push the envelope” and when will they run into trouble? If a US traveler is kidnapped or murdered at an AirBnB in Cuba, who is responsible for that? Would AirBnB be willing to list homes in Iran? While the two-sided asset-light platform has enabled AirBnB to rapidly expand its global reach, there are significant risks that it needs to consider.

  16. This was an extremely interesting article. I agree that there is huge potential–simply economically–for AirBNB to expand in Cuba. While I question any humanitarian motives, I appreciate the outcome of encouraging interaction between people globally, which would hopefully improve relations between different cultures. I am happy to read that AirBNB has faced challenges, such as providing cash to its hosts, and found solutions.

    I disagree with the comments above that suggests that AirBNB is not making too much of a difference as there is already a network of casa particulares. Even though an infrastructure for hosting is already available, I believe that by making such bookings available on AirBNB, people would be more encouraged to try to go to Cuba. Instead of having to perform research themselves on what casa particulares even are, AirBNB simplifies this process or at least connects tourists with a system of hosting that they are already familiar with, thereby encouraging tourism into Cuba. My main worry, however, is the political environment, as pointed out by the author. While AirBNB can lobby to open up trade/travel with Cuba from the US, any actions on this front seems to be completely arbitrary based on the current climate of the government. However, even so, AirBNB steps provides a simple platform for tourists from countries around the world to get a taste and understanding of Cuba.

  17. This is an incredibly cool article that speaks to the power that mission-based enterprises can exert to achieve economic goals, while also contributing to the world of diplomacy and economic development. AirBnB’s involvement in Cuba reminds me of “21st Century Statecraft”, a course I took at Princeton with Anne-Marie Slaughter, who is now the CEO of New America and was previously the Director of Policy Planning at the State Department for Secretary Clinton. In the course, we learned that the vast adoption of technology has led to a new style of diplomacy. Rather than diplomacy conducted solely between heads of states, much more action is happening at a local level with both government and non-government actors getting involved (Here’s an overview of the work they focused on: https://www.pbs.org/newshour/politics/21st-century-statecraft-with-alec-ross) . Despite the change in presidential administrations, AirBnB’s size and position in the travel market give it the ability to command influence. I agree that they should double-down on Cuba – the opportunity is massive and they can accomplish additional objectives as a by-product of their economic success.

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